Competition among Service Providers under the Long-term, Care Insurance System

Abstract

The purpose of this paper is to examine the provision of home help services for elderly people, who require domestic help and/or personal care under the “Long-term Care Insurance” scheme in Japan, which has been in force since April 2000. Recently in Japan, both the number and ratio of elderly people have increased. This aging caused the government to reform the system of social service provision for the elderly throughout the 1990s. The Long-term Care Insurance scheme was the consequence of a law enacted in 1997. Under this system, home help service ranks as a major service, in which the government permits various sectors to participate as providers. Consequently, many private or nonprofit organizations have entered this market that had originally been dominated chiefly by the public sector, municipalities, or their fringe organizations (the Council of Social Welfare in each municipality) before deregulation with respect to the qualifications of the provider. The purpose of deregulation was to promote choice so that users can choose any of the various service providers. In the study area, Anamizu Town, there are three home help service providers: the Council of Social Welfare (X), the Social Welfare Juridical Person (Y), and the Agriculture Cooperation (Z). Provider X provides no other service function except for home help, but it is in contact with the town office. Provider Y operates a nursing home and some related services, in addition to home help. Provider Z only functions as a home help provider, but does not have links to other related organizations. Regarding the characteristics of users, Z contrasts strongly with X and Y. Most of those who use Z tend to live alone or with their elderly partners, and utilize the domestic help service (cleaning, washing, cooking, etc.) . On the other hand, many users of X and Y live with younger family members and choose personal care that supports activities related to body functions (eating, dressing, toileting, etc.). Since the beginning of the Long-term Care Insurance scheme in April 2000, X has been the largest provider, Y second, and Z the smallest in terms of service results. This has historical reasons, because many users had utilized the services of X or Y before April 2000. Since mid-2001, however, Z has increased its share and overtaken the other two providers, This change derives from the level of the service price that is compulsorily determined by the government. Generally, home help service profitability is not high because of the low official price. Consequently, X and Y are not eager to expand their home help services, because X can depend on the municipality office for financial and organizational functions, and Y has a nursing home and other service functions that are more profitable than home help. In contrast, Z cannot afford to reduce its level of service provision, because home help is the only way to survive as a provider under the Long-term Care Insurance scheme. From the analysis, a clear distinction is found between the comprehensive providers (X and Y) and the independent provider (Z) with respect to the characteristics of home help providers.