Abstract
Many developed countries face a growing need for long-term care provision because of population ageing. Japan is one such example, given its population's longevity and low birth rate. In this study, we examine the efficiency of Japan's regional long-term care system in FY2010 by performing a data envelopment analysis, a non-parametric frontier approach, on prefectural data and separating cost efficiency into technical, allocative, and price efficiencies under different average unit costs across regions. In doing so, we elucidate the structure of cost inefficiency by incorporating a method for restricting weight flexibility to avoid unrealistic concerns arising from zero optimal weight. The results indicate that technical inefficiency accounts for the highest share of losses, followed by price inefficiency and allocation inefficiency. Moreover, the majority of technical inefficiency losses stem from labor costs, particularly those for professional caregivers providing institutional services. We show that the largest share of allocative inefficiency losses can also be traced to labor costs for professional caregivers providing institutional services, while the labor provision of in-home care services shows an efficiency gain. However, although none of the prefectures gains efficiency by increasing the number of professional caregivers for institutional services, quite a few prefectures would gain allocative efficiency by increasing capital inputs for institutional services. These results indicate that preferred policies for promoting efficiency might vary from region to region, and thus, policy implications should be drawn with care.
Highlights
Many developed countries face a growing need for long-term care provision because of population ageing
We examine the efficiency of Japan’s regional long-term care system in FY2010 by performing a data envelopment analysis, a non-parametric frontier approach, on prefectural data and separating cost efficiency into technical, allocative, and price efficiencies under different average unit costs across regions
The majority of technical inefficiency losses stem from labor costs, those for professional caregivers providing institutional services
Summary
Many developed countries face a growing need for long-term care provision because of population ageing. Japan is one such example, given its population’s longevity and low birth rate. In 2000, the Japanese government initiated a mandatory social long-term care insurance (LTCI) system, which is operated by both the central and the local governments (Ikegami, 1997; Campbell & Ikegami, 2000). Based on the physical and mental status of the individual, irrespective of his/her income or family situation, this system makes long-term care a universal entitlement for every Japanese citizen aged 65 years and above. LTCI basically operates on social insurance principles: recipients receive services and choose providers, but cash allowances are not provided. Out-of-pocket expenses for elderly beneficiaries amount to 10% of the expenses for services received. The remaining revenues from premiums, national taxes, prefectures, and municipalities are 50%, 25%, 12.5%, and 12.5%, respectively
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