On the Causality among Social Insurance Burden Rate, Health Care Expenditures and Public Pension

Despite a decrease in the number of working generations supporting Japan's social security system, the relationship between public pension benefits and health care expenditures since the inception of universal health insurance system has not been explored. We examined the causal relationships among health care expenditures per month, public pension benefits per beneficiary and the social insurance burden rate in a cointegration model. We obtained one stable long-run equilibrium relationship among those three variables over the period from 1966 to 2002. It was concluded that the increase in health care expenditures caused a rise in public pension benefits and a hike in the social insurance burden rate. The latter half of this study investigated price policy in the health care sector. The null hypothesis of no serial correlation for vector error correction model was rejected. We finally accepted the dynamic OLS model with lead lags as an aggregated health care function. The price elasticity of health care has declined in absolute value since the universal health insurance system started, and it has been around 0.6 since the early 1980s. The policy which eliminated health care fees for the elderly in the 1970s was a mistake since the elderly who had previously been subject to small copayments increased their health care expenditures. The rate of out-of-pocket expenses for health care of the elderly should have been raised in the 1970s.