Editorial / Consumption tax hike must support stable social security
In April, Japan’s consumption tax rate will be raised from 5 percent to 8 percent. The tax hike is placed as the main pillar of the nation’s integrated reform of the social security and tax systems, and the increase in tax revenues will be used exclusively for social security purposes.
We believe this is an opportunity to make 2014 the starting point to achieve the goal of building stable social security systems.
The rapid graying of society and the decrease in the working population have made our social security systems fragile.
About a half century ago, about 10 working-age people supported each elderly person through our social security model. Now, just 2.4 working-age people shoulder the cost of supporting one elderly person. The scale of the human pyramid is expected to narrow even further by around 2050—when each elderly person will have to ride on the shoulders of one working-age person.
Don’t let our children pay
The nation is highly dependent on debt, chiefly government bonds, to cover the ballooning cost of pensions, medical care and nursing care. This has become the main source of the government’s deteriorating fiscal condition. We should no longer neglect the problem by simply passing down the current burden to future generations.
The consumption tax hike will enable the government—at least for a while—to finance social security costs such as basic public pensions. It will increase the sustainability of our social security systems, a step toward the goal of achieving the systems’ long-term stability.
The increase in consumption tax revenues will also be used in building a system in which medical care and nursing care services join hands in supporting the lives of elderly people who choose to continue living at home. The money will also be used to reduce national health insurance premiums.
The government’s social security reform measures will be implemented under the assumption that the consumption tax rate will be further be raised to 10 percent in October 2015. It will be an important task for the government to steadily realize the second hike to solidify our social security systems. To do so, the government needs to carefully scrutinize how the nation’s economy reacts after the April hike.
However, it is impossible to fully cover ballooning social security costs through consumption tax hikes, even after the second hike goes into effect.
To realize the goal of achieving stable social security systems and putting the nation’s finances on a healthy footing, we cannot afford to put off trimming spending in the three fields of medical care, elderly care and pensions.
The surge in medical care costs in particular is causing a headache. The government has decided to, in effect, decrease medical treatment fees paid from the national health insurance system to medical institutions for fiscal 2014, and we believe this judgment was appropriate.
It is also essential to improve efficiency and cut waste in medical services.
Currently, many elderly patients who have several diseases receive treatment at multiple medical institutions. As a result, the patients undergo unnecessary medical examinations and are administered drugs they do not need.
Not only is this is a waste of medical resources paid for by the government, but a considerable number of patients end up suffering from side effects of drugs excessively prescribed to them.
Health insurance societies and other organizations that provide health insurance services should encourage subscribers not to seek unnecessary medical consultations. The medical expense statements of patients should be thoroughly examined, a possibility since record-keeping has improved through the use of computers.
In carrying out this plan, it will be advisable to take advantage of the “my number” system that will go into effect in 2016. The system will enable government offices in charge of three types of administrative duties and services—taxation, social security and disaster response—to manage the personal information of all individuals through 12-digit numbers.
After it goes into force, the system will for some time be used to carry out procedures for tax and social security benefit payments. If the scope of its use is expanded to include records of medical services received by individuals, it would do much to prevent them from seeking needless treatment and medication.
To relax the financial burdens shouldered by corporate and other workers, it also will be inevitable to require well-off elderly people to share burdens commensurate with their financial means in receiving medical services.
In April, there will be a rise in the percentage of medical fees paid by elderly people. The figure for those aged 70 to 74 will increase to 20 percent, as initially set in the revised Health Insurance Law of 2008. Despite this revision, the government has kept the ratio at 10 percent as an exceptional measure, fearing possible angry reactions from elderly people.
This means the government has had to dip into the national coffers to make up for massive losses since 2008. Therefore, it is reasonable for the government to raise the ratio of medical fees to be paid by those in that age bracket.
A similar measure will also be taken in regard to government-administered nursing care insurance services. The share of expenses covered by high-income recipients will be raised from 10 percent to 20 percent. This is essential if the state-run nursing care insurance system is to be maintained.
What should be done to halt the drop in the number of workers, which form the backbone of the social security systems? The entire matter must be explored from this point of view, when it comes to sustaining the systems in future.
The nation’s total fertility rate (TFR)—the number of babies born to a woman during her lifetime—stands at only 1.41. The number of newborn babies was at an all-time low last year. The total population declined by a record 244,000 in 2013, an indication that the reduction will likely accelerate further in future. Efforts should be made to encourage young people to marry, while also assisting parents in raising their children.
We hope the government will take a broad range of steps to address problems arising from the low birthrate. Measures should be taken to ensure no children are on waiting lists for day care centers. This would enable parents to raise their children while continuing to work outside their homes.
The growth in the number of nonregular employees is another cause for worry. In most cases, they earn so little that they pay low taxes and social insurance premiums. Measures should be taken to improve their employment conditions.
There is a mountain of tasks to be carried out in resolving problems related to social security systems. However, political leaders have been slow to reform these systems.
Push 3-way discussions
This is evident in the fate of a three-party reform plan adopted in 2012, under an administration led by the then ruling Democratic Party of Japan. The DPJ, the Liberal Democratic Party and New Komeito agreed to reform the social security and tax systems in an integrated manner, mainly featuring an increase in the consumption tax rate.
However, the DPJ withdrew from three-party negotiations in August 2013 after the government’s National Council on Social Security System Reform put together a final report detailing its recommendations. The DPJ defended its move by saying its recommendations had not been reflected in the report.
Though the DPJ said it would return to the three-party talks later, little progress has been made in facilitating discussions on the issue. It should cooperate in the talks, given its earlier initiative in forming the three-party accord.
Social security reform is an important task that must be tackled by whatever political party is in power.
(From The Yomiuri Shimbun, Jan. 8, 2014)