Moral hazard under zero price policy: evidence from Japanese long-term care claims data

  • Rong FuEmail author
  • Haruko Noguchi
Original Paper


We evaluate the presence and magnitude of moral hazard in Japan’s public long-term care insurance (LTCI) market. Using monthly LTCI claim records from January 2006 to December 2015 linked to concurrent death records, we construct a sample by propensity score matching insured individuals who co-pay 10% of their fees to those with no required copayments, and we implement fixed-effect estimations. We find that a ten-percentage-point reduction in the copayment rate increases monthly costs by 10.2 thousand yen, corresponding to a price elasticity of about − 0.1. Insured individuals with no copayments tend to use more services and have more utilization days than those with copayments do. Furthermore, we find that insured individuals who die from cerebral (myocardial) infarction increase their service use more in response to a reduction in the copayment rate than those who die from senility do, indicating a positive association between ex-ante health risks and ex-post service use. We verify that a cost-sharing adjustment is a valid solution for soaring LTCI expenditures. These findings could provide broad implications for the rapidly aging world.


Moral hazard Public long-term care insurance Propensity score matching Ex-ante health risk Japan 

JEL Classification

I18 I13 I10 



This study is financially supported by several funds: the Waseda University Research Initiative entitled “Empirical and theoretical research for social welfare in sustainable society- Inheritance of human capital beyond ‘an individual’ and ‘a generation’”—(PI: Haruko Noguchi); a Grant-in-Aid for Scientific Research Project funded by the Ministry of Health, Labour, and Welfare (MHLW): “Effects of the prevention policy of lifestyle-related disease on labor productivity and the macroeconomy from the viewpoint of cost-effective analysis” (PI: Haruko Noguchi); a Grant-in-Aid for Scientific Research(C) funded by the Japan Society for the Promotion of Science (JSPS): “Change and disparity in accessibility to long-term care services: Evidence from Japanese big data analyses” (PI: Akira Kawamura); and a Grant-in-Aid for Stat-up funded by JSPS: “The effect of the 2006 long-term care insurance amendment on cost containment: empirical evidence from nationally representative claims data.” (PI: Rong Fu). This study has received official approval for the use of secondary data from the Statistics and Information Department of the MHLW under Tohatsu-0507-3 as of May 7, 2018. We greatly appreciate Dr. Michihito Ando for his helpful comments at the Japan Economic Association 2018 Spring Meeting. Our thanks also go to participants in the European Health Economics Association at Maastricht, The Netherlands, in July 2018 for their valuable suggestions. In addition, we deeply appreciate the two anonymous reviewers for their insightful comments and suggestions on this study. The views and opinions expressed in this article by the independent authors are provided in their personal capacity and are their sole responsibility.

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Supplementary material

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Supplementary material 1 (DOCX 84 KB)


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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Faculty of Political Science and EconomicsWaseda UniversityTokyoJapan

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