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What Causes Errors in Projections of Medical and Long-term Care Expenses?

Author

Listed:
  • Yuki Demizu

    (Researcher, Policy Research Institute, Ministry of Finance)

  • Daizo Kojima

    (Associate Professor, Institute of Economic Research, Kyoto University)

  • Takahide Koike

    (Former Senior Economist, Policy Research Institute, Ministry of Finance)

Abstract

While medical and long-term care costs in Japan are expected to continue to rise in the future, it is not clear to what degree we can estimate this increase using current projecting methods. Therefore, in this study, we hypothetically estimate medical and long-term care expenses based on past data, quantitatively analyzing discrepancies from actual results and the primary factors contributing to increases over time. In estimating medical and long-term care expense, we use a projection method that multiplies the recipient population by the cost per capita. In addition, it is assumed that medical expenses per capita rise at the same rate as nominal GDP per capita and long-term care expenses change at the same rate as nominal wages per capita. Then, projection errors are broken down into “recipient population factors” and “per capita cost factors.” The results of our analysis indicate that, while increases in expenses due to changing population structure make up a large proportion of increases in total medical and long-term care expense, most of these costs are projectable and thus, the projection error is not large. On the other hand, for per capita expenditure, there is a divergence between estimates of growth based on economic indicators and actual results, which is a factor causing underestimates. Of these increases in medical expenses and long-term care expenses during the analysis period, the proportion of error due to this per capita cost was 26% for medical expenses and 28% for long-term care expenses.

Suggested Citation

  • Yuki Demizu & Daizo Kojima & Takahide Koike, 2018. "What Causes Errors in Projections of Medical and Long-term Care Expenses?," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 14(4), pages 563-584, July.
  • Handle: RePEc:mof:journl:ppr14_04_03
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    References listed on IDEAS

    as
    1. Oecd, 2006. "Projecting OECD Health and Long-Term Care Expenditures: What Are the Main Drivers?," OECD Economics Department Working Papers 477, OECD Publishing.
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    3. Congressional Budget Office, 2016. "The 2016 Long-Term Budget Outlook," Reports 51580, Congressional Budget Office.
    4. Congressional Budget Office, 2014. "The 2014 Long-Term Budget Outlook," Reports 45471, Congressional Budget Office.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Medical expenses; Long-term care expenses; Projection errors; Factor analysis;
    All these keywords.

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development

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