Identifying Municipality Discretion Using a Quasi-Experimental Approach: The Case of Eligibility Assessments for Japan’s Long-Term Care Insurance Program

This study adopts a quasi-experimental approach to empirically identify the discretion exercised by municipalities in conducting eligibility assessments for Japan’s Long-Term Care Insurance (LTCI) program. It leverages the municipal merger phenomenon in the first half of the 2000s as a significant factor in creating an extrapolation shock. Prior to the merger, municipalities had a clear incentive to enhance their eligibility ratios as they could transfer eligible recipients to the merged municipalities. This study’s difference-in-difference regression analysis provides concrete evidence that pre-merger municipalities did, indeed, escalate their eligibility ratios immediately before the merger, underscoring discretionary conduct in eligibility assessments. Moreover, it suggests that pre-merger municipalities tended to upgrade the eligibility status of insured residents from “Support needs” to “Long-term care needs I.” These findings not only highlight the deviation of the Japanese LTCI system from its institutional design but also point towards potential mismanagement within the system. Understanding these dynamics is crucial for improving the efficacy and fairness of LTCI programs.