Adapting the Future Elderly Model to a Super-Aging Society: Implications for Health, Health Spending, and Health Policy in Japan

Japan has experienced pronounced population aging, and now has the highest proportion of elderly adults in the world. Yet few projections of Japan’s future health spending and long-term care needs go beyond estimating population by age and sex to estimate  the evolution of the health and functioning of the  future elderly.  This study adapts to the Japanese population the Future Elderly Model  (FEM),  a demographic and economic  Markov micro simulation model that  projects  the  future  health conditions  and  functional status of Japan’s elderly population  in order  to estimate their future  demand  for  health care and long term care spending. We  evaluate the model using the recently released multiple waves of the  Japan Study of Aging and Retirement (JSTAR)  survey,  the Japanese  version of the Health and Retirement Study-like family of internationally comparable surveys. Using  detailed data on a panel of  3,862  Japanese aged 50-75  starting in 2007, we tailor the health transition matrix of the FEM model to the Japanese  context, and  use  a  state-transition Markov  model to  assess  Japan’s health insurance and long-term care insurance programs. We conclude by suggesting policies that may improve the fiscal sustainability of Japan’s health care programs in light of its super-aging population.