Desired Social Security Reforms from the Public's Viewpoint

1.　Social Security and the Public

Much attention has been paid recently to reforming and restructuring Japan's social security system， particularly in parliamentary debate over reducing medical insurance coverage and creating public nursing care insurance. This summer， debate will focus on ways to ease budget pressures through reform of the public pension system.

Newspapers never seem to be without stories about social security problems. Assorted ministries， councils， and economic associations also frequently issue assertive statements on the future of the social security system.

The reason behind all this attention， of course， is budgetary pressure. If the present system continues unchanged， public finances will come to a standstill， and the pension and medical insurance systems will go bankrupt.

Yet it is also true that restoring fiscal soundness should not be done at the expense of lowering the public's living standards−fiscal restructuring and the public's living standards must both be protected. Leaning toward one extreme or the other would be dangerous.

However， recent debate seems to have focused on the side of fiscal soundness. This paper argues for leveling the balance by considering the viewpoint of the very public who pay for and use the social security system.^1，2

In the past， welfare has been regarded primarily as a system to help "disadvantaged people." However， the rapid aging of society has made social security an indispensable part of the public's daily life， causing it to lose its stigma as a government handout. It is increasingly being regarded as a necessity much like food， clothing， and shelter−thus as far as ordinary people are concerned， social security issues are becoming consumer issues.

Of course， it would be unreasonable to discuss social security issues at the same level as daily consumer transactions. For example， there is a substantial difference between buying and eating a watermelon， and receiving a daily living allowance.

However， particularly with regard to social insurance schemes such as pensions and medical insurance， everybody pays premiums， and everybody is potentially eligible to receive benefits. Thus everyone is directly involved in the social security system. As long as the system is operated based on premiums paid by the public， people are entitled to receiving the benefits they paid for. In other words， it is possible to regard social security as a commodity， and to assert that since people pay to receive this commodity， they have rights as consumers. Whether purchasing melons or social security， consumers should be entitled to satisfaction from their purchases.³

In this paper， we adopt the perspective of consumers regarding pension， medical insurance， nursing care insurance and other social security reforms currently in progress， and propose an approach for considering social security reforms from the viewpoint of the public.

We use the term "consumer issues" as a metaphor， of course， but not simply a slogan. We do not simply mean the concept of treating "residents as customers" or receiving friendly service at the welfare office (which would be nice， of course)， but something more concrete.

Given that ordinary consumers are paying money to purchase something， they have the right to receive a commodity of equivalent value. Consumers thus need to be correctly informed of the commodity by the seller (failure to do so could invalidate or cancel a transaction on the grounds of negligence or fraud). Content and quality also need to be assured， or consumers are entitled to demand a replacement， refund， or in some cases seek damages.

In this paper， we argue that these basic consumer rights should be intelligently applied to the social security system including pensions， medical insurance， and nursing care insurance.

2.　The Public Seeks Specific Information

A recent issue in the news has been the disclosure of information. In the area of social security， the importance of ensuring transparency in the bureaucracy is being widely recognized.

For example， there is a growing demand for access to governmental discussions and deliberations， disclosure of documents， and open discussions regarding the present and projected status of pension and medical insurance finances.

But at the same time， from the viewpoint of the general public， it is more important to have information with greater relevance to daily life.

For example， regarding cutbacks in public pensions， people need to know exactly how their benefits will be affected. They need to know if nursing care insurance will fully satisfy their care needs when they grow old. These types of information are much more useful to people rather than the commonly available abstract information on trillion-yen budgets.

Much attention has been focused recently on the need for "individual responsibility，" wherein people are urged to rely less on the government and more on "individual effort." But the problem is that there has been no clarification of what responsibilities must be shouldered， and how much individual effort is needed. People thus have no way of responding intelligently to this advice.⁴

Discussions on reforms frequently raise the point that social security benefits should be limited to "basic benefits，" and that the government's role should be restricted to a "national minimum." Yet these terms are by no means clear.

National minimum
This concept is a famous part of the Beveridge report (1942)， which became the basis of the social security system in the U.K. The report contains the principle of universal and uniform benefits for minimum living expenses， but considers minimums inappropriate for medical insurance， calling instead for comprehensive health services and child allowance separate from the minimum income guarantee.

The present social security system is quite complex， and not fully understood by most people.

Specific payment terms and benefit levels are minutely stipulated in laws and regulations， and are not concealed from the public. Most people simply have not bothered to check.

However， if this were a consumer transaction， the consumer would know the content of what was being purchased. Otherwise， the transaction would not be completed.

Until recently， regulations on consumer transactions had been passive， such as prohibiting lying and deceit. However， an argument arose in consumer law last year called the "obligation to inform，" in which sellers are held responsible for supplying information and explaining products and services more actively， or else contracts would not be valid.

Obligation to inform
As consumer transactions become increasingly diverse and complex， an information gap has arisen between consumers and businesses， and when consumers sign contracts without understanding the content， the result is often trouble.
The report of the 15th Deliberation Council on National Life (Subcommittee on Consumer Policy) issued in December 1996 proposed that civil law be amended so that businesses are obligated to supply information and explain important clauses， and failure to do so could result in cancellation of contracts.

If this concept is applied to social security， the government would have to do more that simply write details of the system into law. Most people do not have the time to read completely through the public pension law (which has 148 articles) or the welfare pension insurance law (188 articles). Even if they did read these laws， the content would be too difficult to understand.

In particular， there has been a sharp increase in the number of choices users must make. For example， there are several ways to receive public pension payments. For public nursing care insurance， users have choices regarding all benefits. The portion of benefits that is not fixed is growing. In this situation， people must be asked how to make choices. Pamphlets and public information offices need to be not only friendly but capable of playing a critical role in this regard.⁵

In the same way， for all social security reforms， the public needs specific information to understand the system. Only then can they begin to exercise "individual responsibility" and "individual effort."

3.　Airing Complaints and Grievances

When problems arise with the content or quality of a purchase， consumers have the right to demand a replacement or refund.

The same should apply to social security. There are countless examples， such as "my pension payments are smaller than promised，" and "we didn't get the home helper we asked for."

However， problems arise when people want to make complaints or grievances， particularly with the elderly. They may not know where to seek help， or else be easily intimidated from speaking out. The first requirement is thus to give people a convenient way to express grievances and complains while protecting their privacy.

Of course， there are already ways to seek relief under the law by filing complaints or going to court. However， the problems we are dealing with here should not be brushed aside by bluntly telling people to file their complaint−most people are averse to such behavior. Viable alternatives need to be offered at an earlier stage.

Social security reforms should be judged not only by their substantive content， but by whether they give the public clear instructions on what to do if the new system does not function properly.

For instance， the public nursing care insurance system has planned an ombudsman review system for service content. By observing how similar systems operate in other countries， it would be desirable for this to grow into a substantive force that protects people's rights.

Ombudsman for adult care facilities
In the U.S.， homes for the elderly are required by law to post information on how to contact an ombudsman. The ombudsman has broad investigative authority， which residents can resort to at any time by reporting grievances or complaints.
This image of the ombudsman differs from the civic ombudsman in Japan who exposes wrongs committed by government agencies and companies. Of particular interest is that the act of posting information on the ombudsman can serve as a powerful deterrent to the violation of people's rights.

Of course， if filing complaints or grievances does not resolve the problem， people can then take their case to court.

With regard to court cases， consumers recently gained a strong ally in the product liability (PL) law. Previously， consumers seeking compensation for injury or damages from using a product had to prove negligence on the part of the manufacturer， and this burden of proof was a significant obstacle. Under the new PL law， consumers need only show that the product is defective.

The same principle should be applied to social security. However， the situation is rather complex. For instance， the status of a person receiving benefits under social welfare has traditionally been characterized as a "reflected interest" and not entitled to any rights.

Reflected interest
Social welfare benefits have been regarded as a type of gift bestowed by the government. Thus when people file suits because they did not gain admittance to a care home or were not sent a home helper， their claims are summarily dismissed as being groundless. In other words， these matters are left to the discretion of government agencies.

The public nursing care insurance system is being designed so that by paying premiums， people will have the right to expect nursing care.

The huge significance of this point should not be lost. In designing the public nursing care insurance system， there was considerable debate on whether the funding would be in the form of taxes or insurance premiums. However， the debate glossed over the issue of rights， focusing instead on the fiscal burden the public would have to bear no matter whether the system was based on taxes or social insurance. However， we should point out that at least under present law， if the system is designated as social insurance， people will have rights which will stand up in court. Still， this is a far cry from the consumer rights guaranteed by the PL law.

4.　Risks Abound in Everyday Life

Everybody is exposed to what might be called the risks of living. One risk that has suddenly emerged all around us is the "risk of becoming bedridden." While we still hear of folk stories about abandoning the elderly to die alone， this risk is more widespread today than ever. With longer life expectancies and the changing structure of illnesses (the shift toward adulthood diseases and chronic diseases)， elderly people today might be called "late-coming disabled people."

Number of bedridden elderly
The number of bedridden elderly is presently estimated at approximately one million， and only 10% of people in their early 80s need care. However， according to a Ministry of Health and Welfare survey (FY 1995)， approximately half of all elderly cannot live on their own for at least six months prior to death， and 70% cannot do so for at least one month prior to death. Moreover， people face the risk not only that they themselves may need care， but that they may have to provide care to other family members.

Regarding the risk of illness， some people become ill while others do not， and some people become ill when they are still young. However， similar to the risk of becoming bedridden， the risk of becoming chronically ill as an adult is quite widespread.

In addition， risks associated with aging will definitely be realized unless one dies prematurely young. Of course， the risk involved in living to any particular age is always uncertain.

Thus some risks of living will be realized by everyone， while other risks will be realized by some. When these risks will be realized is not known. However， as the population ages， risks tend to become homogeneous throughout the population， and tend to be concentrated among the elderly.

In the reform debates， it was often said that benefits should be concentrated on those who truly need them. We should recognize that among the general public， a very high proportion will eventually come to need these benefits in some form.

Social insurance is a system that pools these risks， which may affect anyone at anytime， so that society as a whole can be prepared against these risks. While the specifics of the system may vary， the important point is that everyone is protected from such risks.

If the function of insurance is to distribute risk， the present social insurance system has many aspects that are difficult to understand. In particular， the fact that the system depends heavily on funding from the national budget has confused the debate over whether the system is a tax or insurance. Another shortcoming is that the system serves to support dependents of different generations and redistribute income without adequate debate and study.⁶

On the other hand， it could also be said that if the distribution of risk among members is the principle of insurance， a system that pays benefits only to the elderly does not conform to the insurance principle. However， this seems to be too narrow a conception of the principle of insurance.

At the very least， the insurance principle can be applied to distribute risk across time in preparation for risks that may occur at any time in the future. It is not necessary that at any point in time， there be a mathematical correspondence between the premiums people pay and the benefits received (otherwise risk could be distributed across space but not across time). Modern insurance is supposed to have developed to become completely different from primitive mutual societies. Furthermore， more study is needed on the possibility of undertaking functions peculiar to the insurance system such as "participation" and "independence."⁷

In that sense， the time has come to reevaluate the meaning of insurance as well as social insurance from the viewpoint of the general public. In doing so， it will be helpful to approach the matter from a consumer's perspective−information and choice， and conflict resolution.

Even if the probability of a single accident is small， the public is without doubt exposed to risks. What they will experience is not some "expected value of risk，" but the event itself.

Notes

In this paper， the public who is involved in the social security system are the principals who bear a variety of risks associated with living， pay premiums， and receive benefits. The concept is broader than that of consumers who purchase consumer goods， and involves their role as principal actors with regard to their relationship to areas such as the environment and family (Lebenswelt). (See Yasusuke Murakami，Outline of Anti-Classical Political Economy， Chuokoron-sha， 1994， Chapter 5.)
Regarding the relationship between welfare burdens and economic activity， debate is between the view that the recent economic slump and decline in economic vitality has been caused by welfare， and the view that economic growth and welfare are compatible， and even that welfare spending can stimulate the economy. See Hiroshi Uno， "Now is the Time to Convert to a Welfare Type Growth Pattern， Parts 1-4，" inShukan Shakai Hosho(Social Security Weekly)， nos. 1915-1918， 1996.
In Japan， ironically， demands for consumer protection are more commonly debated in the area of social welfare than in social insurance.
It cannot be denied that people are often myopic and do not have the ability to make judgments， particularly regarding future life planning. There is a problem in ignoring this and calling for individual responsibility. Myopia is one aspect of bounded rationality.
Germany is debating the issue of the obligation to supply information regarding social insurance (see Yoichi Ohashi，Structural Reform of the Study of Administrative Law， Chapter 7， Yuhikaku，1996). In practice， since it is unrealistic to expect all available information to be supplied， the issue is how to distill important information and make it available in a form that helps people make decisions.
Imperial Germany debated the issue of whether social insurance was public assistance or insurance (see Shuichi Sugai， "Social Insurance and Private Insurance，"Hogaku Ronso， Vol. 90， Nos. 4， 5， 6， 1972). In Japan， the debate often centers around comparing the "present" insurance method and an "ideal" tax method (or the present tax method and ideal insurance method)， and thus has not been productive.
In this respect， assuming the tendency toward homogeneity of risks confronting people， funding for nursing care insurance or medical insurance (as well as child and family policies) should seriously consider a cumulative method (with regard to nursing care insurance， see Noriyuki Takayama and others， "Elderly Care Market Projections and Insurance Premium Burdens，" inBunken Ronshu， No. 116， 1996). Whether these insurance systems should be borne by the public or private sector is a completely different argument. The common view is that with the trend toward homogeneity of risk， the role to be played by private insurance may be larger.

Desired Social Security Reforms from the Public's Viewpoint

Kenichiro Naganuma