Structural and Regional Characteristics and Cost Efficiencies in the Local Public Health Insurance System: Empirical Evidence from the Japanese National Health Insurance System

In this study, I use panel data from municipal Japanese National Health Insurance (JNHI) insurers to estimate their financial efficiency scores using nonparametric methods and to estimate the causal effects of structural and regional characteristics on the efficiency scores consistently using econometric methods. The major findings of this study are as follows. First, the estimated efficiency scores imply that many JNHI insurers have serious financial inefficiencies, and that total cost efficiency (economic efficiency) is strongly and positively correlated with allocative efficiency. Second, the empirical results of the effects of various factors on efficiency scores indicate that the two major policy reforms for health care systems for the elderly in 2008 contribute strongly to the improvement of JNHI insurers’ finances. Third, the subsidy from a prefectural government positively affects efficiencies, but subsidies from central and municipal governments have an adverse effect. Fourth, contributions to health care systems for the elderly still have an adverse effect on JNHI finances.