Impact of a fixed price system on the supply of institutional long-term care: a comparative study of Japanese and German metropolitan areas

BACKGROUND: The need for institutional long-term care is increasing as the population ages and the pool of informal care givers declines. Care services are often limited when funding is controlled publicly. Fees for Japanese institutional care are publicly fixed and supply is short, particularly in expensive metropolitan areas. Those insured by universal long-term care insurance (LTCI) are faced with geographically inequitable access. The aim of this study was to examine the impact of a fixed price system on the supply of institutional care in terms of equity. METHODS: The data were derived from official statistics sources in both Japan and Germany, and a self-administered questionnaire was used in Japan in 2011. Cross-sectional multiple regression analyses were used to examine factors affecting bed supply of institutional/residential care in fixed price and free prices systems in Tokyo (Japan), and an individually-bargained price system in North Rhine-Westphalia (Germany). Variables relating to costs and needs were used to test hypotheses of cost-dependency and need-orientation of bed supply in each price system. Analyses were conducted using data both before and after the introduction of LTCI, and the results of each system were qualitatively compared. RESULTS: Total supply of institutional care in Tokyo under fixed pricing was found to be cost-dependent regarding capital costs and scale economies, and negatively related to need. These relationships have however weakened in recent years, possibly caused by political interventions under LTCI. Supply of residential care in Tokyo under free pricing was need-oriented and cost-dependent only regarding scale economies. Supply in North Rhine-Westphalia under individually bargained pricing was cost-independent and not negatively related to need. CONCLUSIONS: Findings suggest that publicly funded fixed prices have a negative impact on geographically equitable supply of institutional care. The contrasting results of the non-fixed-price systems for Japanese residential care and German institutional care provide further theoretical supports for this and indicate possible solutions against inequitable supply.