case study from japan · 15 -30 50% with a ceiling of 600 baht (2,000 yen) per year 30 -50 80% with...

Fiscal Policy for a Sustainable Healthcare and Pension System in Thailand under an Aging Population

Presented by Miss Supanun Chumjai

Fiscal Policy Office, Ministry of Finance

Thailand

Case Study from Japan

Thailand Healthcare and Pension System

Japanese Healthcare and Pension System

Comparisons between Thailand and Japan

Conclusion and Policy Recommendations

01 02 03 04 05

Paper Objectives

Content

Paper Objectives

Make comparisons with the Healthcare and Pension System in Thailand

Study theJapanese Healthcare and Pension System

Recommend efficient and sustainable fiscal policy and other related policy for theThai government

Aging Society

Aged Society

Super-Aged Society

Level of aging population (by UN)

60+ years old >10% of total population



Japan: Super-Aged Society

Overview of Aging Population in Thailand and Japan

Thailand: Aging Society

41%

29 %

70%

43%

Have not planned for or started saving for retirement

Still in debt at age 60

Builds with facilities that

are not elderly-friendly

Age 45+ in informal sector

Ratio of Old Age Population Dependency Ratio

2020

2040

45%

13 %

80%

23%

Want to work until

age 65

Age 75+ and 90% of centenarians

are women

Born after the end of WWII

Want to work as long as they

are in good health

Ratio of Old Age Population Dependency Ratio

2020

2040

Source: United Nation Prospect, 2015

System of Payment

Keywords for Healthcare System

01

02

03

Fee for services

- A method in which doctors and other healthcare providers are paid for each service performed.

Fee for schedule

- Means a listing of the fees normally charged by a given health care provider for specific therapies and procedures is provided.

Capitation

- The amount paid by a health care provider annually for each patient in a medical group plan

There are three main healthcare schemes in Thailand

Thailand Healthcare system

The Civil Servant Medical Benefit Scheme (CSMBS)

organized by the Comptroller General’s Department (CGD)

under the Ministry of Finance

The Social Security Scheme (SSS)

organized by the Social Security Office (SSO)

under the Ministry of Labor

The Universal Coverage Scheme (UCS)

organized by the National Health Security Office (NHSO)

under the National Health Security Board chaired by the public health minister from the Ministry of Public Health (MoPH)

01 02 03

?

Civil Servant Medical Benefit Scheme (CSMBS) 01

Financial resources

Coverage

“Fee-for-service”

Direct Payment- Hospital claim through the CSMBSIndirect Payment- The patients can get reimbursed through their affiliated office.

Type of Payment

Claim, reimbursement

- only for civil servants - 5 million people

(approximately 7.5 % of National Population)

Government (annual budget)

Social Security Scheme (SSS)02

?

Financial resources

Coverage

“Capitation”

Hospitals claim through the Social Security Office (SSO)

Type of Payment

Claim, reimbursementContribution from

employees, employers and

government

- employees in the private sector

- 12 million people (approximately 17.5 % of National Population)

Universal Coverage Scheme (UCS)03

?

Financial resources

Coverage

“Capitation”

Hospitals claim through the National Health Security Office (NHSO)

Type of Payment

Claim, reimbursement

- Thais who are not a member of the CSMBS

or SSS - 50 million people

(approximately 75 % of National Population)


Budget Allocation for Healthcare

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget CSMBS's actual expensesSSS's budget MoPH's and UCS's budgetCSMBS's actual expenses as percentage of the national budget SSS's budget as percentage of national budgetMoPH's and UCS'S budget as percentage of national budget

Percentage (%)Million baht

3%1%

9%

Principles of Financial System

Keywords for Pension System (1)

Pay-As-You-Go (Unfunded)The government imposes a tax on the income of the

working population and then uses the tax revenue to provide retirement benefits for the retirees

Fully-Funded Dedicated assets are accumulated to cover the

scheme’s liabilities. These assets are assigned by law or contract to the pension scheme and hence they must be used for financing the payment of pension benefit obligations.

Partially fundedA combination of the Pay-As-You-Go and Fully-Funded

systems.

01

02

03

Main Pension Scheme

Keywords for Pension System (2)

01

02

Defined Benefits Scheme

- A pension plan with a guarantee by the insurer or pension agency that a benefit based on a prescribed formula will be paid. Such plans can be fully funded or unfunded.

Defined Contribution Scheme

- A pension plan in which the periodic contribution is prescribed and the benefit depends on the contribution plus the investment return on accumulated contributions. Typically, such plans are fully funded.

Thailand Pension System

Old-age allowance

Government Pension

SSFProvident

Fund (PVD)

RMF

Informal workers- Private employees- SOE’s employees- Permanent government employees

National Savings Fund (NSF)

Everyone

Pillar 0Pillar 3

Government Pension Fund (GPF) National Pension

Fund (NPF)

Formal workers who are not members of PVD funds, excluding civil servants

Pillar 2

Civil servants

Social Security Fund (SSF)

- Private employees- Temporary Government employees

Pillar 1

SufficientSubsistent

- Government retirees

Thai elderly, except

government pensioners

Social welfare

Supplementary

Pillar 0: Old Age Allowance

?

Financial resourcesCoverage


Benefits

Thai people aged 60 and above who do not receive pension from the central and local government (around 8 million people)

Type of Scheme

a non-contributory social protection

Age Allowance

per month

60-69 600 baht

(2,000 yen)

70-79 700 baht

(2,330 yen)

80-89 800 baht

(2,400 yen)

90 and

above

1,000 baht

(3,330 yen)

Social Welfare

Pillar 0: The Civil Servant Pension Scheme

?

Financial resources Coverage

Benefits

government officials who were employed before 27 March 1997 – around 4 million people.

Type of Scheme

a non-contributory defined benefit plan

• monthly payment for people who worked at least 25 years, or people who worked 10 years of service and are aged over 50.

• lump sum benefits for people who worked at least 10 years or one year of service and are aged above 50.

Social Welfare


?

Pillar 1: Social Security Fund (SSF)

Financial resources

Coverage

tripartite contributors from government (1% of salary), employers and employees (each 3% of salary but not above 450 baht, or 1,500 yen, per month as the salary base used to calculate must range between 1,650 and 15,000 baht or 5,500 yen to 50,000 yen)

Benefits

formal private sector employees(around 12 million people)

Type of Scheme

a mandatory defined benefit

Duration of

Contribution

Type of Benefit

Less than 12

months

Lump-sum consisting of the

employee’s contribution

only

12 months –

less than 180

months

Lump-sum consisting of the

employer and employee

contributions

180 months

(15 years) or

longer

Lifetime annuity

(retirement age 55 years)

Subsistent

Pillar 2: Government Pension Fund (GPF)

?

Financial resources CoverageContribution from civil servants (employees) and government (employers)

Benefits

civil servants who were employed after 27 March 1997(around 1 million people)

Type of Scheme

a mandatory defined contribution scheme

• monthly payment for people who work at least 25 years, or for people who work 10 years of service and are aged over 50.

• lump sum benefits for those working at least 10 years or one year of service and are aged above 50.

Sufficient

• A mandatory provident fund appropriate to formal workers that fit into Pillar 2 (add-on from SSF and PVD)

• The fund aims to cover employees in the private sector, temporary employees in the public sector and employees of State-Owned Enterprises

• Contribution from employers and employees is at least 3% of salary and will be increased to 5%, 7% and 10% within 10 years (wage ceiling at 60,000 baht, or 200,000 yen, per month)

• The members will receive a 20-year pension or lump-sum payments from the fund for a total amount equal to the balance of their individual accounts.

Pillar 2: Proposed National Pension Fund (NPF)Sufficient

Pillar 3: A voluntary defined contribution (1)

Provident Fund (PVD)

• An occupational pension established under an agreement between employers and employees

• The purpose is to offer retirement saving to employees

• Contribution from employees and employers which ranges from 2% to 15% of the salary for each employee

• Payment depends on each fund

Supplementary

National Savings Fund (NSF) • A new voluntary retirement saving program

• Introduced by the government in 2011 but started operating in 2015

• The Fund covers Thai citizens who are not covered by any pension schemes, especially informal workers

• Member qualification - Thai Nationals aged 15 – 60

• Contribution:Age of Member Co-contribution from the government

15 - 30 50% with a ceiling of 600 baht (2,000 yen) per year

30 - 50 80% with a ceiling of 860 baht (2,700 yen) per year

50 and above 100% with a ceiling of 1,200 baht (4,000 yen) per year

Pillar 3: A voluntary defined contribution (2)Supplementary

Pillar 3: A voluntary defined contribution (3)

Retirement Mutual Fund (RMF)• Long-term fund suitable for individuals earning

income in such forms as wages, salary, and freelance income

• Investors of the fund can be a member of a provident fund, government pension fund or otherwise wish to further enhance their current retirement saving

• Tax exemption up to maximum of 15% of the annual taxable income

Supplementary

2,0

70

,00

0

2,3

80

,00

0

2,5

75

,00

0

2,7

76

,00

0

2,7

33

,00

0

24

8,9

20

26

0,6

00

27

9,8

00

30

7,3

00

32

6,0

50

12.0

10.9 10.9 11.111.9

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2013 2014 2015 2016 2017

National Budget

Government's Budget for old-age

Government's Budget as percentage of National Budget

Budget Allocation for Old-Age

Percentage (%)Million baht

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2013 2014 2015 2016 2017

National Saving FundGovernment Pension FundGovernment PensionSocial Security Fund*Old Age Allowance

Million baht

Japanese Healthcare System

National Health Insurance (NHI)

Employees’ health Insurance

Late-State Medical Care System for the Elderly

01

02

03

Type 1Farmers, Self-employed individuals, non-regular employees, etc.(operated by municipalities and NHI

associations)

Type 2Retired person under employees’ health

insurance(operated by NHI associations)

Type 1

Employees of large companies(operated by health insurance society)

Type 2

Employees of small and medium companies(operated by Japan health insurance association)

Type 3- National public employees/Local public

employees/Private school teachers/staff (operated

by mutual aid association)

Elderly aged over 75 or aged 65-74 and certified as having

a specific disability(operated by Municipalities)

Defined contribution

pension plans (corporate

type)

Defined-benefit

corporate pension

Employees’ Pension

funds(Workplace-

oriented addition)

Mutual Aid Association

Pension(4.39 million subscribers)

(Substitution portion)

Japanese Pension system

Employees’ Pension (35.27 million subscribers)

National Pension (Basic pension)

Defined-contribution pension (individual type)

(0.18 million subscribers)

National’ Pension Funds (0.48 million subscribers)




(Self employed persons, etc.) (Private salaried workers) (Public officers, etc.)

(Dependent spouses of Category-2

Insured persons)

First layer

Category-1 Insured persons18.05 million 9.45 million39.67 million

67.18 million persons

Category-2 Insured persons, etc.* Category-3 Insured persons

Second layer

Third layer

01

02

03

As of the End of March 2014

Comparisons between Thailand and Japan

Healthcare System

Pension System

Fiscal Policy

Local Authorities Organizations (LAOs)

01 02 03 04 05

Reformation of Social Security

System

Japan- Started “Social Security System” after

World War II- In 1961, the government introduced

the “Universal Health Insurance System” and the “Universal (nationwide) Pension System”

- Strategies of the reformation - The New Gold Plan (1989)- The Angle Plan (1994)

- In 1973, the government introduced the “first welfare year”

- in 2000, the government launched “Long-Term Care Insurance Program”

Thailand- Started a kind of social security

system during King Rama V for civil servants only (government pension)

- Introduced the “Government Pension Fund” in 1997

- Social Security Scheme started in 1999 for private sector employees

- In 2002, the government introduced the “Universal Coverage Scheme (UCS) to cover those who had been outside of any public health security system

Reformation of Social Security System

Japan- Provides healthcare system

through “social insurance”

- Manages under “multiple healthcare system” that decided for different occupational class

- Ministry of Health, Labor and Welfare is an authority on national public health policy.

1. System

Thailand- Provides healthcare through the

“annual budget” (except SSS is social

security system)- Manages under “multiple healthcare

system” that is decided for different occupational class

- Healthcare system is supervised by different agencies:

- CSMBS by Ministry of Finance- SSS by Ministry of Labor- UCS by Ministry of Public Health

Healthcare System (1)

2. Financial Resource

Japan- “Multi-payer system” that is

attached to the social security system

- Financial resources come fromemployees, employers and the state

- The reimbursement of services is co-payment method

Thailand- “Single-payer system” for which

finances mainly come from the annual budget

- Financial resources come from annual budget

- The reimbursement of service is under conditions in each scheme(from its agencies)


3. Method of Payment to Healthcare Providers

Japan- Mostly get paid by “fee for

services” method- The cost of services will be revised

every two years by the Ministry of Health, Labor and Welfare

- MHLW defines the price of services and all citizens get the same standard of treatment

Thailand- Healthcare providers get paid by various methods:

- Fee for service for CSMBS- Capitation for SSS and UCS

- The cost of service depends on each agency:- CSMBS around 12,000 baht person (40,000 yen)

- SSS around 2,860 baht person (9,500 yen)- UCS around 2,200 baht per person (7,400 yen)

- Inequality among members of different groups


4. The role of private stakeholders

Japan- Play two significant roles in the public

healthcare system:(1) “healthcare providers” at the

different level of healthcare(2) “insurers”

-Insured persons may buy a “supplemental” healthcare insurance from private insurers to get minor additional benefits.

- All private hospitals are not-for-profit by law and play equally important roles as public hospitals

Thailand- Most private hospitals in Thailand are for-

profit hospitals- There are around 200 private hospitals

taking part in NHSO and approximately 80 private hospitals in SSS

- People who are able to buy additional health insurance and pay high premiumsby themselves prefer private hospitals


5. Budget Allocation

Thailand and Japan

- The Government allocated annual budget for the healthcare system from FY 2008 to FY 2017:- at 14% on average of the National Budget (Thailand) / General Account (Japan)- at 3% on average of GDP

- The world healthcare expenditure as percentage of GPD was at 10% in 2014


1. The system

Japan- Provides pension system through

the “social insurance”

- Operates under “multi-pillars or layers” of pension system that are suitable for different groups of member

- The system is compulsory:- National Pension is a Defined

Benefits Scheme- Employee’s Pension is a

Defined Contribution Scheme

Thailand- Provides pension system through both

“social insurance” and “annual budget” from government

- Operates under “multi-pillars or layers” of pension system that are suitable for different groups of member

- Combination of compulsory and voluntary systems:

- GPF is a Defined Contribution Scheme (Compulsory)

- SSF is a Defined Benefits Scheme (Compulsory)

- NSF is a Defined Contribution Scheme (Voluntary)

Pension System (1)

2. Financial Resource

Japan- Equal funding from premiums and

state subsidies- National Pension system

- Equal payments from premiums and government subsidies

- Employees’ Pension system- Payment from premiums

(government subsidy for administrative cost)

- Pay-As-You-Go

Thailand- Funding from annual budget, contribution- Old-age allowance scheme and government

Pension- funding from budget (Pay-As-You-Go)

- GPF - funding from annual budget (Fully-Funded)

- SSF - funding from contributions (Fully-Funded)

- NSF- funding from members and the

government (Fully-Funded)

Pension System (2)

Japan- 3% on average of General Account- 12% on average of GDP- Super-Aged Society

Thailand- 3% on average of national budget- 3% on average of GDP- Aging Society

3. Budget allocation

Pension System (3)

Japan- Implemented reforms

- increased the formal retirement age from 60 to 65 years for social security pension benefits

- employers are required to choose one of three options for employees who reach age 60:

- increase the retirement age to 65 years

- drop the mandated retirement age- introduce the “continued

employment system

Thailand- The formal retirement age is still at 60 years

old

- The government has tried to increase the retirement age for civil servants from 60 to 65 years old (still unsuccessful)

- SSF decided to increase the retirement age from 55 to 60 and increase the ceiling of contribution (coming soon)

4. Government Policy for Pension system

Pension System (4)

Japan- The government is currently implementing

“a comprehensive reform of social security and tax”

- Increased consumption tax from 5% to 8% in 2015 and plans to increase tax from 8% to 10% in 2019

- In 2017, the amount of increasing revenue will be 8.2 trillion yen

- 3.1 trillion yen or 38% will support basic pension system

- 3.3 trillion or 40% for reducing public debt in terms of ensuring the sustainability of the social security system.

Thailand- Establishing “extra budgetary funds”- “Thai Health Promotion Foundation”

- health promotion- funding from “surcharge excise

taxes” at 2% on tobacco and alcohol (limited at around 4,000 million baht per year)

- “Older person fund” - pension support for poor elderly

persons- funding from “surcharge excise

taxes” at 2% on tobacco and alcohol (limited at 4,000 million baht per year)

Fiscal Policy

Japan- Prefectures and Municipalities are

responsible for developing regional health plans for:

- cost containment- licensing hospitals- monitoring providers in row with the

central guidelines. - Each municipality established many

community centers at each middle or primary school district for elderly (65 years old and above) to easily access the needed services (Act Securing Hometown Medical and Long-Term Care)

- Local government in Japan plays almost no role in public pension

Thailand- There are complications between the

duties of the central government and LAO

- Several related laws from various agencies overlap regarding the

operation of programs- LAOs supervise old-age allowance for

elderly


UCS(50 million people)

SSS(12 million people)

CSMBS(5 million people)

Only UCS(62 million people)

Financial Resources- Insurance system- “Premium” from members and annual Budget

Expectation of

reformation

- Special scheme for

civil servants only, as

they are employers of

government

- The government

needs more time to

decide on an efficient

and sustainable system

for government officers

in the future.

ThaiHealth

Surcharge excise tax

from tobacco and

alcohol

Transfer money

(LAOs)- Old-Age allowance

- “Long-Term care for elderly”

Long-Term care for elderly

- Reduce fiscal burden- Prevent high fiscal risk in the

future- Sustainable system for long

term

Reimbursement- Capitation methodPayment method- “Co-payment” between member and government

designated national schemed

designated authority


NSF- For the 50 million citizens who cannot

participate in the GPF or SSF funds

- Voluntary scheme

GPF- 1 million of civil servants

- Compulsory Scheme

SSF- 12 million insured persons

- Compulsory scheme

Reformation

- Change to “Compulsory scheme”

- Reach all citizens(only 530,000 people have joined the NSF)

- Decide on an efficient and suitable

contribution between member and government

(Fully Funded principle)

- Prevent fiscal risk in the future

- Increase the retirement age from 55 years

old to at least 60 years old

- Increase the ceiling of contribution from

employers and employees as much as possible

(limited at 3% of salary and not higher than

750 baht per month)

- Increase the retirement age

of civil servants

- Provide more benefits to

civil servants who aim to

work after 60 years old

- Reduce the fiscal burden for the government- Prevent fiscal risk from the pension system for the government in the future- Create sustainable pension system in the long term

Expectation of

reformation


• Recommendations• Transparency issue about extra budgetary fund (tax

directly transfers to the fund)• needs an “independent organization” to monitor and

evaluate the performance of extra budgetary funds

• Needs more an efficiency of tax collection from agencies who are in charge of taxes

Fiscal Policy


“Tax policy” is a common tool for solving the problem of fiscal burden for the government

Japan- Increased consumption tax for

supporting the rapidly of social security system fiscal burden (5% in 2015 and will be 10% in 2019)

- The consumption tax will need to exceed 25% by 2050 to cover the amount accountable for national expenditures in social security system

Thailand- Uses “extra budgetary fund” to receive money from “surcharge excise taxes” on tobacco and alcohol to support both healthcare and pension system

• Thailand• The number of LAOs in Thailand is excessive and the scale of each organization is different• Tasks become complicate due to coordination between central government and LAOs under

several laws that are mandated by several agencies

• Japan • Local government plays a significant role in the healthcare system• Local government has authority to collect taxes by itself and supervise the healthcare

providers in its area


Conclusion and Policy recommendations

Recommendations- The government should allow LAOs to play a significant role in the social security system- Ministry of Interior (Supervisor of LOAs) should revise the laws to allow LAOs to collect more taxes by

themselves, such as taxes on natural resources in their area- The government should support LAOs becoming the center of long-term care for elderly by transferringsome money from “ThaiHealth”

Thailand can not avoid becoming an aged-society

Final Conclusion

The government needs to:- take a responsibility for budget allocation to support the healthcare and pension systems - implement efficient fiscal policies and other related policiesThai citizens need to

prepare themselves by:- having a good health- saving money to live adequately after retirement

Financial literacy is necessary for Thai citizens to understand more how to prepare an adequate pension after retirement

case study from japan · 15 -30 50% with a ceiling of 600 baht (2,000 yen) per year 30 -50 80% with...

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