Fiscal Policy for a Sustainable Healthcare and Pension System

in Thailand under an Aging Population:

Case Study from Japan

Supanun Chumjai1

Visiting Scholar

Policy Research Institute, Ministry of Finance, Japan

1 The views and opinions expressed in this paper are those of the author’s and do not necessarily reflect the views and opinions of the Fiscal Policy Office, Ministry of Finance, Thailand or Policy Research Institute.

2

Contents

ABSTRACT 5

LIST OF ABBREVIATIONS 6

LIST OF FIGURES 7

LIST OF TABLES 9

CHAPTER I: INTRODUCTION 9

1.1 Paper Objective 9

1.2 A Summary Review of the Aging Population in Thailand and Government Policies 10

CHAPTER II: LITERATURE REVIEW 12

CHAPTER III: THAILAND HEALTHCARE AND PENSION SYSTEM 14

3.1 Thailand Healthcare System 14

3.1.1 Civil Servant Medical Benefit Scheme (CSMBS) 15

3.1.2 Social Security Scheme (SSS) 16

3.1.3 Universal Coverage Scheme (UCS) 17

3.2 Thailand Pension System 20

3.2.1 Pillar 0: “A non-contributory pillar” 22

3.2.2 Pillar 1: “A mandatory defined benefit pillar” 23

3.2.3 Pillar 2: “A mandatory defined contribution pillar” 24

3.2.4 Pillar 3: “A voluntary defined contribution pillar” 24

3.2.5 Proposed National Pension Fund (NPF) 26

CHAPTER IV: JAPAN HEALTHCARE AND PENSION SYSTEM 27

4.1 Japan Healthcare System 27

4.1.1 National Health Insurance 28

4.1.2 Employees’ Health Insurance 29

4.1.3 Late-state Medical Care System for the Elderly 30

4.2 Japan Pension System 33

4.2.1 National Pension Insurance 33

3

4.2.2 Employees’ Pension Insurance 35

4.2.3 Voluntary Pension Insurance 37

4.2.4 Public Assistance System 39

CHAPTER V: THE COMPARISON BETWEEN THAILAND AND JAPAN 40

5.1 Reformation of Social Security System 40

5.2 Healthcare System 41

5.2.1 The System 41

5.2.2 Financial Resource 42

5.2.3 Method of Payment to Healthcare Providers 42

5.2.4 The Role of Private Stakeholders 43

5.2.5 Budget Allocation 43

5.2.6 Summary 45

5.3 Pension System 48

5.3.1 The System 48

5.3.2 Financial Resource 49

5.3.3 Budget Allocation 49

5.3.4 Government Policy for the Pension System 51

5.3.5 Summary 51

5.4 Fiscal Policy 55

5.5 Local Authorities Organizations (LAOs) 56

CHAPER VI: CONCLUSION AND POLICY RECOMMENDATION 57

6.1 Healthcare System 57

6.1.1 The National System 57

6.1.2 Administration and Management 58

6.1.3 Financial Resources 60

6.1.4 The Role of Private Stakeholders 61

6.2 Pension System 61

4

6.2.1 The System 61

6.2.2 Financial Resources 62

6.3 Fiscal Policy 64

6.4 Local Authorities Organizations (LAOs) 64

REFERENCES 66

5

ABSTRACT

Given the rapid increase in elderly citizens, Thailand is going to become an “aged society” by 2030. Therefore,

it is obvious that Thailand will face many challenges. In terms of policy, the Ministry of Finance should

understand what kinds of problems await the country under this situation, what is needed to deal with these

problems, and what kind of policies and strategies are needed to efficiently maximize the competitiveness of

the country. The objectives of this paper are to learn how to create efficient policy which provides benefits for

both of senior citizens and the Thai government by learning from the experience of the Japanese government

and to suggest efficient and sustainable policies to the Thai government that will help to manage the budget for

the healthcare and pension system, which will ultimately prevent the government’s fiscal risk in the future. This

paper also studies the Japanese Healthcare and Pension system, for which all data and information come from

the Ministry of Health, Labour and Welfare and Budget Bureau. Comparisons for significant issues such as the

management and financial resources for the Japanese and Thai Healthcare and Pension systems show that the

Thailand government should reform some schemes of its Healthcare and Pension system to prevent a huge fiscal

burden from arising due to the aging population. However, besides making efficient and sustainable fiscal

policies and other related policies, the government should be a leader in educating people about financial

literacy. Thailand’s citizens also need to prepare themselves by maintaining good health and saving money to

live adequately after their retirement.

6

LIST OF ABBREVIATIONS

AMCs Asset Management Companies

CGD Comptroller General’s Department

CSMBS Civil Servant Medical Benefit Scheme

DRGs Diagnosis Related Groups

EPI Employees’ Pension Insurance

GPF Government Pension Fund

IMF International Monetary Fund

MAAs Mutual Aid Association

MoPH Ministry of Public Health

NHA National Health Assembly

NHC National Health Commission

NHCO National Health Commission Office

NHI National Health Insurance

NHSO National Health Security Office

NPF National Pension Fund

NSF National Saving Fund

PVD Provident Fund

RMF Retirement Mutual Fund

SSF Social Security Fund

SSO Social Security Office

SSS Social Security Scheme

UCS Universal Coverage Scheme

7

LIST OF FIGURES

Figure 1: CSMB’s Actual Expenses as a Percentage of National Budget 15

Figure 2: SSS’s Budget as a Percentage of National Budget 17

Figure 3: MoPH’s Budget as a Percentage of National Budget 18

Figure 4: Government Budget for the Elderly as a Percentage of National Budget 21

Figure 5: Pension System in Thailand 22

Figure 6: Structure of the Long-Term Care Insurance System 31

Figure 7: Government Budget for the Healthcare System of National Budget 32

Figure 8: Government Budget for the Long-Term Care System of National Budget 32

Figure 9: Japanese Pension System 33

Figure 10: Government Budget for Pension System of National Budget 37

Figure 11: Healthcare's Budget as a Percentage of National Budget (Thailand) 44

Figure 12: Healthcare's Budget as a Percentage of GDP (Thailand) 44

Figure 13: Healthcare and Long-Term Care's Budget as a Percentage of National Budget (Japan) 44

Figure 14: Healthcare and Long-Term Care’s Budget as a Percentage of GDP (Japan) 44

Figure 15: Government Budget for the Elderly as a Percentage of National Budget (Thailand) 50

Figure 16: Government Budget for the Elderly as a Percentage of GDP (Thailand) 50

Figure 17: Pension’s Budget as a Percentage of National Budget (Japan) 50

Figure 18: Pension’s Budget as a Percentage of GDP (Japan) 50

8

LIST OF TABLES

Table 1: Thailand’s Population Projections over 30 years from 2010-2040 10

Table 2: Brief Characteristics of Three Main Healthcare Schemes in Thailand 19

Table 3: Government Budget on Elderly Income Security for FY 2013 to 2017 21

Table 4: Old Age Allowance (Baht) 22

Table 5: Pension Calculation 23

Table 6: The Benefit for an Insured Person Base on Duration of Contribution 24

Table 7: The Ceiling of Co-contribution from the Government by Age 25

Table 8: Summary of National Health Insurance 28

Table 9: Summary of Employees’ Health Insurance 29

Table 10: Summary of Late–State Medical Care System for the Elderly 30

Table 11: Summary of National Pension (As of the end of March 2014) 35

Table 12: Summary of Employees’ Pension Insurance (As of the end of March 2014) 36

Table 13: The break-down by age, Public Assistance Recipients (2010) 39

Table 14: Comparison the Type of System between Thailand and Japan in each group 45

Table 15: Comparison the Type of Organization between Thailand and Japan in each group 46

Table 16: Comparison the Pension System between Thailand and Japan in each group 52

Table 17: Comparison the Organization of Pension System between Thailand and Japan 53

9

CHAPTER I: INTRODUCTION

1.1 Paper Objective

At present, demographic change in Thailand is an issue of significant interest, as an aging society will

have massive implications for public finance. According to Bloomberg Visual data, Thailand is ranked the third

most speedily aging population in the world (behind South Korea and Japan). The number of people aged over

60 in Thailand will increase from 8.4 million in 2010 to 20.5 million in 2040, and the number of people aged

over 80 will increase from 1 million to 4 million during the same period. Along with this rapid increase of

elderly citizens, it is obvious that Thailand will face many challenges. In terms of policy, the Ministry of Finance

should understand what kinds of problems await the country, what is needed to deal with these problems, and

what kind of policies, especially fiscal policies, and strategies are needed to efficiently maximize the

competitiveness of the country

Since Japan has been faced with this situation for a decade, Japan is one of the good models for Thailand

to study regarding how the government manages the budget and tax policy to handle an aged society. According

to a document issued by the Japanese government, the government started taking care of older people by

enacting a special law in 1973, and the government has launched many programs since then. Therefore, it can

be said that the Japanese government has aggregated sufficient experience to deal with an aged society, for

which some programs are successful and others were not. Based on these experiences, Japan has been

developing an efficient law to provide sustainable long-term benefits for senior citizens. Furthermore, the

Japanese government also has sufficient tools to control the fiscal risk through budget management and tax

policies. As a result, Japan has been and will be the role model for other countries wishing to study how to deal

with an aged society.

The objective of this study is to learn how to create efficient law that provides efficient benefits for

both senior citizens and the Thai government. This objective is pursued by examining the many policies and

programs conducted by the Japanese government and suggesting efficient and sustainable policies to the Thai

government to help manage the budget for healthcare and the pension system, which will control the

government’s fiscal risk in the future.

10

The result of this study may contribute to the suggestion of efficient and sustainable policies for the

Thai government that may help to handle problems in an aged society and to manage the fiscal risks that come

with such a society.

1.2 A Summary Review of Aging Population in Thailand and Government Policies

Thailand’s number of older people has been growing recently. According to the Office of the National

Economic and Social Development Board of Thailand (see table 1), the number of people aged 60 and over was

only 8.4 million, or 13% of the population in 2010. However, by 2040, Thailand’s aging population is expected

to increase to 20.5 million, accounting for 32% of the population. This means that out of every four Thais, one

person will be a senior.

Table 1: Thailand’s Population Projections over 30 years from 2010-2040

Population by Age (millions) Percentage (%)

Year 0 - 14 15 - 59 60 and over Total 0 - 14 15 - 59 60 and over Total

2010 12.6 42.7 8.4 63.7 19.8 67 13.2 100

2020 11.1 42.2 12.6 65.9 16.8 64.1 19.1 100

2030 9.8 38.7 17.5 66.0 14.8 58.6 26.6 100

2040 8.1 35.1 20.5 63.7 12.8 55.1 32.1 100 Source: Office of the National Economic and Social Development Board of Thailand as of September 20th, 2017

In terms of care and support for older people, the data collected for the Situation of Older People in

Thailand report in 2007, which was revised again in 20112, showed that the well-being of the Thai older people

has continued to develop. The number showed that only 15% of persons 60 and over mentioned that they need

some assistance with their daily living activities; at age 75 and over, many people required more care and support

from their family. However, these statistics do not account for the fact that 50% of older people do not have a

child living in the same house or same area and 16% do not have living children. Moreover, the report showed

that 75% of Thai elderly are satisfied with their financial status. In fact, 33% of older people still work daily 2 Knodel, John and Napaporn Chayovan, 2013. “The Changing Well-being of Thai Elderly: An Update from the 2011 Survey of Older Persons in Thailand.” HelpAge International.

11

and 90.3% of them work in at least an informal manner. Another source of elderly income comes from

government pension, or old age allowance, and from their family.

Regarding government policies relating to older people, the Thai government established the “National

Committee of Senior Citizens”, and now the government’s current policies and programs are following with the

second National Plan for Older Persons, which started in 2002 and will conclude in 2021. The National Plan

focuses on the development of policies and efficient programs to support the elderly. At present, there are some

successful program activities from the plan, such as the program for promoting a positive attitude toward elderly

people, the program of promoting health for the elderly, and the program of social protection of the elderly.

Although the plan is being successfully implemented, the government still needs to be a leader to encourage

cooperation from all participating sectors and to achieve the plan.

In addition, the government has been concerned about the healthcare and pension system for older

people. For example, the government launched the universal coverage policy on health care finance to cover the

22% of the total population that was not covered by any kind of healthcare scheme in 2011. In terms of a pension

system, in 2009, the government established the social pension policy called “the old age allowance”, which is

financed from the annual budget through the Ministry of Interior. This scheme provided a secure income for

older people. Even though the sum is not too high, the pension does serve its function as a social protection

mechanism because it is a dependable source of income regardless of a person’s economic condition. Moreover,

the Thai government has launched many schemes for supporting older people with their healthcare and pension

system. There are some different conditions and benefits for each scheme, and this paper elaborates on those

details in a later section.

In terms of projecting the fiscal burden of elderly citizens, the IMF’s technical assistance report in 2015

suggested that Thailand is facing the steep demographic transition and therefore could have important fiscal

implications through its impact on age-related public spending. The projection models on public pension and

health spending that the Ministry of Finance can use to monitor and evaluate the public pension and health

systems on an ongoing basis. However, the IMF mentioned that there are several schemes from both the pension

and health systems which are not yet well understood. Also, a comprehensive assessment of the fiscal burden

12

of public pension and health systems for the medium and long term is urgently needed. Moreover, the IMF

mentioned that in order to project the fiscal burden away from public pension and health systems, a good model

is needed.

In addition to Thailand, other developing countries should also be concerned about this issue.

According to the Report “Live Long and Prosper: Ageing in East Asia and the Pacific, 2016” from the World

Bank, both Thailand and other developing countries are “getting old before getting rich”, which means the

capability of the government to manage the speedily-aging population is more constrained than more developed

countries, where the population grew rich while their working age populations were still growing. Moreover,

the report showed that two thirds of Thais expected that the government will be their primary fund of financial

support in old ages. Further, the report suggested that Thais should understand the situation; the rapid aging of

the population is not just about old people, it concerns everybody. The government must think about a broad

range of policy reforms. For example, the government should consider the policy related to how families decide

how many children to have and strengthen public support for child care and a work-life balance for parents.

Moreover, policy reform will be needed to ensure that social security, health and long-term care systems achieve

wide coverage and adequate financial protection for the elderly, while ensuring that public spending remains

sustainable.

II. LITERATURE REVIEW

The United Nation (2001) uses above 60 years to refer to the elderly and categorizes a country’s level

of aging population into three levels as follows:

1) “Ageing Society” refers to a society or country where the population of 60 years old and above is

higher than 10% of the total population or a society or country where the population of 65 years old and above

is higher than 7% of the total population.

2) “Aged Society” refers to a society or country where the population of 60 years old and above is

higher than 20% of the total population or society or country where the population of 65 years old and above is

higher than 14% of the total population.

13

3) “Super-aged Society” refers to a society or country where the population of 65 years old and above

is higher than 20% of the total population.

Thailand’s projected population (from table 1) and the level of the aging population by the UN revealed

that Thailand is going to be an “Aged Society” in 2030. Therefore, management of the aging society and policy

guidelines are required in Thailand. According to Sunward (2015), Thailand’s preparation for an aging society

in accordance with the government’s strategy to create good quality old age population together with the

creation of improvement social security system for the elderly has not yet fulfilled the objective from the 2nd

National Plan (2001-2021). However, in the past 5 years, welfare for the elderly has been continuously

mobilized through government policy at a national level. A significant example is the promotion of saving for

old age by the National Saving Fund Act B.E. 2554, which officially came into force on 20th August 2015.

Moreover, Suwanrada (2015) estimated the overall fiscal burden for the government under different pension

schemes and concluded that in 2017, accumulated fiscal burden will be around 266,760 million baht, which will

increase to around 473,439 million baht in 2040 or approximately 3.69% per year on average.

In terms of policy implementation, Sakunpanit (2012) emphasized analyzing the source of finances and

methods used to raise money by the elderly in terms of efficiency, fiscal impacts and fiscal sustainability in the

implementation of various policy alternatives. Sakunpanit pointed out that the fiscal burden for the government

from the UCS scheme will increase due to the aging population. Therefore, if the government believes that the

national health security is in need, “an increase in tax imposition and revision of the contribution of the UCS

scheme” is suitable fiscal restructuring that will offer accessible healthcare provision for all. In addition, the

government should examine the possibility of restructuring the management of pension funds and fiscal

sustainability under different systems as well.

In addition, it’s obvious that the government will face a fiscal burden due to Thailand becoming a more

aged society. However, the government should not be the only ones ready for that situation; the elderly should

prepare themselves for the situation as well. Yodying & Suppanuta (2015) stated that Thailand cannot avoid

being an aged society in the future, and therefore the government should increase elderly involvement in

preparing for health and well-being into older age by promoting health, training healthcare providers, and

supporting income security, social protection and poverty prevention. In addition, the government should

14

develop a supportive environment focusing on care givers and develop a positive image of aging. In order to

succeed at all of the above, the efforts should be implemented through partnership with national and provincial

government as well as community based organizations.

Furthermore, the source of income for older people is a significant point, and the government will need

to develop an efficient policy to provide a source of income. According to Knodel, Prachuabmoh, & Chayovan

(2015), who cited an update based on the 2014 Survey of Older Persons in Thailand, 40% of older persons

worked during the prior 12 months; this is a slight decrease from 2011 but above the levels reported in the 1994

and 2002 surveys. The clear majority (85%) of persons 60 and older received the government Old Age

Allowance in 2014, up from 81% in 2011; these high levels reflect the transformation of the program in 2009

into a universal social pension. Although almost 80% of older persons received some income from their

children, only 37% reported children as their main source of income, down from 40% in 2011. For 15%, the

Old Age Allowance was their main source of income in 2014, up modestly from 11% in 2011. Therefore, it is

quite obvious that older people currently rely on the Old Age Allowance from the government more than in the

past. Although the amount of the Old Age Allowance is small, it is still a significant source of income for older

people. The government should perhaps allocate a greater amount of their budget to support an increase in the

allowance that will be sufficient for old people to have a good quality of life.

CHAPTER III. THAILAND HEALTHCARE AND PENSION SYSTEM

3.1 Thailand Healthcare System

There are currently three main healthcare schemes in Thailand provided by the government: the Civil

Servant Medical Benefit Scheme (CSMBS), which is organized by the Comptroller General’s Department

(CGD) under the Ministry of Finance, the Social Security Scheme (SSS), which is organized by the Social

Security Office (SSO) under the Ministry of Labour, and the Universal Coverage Scheme (UCS), which is

organized by the National Health Security Office (NHSO) under the National Health Security Board and chaired

by the public health minister from the Ministry of Public Health (MoPH). Moreover, there are other public

health insurance schemes managed by state enterprises to provide healthcare coverage to their employees.

15

3.1.1 Civil Servant Medical Benefit Scheme (CSMBS)

Government employees and their dependents are covered under the CSMBS scheme starting from the

beginning of employment. There are two types of reimbursement: direct payment and indirect payment. If

patients register for the direct payment system at a public hospital, public hospitals can claim all expenses

through the CSMBS. On the other hand, if the patients do not register for direct payment at a public hospital,

the patients should reimburse through their affiliated office. However, service cost reimbursement at private

health facilities is limited and only for accidents or life-threatening emergencies.

In terms of budget allocation, the government allocates to this scheme about 60,000 million baht every

fiscal year, at 12,000 baht per person for 5 million people. However, the actual expense of CSMBS was actually

higher than the annual budget for most years. From FY 2013 to FY 2017, the government disbursed the actual

expense for CSMBS at 66,466, 59,772, 62,353, 71,036 and 73,870 million baht, respectively3. Therefore, it is

obvious that the annual budget for the CSMBS does not completely cover the actual expenses, and the

government must use money from the Central Fund to support CSMBS (see figure 1).

Figure 1: CSMBS’s Actual Expense as Percentage of National Budget Million Baht Percentage (%)

3 Collected by Fiscal Policy Bureau, Fiscal Policy Office. As of September 20th, 2017

1,835

,000

1,700

,000

2,070

,000

1,700

,000

2,070

,000

2,380

,000

2,575

,000

2,776

,000

2,733

,000

61,72

3

62,39

8

61,84

4

61,58

7

66,46

6

59,77

2

62,35

3

71,03

6

73,87

0

3.4 3.7

3.0

3.6

3.2

2.5 2.4 2.6 2.7

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

-

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 Expense CSMBS's Actual Expense as Percentage of National Budget

16

3.1.2 Social Security Scheme (SSS)

Launched in 1990, the SSS is a compulsory insurance scheme for employees in the private sector. The

scheme only covers the employees themselves, and its inpatient and outpatient services are provided through

both private and public hospitals. The SSS payment mechanism operates on a capitation basis, and copayments

are added for some necessary but expensive services. Its source of funds comes from employees, employers,

and the government. Under the SSS scheme, restrictions are applied. Health benefits under the SSS scheme

begin after 3 months of contributions and the benefits continue for up to 6 months after unemployment.

Employees receive protection benefits under a total of seven circumstances,: illness or accident,

physical disability, death not related to performance of work, child delivery, old age, child assistance, and

unemployment. In terms of contribution from the government, the budget is allocated to the SSS through the

Social Security Fund (SSF) every fiscal year. From FY 2013 to FY 2017, the government disbursed the budget

for SSF as 30,920, 24,899, 27,992, 28,049 and 41,464 million baht, respectively4. The number of SSS members

was approximately 10.33 million people in 2016, which means the budget for each person was about 2,860 baht.

The government will allocate the budget to the SSS depending on its policy and economic situation at that time.

For a decade, the government has spent around 1.2 % of the national budget on the healthcare and pension

system through the SSS (see figure 2). However, as a contributor under the law, the government allocates a

budget to the SSS less than the stated amount. As a result, the government debt to the SSS is 74,500 million

baht, as of March 2017.

4 Budget in Brief, Bureau of Budget FY 2013 to FY 2017

17

Figure 2: SSS’s budget as Percentage of National Budget

Million baht Percentage (%)

Source: Budget Bureau (FY 2003- FY 2017), Thailand

3.1.3 Universal Coverage Scheme (UCS)

The National Health Security Office (NHSO) is a public organization under the Ministry of Public

Health (MoPH) and was established in 2002. NHSO’s responsibility is to create health security for every Thai

citizen, whereby “every person born as Thai should feel secure irrespective of being sick or healthy.” NHSO

operates the “Universal Coverage Scheme” (UCS), which is responsible for developing a service system that is

easy to access, an effective information system for communications, an evidence-based system of health care

delivery and that enables the freedom to choose a registration facility in accordance with one’s personal

preferences for convenience and necessity.

The UCS is the product of a long string of efforts to improve equity in health. Under this scheme, all

Thais who are not the member of the CSMBS or SSS are eligible to enroll by registering with a contracting unit

(a district healthcare provider network). Once registered, an individual will receive a gold card that entitles them

to free care at health centers in their home district and other contracted hospitals, plus referrals to provincial or

tertiary care hospitals in urban areas. Moreover, members are entitled to a comprehensive benefits package,

1,660

,000

1,835

,000

1,700

,000

2,070

,000

1,700

,000

2,070

,000

2,380

,000

2,575

,000

2,776

,000

2,733

,000

21,59

0

22,79

8

17,22

8

23,48

9

11,16

5

30,92

0

24,89

9

27,99

2

28,04

9

41,46

4

1.3 1.2

1.01.1

0.7

1.5

1.0 1.1 1.0

1.5

0.00.20.40.60.81.01.21.41.6

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget SSS's Budget SSS's Budget as percentage of National Budget

18

which provided similar coverage to the pre-existing health insurance schemes and was recently extended to

cover more expensive services.

In terms of funding, the UCS was mostly financed by income taxes, so it was proportionately more

heavily funded by the rich than the poor people. Primarily, users paid a co-payment of 30 baht per visit.

However, collection of the co-payments ultimately cost more than the revenue it generated. The UCS budget,

determined by the number of beneficiaries multiplied by a standard per-person rate, also increased in absolute

and per capita terms. In FY 2003, the government allocated a budget of 27,138 million baht to the USC; by FY

2017, this amount had increased to 123,466 million. The proportion of the USC budget is about 4% of the

national budget, on average. The number of USC members was approximately 50 million people in 2016, which

means the budget was around 2,220 baht for each person.

In addition, other than budget allocation to NHSO directly, the government also allocates budget to

MoPH to operate other agencies under the NHSO, such as the Department of Medical Service, the Department

of Health Service Support, and the Department of Health. The total budget from FY 2013 to FY 2017 was

99,788, 106,103, 109,658, 123,542 and 130,764 million baht, respectively5. The government spends around 9%

of the national budget for the healthcare and pension system through NHSO and MoPH each year (see Figure

3).

5 Budget in Brief, Bureau of Budget FY 2013 to FY 2017

19

Figure 3: MoPH’s Budget as a Percentage of the National Budget Million baht Percentage (%)

Source: Bureau of the budget (FY 2003- FY 2017)

Since there are three main healthcare schemes (see Table 2) in Thailand, there are many questions about

the differences among the schemes, such as the budget from the government for each person, the benefit from

each package, and the method of claim or reimbursement. However, it can be explained that CSMBS is the

welfare that the government provides for its employees. Therefore, 100% of the funding comes from the

government. On the other hand, the SSS is social welfare for which 3 parties, the government, employers and

employees, contribute to with funds. UCS is a national welfare programs for all citizens who are not civil

servants and cannot join the SSS; like CSMBS, UCSi is 100% financed from the government. However, to

sustain all three healthcare systems due to the aging population will be very challenging for the government.

Some schemes should be reformed, and the government should seriously concern itself with minimizing fiscal

risk in the future.

Table 2: Basic Characteristics of the Three Main Healthcare Schemes in Thailand

Employment Contributions, Coverage

Entry Condition (s)

Health Insurance

Scheme

Type of Payment

Benefit Package

Claim, Reimbursement

Related Organizations

or Systems Notes

Government employees and their dependents (parents,

- Government - Membership is 5 million people

- CSMBS - Fee-for-service - Diagnostic related-

OP and IP services at any public healthcare facilities,

1. When direct payment was set up, hospital claims through the CSMBS

1. Hospitals 2. Central office of Health Information (CHI)

Service cost reimbursement at private health facilities is limited and

1,660

,000

1,835

,000

1,700

,000

2,070

,000

1,700

,000

2,070

,000

2,380

,000

2,575

,000

2,776

,000

2,733

,000

141,8

34

152,5

93

161,0

10

187,9

63

199,3

70

208,5

33

221,2

80

224,6

22

246,5

51

254,2

30

9 8 9 9

12 10 9 9 9 9

-

2

4

6

8

10

12

14

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget MoPH's and UCS's budget MoPH's and UCS'S budget as percentage of national budget

20

Employment Contributions, Coverage

Entry Condition (s)

Health Insurance

Scheme

Type of Payment

Benefit Package

Claim, Reimbursement

Related Organizations

or Systems Notes

spouse and up to 3 children < 21 years old.)

(approximately 7.5 % of total population)

Group (DRG) method for inpatient (IP) - Per item with ceiling for outpatient (OP)

except for health promotion and disease prevention (PP) services

2. Without direct payment setup, the patients can get reimburse through their affiliated office.

3. CSMBS 1. Patients 2. Patients’ affiliated office 3. GFMIS system 4. CSMBS

only for accident or emergency threaten to life.

Formal private employees

- Government, Employers, And Employees - Membership is 12 million people (approximately 17.5% of total population)

>= 3-month Of contributions, and up to 6- month after unemployed Less than 7-month of Contributions Within the first 3-month of contributions

SSS

UCS

- Capitation - DRG method with global budget for IP

OP and IP services at main contractor or subcontractors, or refer as needed, except for PP services

1. No reimbursement for basic package included in capitation. 2. reimbursement for IP and additional vertical programs 3. patient reimburses for emergency services out of service network.

1. Hospitals 2. SSO provincial branch office 3. SSO 1. Patients 2. SSO provincial branch office 3. SSO

Service cost reimbursement at private health facilities is limited and only as needed.

Unemployed, or another informal sector workers

- Government - Membership is 50 million people (approximately 75% of national population) + nonregistered qualified citizens (2%)

Does not have any other government health benefit.

UCS - Capitation - DRG method with global budget for IP

- OP and IP services at primary care contractors, or refer as need - Health promotion and disease prevention (PP) programs for all citizens

1. No reimbursement for basic package included in capitation. 2. Reimbursement for IP and additional vertical programs

1. Hospitals 2. Central office of Health Information (CHI) on some vertical programs 3. The ministry of public health (MOPH) on PP programs 4. National Health Security Office (NHSO)

When they are eligible to UCS, the first service is covered and register is requited at the Health facilities. (only registered UCS are count for government budget allocation.)

Source: Journal of the Thai Medical Informatics Association, 2015

3.2 Thailand Pension System

As mentioned above, Thailand is dealing with a rapidly growing population of older persons. Therefore,

the Thai Government has allocated funds from the annual budget to provide old-age income security to elderly.

As can be seen from Table 3, the government budget for old-age income security has increased each year from

All claims and reimbursements are managed under the UCS scheme claim

UCS for

Pregnancy

UCS

21

FY 2013 to 2017. It can also be noted that the government budget on old-age is around 11.4% on average as

percentage of national budget (see Figure 4).

Table 3: Government Budget on Old-Age Income Security for FY 2013 to 2017

Scheme 2013 2014 2015 2016 2017 Old Age Allowance 58,500 56,500 57,000 58,000 59,000 Social Security Fund* 30,920 24,900 28,000 27,000 41,400 Government Pension 124,000 132,200 149,500 175,700 179,000 Government Pension Fund 35,000 47,000 45,300 46,000 46,000 National Saving Fund 500 - - 600 650 Total (Million baht) 248,920 260,600 279,800 307,300 326,050

Source: Bureau of Fiscal policy, Fiscal Policy Office as of October 1st, 2016

Note: for 7 circumstances, namely: illness or accident; physical disability; death not related to performance of work; child delivery; old age, child

assistance and unemployment

Figure 4: Government Budget for Old-Age as Percentage of National Budget Million baht Percentage (%)

Source: Bureau of Fiscal Policy, Fiscal Policy Office as of October 1st, 2016

In Thailand, the current pension system is comprised of 4 pillars, namely a non-contributory pillar, a

mandatory defined benefit pillar, a mandatory defined contribution pillar, and a voluntary defined contribution

pillar (see Figure 5)

2,070

,000

2,380

,000

2,575

,000

2,776

,000

2,733

,000

248,9

20

260,6

00

279,8

00

307,3

00

326,0

50

12.0 10.910.9 11.1 11.9

10.0

10.5

11.0

11.5

12.0

12.5

-

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

22

Figure 5: Pension System in Thailand

Source: Bureau of Saving and Investment Policy, Fiscal Policy Office as of September 20th, 2017

3.2.1 Pillar 0: “A non-contributory pillar”

Old Age Allowance - the scheme is a non-contributory social protection which aims to

guarantee basic income for Thai citizens aged 60 and above. Persons qualified to receive the allowance are Thai

elderly who do not receive pensions from the central and local government, thereby excluding civil servants

who receive pensions from the central or local government. The amount of this allowance depends on the age

of the recipient as follows:

Table 4: Old Age Allowance (Baht)

Age Allowance per Month 60-69 600 70-79 700 80-89 800

90 and above 1,000 Source: Ministry of Social Development and Human Security as of September 20th, 2017

23

The Civil Servant Pension Scheme - the scheme is a non-contributory defined benefit plan

for government officials (5 million people) and financed out of government budget allocation. Under the Civil

Servant Pension Scheme, government officials are entitled to receiving a pension in the form of a monthly

payment, provided that they have at least 25 years of service, or 10 years of service if aged over 50. For other

cases, the government official will receive lump sum benefits after working at least 10 years or one year of

service if aged above 50.

There are two types of pension calculations for the government officials. One is for the old Civil

Servant Pension Scheme, which is for civil servants entering service before 1997. The second one is for the new

Civil Servant Pension Scheme, which is for civil servants entering service after 1977 (see Table 5).

Table 5: Pension Calculation

Type Pension Calculation Old Civil Servant Pension Scheme (Government Pension)

Monthly Pension = Last month salaries * official term (years) / 50 The amount of monthly pension shall not exceed 100% of last month’s salary

New Civil Servant Pension Scheme (Government Pension Fund)

- Monthly Pension = Average salaries for the last 60 months * the official term (years) / 50 The amount of monthly pension shall not exceed 70% of the average salaries for the last 60 months - Lump-sum payment (Gratuity) = Salary of the last month * the official term (years)

Source: Government Pension Fund as of September 20th, 2017

3.2.2 Pillar 1: “a mandatory defined benefit pillar”

Social Security Fund (SSF) – the fund was established in 1990 under the Social Security Fund Act

B.E. 2532 (1990). SSF covers formal sector private employees (12 million people). Employers and employees

are both mandated by law to make contributions to the fund. In terms of financing, the scheme is financed by

tripartite contributors which are government (1% of salary), employers and employees (each 3% of salary but

not above 450 baht per month, as the salary base used to calculate must range between 1,650 and 15,000 baht).

24

An insured person will receive a lump-sum payment or a pension paid monthly when they retire at 55 years old

for a life time. The monthly payment depends on the duration for each insured person has contributed as follows:

Table 6: The benefit for an insured person based on duration of contribution

Duration of Contribution Type of Benefit Less than 12 months Lump-sum consisting of the employee’s contribution only 12 months to less than 180 months Lump-sum consisting of the employer and employee contributions 180 months (15 years) or longer Lifetime annuity

- Monthly pension = 20% * average salary for the last 60 months and increase by 1.5% * average salary for every year that the insured person made contribution beyond 15 years. Or Monthly pension = (20%+1.5%* (years of contribution – 15)) * average salary for the last 60 months.

Source: Bureau of Saving and Investment Policy, Fiscal Policy Office as of September 20th, 2017

3.2.3 Pillar 2: “A mandatory defined contribution pillar”

Government Pension Fund (GPF) – the fund is a defined contribution fund established on March

27th, 1997 under the Government Pension Fund Act B.E. 2539 (1996). The scheme is a mandatory defined

contribution plan for civil servants who were employed after March 27, 1997. Other civil servants who were

employed before that time can choose whether or not to apply to become a member of the fund. Members are

required to contribute 3% of their salaries every month; the government, as their employer, adds the same

amount to the fund. Members can also make a higher contribution of up to 15% of their salary. The number of

the members as of 31 December 2016 was around 1 million people6.

3.2.4 Pillar 3: “A voluntary defined contribution pillar”

(1) Provident Fund (PVD) – the fund is an occupational pension and established under an

agreement between employer and employees for the purpose of offering retirement saving to employees. When

6 Government Pension Fund annual report of 2016

25

the fund is set up, employer and employees both are required to make contributions together which range from

2% to 15% of the salary in each employee.

In terms of termination, it comes about by either one of three factors: retirement at 55 or older as

stipulated in the governing rules, resignation, or death. When membership is determined, members are entitled

to a full amount of benefit package in accordance with the fund article. In addition, portability among provident

funds and installment payments are allowed by law.

(2) National Saving Fund (NSF) – the fund is a new voluntary retirement saving program which

was introduced by the government in 2011 (beginning operations in 2015). It is intended to cover Thai citizens

who are not covered by any other pension schemes, particularly informal workers. In terms of membership,

Thai Nationals aged 15–60 are eligible to become a member of NSF. Under the scheme, members can contribute

from 50 to 13,200 baht per year. The government will be a co-contributor in this scheme together with members,

depending on the amount of (members) contribution and age with a ceiling as follows:

Table 7: The ceiling of co-contribution from the government by age

Age of Member Co-contribution from the government 15 - 30 50% with a ceiling of 600 baht per year 30 - 50 80% with a ceiling of 860 baht per year

50 and above 100% with a ceiling of 1,200 baht per year Source: National Saving Fund as of September 20th, 2017

If retirement begins at age 60, a member will receive a pension paid monthly for a lifetime; the

amount of the pension varies depending on the amount of contributions made.

(3) Retirement Mutual Fund (RMF) – the fund is a voluntary long-term fund suitable for

individuals earning income in such forms as wages, salary, and freelance income. Moreover, it is particularly

suitable for those who are not a member of a provident fund, government pension fund or otherwise wish to

further enhance their current retirement savings. Investors who invest in RMF will get tax exemption up to a

maximum of 15% of the annual taxable income. However, the amount of the 15% annual taxable income has to

combine to government pension funds, provident funds, private teacher aid funds, and pension insurance

premiums, and the total investment shall not exceed 500,000 baht.

26

3.2.5 Proposed National Pension Fund (NPF)7

The Ministry of Finance proposed the National Pension Fund (NPF), which is a mandatory provident

fund appropriate for formal workers that fit into Pillar 2. Since there are several pillar pension systems in

Thailand, some groups of workers are liable to be in poverty in their old age, especially those who rely merely

on pension from the Social Security Fund. In accordance with the basic protection of the social security system,

the amount of post-retirement income will be very low, at around 19% of a workers’ last month’s salary; this is

far from a sufficient level at around 50%. For this reason, the government has to take action to prepare a

sufficient monthly pension for those people to reduce the risk of a huge fiscal burden on elderly welfare systems

in the long run.

There are three main objectives to set up the NPF as following:

(1) The most important objective is to ensure an adequate post-retirement income with no less than

50% of workers’ latest salary

(2) The government expects the fund to be financially self-sustained due to the defined-contribution

features of the fund

(3) The fund is expected to increase long-term domestic savings, by approximately 60 billion baht

or 1,700 million USD in the first year, up to 1.78 trillion baht or 50,000 million USD by the

tenth year.

In addition, the fund will be regulated by the Ministry of Finance, while the Stock Exchange of Thailand will

regulate asset management companies who will manage the investment of the fund.

In terms of features of NPF8, the fund is expected to cover employees in the private sector, temporary

employees in the public sector and employees of stat-owned enterprise; approximately 11 million formal

workers in total will be covered under this law. For contributions, both employers and employees are obliged

to make monthly saving to the fund at a rate of 3% of the salary. This rate will be increased to 5%, 7% and 10%

within 10 years and with the wage ceiling at 60,000 baht per month. However, employees who would like to

7 Bureau of Saving and Investment Policy, Fiscal Policy Office as of September 30th, 2017 8 Draft of the National Pension Act is currently under the consideration of the Council of the State as of September 30th, 2017

27

contribute more can contribute up to 15% of their salary. For employees who earn less than 10,000 baht per

month, they do not have to make contributions and their employers will contribute alone to the fund.

Once employees get to 60 years old, they will receive a 20-year pension or lump-sum payments

from the fund of a total amount equal to the balance of their individual accounts. For investment, the fund will

be managed by asset management companies (AMCs) that will be approved by the NPF board. In addition, the

members will get the exemption of taxation on contribution, returns from investment, and pension benefits.

Eventually, the government expects that the establishment of the fund will help increase the post-retirement

income of formal workers from 20% to 50% of their pre-retirement income.

CHAPTER IV: JAPAN HEALTHCARE AND PENSION SYSTEM

Japan became an aged population country more than 40 years ago. According to 2015 census data

released by the Ministry of Internal Affairs and Communications, Japanese people aged 65 or over make up a

record 26.7% of Japan’s population of 127 million, which increased by 3.7 % since the last survey was

conducted in 2010. The increasing number of older people in Japan will affect the number of workers in the

future. Government data showed the number of workers in Japan is projected to fall by 7.9 million, or 12.4%,

to 55.61 million by 2030. Moreover, the overall population will drop to 86 million in 2060, with the proportion

of people aged 65 or over reaching nearly 40% of the total.

Therefore, it is obvious that the government is challenged by the aging population and declining

fertility. As a result, social security expenses have been increasing sharply. On the other hand, the number of

contributors from workers is decreasing rapidly, creating doubt about how the government will sustain the

current security system.

4.1 Japan Healthcare system

According to the Ministry of Health, Labour and Welfare, all Japanese people are secured under public

health insurance. Nowadays, there are three main healthcare insurance systems in Japan.

28

4.1.1 National Health Insurance (NHI)

This system is operated by municipalities and NHI associations for individuals who are aged less than

74 years old and not the member of employees’ insurance system. Therefore, the members in this system are

self-employed individuals, farmers, non-regular employees, unemployed people, and retired persons under self-

employees’ health insurance. The financial resources of NHI come from premiums and state subsidies. In terms

of the premium, it is calculated for each household depending on the ability to pay. For payment, NHI is a co-

payment between members and the government, which is different depending on its condition (see Table 8).

Table 8: Summary of National Health Insurance

Types of Member Premium Financial resources Co-payment

Type 1 Farmers, self-employed individual, non-regular employees, etc. (operated by municipalities and NHI associations) Type 2 Retired person under employees’ health insurance (operated by NHI associations)

Calculated for each household depending on the benefits received and ability to pay (levy calculation formulas differ among insurers)

1. Premium 2. Municipalities and NHI associations will subsidy at 41% of benefit expenses, etc. None (healthcare expenses for retirees who were waged earners for at least 20 years and enroll in NHI are covered by municipally administered NHI using contributions from Employees Insurance)

1. 30% for people after reaching compulsory education age until 69 years old 2. 20% for people before reaching compulsory education age 3. 20% for people 70 -74 years old 20% (except people who have more than certain level of income will pay 30%) 4. 10% for those already turned 70 years old by the end of March 2014

Source: The ministry of Health, Labour and Welfare as of June 2015.

29

4.1.2 Employees’ Health Insurance

The members under this system are general employees, national public employees, local public

employees, and private school teachers/staff. There are different insurers operating health insurance depending

on the type of members. The Japan Health Insurance Association operates health insurance for employees of

small and medium companies. Health Insurance Societies operate health insurance for employees of large

companies. Mutual aid associations operate health insurance for national public employees, public employees,

and private school teacher/staff. Table 9 shows the differences of financial funding, premiums and government

subsidies for each type. For example, the premium (equal between employers and employees) for employees of

small and medium companies is 10% while the premium for employees of large companies is not fixed and

depends on the insurers. However, this system involves a co-payment, where all insured individuals must pay

30% of the service expenses. In case of type 3, the premium varies depending on the core insured person’s

income and additional subscribers.

Table 9: Summary of Employees’ Health Insurance

Types of Member Premium Financial resources Co-payment

Type 1 Employees of large companies (operated by health insurance society)

Different among health insurance society

1. Premium 2. State subsidy from the budget at fixed amount

Insured person must pay 30%

Type 2 Employees of small and medium companies (operated by Japan health insurance association)

10% (National average)

1. Premium 2. State subsidy from the budget at16.4% of benefit expenses, etc.

Insured person must pay 30%

Type 3

- National public employees - Local public employees - Private school teachers/staff (operated by mutual aid association)

- from 6% to 10% - 12% - 7.56% (as of September 2010)

1. Premium 2. Administrative cost (depends on Insured person)

Insured person must pay 30%

Source: Ministry of Health, Labour and Welfare as of June 2015.

30

4.1.3 Late – state Medical care system for the elderly

The system is provided for elderly people at least 75 years old or between 65-74 years old and certified

as having a specific disability by a wide area union operated by Municipalities (NHI) (see Table 10). For the

funding term, the funding resources come from the premium at 10%, which is calculated by using the amount

of the per capita rate and income ratio of insured persons provided by wide area union, the government subsidy

at 50% and support coverage from working generation at 40%. The insured person must pay basically 10%.

Table 10: Summary of the Late–State Medical Care System for the Elderly

Types of Member Premium Financial resources Co-payment Elderly who aged over 75 or aged 65-74 that certified as having a specific disability (operated by Municipalities)

calculated using the amount of the per capita rate and income ratio of insured persons provided by wide area union (around 10%)

1. Public Funding 50% (National: Prefectural: Municipal as 4:1:1) 2. Support coverage 40% (working generation) 3. Premium 10%

Insured person must pay 10% (30% for persons with more than a certain level of income)

Source: Ministry of Health, Labour and Welfare as of June 2015

Besides the healthcare system, Japan provides long-term care insurance through a system established

in 2000. One of the objectives for this system is to separate long-term care from coverage of healthcare insurance

and decrease cases of "social hospitalization" as the first step toward restructuring the social security system9.

The system is for people aged 65 or above or aged 40-64 and in need of long-term care. The service is provided

to the former regardless of the causes of their illnesses and to the latter if they have terminal cancer or diseases

caused by aging, such as Arthrorheumatism.

The municipalities and special wards in the metropolitan area are an insurer of public long-term care.

The source of fund comes from the premiums (insured person) and taxation equally (50:50). In terms of

9 Ministry of Health, Labour and Welfare, Japan.

31

premiums, 22% is collected from insured persons aged 65 and the rest (28%) comes from those aged 40-64. For

taxation, the contribution comes from state (25%), prefecture (12.5%) and municipalities (12.5%). Furthermore,

this system involves co-payments between insured person and municipalities. The insured person must pay 10%

or 20% depending on their income, and municipalities pay for the rest at 90% or 80% (Figure 6).

Figure 6: Structure of the Long-Term Care Insurance System

Source: Annual report 2016 Edition, Ministry of Health, Labour and Welfare.

Regarding budget allocation, the Japanese government allocates the budget for social securities through

the Ministry of Health, Labour and Welfare. The percentage of the social security budget was, on average, about

3% of general account from FY 2008 to 201710. Figures 7 and 8 show the budget allocation data for healthcare

and long-term care, which was collected from the Budget Bureau and Ministry of Health, Labour and Welfare.

On average, the government allocated 11% of the national budget to general healthcare and 3% of the national

budget to long-term care. Therefore, it can be noted that the government allocates 14% of the national budget

in total to both systems, which is almost half as much as is allocated from the national budget for social security.

10 The data of FY 2009 to 2011 and 2015 were calculated by the writer using probability of trend and average number from historical data.

32

Figure 7: Government Budget for Healthcare system of National Budget Billion Yen Percentage (%)

Source: Ministry of Health, Labour and Welfare and Budget Bureau, Ministry of Finance (As of 22nd September 2017)

Figure 8: Government Budget for Long-term Care System of National Budget Billion Yen Percentage (%)

Source: Ministry of Health, Labour and Welfare and Budget Bureau, Ministry of Finance (As of 22nd September 2017).

83,06

1 102,4

74

92,29

9

94,71

6

90,33

4

92,61

2

95,88

2

96,34

2

96,72

2

97,45

5

8,564

11,07

1

10,64

0

10,26

7

10,20

0

11,19

9

10,55

8

11,14

3

11,27

4

11,50

1

10

11 12 11 11

12 11

12 12 12

9

10

10

11

11

12

12

13

-

20,000

40,000

60,000

80,000

100,000

120,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget Healthcare budget Healthcare's budget as percentage of National Budget

83,06

1 102,4

74

92,29

9

94,71

6

90,33

4

92,61

2

95,88

2

96,34

2

96,72

2

97,45

5

1,906

2,526

2,386

2,392

2,401

2,625

2,491

2,872

2,932

3,013

2

2 3 3

3 3 3

3 3 3

-

1

2

3

4

-

20,000

40,000

60,000

80,000

100,000

120,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget Long-term care budget Long-term care's budget as percentage of National Budget

33

4.2 Japan Pension system

The Japanese pension system has endured several reforms in the public and occupational pension

pillars. Figure 9 shows that there are three layers for the Japanese Pension System. The first layer is National

Pension Insurance, which is basic pension mandatory for all residents between 20 and 59 years of age. The

second layer is Employees’ Pension Insurance and Mutual Aid Association Pension Insurance, which is for both

private company workers and public officers. The insured person receives this pension as a supplement to the

National Pension in proportion to the individual’s remuneration. The last layer is Voluntary Pension Insurance,

which is voluntarily available for individuals and companies.

Figure 9: Japanese Pension System

Source: Ministry of Health, Labour and Welfare, Japan (as of the end of March 2014)

4.2.1 National Pension Insurance (Basic Pension)

Under National Pension Act, the national pension (the first layer) is public pension insurance program

contributed to by all persons aged 20 to 59 years who are residents of Japan. The National Pension Insurance

provides benefits called the “Basic Pension” due to old age, disability, or death. There are 3 categories of insured

people under this system. The first category refers to insured persons who are self-employment, farmers, non-

working, etc., and those aged 20-59 years old. The second category refers to insured persons who are private

34

company workers and public officers. The third category refers to insured persons who are part of a married

couple of insured persons from category 2 and those aged 20-59 years old. In addition, an insured person in

category 2 aged 65 or older and who is eligible for pension benefits on the grounds of old-age and retirement

are also included in this third category.

In terms of the premiums for insured persons in category 1, premiums are a fixed-amount at 15,590 yen

a month as of April 2015 and will be increased by 280 yen every year from April 2015. From FY 2017 onward,

the monthly premium will be at 16,900 yen. For insured persons in category 3, the premium was borne by the

insurer of the pension in which a spouse participates.

For benefits, the main benefit is the Old-Age Basic Pension, which an insured person will receive at

the age of 65. The amount of pension depends on the insured person’s contribution-paid period, which is limited

from at least 25 years up to 40 years maximum. Although the pensionable age for the Old-age Basic Pension is

65 in principle, an insured person may opt to receive pension at whatever age after 60. The pension amount is

adjusted depending on the age at which the insured person starts to receive his or her pension. The insured

person may opt to receive a reduced amount of pension before age 65, or they may opt to receive an increased

amount after age 65. Specifically, the early pension amount receivable at the age of 60 is about 70 % of that for

age 65 and the delayed pension amount receivable from the age of 70 or older is at 142 %. In addition, after

insured persons start receiving their payment, the receivable rate will not change for the rest of their life11.

Moreover, other benefits are Disability Basic Pension, Survivors' Basic Pension, Widow's Pension, Lump-sum

Death Benefit, and Lump-sum Withdrawal Payments (exclusively for Non-Japanese Citizens). National Pension

receives substantial subsidies of currently 50% of payments from the Japanese government.

11 National Pension system, Japanese Pension Service as of 1ST August 2017.

35

Table 11: Summary of National Pension (As of the end of March 2014)

Classification Number of Insured Persons

(10,000 person)

Number of people eligible

for Old-Age Basic Pension

(10,000 person)

Average monthly

benefit for Old-Age

Basic Pension

(10,000 Yen)

Premium (as of

September 2014)

Pensionable age of Old-Age Basic Pension

Category 1 – Insured Person 1,805 Category 2 – Insured Person 3,832 3,068 5.7 15,250 Yen 65 Category 3 – Insured Person 945 Total 6,582

Source: Ministry of Health, Labour and Welfare, Japan.

Note: 1. Average monthly benefit for Old-Age Basic Pension, excluding advance or postponed payment

2. Total of public pension subscribers = 6,715

4.2.2 Employees’ Pension Insurance (EPI)

The second layer is called Employees’ Pension Insurance, which is an additional layer to the National

Pension Insurance. The insured persons are both private company and public employees. The Employees’

Pension Insurance (EPI) was introduced for private sector employees and its premium is proportional to the

amount of the wages (salary and bonus). The current premium rate is at 17.47% of wages as of September 2014,

which is equally split between employers and employees. From September 2017 onward, the premium will be

raised to 18.30% of the wages. In terms of benefit, the insured person will receive the pension at the age of 65

and the amount of pension depends on insured person’s contribution-paid periods and the wages of each insured

person. Other benefits consist of Old-Age Employees' Pension for age 60-64, Disability Employees' Pension

and Disability Allowance, Survivors' Employees' Pension, Lump-sum Withdrawal Payments (exclusively for

Non-Japanese Citizens). In the case of Mutual Aid Association (MAA), the insurance covers employees

working in central and local governments as well as private school employees, and it operates mainly along the

same lines. The premium rate of an insured person for central and local government and private school teacher

36

are at 16.92% and 14% respectively. Employees’ Pension does not receive substantial subsidies from the

Japanese government, but the government bears the cost of administration.

Table 12: Summary of Employees’ Pension Insurance (as of the end of March 2014)

Classification Number of Insured Persons

(10,000 person)

Number of people

eligible for Old-Age

Basic Pension

(10,000 person)

Average monthly

benefit for Old-Age

Basic Pension

(10,000 Yen)

Premium (% as of

September 2014)

Pensionable age of Old-Age Basic Pension

Employees ‘Pension Insurance

3,527 1,523 15.7 17.474 Remuneration-based Portion

National Public Officers Mutual Aid association (MMAs)

106 69 20.4 16.924 - General Male/Mutual aid Female Age 61 - Employees’ Female Age 60 - Miners/Seamen Age 60

Local Public Officers MAAs

283 198 21.0 16.924 Fixed amount Portion - General Male/Mutual aid Female Age 61 - Employees’ Female Age 60 - Miners/Seamen Age 60

Private school teachers/employees MAAs

51 13 20.5 14.000

Total 3,967 1,803 46.0 Source: Ministry of Health, Labour and Welfare, Japan.

In terms of budget allocation, the government allocates the annual budget to the pension system through

the Ministry of Health, Labour and Welfare, which is similar to the healthcare system. From FY 2008 to 2017,

the government allocated approximately 11% of the national budget, which was the same percentage as was

allocated for the healthcare system (see Figure 10).

37

Figure 10: Government Budget for Pension System Allocated from the National Budget Billion Yen Percentage (%)

Source: Ministry of Health, Labour and Welfare and Budget Bureau, Ministry of Finance.

4.2.3 Voluntary Pension Insurance

The last layer of the pension system in Japan comes in a variety of forms. The details for each plan are

as follows:

Employees’ Pension Funds – Employees’ Pension Funds are public corporations subject to

approval of the Ministry of Health, Labour and Welfare, and they are operated through democratic consultation

by the delegates who are elected in equal number by the employer and the participants in the plan. Each of the

funds has a board of directors with a chairman as well as a secretary that provides necessary services, including

the payment of pension benefits. Both the employer and employees pay premiums to an Employees’ Pension

Fund.

The Defined Benefit Corporate Pensions – Under the Defined Benefit Corporate Pension

Act, the pension can be fund-type or contract-type. Defined Benefit Corporate Pensions can be established by

an employer of a qualified office to which the Employee’s Pension Insurance Plan is applicable. An employer

who plans to set up a Defined Benefit fund should prepare by-laws regulating the details of the system based on

an agreement between management and a Labour union representing most of the employees of each office that

83,06

1 102,4

74

92,29

9

94,71

6

90,33

4

92,61

2

95,88

2

96,34

2

96,72

2

97,45

5

7,438

9,696

9,503

9,315

9,461

10,71

6

10,42

8

11,16

2

11,31

3

11,48

3

9 9 10 10 10 12 11 12 12 12

- 2 4 6 8 10 12 14

-

20,000

40,000

60,000

80,000

100,000

120,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget Pension Budget Pension's Budget as percentage of National Budget

38

is covered by the plan and get approval from the Ministry of Heath, Labour and Welfare. In principle, premiums

are paid by employers. While defined in the pension rules, employees can pay the premium if they agree to. In

terms of fund-type, funds will be established as a corporate entity independent of the sponsoring company.

Management and operation of the pension assets and payment of benefits will be managed by the fund. Another

type is contract-type plan, under the laws; the sponsoring company will make a contract with trust companies,

life insurance companies and other institutions. Management and operation of pension assets will be managed

outside the company.

The Defined Contribution Pension plan – The plan has two forms, namely corporate-type

and personal-type, which is restrictive under the Defined Contribution Pension Act. In case of a corporate-type,

the plan can be established by an employer of an office to which the Employee’s Pension Insurance Plan is

applicable. An employer who plans to set up a corporate-type should prepare by-laws based on an agreement

between management and a Labour union and obtain approval from the Ministry of Health, Labour and Welfare.

In case of Defined Contribution Plans, they are fully portable, the contributions paid are clearly specified for

each employee, and benefits are determined based on the sum of the contributions and investment profit. A

corporate-type plan must be implemented through a contract with a pension management organization, such as

a trust bank, insurer, or fund manager. In addition, self-employed persons or employees whose employer does

not operate an occupational pension plan can participate in a personal-type plan.

The National Pension Fund – The funds are public corporations subject to the approval of

the Minister of Health, Labour and Welfare and operated through consultation by the delegates who are elected

from the participants in the system. Each of the funds has its chairman of the board of directors, directors, and

secretary that provides necessary services, including the payment of benefit. The objectives the funds are to

reduce the gap of pension benefit between employees and self-employed persons who were only covered by the

Old-Age Basic Pension. In addition, insured person of the fund will be secured since they will receive the

pension benefit in addition to the Old-Age Basic Pension. Notably, this system is a defined benefit type pension

system in which people directly and individually participate in this system.

39

4.2.4 Public Assistance System

Under the Public Assistance Act introduced in 1950, the law specifies four fundamental principles: (1)

it is the state’s responsibility to provide public assistance to people in need; (2) without discrimination of sex,

social background, and reasons for falling into hardship (only the economic condition is the criteria of receiving

assistance), whereby all citizens have a right to claim public assistance from the state; (3) all citizens are

guaranteed by the state for a minimum level of healthy and cultural life; and (4) public assistance is a supplement

to all resources available and the best efforts exerted by the applicant.

According to The Ministry of Health, Labour and Welfare, there are two main objectives from the

system. First, to guarantee the minimum standard of living by providing assistance for those who have trouble

making a living despite utilizing all their assets and ability, depending on the level of necessity. The other is to

promote the self-reliance to people by conducting home visits several times a year according to the status of

recipient households and providing vocational guidance for recipients who can be employed.

In addition, there are 8 types of assistance in this system, namely livelihood assistance, education

assistance, housing assistance, medical assistance, long-term care assistance, maternity assistance, occupational

assistance, and funeral assistance, which can all be provided alone or in combination according to the needs of

the person requiring the public assistance. According to the Ministry of Health, Labour and Welfare, for basic

life in an urban area, a single mother with 2 children will receive 189,870 yen per month. On the other hand, in

a rural area for the same case will receive 159,900 yen per month. In the case of an elderly couple, in an urban

area they will receive 120,730 yen per month and in a rural area they will receive 97,860 yen per month. The

table below shows the break-down by age of Public Assistance Recipients in 2010.

Table 13: The break-down by age, Public Assistance Recipients (2010)

Age Share (%) Coverage Rate (% in Assistance) <5 3.0 8.78

6 to 11 4.9 13.30 12 to 14 3.2 16.92 15 to 19 4.2 12.85 20 to 29 2.9 3.85

40

Age Share (%) Coverage Rate (% in Assistance) 30 to 39 6.9 7.05 40 to 49 9.9 11.02 50 to 59 14.2 16.20 60 to 79 22.9 21.40

70+ 28.0 23.41 Total 100% 14.67

Source: National Institute of Population and Social Security Research, Report of Social Security in Japan 2014 (as of 31 August 2017)

The government has allocated a budget of more than 2,000 billion Yen to the Public Assistance System

since 2009. The budget for this system in 2015 was around 2,904 billion Yen, which was about 105% higher

than the budget of around 1,488 billion Yen in 1989.12

CHAPTER V: THE COMPARISON BETWEEN THAILAND AND JAPAN

5.1 Reformation of Social Security System

Japan started the “Social Security System” after World War II to support the country’s recovery and

reduce the suffering of people after the war. The development of health insurance and social security are closely

related to the country’s economy. During 1955 to 1964, Japan successfully expanded insurance coverage

because of high economic growth at that time. In 1961, the government introduced the “Universal Health

Insurance System” and “the Universal (nationwide) Pension System.” However, the Japanese government

started to reform the social security system as the country’s population became increasingly aged. Strategies of

the reformation included providing effective and appropriate social and health service for the elderly (The New

Gold Plan in 1989) and promoting families to have more children (The Angle Plan in 1994). 1973 was a special

year in Japanese social security history and is called the “first welfare year” because great benefit improvements

were made in the areas of health insurance and pension. Moreover, in 2000, the government launched the “Long-

Term Care Insurance Program” to cover the growing expenses of long-term care by reimbursing expenses for

facility services and home care services to elderly in need of care.

12 Japanese Social Security Statistic Database, National Institute of Population and Security Research as of June 28, 2016.

41

Meanwhile, Thailand is the country where the first social security system was introduced during the

period of King Rama V, but it was a pension security system only for civil servants. However, the “Social

Security Scheme” (SSS), which is a part of the comprehensive social security system, started in 1990 for private

sector employees. The system was mandated by the Social Security Act of 1990 and operated by the Social

Security Office of the Ministry of Labour. In addition, the government has made efforts to provide healthcare

for the rest of the population. Thailand introduced the “Universal Coverage Scheme (USC)” in 2002 that covers

those who had been outside of any public health security system. At present, there are several different schemes

of social security which cover different groups of the population and different areas of social security system.

For example, CSMBS is the healthcare scheme and GPF is the pension fund for civil servants, and Social

Security Scheme (SSS) is the healthcare and pension scheme for private sector employees. In addition, people

who have a high-income tend to buy the private insurance schemes.

5.2 Healthcare System

5.2.1 The System

Japan is a country where healthcare benefits are provided through the “social insurance.” Japanese

healthcare benefits are also supported by public funds (as part of the annual budget). Conversely, Thailand is a

country where healthcare benefits are mainly provided through the “annual budget” from the government

(except SSS, for which contributions come from employees, employers and government). Both countries have

a “multiple healthcare system” that divided for different occupational classes. However, multiple healthcare

systems are not very problematic if all systems are supervised by a single authority responsible for the national

public health policy. In Japan, the Ministry of Health, Labour and Welfare is the authority on national public

health policy.

In contrast, Thailand’s healthcare system is governed by different agencies. The administrative

separation of the different healthcare systems into several agencies leads to fragmentation for patients and health

service costs database as well as duplication of administrative costs. For example, in terms of an unequal health

benefit, the members of CSMBS are allowed to obtain healthcare services in any public hospital nationwide

under the “fee for service” payment method, while SSS and USC members can obtain services only in hospitals

42

or health centers where they have previously registered as a beneficiary under the “per capitation” payment

method.

5.2.2 Financial Resource

The method of financing between Japan and Thailand is different. Japan uses a “multi-payer system,”,

which is attached to the social security system and often made up of various health funds belonging to various

occupational groups. Financial contributions come from employees, employers and the state. Moreover, the

reimbursement of services is a co-payment method where the patients have to pay 30% by themselves to limit

the healthcare cost burden. Conversely, Thailand mainly uses a “single-payer system,” where the method of

financing mostly comes from the annual budget. However, there are further complications in the Thailand

Healthcare system due to the fact that SSS is a multi-payer system but CSMBS and USC are single-payer

systems.

5.2.3 Method of Payment to Healthcare Providers

Japanese healthcare providers mainly get paid by the “fee for services13” method at the primary level,

which is revised every two years by the Ministry of Health, Labour and Welfare. As a result, the Japanese

government defines the price of services and all patients are treated in the same standard of services from

healthcare providers. Conversely, Thai healthcare providers get paid by various methods, namely fee for

services, DRGs14 , Capitation15 and fee for schedule16, depending on the patients and services. For example, only

the patients from CMSBS will use the fee for services method, and the government pays all expenses under

conditions which are set by Comptroller General’s Department (CGD) of the Ministry of Finance.

On the other hand, the patients from UCS and SSS will use a different method of payment depending

on the treatment, and the amount of payment is limited under different conditions. The cost of treatments and

services for UCS are set by the Social Security Office of the Ministry of Labour. In the case of the SSS, the cost

13 Fee for service means a method in which doctors and other healthcare providers are paid for each service performed. 14 DRGs (Diagnosis Related Groups) means any of the payment categories that are used to classify patients and especially Medicare patients for reimbursing hospitals for each case in each category with a fixed fee regardless of the actual costs incurred. 15 Capitation means the amount paid a health care provider annually from each patient in a medical group plan. 16 Fee schedule means a listing of the fees normally charged by a given health care provider for specific therapies and procedures provided.

43

of treatments and services are set by NHSO. The standard of treatment and services for those members is

different, and there is always a question for Thai government regarding the inequality for each system.

5.2.4 The role of private stakeholders

In Japan, private stakeholders play two significant roles in the public healthcare system: they are service

providers and insurers. Private hospitals serve as the main healthcare providers across the different levels of

healthcare. At the primary level, there are many private clinics that provide healthcare services to the local

population. At the secondary and tertiary level, all private hospitals are not-for-profit by law and play as equally-

important of a role as public hospitals. The reasoning behind this is that it is believed the delivery of healthcare

services is based not only commercial, but also social objectives. In case of insurers, it is obvious that the private

sector role as health insurers is limited. Japan is the country where the universal healthcare system covers almost

all healthcare requirements; therefore, there is a limited market for private health insurers. Insured persons may

buy “supplemental” healthcare insurance from private insurers, but these packages often provide minor

additional benefits.

Most private hospitals in Thailand are for-profit hospitals. The hypothesis behind this is that Thailand

is a country where Buddhist temples never get involved with healthcare matters, unlike in Japan where religious

organizations (related to Christianity) run the nonprofit hospitals. There are around 200 private hospitals taking

part in NHSO and approximately 80 private hospitals in SSS. Private hospitals are suitable for people who are

able to buy additional health insurance and pay a high premium by themselves.

5.2.5 Budget Allocation

This comparison will focus only on the Annual Budget from the Central Government. Figures 11 and

12 show the annual budget allocation in Thailand for the healthcare system as a percentage of National Budget

and Gross Domestic Product (GDP). As explained in Chapter III, healthcare systems in Thailand are operated

by many agencies under different conditions. However, almost all funds come from annual budget. The figures

from show that between FY 2008 to FY 2017, the Japanese government allocated on average 14% of the national

budget (or 3% of the GDP) to the healthcare system. However, the world healthcare expenditure as percentage

44

of GPD was at 10% in 201417 therefore Thailand and Japan healthcare expenditure as percentage of GDP was

lower than the world healthcare expenditure. Figure 11: Healthcare's Budget as percentage of National Budget Figure 12: Healthcare's Budget as percentage of GDP

Million baht Percentage (%) Million baht Percentage (%)

Source: 1. National Budget from Bureau of the Budget Source: 1. Gross Domestic Product from Office of the National Economic

2. Healthcare Budget from Bureau of Fiscal policy, Fiscal Policy Office and Social Development Board (NESDB) 2. Healthcare Budget from Bureau of Fiscal policy, Fiscal Policy Office

Note: GDP in FY 2017 is projected by NESDB

Figure 13: Healthcare & Long -term care's Budget as percentage of GDP Figure 14: Healthcare & Long-term care’s Budget as percentage of

National Budget

Billion yen Percentage (%) Billion yen Percentage (%)

Source: Ministry of Health, Labour and Welfare and Budget Bureau, Ministry of Finance

17 World bank, https://data.worldbank.org/indicator/SH.XPD.TOTL.ZS?end=2014&start=1995&view=chart as of 15 october 2017

1,660

,000

1,835

,000

1,700

,000

2,070

,000

1,700

,000

2,070

,000

2,380

,000

2,575

,000

2,776

,000

2,733

,000

223,2

42

237,1

14

240,6

36

273,2

96

272,1

22

305,9

19

305,9

50

314,9

67

345,6

36

369,5

63

13 1314 13

1615

13 1212 14

0

5

10

15

20

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National BudgetHealthcare budgetHealthcare's Budget as percentage of National Budget

7,710

,337

7,657

,098

8,232

,395

8,301

,560

8,902

,825

9,146

,100

9,229

,755

9,501

,222

9,880

,878

10,17

7,304

223,2

42

237,1

14

240,6

36

273,2

96

272,1

22

305,9

19

305,9

50

314,9

67

345,6

36

369,5

63

33 3

33

3 3 33 4

0

1

2

3

4

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDP Healthcare budget Healthcare's Budget as percentage of GDP

83,06

1 102,4

74

92,29

9

94,71

6

90,33

4

92,61

2

95,88

2

96,34

2

96,72

2

97,45

5

10,47

1

13,59

7

13,02

6

12,65

8

12,60

1

13,82

4

13,04

9

14,01

5

14,20

6

14,51

4

13

1314

1314 15 14

15 15 15

11

12

13

14

15

16

-

20,000

40,000

60,000

80,000

100,000

120,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National BudgetHealthcare and Long term care BudgetAs percentage of National Budget

509,3

98

492,0

75

499,1

95

493,8

53

494,6

74

507,4

01

517,8

67

532,1

91

553,3

75

542,4

59

10,47

1

13,59

7

13,02

6

12,65

8

12,60

1

13,82

4

13,04

9

14,01

5

14,20

6

14,51

4

23

3 3 33

3 3 3 3

0

1

1

2

2

3

3

-

100,000

200,000

300,000

400,000

500,000

600,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDP

Healthcare and Long term care Budget

As percentage of GDP

45

5.2.6 Summary

Tables 14 and 15 show a summary of the differences between the current healthcare systems in Thailand

and Japan. Both countries have three types of healthcare systems for different groups. The first group is civil

servants; the Thai government provides CSMBS for its officers, including their dependents, under these

conditions. However, local officers and private school teachers and staff are not included in CSMBS. Local

officers are provided a healthcare system under the Ministry of Interior. Meanwhile private school teachers and

staff have their own healthcare system provided by different agencies. In Japan, national public employees,

local public employees, and private school teachers and staff are provided healthcare system by different Mutual

Aid Associations.

The second group is private or formal workers; both countries have a healthcare system for this group,

called SSS in Thailand and HI in Japan. The third group is for the rest of citizens. For Thailand, besides CSMBS

and SSS, everyone can be the member of USC, which is a free system involving a voluntary payment of 30

baht. USC is managed by NHSO, which is mandated by the National Health Security Act 2002. Meanwhile,

Japan has NHI system that is provided to farmers, self-employed persons, and retired persons under Employees’

Health Insurance. Moreover, Japan has a Late-State Medical Care system for the elderly that is aimed at creating

a sustainable budget for the aged population.

Table 14: Comparison the Type of System between Thailand and Japan in each group

Group Thailand Japan 1. Civil Servant and dependents 2. Private Workers 3. Other

- Civil Servant Medical Benefit Scheme (CSMBS) - Social Security Scheme (SSS) (Formal worker and self-employed) - Universal Coverage Scheme (UCS) (Citizens not covered by CSMBS or SSS)

- Mutual Aid Associations (National public employees/local public employees/ Private school teachers) - Health Insurance (HI) (Employees’ Insurance System) 1. National Health Insurance (NHI) (General Citizens – Farmers, self-employed persons, and retired persons)

46

Group Thailand Japan 2. Late-State Medical Care system for the elderly (Elderly who aged over 75 or aged 65-74 that certified as having a specific disability)

Table 15: Comparison the organization of Healthcare system between Thailand and Japan Thailand

System Type of Organization Financial Resource Method of Payment (Healthcare Providers)

Reimbursement

CSMBS

CSMBS is mandated by The Royal Decree on Medical Benefits of Civil Servant 1980 and its major amendment in 2010 and managed by Comptroller General’s Department (CGD) under the Ministry of Finance

Annual Budget from Central Government

Fees for services Annual Budget under conditions

SSS SSS is a part of the comprehensive social security system, as mandated by the Social Security Act 1990 and managed by the Social Security Office of the Ministry of Labour.

- Contribution from government (annual budget), employees and employers. - Administrative cost from government (annual budget)

DRGs /Capitation/Fees schedule

Annual Budget under conditions through SSO

USC UCS is mandated by the National Health Security Act 2002. By law, the NHSO is responsible for managing the system.

All cost of USC from government (Annual Budget)

DRGs /Capitation/Fee schedule

Annual Budget under conditions through NHSO

47

Japan

System Type of Organization Financial Resource Method of Payment (Healthcare Providers)

Reimbursement

National and Related Public Service Mutual Aid Association (National Public Employees)

The system is mandated by National Public Service Mutual Aid Association Law 1958 and managed by Mutual Aid Associations of the ministry and agencies, etc.

1. Premium 2. Government Subsidy

Fees for services /Fees schedule

Co-payment

Local Government Employees’ Mutual Aid Association (Local Public Employees)

The system is mandated by Local Public Service Mutual Aid Association Law 1962 and managed by Mutual Aid Associations of local public employees, etc.

1. Premium 2. Government Subsidy

Fees for services/ Fees schedule

Co-payment

Private school teachers and employees Mutual Aid Association (Private school teachers and staff members)

The system is mandated by Private School Personal Mutual Aid Association Law 1953 and managed by Promotion and Mutual Aid Corporation for Private school of Japan.

1.Premium 2. Government Subsidy

Fees for services /Fees schedule

Co-payment

HI HI is mandated by Health Insurance Law 1922 and managed by (1) Japan Health Insurance Association for employees of small and medium companies and (2) Health Insurance Societies for employees of large companies.

1. Premium 2. Government Subsidy

Fees for services/ Fees schedule

Co-payment

48

NHI HI is mandated by National Health Insurance Law 1958 and managed by (1) Municipalities (and special wards) and National Health Insurance Associations for farmers, self-employed, etc., and (2) municipalities for retired person formerly under Employees’ Health Insurance.

1. Premium 2. Government Subsidy

Fees for services/ Frees schedule

Co-payment

Source: Synthesis by the writer

5.3 Pension System

5.3.1 The system

Like the healthcare system, the Japanese pension system is provided through “social insurance,”

whereas the Thai pension system is provided through both “social insurance” and an annual budget from the

government. Both countries have multiple pillars or layers to their pension systems, which are suitable for

different groups of members. In Japan, all citizens are mandated to be a member of the National Pension

(Defined Benefits Scheme) or basic pension. Moreover, for employees, they can also be a member of

Employee’s Pension (Defined Contribution Scheme) to get more pensions after retirement. The rest of the

system is a voluntary pension system (Defined Benefits Scheme or Defined Contribution Scheme).

On the other hand, Thailand does not have a compulsory national pension for all citizens. The

compulsory pension system is provided for civil servant through Government Pension Fund (GPF), which is a

Defined Contribution Scheme and private employees and government temporary employees through Social

Security Fund (SSF) which is a Defined Benefits Scheme, as a basic pension. The old age allowance scheme

and government pension are the system that the government provides for older people and government retirees

as social welfare from annual budget. The rest of citizens (especially informal workers) can be a member of

National Saving Fund (Defined Contribution Scheme) and other private funds voluntarily.

49

5.3.2 Financial Resource

In Japan, the financial resources for the National Pension come from premiums collected equally from

insured persons and government subsidies. The principle of the system is Pay-As-You-Go,18 which means the

working generation pays for older people. This system is the same as the Government Pension in Thailand, for

which the government collects taxes from the working generation to pay pensions to government retirees. In

case of Employees’ Pension in Japan, the system is contributed to by employees and employers equally under

a Pay-As-You-Go principle, which is different from in Thailand. The GPF for civil servants is fully funded19 or

full funding principle which the cost of payment is contributed from employers (government) and employees

(government officers) and interests from investment. In case of private employees and government temporary

employees, the principle of the SSF is mixed between Fully Funded and Pay-As-You-Go. The cost of payment

comes from the contribution between employees, employers and the government with the limited amount by

law. The rest of pension system in both countries is voluntary system which the cost of payment mainly comes

from the contribution between employees and employers under the condition for each fund and almost voluntary

systems are Fully-Funded principle.

5.3.3 Budget allocation

This comparison will focus only on the annual budget from central government. Figures 15 and 16

show the funds allocation in Thailand for the pension system as a percentage of the national budget and gross

domestic product (GDP). The numbers from both tables show that the government allocated the budget for the

pension system from FY 2008 to FY 2017 at 12% of the national budget on average. However, in terms of the

percentage of GDP, the Japanese government allocate the budget to pension system at 12% of the GDP on

average. Meanwhile, in Thailand, the government allocated funds to the elderly at only 3% of the GDP on

average (see Figures 17 and 18). It is clear that as super-aged society like Japan has allocates a huge budget to

support its pension system. Thailand will become aged society soon, and thus the budget for the pension system

will also be huge in the future. Therefore, the government should study how to avoid a huge fiscal burden and

obtain sustainable financial resources to support the pension system.

18 A system in which retirement benefits are financed by contributions levied from current workers. 19 A system that has sufficient liquid assets to pay all of its liabilities, including (and especially) all future payments to beneficiaries.

50

Figure 15: Government Budget for the Elderly as Percentage of National Budget Figure 16: Government Budget for the Elderly as Percentage of

GDP

Million baht Percentage (%) Million baht Percentage (%)

Source: Bureau of the Budget Source: Gross Domestic Product from Office of the National Economic

and Social Development Board (NESDB) Note: GDP in FY 2017 is projected by NESDB

Figure17: Pension’s budget as percentage of the national budget Figure 18: Pension’s budget as percentage of GDP

Billion Yen Percentage (%) Billion Yen Percentage (%)

Source: Ministry of Health, Labour and Welfare and Budget Bureau, Ministry of Finance

2,070

,000

2,380

,000

2,575

,000

2,776

,000

2,733

,000

248,9

20

260,6

00

279,8

00

307,3

00

326,0

50

12 1111

11 12

10

11

11

12

12

13

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2013 2014 2015 2016 2017National Budget

Government's Budget for old-age

Government's Budget as percentage of National Budget

9,146

,100

9,229

,755

9,501

,222

9,880

,878

10,17

7,304

248,9

20

260,6

00

279,8

00

307,3

00

326,0

50

3 3 3 3 3

2

3

3

3

3

3

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2013 2014 2015 2016 2017GDP

Government's Budget for old-age

Government's Budget for old-age as Percentage of GDP

83,06

1 102,4

74

92,29

9

94,71

6

90,33

4

92,61

2

95,88

2

96,34

2

96,72

2

97,45

5

7,438

9,696

9,503

9,315

9,461

10,71

6

10,42

8

11,16

2

11,31

3

11,48

3

9

9 10 10 10

12 11 12 12 12

-

2

4

6

8

10

12

14

-

20,000

40,000

60,000

80,000

100,000

120,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

National Budget

Pension Budget

Pension's Budget as percentage of National Budget

509,3

98

492,0

75

499,1

95

493,8

53

494,6

74

507,4

01

517,8

67

532,1

91

553,3

75

542,4

59

7,438

9,696

9,503

9,315

9,461

10,71

6

10,42

8

11,16

2

11,31

3

11,48

3

9 9 10 10 10 12 11 12 12 12

-

2

4

6

8

10

12

14

-

100,000

200,000

300,000

400,000

500,000

600,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

GDPPension BudgetPension's Budget as percentage of GDP

51

5.3.4 Government Policy for Pension system

Japan has the highest life expectancy globally; therefore, the need for people to work past retirement

age is a necessity for sustainability. The Japanese government has implemented reforms such as increasing the

formal retirement age from 60 to 65 years for allocation of social security pension benefits. Moreover,

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 altogether, or introduce the “continued employment system,”

which allows employers to offer their employees adjustable working arrangements on a yearly contract basis

until they reach age 65. The continued employment system is the most preferred option of employers. However,

despite all these changes to accommodate the needs of an aging workforce, there remains an opportunity to

broaden the scope of flexible work arrangements, to embrace working after the age of 65, and to enable

employees to continue earning. In Thailand, the formal retirement age is still 60 years old. The government tried

to increase retirement age for civil servants from 60 to 65 years old, but the efforts failed due to the complicated

government system and arguments from civil servants. In addition, in the case of SSF, the Social Security Office

in charge of the fund is doing research on expanding the retirement age from 55 years old to 60 years old (at

least) to prevent huge fiscal burdens for the government in the long term.

5.3.5 Summary

Tables 16 and 17 show the differences between the current pension systems of Thailand and Japan.

Both countries have three systems for different groups of individuals. The first system is for all citizens as basic

pension. There are various schemes for Thai citizens depending on whom they are. For example, an old age

allowance scheme is provided for all elderly, and NFS is provided for citizens who are not covered by any other

pension schemes, such as informal workers. Unlike in Japan, there is only a single national pension scheme

provided for all citizens.

The second system is for the working population. In Thailand, private workers must become members

of SSS, while in Japan the working generation is required to participate in the Employees’ Pension Fund,

depending on who they are. For example, for national public officers, they must be a member of a Mutual Aid

Associations Pension. The third system is a voluntary system. There are several funds or plans that everyone

can be a member. Moreover, the pension systems from both countries are managed by different principles. For

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example, Japan’s National Pension has a defined benefits scheme and is managed by a Pay-As-You-Go

principle. On the other hand, NSF from Thailand has a defined contribution scheme and is managed by a fully

funded principle.

Table 16: Comparison between the Pension Systems of Thailand and Japan

System Thailand Japan 1. Nation Pension (as basic pension) 2. Working generation 3.Voluntary System

- Old-age Allowance for elderly (above 60) (welfare from government) - Government Pension for government retirees (welfare from government) - National Savings Fund (NSF) for informal workers (voluntary system) - Government Pension Fund (GPF) for civil servant (compulsory system) - Social Security Fund (SSF) for private employees/Government temporary employees (compulsory system) - Provident Fund (PVD) for private employees, SOE’s employees and Government permanent employees (supplementary system) - Social Security Fund (SSF) for informal workers (supplementary system) - Retirement Mutual Fund (RMF) for everyone (supplementary system)

- National Pension for all citizens by law (compulsory system) - Employees’ Pension for private employees (compulsory system) - Mutual Aid Association Pension for National Public officers/Local Public officers/Private school teachers (compulsory system) - Employees’ Pension Funds - Defined Benefit Corporate Pensions - Defined Contribution Pension plan - National Pension Fund (supplementary system)

Source: Synthesis by the writer

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Table 17: Comparison of the Organization of Pension Systems between Thailand and Japan

Thailand

System Type of system Member/Insured Person Financial Resource Payment Old-age allowance

Welfare from Government (Pay-As-You-Go)

A guaranteed basic income for all Thai persons aged 60 and above

Annual budget from the central government

60 years and above

Civil Servant Pension Scheme

- Government pension is welfare from government (Pay-As-You-Go) - Government pension fund is a Defined Contribution Scheme (Fully Funded plan)

1. Old Civil Servants who entered service before 1997 2. New Civil Servants who entered service after 1977

1. Government pension, annual budget (for old civil servants) 2. Government Pensions Fund - Contribution from civil servants and government as employers (for new civil servant scheme)

1. Pension after least 25 years of service, or 10 years of service if over 50 2. Lump sum benefits after working at least 10 years or one year of service and are aged above 50 3. Pension after retirement (60 years old and above)

SSF Defined Benefits Scheme (mixed between Fully Funded and Pay-As-You-Go)

- Private Employees - Government Temporary Offices

Contribution from employees, employers and government subsidy

A lump-sum payment or a pension paid monthly when they retire at 55 years old

NSF Defined Contribution Scheme

The rest of citizens who are not covered by any pension

Contribution from members and government

When retirement at 60 years

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(Fully Funded) schemes especially Informal workers

Others Private Fund

Defined Contribution Scheme - PVD (Fully Funded) - RMF (Fully Funded)

- Private Employees from State-Owned Enterprise - Everyone

- Contribution from employees and employers - Members

Under its conditions

Japan

System Type of system Member/Insured Person Financial Resource Payment National Pension

Defined Benefits Scheme (Pay-As-You-Go)

All citizens by law Premium and government subsidy

65 years old

Employees’ Pension

Defined Contribution Scheme (Pay-As-You-Go)

Private employees Premium and government subsidy for administrative cost

Depends on the insured person

Mutual Aid Association Pension

Defined Contribution Scheme (Pay-As-You-Go)

National Public officers/Local Public officers/Private school teachers

Premium and government subsidy for administrative cost

Depends on the insured person

Others Voluntary system

Depending on each system

Everyone Premium Under its conditions

Source: Synthesis by the writer

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5.4 Fiscal Policy

The Japanese Public Finance Fact Sheet 2017 from the Budget Bureau and Ministry of Finance

addressed that the currently government is implementing “comprehensive reform of social security and tax

policy” to secure stable financial resources and mediate fiscal burden under an increasingly aged population.

The objectives of the program are to maintain and enhance the social security system and achieve fiscal

consolidation targets. The stable financial resources should be secured, and the Japanese government has

determined that the consumption tax is a suitable source of revenue for social security. Therefore, the

government increased consumption tax from 5% to 8% in 2015 and plans to increase it again from 8% to 10%

in 2019. In addition, the fact sheet showed how the government uses the revenue by raising consumption tax in

2017. The amount of increasing revenue will be 8.2 trillion yen and will be allocated to support the basic pension

system at 3.1 trillion yen (38%) and for reducing public debt and ensuring the sustainability of social security

system at 3.3 trillion (40%). However, increasing the consumption tax to 10% is not sufficient for sustainability.

The consumption tax will need to exceed 25% by 2050 in order to cover the amount accountable for national

expenditures in social security system20.

On the contrary, the Thai government so far is not able to increase value added tax (consumption tax)

for the aging population due to many reasons, such as political issues and economic recession. The annual

budget is not enough to support the healthcare and pension systems because the country must allocate the budget

for investment to stimulate domestic expenditure. However, the government has been concerned about the fiscal

burden from the healthcare and pension system. Establishing “extra budgetary funds” are an alternative fiscal

tool to deal with fiscal burden from an aging population. In terms of extra budgetary funds for the healthcare

system, the Thai Health Promotion Foundation (ThaiHealth) is an autonomous state agency established by the

Health Promotion Foundation Act (2001). It acts as an innovative enabler with the mission to inspire, motivate,

coordinate, and empower individuals and organizations in all sectors for the enhancement of “health promotive

capability as well as healthy society and environment.” Currently, there are 15 master plans that ThaiHealth has

endorsed as its strategic plans for health promotion, which are proactively and strategically executed through

20 SUZUKI Wataru, Gakushuin University, “Weekly Economist”, October 29, 2013, pp.87-89.

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its partners nationwide.21 The budget is obtained from “surcharge excise taxes” at 2% on tobacco and alcohol

(around 4,000 million baht per year), a financial mechanism that facilitates a sustainable funding source for

ThaiHealth to continuously support health promotion programs.

In terms of extra budgetary funds for the pension system, the government launched an “older person

fund,” which is mandated by Older Person Act (2003). The fund objectives are protection, promotion and

support of elderly persons in various areas, such as appropriate subsidies for good of living. However, the

funding source mainly comes from the annual budget and is not enough for supporting poor elderly people.

Therefore, the Ministry of Finance currently urged the cabinet to approve a law to allow the fund to receive

more money from “surcharge excise tax” at 2% on tobacco and alcohol but not exceed than 4,000 million baht

per year to support poor elderly which are one-third of all elderly people in Thailand. This fiscal policy can help

the government reduce the fiscal burden in the future. The law will be effective by next year and the Ministry

of Finance is now studying how many poor elderly people will receive money from this policy.

5.5 Local Authorities Organizations (LAOs)

It can be said that Japan’s healthcare system is largely overseen by the central government, with

prefectures and municipalities playing a secondary role. The Japanese government is responsible for health

insurance policy, setting fees for provider reimbursement and standards for healthcare facilities. Meanwhile,

prefectures and municipalities are responsible for developing regional health plans that involve cost

containment, licensing hospitals, and monitoring providers in row with the central guidelines. For example, in

case of the healthcare system, both prefectural and municipal government manage the public insurances. A 2016

revision by the “Act Securing Hometown Medical and Long-Term Care” tried to promote integrated service

delivery for both medical and long-term care for those ages 65 and above. Each municipality established many

community centers at each middle or primary school district so that the elderly who are living nearby can easily

access the needed services. However, the local government in Japan almost plays no role in public pension.

On the other hand, LAOs in Thailand are different from Japan. Since LAOs started operating more than

10 years ago, their revenue still relies on the annual budget from the central government, which is about 90%

of LAOs revenue. Moreover, there are complications regarding tasks between central government and LAOs 21 Annual Report 2016, Thai Health Promotion Foundation

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since they are related to several laws from various agencies. The government is currently considering reforming

some laws to solve the complicated duties between central government and LAOs. The obvious task for LAOs

in terms of pension system is an old-age allowance scheme for the elderly. The government allocates an annual

budget through the Ministry of Interior, then the budget is passed to LAOs, who provide the budget to the elderly

monthly. This is done because the government considers LAOs to be agencies that are closely connected to the

people in its area.

CHAPTER VI: CONCLUSIONS AND POLICY RECOMMENDATIONS The conclusions drawn below are based on the analysis in Chapters III, IV, and V, and the policy

recommendations are from my own opinions.

6.1 Healthcare System

The result of this paper shows that Thailand’s health insurance system is cost-inefficient and provides

unequal benefits to different groups of the population due to the fragmentation in the management of different

healthcare schemes. Therefore, my recommendations aim to improve efficiency in administrative costs and

reduce inequality of benefits in Thailand’s healthcare system.

6.1.1 The National System

The Thai government should decide among the three different healthcare schemes and choose one to

become the “designated national scheme.” However, the “social security model” as it is Japan may not be

suitable for Thailand. The main reason is that the SSS covers only around 12 million employees of 40 million

worker in the formal sector. The rest of the work force is in the informal sector and remains important as well.

In addition, healthcare benefits under the SSS cover only the employees themselves and not family members,

and coverage ends at retirement. The alternative healthcare system is required to take responsibility for retired

private employees, including children and unemployed person. In terms of CSMBS, this scheme is special for

civil servants because they are employees of the government. Therefore, reforming this scheme is sensitive and

not yet necessary.

My recommendation is that the UCS seems to be the most likely option, as it already covers 50 million

people out of a population of 67 million, and the management of the scheme is the most efficient of all three

schemes. In addition, if Thailand has the national system for healthcare insurance, the government can decide

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the standard conditions for all citizens and create equality in healthcare services. However, the UCS’s

dependence on the annual budget for funding may create a huge fiscal burden due to society becoming

increasingly aged. Therefore, the government should be concerned about finding sustainable financial resources

to support the UCS in the long term.

As recommendated above, all healthcare benefits need to be harmonized based on those defined under

the UCS. The integration of the UCS and SSS is not problematic because the healthcare benefits offered by both

schemes are comparable. After transfer of the SSS to the UCS, SSS beneficiaries no longer need to make

contributions (employees, employers and government) to the healthcare insurance, as they are entitled to the

universal healthcare benefits that are free of charge for all Thai citizens. Although this recommendation can

create equality among Thai citizens (except civil servants), it will at the same time place a huge fiscal burden

on the government because the UCS is funded exclusively from the national budget. Moreover, the funding

needs of the UCS will continute to increase each year due to the aging population, placing further stress on the

national budget and government.

6.1.2 Administration and Management

The Japanese healthcare system is administered exclusively by the Ministry of Health, Labour and

Welfare. The advantage of this is that a single agency controls the standard of healthcare services for all Japanese

citizens and defines the policies for all other agencies involved in the healthcare system. This is a different

system from Thailand, where there are multiple agencies responsible for the healthcare of different groups of

the population. As the result, there is some degree of inequality in the standard of treatment and services for

members in among the groups.

The Thai government needs a system that can avoid the duplication of healthcare insurance. It should

only designate health authority that ensures healthcare policy and supervision of the three schemes. The Ministry

of Public Health already has responsibility for policy on national public health. Moreover, the Ministry plays a

role as the policy-maker and service provider, with many public hospitals under its provision. However, the

designated public agency in charge of the national health insurance system should be independent from the

Ministry despite being under its supervision due to the transparency of management. My recommendation for

the designated authority in Thailand would be the “Ministry of Public Health.”

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In terms of management, even though Japan has many various schemes, the management is supervised

and monitored by the Ministry of Health, Labour and Welfare. The reason is that all schemes are managed

through the social security model. All citizens are required to be an insured person in each scheme. Moreover,

all insured persons must pay for premiums and cost of services by co-payment method together with the

government.

My recommendation is that the government maybe needs to reform the method of payment to healthcare

providers. The “co-payment” is an alternative method that the government can control and use to reduce the

fiscal burden. In addition, the government can start the co-payment method from UCS because the members

used to pay 30-baht voluntarily and the members in this scheme are majority of Thai population. In the case of

government officers, this issue is sensitive and complicated because the government officers consider

themselves employees of the government. However, the proportion of co-payment between members and

government is sensitive because the background of each member is totally different. This is the most challenging

issue for the government during reforms of the healthcare system.

In terms of a reimbursement method, most healthcare systems in Japan use the “fee for service” method

set up by the Ministry of Health, Labour and Welfare. The advantages of this system are that all Japanese have

same standard of treatment and services and the cost of services is not different between insured people in each

system. In Thailand, there are several reimbursement methods depending on system. This is because of the

different of benefits in each group. For example, the civil servant reimbursement method is fee for service

because they are employees of the government. For SSS members, the reimbursement is mixed depending on

the condition from its supervisor (Social Security Office). For UCS, the main reimbursement is capitation

method which set up by NHSO to prevent the fiscal burden for the government.

In my opinion, the circumstance of healthcare system between Japan and Thailand is different in terms

of system, administration, and management. Therefore, Japanese’s system is not suitable and efficient for

Thailand. As mentioned above, the UCS seems to be the most likely option of a national healthcare system, and

my recommendation is that the government should keep the “capitation” payment system in order to be able to

control the healthcare costs in the annual budget. However, the efficient reimbursements should be flexible to

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allow, for instance, the government make additional payments for chronic diseases or other costly diseases on

the DRG basis. The flexible reimbursement will become more aligned with actual costs.

In case of CSMBS, in the short term it is not necessary to integrate with UCS. Both systems use different

reimbursement systems, so integration could cause increased complexity for management and administration.

Moreover, the proposed integration will likely raise strong objections from civil servants who perceive their

generous healthcare system as part of their employment benefits. My recommendation is that the government

should gradually phase out the CSMBS by subscribing newly hired civil servants to the UCS (if the USC will

be the referential scheme of the National Healthcare System) and offering financial payment to compensate for

lost healthcare benefits. One of the important reasons why reformation of the civil servant healthcare system is

sensitive is that the salary of civil servants is lower than private sector employees with comparable positions.

Therefore, an efficient and sustainable welfare from the government as employers is important for persuading

the young generation to become a civil servant. Thus, reasonable compensations are needed if the government

decides to reform the civil servant healthcare system.

6.1.3 Financial resources

As the government plays the majority role in Thailand’s healthcare system, the government must

allocate around 14% of the national budget for the cost of treatment and services, and the percentage needs be

increased every year due to the aging society. Therefore, relying on only annual budget is not sustainable for

financial resources of the healthcare system in the long term.

My recommendation is that an “insurance system” like the one in Japan is likely to be an efficient

method for Thailand to reduce the costs of its healthcare system and prevent huge fiscal burdens in the future.

In this case, the member of each system would pay premiums for the treatment and services. However, the

government would decide carefully how much the premium will be in accordance with the ability of the

individual to pay. Moreover, the government might need Technical Assistance (TA) from expert organizations

as well as an efficient model to avoid conflict in each system. In my opinion, the government can start the

insurance system from the UCS because the members in this scheme are the majority of Thai population. In

case of government officers, this issue is sensitive and complicated because government officers consider

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themselves employees of the government. Ultimately, it will take some time to properly reform the CSMBS and

for the government to decide on the most efficient and sustainable system for government officers in the future.

6.1.4 The role of private stakeholders

Japan’s private hospitals act as healthcare providers and are non-profit organizations supervised by the

Ministry of Health, Labour and Welfare. This is different from Thailand because Thai private hospitals are

independent and for-profit. Private hospitals can decide to be part of the government healthcare providers and

they will receive the payment under the government conditions. In my opinion, this is suitable and efficient for

Thailand so far. The patients who have ability to pay for premium treatment and services can go to private

hospitals. On the other hand, the patients who do not have ability to pay for premium treatment and service can

go to public hospitals where they have already registered.

6.2 Pension System

The results of this paper show that Thailand’s pension insurance system covers all Thais citizens;

however, some improvements by the government are still needed. The most important issue is to prevent fiscal

risk and reduce governmental costs. Therefore, my recommendation is to improve sustainability and efficiency

of the pension system and its financial resources in the long-term due to the aging population.

6.2.1 The system

Japanese pension systems are operated by the compulsory insurance system. All Japanese citizens are

secured under the National Pension as a basic pension. Since all systems are an insurance system, the financial

resources come from premiums from insured persons as well as tax revenues. The insured persons will get paid

under its system condition. The payment of pension will come from the premium and the government equally

for National Pension. The management of pension system in Japan is a Pay-As-You-Go principle. In addition,

for employees or working generation, they are compulsory to join the Employees’ pension depending on who

they are. Then they will get paid for pensions add on the basic pension.

Thailand’s pension system covers all Thais citizens already. In case of NSF, the fund is provided for

the rest of citizens who are not covered by any pension schemes especially informal workers like voluntary

plan. The membership target of NSF is about 40 million people. However, the membership of NSF since the

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fund started in 2015 are stable at around 530,000 members22 which is only 1% of the target. My recommendation

is that NSF should be a compulsory scheme. As a result, all citizens will be covered by pension system like in

Japan. Therefore, the government should persuade people who are eligible to be a member of NSF to become

members.

About the financing plan, Japanese pension uses the “Pay-As-You-Go” principle as a payment method.

There are some disadvantages to this method such as sustainability, incentives for early retirement, and an

increased burden on future generations. Those issues are not serious when the pension system operates at the

beginning, but they will become more problematic over time especially as the population begins to age.

Therefore, my recommendation is a “fully-funded” method for the pension system in Thailand because the

assets accumulated are used to pay for future obligations, and the total contributions plus investment returns are

enough at any time to cover the present value of the entire flow of future pension responsibility. This method

will prevent fiscal risk due to an increasingly aged population in the long term.

However, the investors might have a question about how the fund manages the risk from its investment.

In Thailand, for example, GFP is a defined contribution scheme and managed under the board of directors

chaired by a permanent Secretary of Finance. The members are tripartite representatives from employees,

employers and the experts in the fields of law, investment and finance. The investment of the fund is legislated

under the Government Pension Fund Act B.E. 2539, which basically aims to provide security for members’

retirement. Therefore, the investment shall focus on the long-term returns with an appropriate risk framework.

6.2.2 Financial Resource

There are various schemes in Thailand and their financial resources are different as well. The schemes

for welfare from the government such as old age allowance and government pension are government-funded.

Those schemes will create huge fiscal burden for the government as Thailand becomes an aged society.

Conversely, other schemes such GPF, SSF and NSF are funded from contributions by their members and the

government, depending on each scheme. However, the government has a responsibility to allocate the annual

budget for all schemes.

22 National Savings Fund as of 31 August 2017

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In Japan, the National Pension is funded from insured persons (premiums) the government (subsidies).

Other schemes are funded by contributions from employees and employers. However, even the government

subsidies are only enough for national pension as a basic pension; the government still faces huge fiscal burdens

because of the aging population. As the number of working generation decreases and the number of older people

increases, the revenue from taxes will decrease. This is one of the reasons that the Japanese government has

consumption tax to support the social security system.

In Thailand, SSF will cause a fiscal burden for the government in the future because the fund started to

pay pensions for its members in 2014. There are alternative policies to prevent fiscal risk from SSF. As

mentioned in Chapter III, the contribution from employees and employers in SSF seem to be not efficient at

present (limited at 3% of salary and not higher than 750 baht per month). In terms of payment, SSF will pay

pension for the member when they are 55 years old. My recommendation is that the government should revise

the law and expand the retirement age from 55 years to at least 60 years and expand the limitation of contribution

between employers and employees as much as they have ability to pay. As the result, SSF will have more reserve

funds, which will be enough to pay for future obligations. In addition, these changes can prevent increased fiscal

risk for the government in case the fund does not have ability to pay the pensions for its members in the future.

The GPF scheme is efficient for government officers so far. The government can control the number

of new government officers, which can limit the fiscal burden from pension for government retirees in the future.

In addition, the numbers of government officers are stable at around 1.2 million lately. However, the government

started expanding the retirement age for government officers in special positions such as a judge, prosecutor or

professor. My recommendation is that the government should consider expanding the retirement age in other

positions and provide more benefits to the government officers who aim to work after 60 years old. This can

persuade government officers to work longer and can help the government reduce fiscal burden for paying

pension for government officers in the long term. However, this issue is sensitive for civil servants, and therefore

the government should consider their options carefully and perhaps hold a public hearing.

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6.3 Fiscal Policy

Tax policy is a common tool for the government to use to solve the problem of increased fiscal burden.

The Japanese government increased the consumption tax to support the rapid growth of social security system

fiscal burden. This policy can be considered an “earmarked tax” system because the government uses the extra

revenue for a special purpose. In Thailand, the government uses “extra budgetary funds” to receive money from

“surcharge excise taxes” on tobacco and alcohol to support both the healthcare and pension systems. Therefore,

it can be said that both countries have to increase taxes to support the rapidly increasing burden of the social

security system.

However, there is a difference regarding the transparency issue of these policies. The Japanese

government increased consumption tax, and the extra revenue is used through the budget system. Therefore, it

is obvious that the government uses the money efficiently and achieves the objectives. On the other hand, in

Thailand, the extra budget funds are operated by independent committees and the money directly transfers to

the fund. This is an issue and the government must clarify how the extra budgetary funds are used efficiently to

achieve the objectives of the fund.

In my opinion, increased taxes or surcharge taxes is an efficient fiscal tool to solve the fiscal burden

crisis for the government in the short term. A more significant issue is how efficiently and transparently the

government uses that money to support the social security system. My recommendation is that Thailand needs

an independent organization to monitor and evaluate the performance of extra budgetary funds to make sure

that the funds operate efficiently and help the government reduce its fiscal burden in the long term. Furthermore,

the government needs a more efficient method of tax collection from all agencies that are in charge of taxes.

Tax policy can solve the short-term problems of an aging population; therefore, creating sustainable financial

resources will be the best way for the government to support the healthcare and pension system in the long term.

6.4 Local Authorities Organizations (LAOs)

Japan’s local government plays a significant role in the healthcare system. For example, the local

government operates the long-term care system for elderly. Local government also has the authority to collect

taxes by itself and monitor the healthcare providers in its area. The work of the local government relies on

subsides from the central government.

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The number of LAOs in Thailand is excessive and the scale of each organization is different. Small

LAOs have to rely on a budget from the central government. Moreover, there is a complicated relationship

between the central government and LAOs defined by several laws that are mandated by several agencies. My

recommendation is that the central government should allow LAOs to play a significant role in the social

security system, and especially in healthcare system, as they do in Japan. The Ministry of Interior, which is in

charge of LAOs, should revise the laws to allow LAOs to collect more taxes by themselves, such taxes from

natural resources in their area. Moreover, the central government should support LAOs as the center of long-

term care for elderly by transferring some money from “ThaiHealth,” which receives budget from surcharge

excise taxes on tobacco and alcohol. This policy can help the government reduce its annual budget for LAOs.

Moreover, the sustainable financial resource from surcharge excise taxes can prevent fiscal risk from LAOs for

the long term.

Finally, Thailand cannot avoid becoming an aged-society soon. Not only must the government take

responsibility for budget allocation to support the healthcare and pension systems and to implement efficient

fiscal policies, but Thai citizens also need to prepare themselves by saving enough money to live adequately

after retirement. Financial literacy is necessary for helping Thai citizens understand how to prepare an adequate

pension for after retirement. The government should be the leader of this movement to educate the people of

Thailand in the future.

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