East and Southeast Asia are aging rapidly. South Korea, for example, has become one of the fastest aging societies in the world. In France, 115 years (1865–1980) were required for the proportion of population aged 65 and over to rise from 7 percent to 14 percent, but in South Korea, it is expected that a comparable change will occur in only eighteen years (2000–2018). More strikingly, it will take only eight years (2018–2026) for the proportion of South Korea’s elderly to increase from 14 percent to 20 percent. The nation’s old-age dependency ratio grew from 5.7 percent in 1970 to 12.6 percent in 2005, and is projected to further increase to 72.0 percent by 2050. At the macroeconomic level, these figures suggest an increasing burden on the working-age population to support the elderly population.

Such figures, however, do not tell the whole story about the burden shouldered by the working-age population. The lives of elderly and working-age individuals are not separate but rather, are linked by the institution of the family. Working-age adult children often take on the role of caring for elderly parents, who may have functional limitations and cognitive impairments. Such informal family caregiving is embedded in traditional Korean culture, as it is in many Asian societies that uphold traditional norms of filial piety.

As the elderly population grows, the demand for elderly long-term care will increase sharply. The supply of informal care, however, is decreasing for a number of reasons. Declining fertility rates have already diminished the potential pool of family caregivers. Further reducing the availability of family caregivers is an array of socioeconomic changes, such as increased migration, decreasing rates of intergenerational co-residence, and increasing labor force participation rates among women, who have historically served as the main family caregivers. Adult children, therefore, will increasingly experience a conflict between parental care responsibilities and their own work. Anecdotal evidence suggests that many daughters or daughters-in-law give up their professional employment to care for their disabled parent(s) or parent(s)-in-law. The work-family conflict also has important implications for the economy—informal caregiving may have additional negative effects on the labor force participation of the already shrinking working-age population.

I recently conducted a study using data from the Korean Longitudinal Study of Aging. My study indicated that providing at least ten hours of care per week reduces the probability of female labor force participation by 15.2 percentage points. I concluded that informal care is already an important economic issue in South Korea even though its population aging is still at an early stage. If the current trend continues, the labor market costs of informal caregiving will increase as the country experiences the full force of the demographic transition. One of the expected benefits of the public long-term care insurance implemented in July 2008 is to help family caregivers participate more easily in the labor force. In Japan, there is some evidence that long-term care insurance positively affects female labor force participation, but such beneficial effects have not yet materialized clearly in Korea. In both countries, there is much to learn from early experience with long-term care insurance.

In most parts of Asia, informal caregivers remain invisible on the policy agenda, not only because of cultural norms that perpetuate family-centered care but also because informal care incurs no public cost. However, the demographic transition, coupled with socioeconomic changes in the region, underscores the need to examine whether informal care is really without costs, at both individual and societal levels. Throughout Asia, the challenge for public policy will be finding the optimal mix of informal, family-based and formal, socially supported elder care.

The Director of the Asia Health Policy Program, Karen Eggleston, served as guest editor of the International Journal of Healthcare Finance and Economics for the June 2009 issue. The eight papers of that issue evaluate different provider payment methods in comparative international perspective, with authors from Hungary, China, Thailand, the US, Switzerland, and Canada. These contributions illustrate how the array of incentives facing providers shapes their interpersonal, clinical, administrative, and investment decisions in ways that profoundly impact the performance of health care systems.

The collection leads off with a study by János Kornai, one of the most prominent scholars of socialism and post-socialist transition, and the originator of the concept of the soft budget constraint. Kornai’s paper examines the political economy of why soft budget constraints appear to be especially prevalent among health care providers, compared to other sectors of the economy.

Two other papers in the issue take up the challenge of empirically identifying the extent of soft budget constraints among hospitals and their impact on safety net services, quality of care, and efficiency, in the United States (Shen and Eggleston) and – even more preliminarily – in China (Eggleston and colleagues, AHPP working paper #8).

The impact of adopting National Health Insurance (NHI) and policies separating prescribing from dispensing are the subject of Kang-Hung Chang’s article entitled “The healer or the druggist: Effects of two health care policies in Taiwan on elderly patients’ choice between physician and pharmacist services” (AHPP working paper #5).

In “Does your health care depend on how your insurer pays providers? Variation in utilization and outcomes in Thailand” (AHPP working paper #4), Sanita Hirunrassamee of Chulalongkorn University and Sauwakon Ratanawijitrasin of Mahidol University study the impact of multiple provider payment methods in Thailand, providing striking evidence consistent with standard predictions of how payment incentives shape provider behavior. For example, patients whose insurers paid on a capitated or case basis (the 30 Baht and social security schemes) were less likely to receive new drugs than those for whom the insurer paid on a fee-for-service basis (civil servants). Patients with lung cancer were less likely to receive an MRI or a CT scan if payment involved supply-side cost sharing, compared to otherwise similar patients under fee-for-service. (This article is open access.)

The fourth paper in this special issue is entitled “Allocation of control rights and cooperation efficiency in public-private partnerships: Theory and evidence from the Chinese pharmaceutical industry” (AHPP working paper #6). Zhe Zhang and her colleagues use a survey of 140 pharmaceutical firms in China to explore the relationships between firms’ control rights within public-private partnerships and the firms’ investments.

Hai Fang, Hong Liu, and John A. Rizzo delve into another question of health service delivery design and accompanying supply-side incentives: requiring primary physician gatekeepers to monitor patient access to specialty care (AHPP working paper #2).

Direct comparisons of payment incentives in two or more countries are rare. In “An economic analysis of payment for health care services: The United States and Switzerland compared,” Peter Zweifel and Ming Tai-Seale compare the nationwide uniform fee schedule for ambulatory medical services in Switzerland with the resource-based relative value scale in the United States.

Several of the papers featured in this special issue were presented at the conference “Provider Payment Incentives in the Asia-Pacific” convened November 7-8, 2008 at the China Center for Economic Research (CCER) at Peking University in Beijing. That conference was sponsored by the Asia Health Policy Program of the Shorenstein Asia-Pacific Research Center at Stanford University and CCER, with organizing team members from Stanford University, Peking University, and Seoul National University.

As Eggleston notes in the guest editorial to the special issue, AHPP and the other scholars associated with the issue “hope that these papers will contribute to more intellectual effort on how provider payment reforms, carefully designed and rigorously evaluated, can improve ‘value for money’ in health care.”

The Asia Health Policy Program at the Walter H. Shorenstein Asia-Pacific Research Center is pleased to announce that Brian K. Chen has been awarded the %fellowship1% for 2009-2010.  Brian is currently completing his Ph.D. in Business Administration in the Business and Public Policy Group at the Haas School of Business, University of California at Berkeley.  He received a Juris Doctor from Stanford Law School in 1997, and graduated summa cum laude from Harvard College in 1992. 

As an applied economist, Brian’s research focuses on the impact of incentives in health care organizations on provider and patient behavior.  For his dissertation, Brian empirically examined how vertical integration and prohibition against self-referrals affected physician prescribing behavior.  His job market paper has been selected for presentation at the American Law and Economics Association’s Annual Meeting in 2009.

Brian comes to the Shorenstein Asia-Pacific Research Center not only with a multidisciplinary law and economics background, but also with an international perspective from having lived and worked in Taiwan, Japan, and France.  He has a particularly intimate knowledge of the Taiwanese health care system from his experience as an assistant to the hospital administrator at a medical college in Taiwan.

During his residence as a postdoctoral fellow with the Asia Health Policy Program, Brian plans to conduct empirical research on cost containment policies in Taiwan and Japan and how those policies impacted provider behavior. His work will also contribute to the program’s research activities on comparative health systems and health service delivery in the Asia-Pacific, a theme that encompasses the historical evolution of health policies; the role of the private sector and public-private partnerships; payment incentives and their impact on patients and providers; organizational innovation, contracting, and soft budget constraints; and chronic disease management and service coordination for aging populations.

The Asia Health Policy Program hosted meetings of the Association of Pacific Rim Universities World Institute (AWI, www.apru.org/awi) public health research project, February 24-25 at the Shorenstein Asia-Pacific Research Center. Stanford University is a member of the Association of Pacific Rim Universities, and the Asia Health Policy Program coordinates with others on the steering committee for the AWI public health project. The project brings together scholars from leading Pacific Rim universities to focus on comparative study of chronic non-communicable disease – the number one cause of premature death worldwide – in selected Pacific Rim cities (Beijing, Danang, Hangzhou, Hong Kong, Singapore, Jakarta, Makassar, Nanjing, Sydney, Taipei, Vientiane and Wuhan).

Ambassador Michael H. Armacost, Acting Director of the Shorenstein Asia-Pacific Research Center, welcomed the participants -- researchers and deans of schools of public health from China, Hong Kong, Japan, Korea, Singapore, Vietnam, Malaysia, Indonesia, and Australia. During the deliberations, the participants agreed to establish a program of research and development to prepare tools for use by health systems worldwide to implement best practice in chronic disease prevention and management through four areas of research: risk factor surveillance; assessment of costs and organization of services; change management to implement best practice; and monitoring and evaluation.

The previous meeting of the AWI public health project was held in November 2008 in Singapore. The next meeting will be held in June 2009 at Johns Hopkins University (an Invited Member of the Association of Pacific Rim Universities World Institute).

On February 23, prior to the public health project meetings, the Asia Health Policy Program also hosted the planning meetings for the AWI 2009 public health workshop, to be held at Johns Hopkins University June 24-26, 2009.