Japan’s Long-Term Care (LTC) Insurance May Shift from Income-Based Eligibility to Asset Verification

The 2027 reform debate isn’t just about expanding the 20% copayment. It's also about redesigning the system's "entry price" with savings tests, monthly caps, and MyNumber-enabled verification.

Mark Kennedy

Feb 26, 2026

In order to determine the future copay percentage for long-term care insurance, Grandma may need to declare the value of all her assets (original AI-generated image by author Mark Kennedy)

TL;DR

Japan’s Ministry of Health, Labor and Welfare (MHLW) is advancing concrete options to expand the number of long-term care (LTC) users subject to a 20% copayment. These options are paired with “shock absorbers,” such as monthly caps on burden increases and asset (savings) consideration.
Japan is quietly shifting from “means-testing by income” to “ability-to-pay by level of asset wealth,” and LTC is becoming the template for healthcare and pensions.
If you sell to Japan in sectors such as insurance, finance, care technology, healthcare, or senior housing, plan for policy-driven shifts in demand: expect more price sensitivity, more compliance and data management, and more political volatility around “fairness.”

What’s new

Japan’s LTC insurance reform process is converging on a clear direction. They plan to expand the number of people who pay 20% out of pocket, while adding measures to prevent sudden household “hard landings.” These measures include monthly caps on incremental burdens and the explicit consideration of savings and deposits—and potentially other assets.

Why it matters

Out-of-pocket design is the system’s “entry price.” Change it, and you change utilization, household budgeting, and the politics of intergenerational burden-sharing. The deeper shift is philosophical: Japan is shifting from evaluating fairness based on income to evaluating it based on balance sheets—and LTC is where this new logic is being tested.

Catch up quick

LTC insurance has been in place for about 25 years. As the number of Category 1 insured individuals (age 65 and older) grew by about 1.7 times, the number of service users grew by about 3.6 times—creating a structural funding squeeze.

Copayments have already increased: 20% for “higher-income” seniors in 2015 and 30% for “working-age equivalent income” in 2018. The next challenge is expanding the 20% bracket downward and determining how to define “ability to pay.”

By the numbers

Total LTC costs have grown approximately 4X since inception, reaching 14.3 trillion yen (approximately US $91.3 billion) in the FY2025 budget.
As of March 2025, Japan had 5,406,760 LTC service users. Of those, ~4.3% paid a 20% copayment, or 234,062 people, and ~3.9% paid a 30% copayment, or 206,341 people. The remainder, or 91.8%, paid the standard 10% copayment.
One proposed “shock absorber” is capping the increase in the monthly burden for newly shifted users (e.g., a temporary cap of 7,000 yen ($45) per month, as discussed, alongside a referenced maximum monthly difference framework.
A concrete savings test is being proposed as a safety valve: if savings or deposits are below a certain threshold, users could apply to keep the 10% copay. Proposed thresholds are 7 million yen ($44,700) for individuals and 10 million yen ($63,900) for couples.
The high-cost long-term care service fee system, or kogaku kago sabisuhi (高額介護サービス費) in Japanese, has long used income-tier ceilings (e.g., system-start reference points such as 15,000 yen ($96) per individual for public assistance recipients, 24,600 yen ($157) per household for resident-tax-exempt households, and 37,200 yen ($237) per household for others and has undergone repeated revisions.

Context

This isn’t happening in isolation. The same “ability-to-pay” logic is advancing across adjacent systems. Discussions are explicitly referencing the need to reflect financial income and assets more consistently and correcting the unfairness created when financial income is only captured if someone files a tax return versus withholding.

Meanwhile, administrative feasibility is becoming policy; the document repeatedly ties asset verification capacity to the spread of MyNumber-linked deposit accounts.

How it works

Step 1: Expand the 20% copay population by redefining “income above a certain level.”
Step 2: Add transition measures so that the first month or first period does not produce an immediate utilization crash (the “monthly cap on increased burden” concept).
Step 3: Introduce an asset-screening mechanism initially framed around savings and deposits, with debate about scope, as a fairness tool and a way to relieve political pressure.
Step 4: Build the verification infrastructure: self-declaration as the baseline, penalties for fraud, and the municipal ability to confirm with financial institutions—which will eventually be enhanced by the MyNumber infrastructure.

Between the lines

Japan is trying to do two contradictory things at once: (1) raise more from seniors “who can afford it” and (2) avoid a visible backlash from those avoiding care. That’s why the emphasis of the design is not only on who pays 20%, but also on how to soften the transition (caps), how to defend the fairness narrative (assets), and how to operationalize enforcement (MyNumber-adjacent verification).

Friction point

Verification is the bottleneck. MHLW explicitly flags technical challenges in identifying financial income and assets. It also warns that half-built implementation could create new unfairness, for example, differences driven by tax-filing behavior.

Municipalities are implicitly the “unfunded mandate risk”: the administrative burden is repeatedly raised as a concern if the system shifts from income tiers to asset checks.

Follow the money

LTC is already a macro line item. 14.3 trillion yen (approximately US $91.3 billion for the FY2025 budget) is not a “health policy” number; it’s a fiscal structure number.

Once the policy frame becomes “ability to pay,” the target inevitably expands from copays to premiums and from long-term care to medical insurance because the political sell is “protect the working generation.”

The number of long-term care (LTC) recipients with a 20% copay may increase very soon (original AI-generated image by author Mark Kennedy)

The trade-off

Raising copays can reduce low-value use, but LTC is not discretionary consumption like many outpatient visits. Care is often long-term, intertwined with family labor, housing, and dementia progression. A poorly designed increase could push households to do two costly things: reduce formal care, which would worsen outcomes, and increase informal care, which would reduce family time and productivity.

Commentary

Japan’s LTC debate is often framed as “sustainability versus compassion.” That’s too simple. The real question is whether the state can credibly measure “ability” without triggering a trust crisis.

Undoubtedly, MHLW officials are studying how other advanced economies have tightened cost-sharing or incorporated income and asset tests into LTC financing as their populations age. For example, Germany combines social LTC insurance with means-tested social assistance for individuals who have exhausted their income and assets. South Korea calibrates copayments through income-linked contribution tiers within its national insurance framework. The Netherlands explicitly calculates copayments using taxable income and wealth data. The United Kingdom relies on strict means-testing for publicly funded care, including asset thresholds. Meanwhile, the United States uses Medicaid, which requires a process called “spend down” of income and assets to qualify.

A recurring pattern across OECD systems is to raise premiums, copayments, or means-testing, which often includes assets. Japan’s debate is notable not for the concept of ability-to-pay but for the potential shift from income-based tiers toward balance-sheet consideration in the core insurance design. The policy challenge lies less in setting a precedent and more in calibration, administration, and maintaining political legitimacy.

Moving from income to assets means more than just adjusting a copay rate; it means rewriting the implicit contract between citizens and the system. This includes what must be disclosed, what is considered “fair game,” and what the government can verify. The MyNumber system makes this possible. However, it doesn’t automatically make it legitimate.

What to watch

The final decision on how far down the income ladder the 20% copay expands and whether it’s staged.
Whether “assets” remains narrowly defined as “savings/deposits” or expands in scope, and how exemptions and thresholds are set.
Implementation mechanics, including self-declaration versus direct verification, penalties, municipal workload, and MyNumber-linked account uptake.
Spillover: Parallel reforms in medical copays and high-cost ceilings interact with care utilization for older households using both systems.

The bottom line

Japan is engineering a new social security “standard design”: a system in which the burden is according to ability and is increasingly defined by assets. This system is made enforceable by a data infrastructure. LTC is where the prototype becomes real—and where the political and human costs of failure are felt first.

What do you think?

Japan is quietly redefining “ability to pay” for LTC, shifting the focus from income to assets. Is this a necessary modernization or an asset dragnet that breaks trust?

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