The Current State of Welfare Moving Toward Marketization

The provision of welfare services is becoming more diversified, with not only government bodies but also private companies taking on this role. Here is a summary of its effects and challenges.　

• The “Megumi” Group’s Egregious Fraud Case
• Will Companies Exploit Welfare?
• The Trend toward Diversified Welfare Service Providers
• What Is a Quasi-Market?
• The Reality of Diversification and the Role of Families

The “Megumi” Group’s Egregious Fraud Case

In June 2024, “Megumi,” which operates group homes nationwide, received the heavy penalty of license cancellation for fraudulent billing of disability services. More than 100 facilities were affected, dealing a major blow to stakeholders because numerous residents were impacted. Investigations also revealed false claims for reimbursement—such as reporting required qualified staff where none were assigned—and multiple forms of abuse, including failure to provide proper meals and physical assault.

Will Companies Exploit Welfare?

Back in the 1980s, some university lecturers in welfare studies warned that entrusting welfare to companies would lead to the exploitation of people with disabilities. This incident could be seen as the grim fulfillment of that “prediction.”
The Megumi group indeed profited by preying on people with disabilities, which is utterly unacceptable.

Even so, it is no longer realistic to exclude companies from providing welfare services altogether. There are companies that approach people with disabilities in good faith. At the macro level, social security benefit expenditures (the total cost of Japan’s social welfare, including pensions and health insurance, financed by social insurance premiums and public funds) reached a record high ¥138.7433 trillion in FY2021, far exceeding the general account budget. Per capita, the amount also hit a record high of ¥1,105,500. Given this reality, a system in which government alone provides welfare services is impractical; the diversification of welfare providers has reached a point of no return.

The Trend toward Diversified Welfare Service Providers

The search for welfare pluralism—broadening providers beyond government—traces back to the U.K.’s Wolfenden Report (1978). As services expanded in the wake of the Beveridge Report (1942), which made all citizens subjects of welfare, attempts were made to diversify providers by incorporating private actors.

Japan later moved in the same direction, notably with the Long-Term Care Insurance Act (1997), which opened the market starting in 2000 to private companies alongside other providers.

Source: Compiled by the author

Companies such as COMSN, Inc. initially drew attention as corporate providers—along with criticism—but they also actively served remote islands and nighttime slots that other providers avoided. COMSN, too, ultimately committed fraudulent billing and shut down. While slow responses have been criticized, the only viable course appears to be strengthening administrative supervision of welfare-sector companies.

What Is a Quasi-Market?

Another key concept shaping today’s welfare service environment is the “quasi-market,” proposed by U.K. social policy scholar Julian Le Grand. In simple terms, it partially introduces competition into welfare by encouraging a level of rivalry among facilities and providers short of bankruptcy-inducing pressure.

As seen in the Megumi case, when a facility with residents loses its license (i.e., “goes bankrupt”), residents can suddenly lose their homes—securing alternatives on short notice is difficult. In the Megumi case, facilities whose licenses were cancelled were transferred to other corporations.

Conversely, a system that never allows failure can sap managerial effort on the provider side, degrading service quality—e.g., noticeable odors in facilities or brusque staff attitudes. Such tendencies were seen under Japan’s pre-2000 “placement system” (an administration-centered model before the Basic Structural Reform of Social Welfare), where government “placed” users with providers. In that setting, providers did not see users as customers to be won over; the “customer” was effectively the government.

Reflecting on this, Japan introduced a contract system: users choose facilities/providers, enter contracts, and pay user fees. The state subsidizes those fees through support payments. In effect, welfare services were converted into a quasi-market.

The Reality of Diversification and the Role of Families

The diversification of welfare service providers in a quasi-market refers to a system in which welfare services are delivered by four types of entities: (1) traditional government providers; (2) the voluntary sector (nonprofits/NGOs and volunteers); (3) informal systems (unofficial groups, families, friends, neighbors); and (4) private companies.

Source: Compiled by the author

Within this framework, families are positioned as part of the informal system. That is because welfare services have become highly specialized; without professional support, appropriate services are hard to secure. Families alone cannot reliably obtain what is needed. Attempting to provide, for example, long-term care solely within the family can risk tragedies such as caregiver suicide or caregiver homicide.

In an era of diversified service providers, the role of the family is likely to be that of a source of emotional support, since it is often difficult for them to be deeply involved in providing concrete care. When a family member needs to receive welfare services, the family’s role is to learn about the system, understand how it works, and take on the responsibility of skillfully utilizing those services.

In reality, however, it often takes families considerable time to learn the system—worse, some are unaware it exists at all. Having someone knowledgeable about welfare, or a professional, near the family can prevent such situations.

A final note on being a source of emotional support: under the Civil Code’s family support obligations, it would be helpful to clarify the relationship between elder-parent support and inheritance. 

Being a true pillar requires a certain level of financial capacity. Under equal inheritance, even with “contributions” for caregiving considered, there is limited financial incentive for adult children to provide care.

If supporting elderly parents—and, additionally, maintaining family graves—carried inheritance advantages, a family key person might more readily become that source of emotional support.

(Published with additions and revisions in the November 2024 issue of "EN-ICHI FORUM")

References

• 『社会福祉の原理と政策』日本ソーシャルワーク教育学校連盟編、中央法規、2021年。
• 『政策志向の社会学－福祉国家と市民社会』武川正吾、有斐閣、2012年。
• 『準市場、もう一つの見えざる手』ジュリアン・ルグラン著、後房雄訳、法律文化社、2010年。
• 『社会福祉の拡大と限定』古川孝順、中央法規、2009年。
• 『公共政策と人間－社会保障制度の準市場改革』ジュリアン・ルグラン著、郡司篤晃監修、聖学院出版会、2008年。

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