The Emergency Revision of Long-Term Care Reimbursement Rates and Its Structural Limits: The Government's Own Confession That the Ordinary System Can No Longer Keep Up

In June 2026, long-term care reimbursement rates will be revised. The revision rate is +2.03%, additional national spending is 51.8 billion yen, and the wage increase through the treatment improvement allowance will reach a maximum of 19,000 yen per month (6.3%). On the surface, the numbers read as "a wage increase responsive to voices from care settings" — but the real significance of this revision lies elsewhere.

Long-term care reimbursement is a regulated price revised, in principle, once every three years under the Long-Term Care Insurance Act. The most recent revision was in April 2024; under the normal schedule, the next would have been April 2027. Bringing that forward by one year to June 2026 — a "mid-cycle revision" — is virtually unprecedented as a full-scale measure since the long-term care insurance system launched in 2000. As Nippon Life Insurance Research Institute explicitly characterizes this revision as a "mid-cycle revision," it means that the government has voluntarily disabled the three-year-cycle institutional failsafe that was built into the long-term care insurance system to protect provider predictability and premium stability.

Why was it necessary to advance the schedule by breaking the cycle? The backdrop is the rapid deterioration of the long-term care labor market. According to a survey by Tokyo Shoko Research, care provider bankruptcies in 2025 totaled 176 cases — up 2.3% year-on-year and a second consecutive annual record. In particular, home-care services recorded 91 cases (up from 81 the previous year, +12.3%), setting a third consecutive record, while dementia group homes surged to 9 cases (up from 2 the year before). Bankruptcies directly attributable to staffing shortages reached 29 cases — up 45.0% year-on-year and a new record high. Compared to 111 cases in 2019 (before the COVID-19 pandemic), the level is roughly 60% higher.

The situation at the point of hiring is even more severe. According to the FY2024 Long-Term Care Labor Conditions Survey by the Long-Term Care Labor Stability Center, 86.6% of care providers report difficulty securing personnel. Among the reasons cited for difficulty hiring, "working conditions inferior to other industries" stood at 53.7%, and "intense competition with other care providers for workers" at 53.1%. For home-care workers specifically, the effective job-offer ratio has reached 14.14 to 1 — a level that represents not merely "difficulty hiring" but effectively "hiring is impossible" (the ratio for all care-related occupations stands at approximately 4:1, against an all-industry average of 1.24).

In short, with service delivery collapse — centered on home-care services — becoming a realistic prospect, the government concluded that waiting for the normal FY2027 revision would be too late. The three-year cycle was an institutional failsafe designed to protect provider predictability and premium stability. By voluntarily disabling it, the government has effectively made an official admission that the ordinary system can no longer keep pace with the problem. This article reads the emergency revision not as "good news for the care sector" but as "a signal that Japan's long-term care labor market has reached its institutional limits."

The Trap of the Regulated-Price System: "Wages Are Rising, Yet the Gap Is Widening"

The central justification for the emergency revision is the wage problem. But this problem is not as simple as "wages are insufficient, so add more."

According to the FY2024 Survey on the Treatment Status of Long-Term Care Workers by the Ministry of Health, Labour and Welfare, the average monthly salary of full-time care workers (monthly-salary basis) rose from 324,240 yen in September 2023 to 338,200 yen in September 2024 — an increase of 13,960 yen (+4.3%) per month. This reflects the consolidation of the treatment improvement allowance in the FY2024 revision, and on the surface it does represent "a realized wage increase."

Yet over the same period, the salary gap with the all-industry average widened from 69,000 yen to 83,000 yen per month — a reverse expansion of 14,000 yen. Care worker salaries are rising, yet the gap with other industries is growing wider.

This paradox is not coincidental; it arises from the structure of the regulated-price system itself. Long-term care reimbursement is a regulated price announced by the Minister of Health, Labour and Welfare and revised only once every three years. Meanwhile, wages in other industries are set freely each year in response to rising prices and labor shortages. From 2022 through 2024, private-sector companies — including manufacturing and service industries — continued annual wage increases in the range of 3–5%, driven by union spring negotiations and wage-hike trends among small and medium enterprises. The indirect route through long-term care reimbursement cannot track that free-market wage competition. The 13,960-yen monthly increase failed to close the gap with the rising wages of other industries and instead allowed the differential to widen further.

If care workers were to catch up to the all-industry average (approximately 420,000 yen in September 2024), they would need more than 80,000 yen per month added to their wages. The maximum monthly add-on of 19,000 yen achievable through this revision falls short of one-quarter of that. The headline "wage increase scale of the emergency revision" is accurate, but whether it actually reaches the structural problem is a question that remains unanswered.

The First Decline in Care Workforce Numbers Since 2000: FY2023

The limits of the regulated-price system are also reflected in clear employment figures. The care workforce had grown almost continuously since the long-term care insurance system launched in 2000, driven by expanding demand. But according to materials submitted to the Long-Term Care Benefit Subcommittee of the Social Security Council, the care workforce declined from FY2022 to FY2023 for the first time since the system launched. The workforce stood at approximately 2.15 million in FY2022; FY2023 came in below that figure.

As a number, the decline is small — but structurally, it marks a major turning point. This is because the 9th Long-Term Care Insurance Business Plan projects required staffing at 2.4 million in FY2026 and 2.72 million in FY2040 — implying shortfalls of approximately 250,000 by FY2026 and 570,000 by FY2040. Rather than the actual workforce closing in on the required figure, the actual workforce has already begun to contract. In the sense that the demand and supply curves began moving in opposite directions, FY2023 was a structural turning point in the care labor market.

The shortfall in the care workforce is also reflected in trends in the National Care Worker certification examination. According to registration data from the Japan Social Work and Welfare Promotion and Test Center, the cumulative number of registered care workers reached approximately 1.94 million as of September 2023. But only a fraction of registered holders are actually working in care settings. In the 37th National Care Worker Certification Examination (administered in 2025), the number of examinees was 75,387, with 58,992 passing and a pass rate of 78.3% — a four-year high over the previous year, though the increase was marginal (up 792 from 74,595 the year before). Credential holders are accumulating, but they are not flowing into care settings. Non-wage factors — working conditions, career pathways, and social recognition — continue to push credentialed individuals toward other fields.

Turnover Is Down, Yet Staffing Shortages Are Getting Worse

A seemingly contradictory set of facts requires clarification here. The Long-Term Care Labor Conditions Survey found that the turnover rate for care workers reached a record low of 12.4% — below the all-industry average of 15.4%. The conventional perception that "care = high turnover" does not match recent data. So why are staffing shortages deepening?

The answer lies in the decline in hiring rates. The number of people leaving is down, but the number of new entrants is falling even further. The figure of 86.6% of providers reporting difficulty hiring reflects not a retention problem, but an entry problem. Those who continue working in care settings stay because of career identity and a sense of mission — but for prospective entrants, wage comparisons with other industries, physical demands, and social recognition function as barriers to entry. Even if turnover falls, when hiring rates fall even further, the overall workforce contracts. This is a problem that cannot be resolved by continuing to implement wage increases through add-on allowances, because prospective entrants are not making career decisions by examining the intricacies of long-term care reimbursement structures — they are moving based on legible signals like "how much is the starting salary" and "does it compare favorably to what my peers earn."

The Limits of Reliance on Foreign Workers

As wage increases and domestic hiring hit their limits, the mobilization of foreign workers has emerged as another option. According to the Ministry of Health, Labour and Welfare's report on "The Current Status and Future Direction of Accepting Foreign Care Workers," foreign workers employed under the Specified Skilled Worker (care) status reached a record high of approximately 44,000 as of end of December 2024. Four parallel acceptance pathways — the EPA framework, Specified Skilled Worker, Technical Intern Training, and the newly created Ikusei Shuro system — are operating simultaneously; the Ikusei Shuro system, which passed into law in June 2024, is scheduled to take effect in FY2027. From April 2025, home-care services were also opened to Technical Intern Training and Specified Skilled Worker visa holders.

Yet structural limits also exist in reliance on foreign workers. According to the Long-Term Care Labor Conditions Survey, care providers accepting foreign nationals still account for only approximately 20% of providers (up 2.4 percentage points from the previous year). Acceptance requires providers to bear costs for housing support, Japanese language education, and residency status management — burdens that are particularly difficult for smaller operators. On the international front as well, the continued weakening of the yen has reduced the relative attractiveness of working in Japan. Sending countries such as Vietnam and Indonesia are also courted by Germany, South Korea, Taiwan, and the Gulf states — Japan is no longer the default destination. Even if Japan were to raise care wages by 80,000 yen per month to match the all-industry average, that increase is denominated in yen only — in dollar or euro terms, Japan would still struggle to compete with rival countries. The modest 19,000-yen monthly add-on of the emergency revision falls far short of restoring competitiveness in the international labor market.

The Limits of the Indirect Route: "Regulated Reimbursement → Provider → Wages"

The wage problem, hiring problem, and foreign worker problem traced above all lead back to the same structural root. The wages of Japan's long-term care workers are determined not through direct transactions between users and providers, but through the indirect route of "regulated reimbursement → provider → wages," mediated by public insurance. This route embeds three layers of delay.

The first is the delay inherent in the revision cycle itself. With revisions only once every three years, it is structurally difficult to track current wage levels, price levels, and wage trends in other industries. Even responding with an emergency revision, as this time, amounts to emergency treatment — it does not change the structure itself. The second is the delay in distributing reimbursement income into wages. Long-term care reimbursement determines a provider's total revenue, but the ratio allocated to personnel costs and the distribution among recipients (management, full-time, and part-time staff) is left to each provider's discretion. The treatment improvement allowance has attempted to correct this by specifying distribution requirements in detail, but this has only increased administrative burden and complexity — leaving frontline workers with the opacity of "my wage went up, but I don't know which allowance raised it." The third is the delay tied to premium-setting. Raising long-term care reimbursement ultimately increases the insurance premium burden on insured parties. The emergency revision also requires financing from the FY2026 budget and premium increases — structurally forcing a discussion of insured-party burdens six months earlier than planned.

These three delays are also mechanisms by which the regulated-price system guarantees "predictability" — meaning the structural limits are not side effects but design features. The emergency revision has temporarily disabled this design; if it is disabled repeatedly, predictability itself is lost. "Normalization of mid-cycle revisions" is precisely that risk.

The "Precedent Limits" Germany Reveals

International comparison simultaneously reveals both the range of options available to Japan and the limits of those options. According to a June 2025 report by JILPT (Japan Institute for Labour Policy and Training), Germany maintains a separately established sector-specific minimum wage for the care industry. From July 2025, the minimum levels are 16.10 euros per hour for unskilled workers, 17.35 euros for care assistants, and 20.50 euros for care specialists. Under this system, monthly salaries for eldercare workers in Germany rose from 2,616 euros in 2014 to 4,228 euros in 2024 — a +61.6% increase over ten years. This is a direct wage uplift that is incomparably more powerful than Japan's indirect approach through long-term care reimbursement.

Yet even Germany has seen its Federal Statistical Office project a shortfall of 90,000 nursing and care workers over the next ten years, reaching 280,000 by 2049. Even with a minimum floor protecting wages, simultaneous demographic shifts and labor demand growth cannot be outpaced. The lesson for Japan is twofold. First, protecting workers directly — rather than routing through providers — enables far more substantial wage increases. Second, even so, workforce shortages will not be resolved. Germany's precedent confirms that wage increases are a necessary condition, but not a sufficient one.

Normalization of Mid-Cycle Revisions and the Dilemma of Benefit Restraint vs. Workforce Investment

What awaits beyond the emergency revision? In the short term, three scenarios are visible.

The first is the normalization of mid-cycle revisions. Even if the June 2026 revision was an emergency response to an unexpected collapse in the labor market, if the labor market deteriorates again after the regular April 2027 revision, calls for another mid-cycle revision will emerge. The fact that the FY2024 revision's effect ended up "widening the gap with the all-industry average by 14,000 yen" demonstrates that the effectiveness verification of the three-year cycle is structurally unable to keep pace. The risk of mid-cycle revisions shifting from an institutional exception to an operational norm is real.

The second is the trade-off with benefit restraint. Continuing to raise long-term care reimbursement will ultimately increase insurance premium burdens on insured parties and out-of-pocket costs for care users. Insurance premiums have already risen from 2,911 yen in 2000 to approximately 6,225 yen nationally in FY2024. For insured parties aged 65 and over, care insurance premiums and medical insurance premiums are simultaneously rising against the backdrop of pension-based incomes. Meanwhile, measures to improve care benefit efficiency — such as moving care-needs levels 1 and 2 to comprehensive community services or introducing fees for care plans — face strong political resistance and are not advancing. The dilemma of simultaneously demanding "reimbursement increases to secure the workforce" and "benefit restraint for sustainability" cannot be resolved through an emergency revision.

The third is a further acceleration of foreign worker policy. The FY2027 implementation of the Ikusei Shuro system, the opening of Specified Skilled Worker pathways to home-care services, and similar measures seek to fill part of the gap that wage policy cannot solve by "bringing in more people." But as noted above, the dual wall of yen depreciation and international competition exists. Unless Japan can offer acceptance conditions superior to those of Germany and South Korea, foreign workers will fill only a portion of the structural shortfall.

In the book domain, 『介護格差』 (Care Disparities) by Yoshihiro Yuki (Iwanami Shinsho, 2024) offers a systematic overview of the structural limits of the care labor market and the range of policy options available. It is a useful reference for reading the emergency revision in context.

The Emergency Revision Is a Starting Point, Not a Destination

In summary, the June 2026 emergency revision of long-term care reimbursement is the government's emergency response to the collapse of the care labor market. It is a necessary and indispensable form of emergency treatment, and some degree of effect can be expected in care settings. But it does not change the underlying structure.

As examined in the sister article "The Surge in Social Insurance Burden in 2026", 2026 is also a year of major shifts on the social insurance premium burden side — insured parties will be receiving both increased burdens and improved benefits simultaneously. As examined in the sister article "What Changed with the 2026 Welfare Reform", the entire social security system is being redesigned concurrently, and the care sector — as the most labor-intensive domain — will continue to be a central policy focus. Overlapping with the workforce collapse of local government workers examined in the sister article "The Labor Force Collapse of Local Government", the workforce sustaining public services as a whole is entering a state of crisis.

Chronic shocks require chronic structural reform — not symptomatic treatment. The emergency revision is a starting point, not a destination. What is called for over the next three years is not a monthly add-on of 19,000 yen, but a debate that redesigns the very relationship between regulated pricing and the labor market. A sector-specific minimum wage for care, strategic foreign worker acceptance, concentration of benefits, technology-driven productivity improvements in care, and a redefinition of the roles of families and communities — none of these is sufficient as a standalone solution; only their combination will produce a design capable of sustaining Japan through the 2040 Problem. The emergency revision is nothing more than an entry point into that debate, and it is vital to maintain that recognition rather than becoming intoxicated by the numbers of the revision itself.

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References

Reference Books

• 『介護格差』 (Care Disparities) (Yoshihiro Yuki, Iwanami Shinsho, 2024): A systematic overview of the structural limits of the care labor market and the range of policy options available, covering long-term care reimbursement, treatment improvement allowances, and foreign worker policy in a comprehensive current-situation analysis. A useful reference for reading the emergency revision in context