Objective evaluation of the individual's eligibility for benefit was a premeditated policy throughout the design of the LTCI system. This reflects a bitter reflection over some of the drawbacks of the health insurance system, most prominent of which is the "medically unjustifiable" prolonged hospitalization.

Because of chronic shortage of nursing home beds, many elderly who lack adequate care at home are institutionalized at geriatric hospitals without firm medical necessity. Although all health insurance claims are subject to rigorous review, such "medically unjustifiable" prolonged hospitalization is seldom denied payment chiefly because it is difficult to challenge the physicians' judgment without a objective evaluation tool.

The German LTCI also has an assessment tool but Japan's tool is far more complex and sophisticated. An evidence-based approach was adopted to develop the assessment tool: a radical departure from traditional negotiation oriented policy making. A field survey was conducted on a sample of residents of selected nursing homes to quantify the care need by means of one-minute time study and correlate it with ADL measurement. The methodology was in many ways similar to that of the U.S. with its development of MDS, RUGs.

The product was the assessment tool consisting of 73 items which will predict the individual care need with certain accuracy. The tool is fully computerized to facilitate the assessment process and is now used nationwide to determine the eligibility for the benefit.