Everything You Ever Wanted to Know about National Health Plans ….and maybe more - Japan


One thing I thought about when researching Japan's plan was the consideration of tradition and society.  As a professor once said, it is easier to get 100 Japanese to wear the same clothing than it is to get two Americans to decide on which pizza to buy.  In Japan families will help with in hospital nursing.  How willing would American's be to help with nursing?

Japan According to the Organisation for Economic Co-operation and Development (OECD) statistics, Japanese per capita health expenditure is lower than Germany by 15 percent and by about a half compared to that of the United States. Because of economic incentives involved as well as tradition, the percentage of pharmaceutical-related expenses in total health expenditures is exceptionally high in Japan. The figure was reportedly 29.5 percent (including both inpatient and outpatient care) in Japan, compared with 17.1 percent in Germany and 11.3 percent in the United States.

Patient cost-sharing has increased and patient charges on pharmaceutical costs for outpatient services has been in use for the first time since September 1997, which was reported to have a major impact on patients’ behavior.

Inefficiency exists in areas such as: long hospital stays and outpatient care waiting times

  1. Amenities in hospitals are far inferior to those in other developed countries
  2. A significant but uncounted number of services are not reimbursed by sickness funds
  3. Uncounted services may not be included in national health expenditure calculations
  4. Families often help with nursing in hospitals
  5. There are also some under-the-table payments to physicians for favors such as special attention and treatment, and quick admission
  6. The health plan pays relatively little attention to preventive care

Once benefits provided by health insurance reach a certain level, moral hazard comes into play inevitably—for patients as well as physicians. In this vein, we now turn to negative lessons from Japanese experiences. Despite vigorous price control measures in the 1980s and 1990s, health expenditures increased by 1 trillion yens annually in recent years. As a general rule, if the persons receiving fees (such as physicians ) also control the volume of services, they will normally respond to a reduction in fees by raising the volume of services to restore their income; Japan is no exception. The effects of patient cost-sharing on distributional aspects and on effective use of health services are not fully investigated. Moreover, we cannot continue to increase patient cost-sharing. The next step might be the introduction of selective benefit. In this scenario, insurance coverage would be classified into two categories: basic benefit and selective benefit. A higher contribution would be required to receive the selective benefit. Japan enjoys the lowest infant mortality rate and the longest life expectancy in the world. Furthermore, the country’s public health expenditure is only 5 or 6 percent of its GDP, and the health care system appears to be functioning quite well. However, we should be careful in drawing any conclusions from these, because infant mortality rate and life expectancy at birth are no longer proper indicators for evaluating a health care system.

Preventative care and maternity

  1. Large employers may provide some preventive care
  2. Health insurance covers little preventive care
  3. It provides only cash payment for normal pregnancy
  4. Pregnancy is not considered an illness in Japan

Cost Containment

All patients except the elderly face higher cost-sharing. Cost sharing

Employer-based health insurance

  1. Employees pay 10% coinsurance for their care
  2. Dependents pay 20% for inpatient care
  3. Dependents pay 30% for outpatient care National Health Insurance
  4. Regular patients pay 30% coinsurance

Retired employees within the National Health Insurance scheme pay

  1. 20 percent
  2. Dependents pay 20 percent for inpatient care
  3. 30 percent for outpatient care

The McKinsey Quarterly, May 2008 At first glance, Japan's health care system, like its people, seems to be in remarkably good shape. The country's National Health Insurance plan provides generous universal coverage. The Japanese suffer relatively low rates of disease and have among the highest life expectancy in the world. Moreover, spending on health care is lower than in most Organisation of Economic Co-operation and Development (OECD) countries, thanks to strictly controlled reimbursement levels.

But Japan, like many other economically advanced countries, faces mounting health care expenses that will be difficult to support using current methods. MGI research suggests health care spending in Japan could double as a proportion of GDP within 30 years, with advances in medical technology, growing wealth, and demographic changes driving the increase. The financing gap is so large that policies on which Japan has relied in the past, such as increasing co-payments, will not be sufficient to close it." There is often an important potential conflict between efficiency and equity, but in Japan this is less of a problem because people are accustomed to their egalitarian system generating minor inconveniences in terms of accessibility (Mooney 1996).

Consumption of pharmaceuticals is high in Japan. Because of economic incentives involved as well as tradition pharmaceutical-related expenses in total health expenditures is exceptionally high in Japan. Japanese doctors not only prescribe drugs but also dispense them. There is a certain gap between the discount price at which doctors buy drugs and the official price by which doctors are reimbursed by the Insurance system for the drugs they prescribe.

Another reform that the government intends will change the fee-for-service practice. This system is effective to stimulate physicians to work hard, but sometimes induce them to use too much medicine and patients to stay at hospitalDoctors will increase their case load to offset the lower fees.  The percentage ratio of the costs of medicine in Japan is exceptionally high, about 30% of the total health service and medical costs. The average length of hospitalization is much longer than that of other highly industrialized countries.

To cope with these difficulties the government intends to

1) mix the fee-for-service practice with fixed-rate practice ;

2) promote the division of hospital and pharmacy; and

3) integrate health services with personal social services for the elderly.Although  the  nationally  uniform  fee  schedule  has  brought  about  both equity-  and  cost  containment,  it  has  also  had  a  negative  effect  on  the health  care  system. 

The  first  negative  feature  is  the  distorting  effect  on patient  volume.  Since  fees  are  controlled,  providers  seek  to  maximize their  revenue  by  seeing  more  patients.  This  dilutes  the  services  provided.  In  outpatient  care,  a  clinic  physician  sees  an  average  of  forty-nine  patients per day13  percent see more than a hundred.

While  patients have ready access  to  care,  consultation  times  are  short,  and  patients  end  up  paying repeat  visits  to  the  clinics.  In  inpatient  care,  the  total  number  of  staff  peroccupied  bed  is  still  only  0.77,  about  one-quarter  the  U.S.  level. 

A  second  negative  feature  is  the-distorting  effect  on  the  type  of  services provided.  Services  for  which  the  fee  schedule’s  price  is  higher  than  the market  price  (for  example,  drugs  and  laboratory  tests)  tend  to  be  provided excessively, despite  a  recent  lowering  of  their  scheduled  prices.  In the case of drugs, the result of lowered  fees has been heavy promotion of new drugs whose  patents  protect  them  from  fierce  price  competition.  One  consequence  is  that  third-generation  antibiotics  are  used  more  extensively  in Japan  than  anywhere  else

In  the  case  of  laboratory  tests,  free-standing laboratories  have  cut  their  prices  to  the  point  that  their  efficacy  is questioned.  On  the  other  hand,  cognitive  procedures  and  home  care  are under-provided  because  of  the  implicit  rationing  process  that  keeps  their fees  at  a  very  low  level,  if  fees  are  established  at  all.  Also,  experimentation with  new  financing  mechanisms  has  proved  difficult  because  of  the monolithic  structure  of  the  nationally  enforced  procedure-based  fee-for-service system.

The  third,  and  perhaps  most  serious,  negative  feature  has  to  do  with quality  of  care.  Because  Japan’s  fee  schedule  guarantees  uniform  payment to  all  providers,  on  the  assumption  that  their  quality  is  uniform,  no  real incentives  exist  to  maintain  quality.  No  formal  quality  assurance  programs  exist,  and  specialty  boards  do  not  contribute  much  to  quality assurance.  Under  these  circumstances,  the  increasingly  quality-conscious public  has  turned  to  the  large  public  and-teaching  hospitals,  perceiving that  their  quality  is  higher.  This  has  resulted  in  long  queues  in  their outpatient  departments  (appointments  are  not  the  general  rule,  even  in these  hospitals)  and  waiting  lists  in  their  inpatient  departments. 

A  black  market  exists  for  those  who  can  afford  it.  Using  the channel  of  a  monetary  gift  in  the  range  of  one  to  three  thousand  dollars to  the attending  physician  in  a  Tokyo  university  hospital,  which  is  socially prescribed,  a  patient  choosing  a  private  room  can  be  admitted  sooner  and can  be  treated  by  a  senior  specialist.  Notwithstanding  the  inequities implicit  in  such  an  arrangement,  it  also  means  that  quality  assessment  is difficult,  if  not  impossible.

  1. Funded by: The Policy and Human Resources Development Trust Fund of the Government of Japan
  2. Addressing Japan's Health Care Cost Challenge
  3. Japanese Health Care Through regulated Fees