The Tokyo Foundation for Policy Research


The Tokyo Foundation for Policy Research

Addressing the Problems in the Japanese Healthcare System

August 27, 2009

Japan has a healthcare system characterized by universal health insurance coverage, as all Japanese citizens belong to one of the country’s health insurance systems. The author analyzes problems of the current system, outlines the healthcare platforms of the major political parties, and points out important tasks to which all parties should be committed.

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Japan’s healthcare system is fundamentally a system of universal health insurance coverage. Japanese citizens belong to either the national health insurance, workplace-based health insurance, or government-managed health insurance system. It is a free-access system with no gatekeepers that allows people to be examined and treated at the medical institutions of their choice, regardless of their symptoms. This has led to the problem of excessive demand from patients who visit doctors too often. The frequency of doctor visits per patient in Japan far outstrips the average for Organisation for Economic Cooperation and Development countries. Another characteristic of the Japanese healthcare system is the high number of hospital beds per capita; to maintain the utilization rate of all these beds, hospital stays are also longer than the OECD average.

The aging of Japan’s population is causing severe problems for the country’s public finances. The health insurance system, in particular, is structured such that fiscal resources are transferred from workplace-based insurance (whose members tend to be younger and have higher incomes) to the national (many of whose members are elderly or unemployed) and government-managed insurance systems.

The remuneration system is fundamentally a fee-for-service system, but a comprehensive payment system is gradually being introduced in acute hospitals. The payments doctors receive for medical services are the same nationwide, with rates set by the central government.

There is a general impression that the remuneration system and other complex regulations and systems in Japanese healthcare tie the hands of medical practitioners. Yet ad hoc responses to regulatory reform moves have led to imbalances. These include a system in which doctors are free to present themselves as specialists in any field, regardless of experience, causing excessive competition and patient confusion, and the setting of inappropriate fees for medical services, which provides excessive incentive for hospitals to purchase expensive medical equipment, thereby contributing to the ballooning of healthcare costs.

It is therefore important to distinguish clearly between areas where regulations are needed to ensure safety and security, and areas where freedom should be allowed to promote efficiency and creative innovation.

The healthcare platforms of the major political parties in Japan may be summarized as follows (as of July 22).

1) Liberal Democratic Party, New Komeito

• No mention of amount of fiscal expenditure
• Focus on support for pharmaceutical development

2) Democratic Party of Japan

• Priority on securing fiscal expenditure
• Pledge to unify health insurance

3) Japanese Communist Party

• Priority on reducing amount patients pay for medical care (insurance premiums, charges at point of service)
• Emphasis on improving operation of the national health insurance system

4) Social Democratic Party

• Opposition to increases in patient’s share of costs and control of total medical expenditure
• References to preventive medicine and disparities between public and private hospitals

5) People’s New Party

• Priority on securing fiscal expenditure
• Emphasis on investment in medical facilities

One point on which all parties agree is the area of community healthcare, particularly ensuring the availability of acute and perinatal medical services and tackling the shortage of doctors.

In my view, however, there are two important issues that the parties should have raised with the people in their manifestoes but that are not even mentioned: first, the relationship between the national and local governments, and second, medical statistics.

1. Reforming the local finance system to give local governments responsibility for the apparatus of healthcare provision

Local governments play significant roles in the fields of healthcare and social welfare, and they need to be flexible in developing policies that respond to the desires of local citizens. Today, however, there are tangible and intangible restraints on both the powers and fiscal resources of local governments. In particular, a pattern has become established in which local governments and the national government each try to push responsibility for maintaining the apparatus of healthcare provision onto the other.

One of the main reasons this kind of structure has taken root is the local government finance system. Within the general subsidies that make up local governments’ general revenue source, the practice by which the national government requires local governments to pay for particular items using Local Allocation Tax Grants is being abused. This presents three problems.

(1) The purposes for which local governments may use their general revenue are effectively limited by the national government.

(2) The respective responsibilities of the national and local governments in fiscal expenditure and policy implementation are unclear.

(3) There is a lack of correspondence between the systems (subsidies and Local Allocation Tax Grants) and functions (revenue guarantees and fiscal adjustment) with regard to fiscal transfers.

Therefore, we need to clarify the responsibility of the national government to guarantee, as grants, the fiscal resources that local governments need for policies that the national government in essence requires them to implement (and its accountability to the people for this spending), and the accountability of local governments to residents for the general revenues that they receive as local allocation taxes and can spend at their discretion.

2. Obtaining statistical data for use in developing appropriate healthcare policies

It is important that healthcare policy is based on a solid understanding of the current reality. However, it is hard to claim that healthcare policies to date have been formulated and implemented on the basis of solid, readily acceptable evidence. What happens, in effect, is that interest groups communicate their individual demands to politicians and bureaucrats behind closed doors, and reasons are then conceived to justify the resultant policies.

For example, each year the Ministry of Health, Labor, and Welfare publishes the nation’s estimated healthcare expenditure, but since the range of items included in this expenditure is limited to the costs of treating injuries and illnesses, the figure is essentially an estimate only of the healthcare expenses covered by public insurance. The costs associated with normal pregnancies and births; health checkups, vaccinations, and other procedures aimed at maintaining and promoting health; and prosthetics for people missing limbs, eyes, or other body parts are not included in the calculation. The same goes for the costs borne by patients for items not fully covered by health insurance, such as room fees during hospitalization and dental fees. While the estimate may be adequate as an explanation of the range of activities under the jurisdiction of the MHLW, it is wholly inadequate for gaining a clear understanding of the use of healthcare services by Japanese citizens. If the costs of a normal pregnancy and delivery are high, they may contribute to the low birthrate, and the importance of health checkups and vaccinations for the purpose of maintaining and promoting health is likely to be of great interest to the public.

To get beyond the current situation it is vital for the national government to take responsibility in conducting statistical studies and publicly disclosing the resulting data. Unless the government shows strong leadership, however, little progress will be made in obtaining and utilizing such statistical data. Specifically, estimating healthcare costs not covered by insurance and Japan’s “real” total healthcare expenditure, including the capital costs of local-government-run hospitals and transfers from the general account, will illuminate the problems in the Japanese healthcare system in an understandable, readily acceptable form. If we are serious about putting politicians, rather than bureaucrats, in charge of the healthcare system, then gaining an accurate understanding of healthcare expenditure is an important task to which all parties should be committed from the perspective of establishing a basis for discussions of healthcare policies.

    • Professor, Hitotsubashi University
    • Masako Ii
    • Masako Ii

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