by Jenny Kakasuleff of the Liberal Examiner
August 1, 2009
This article will look at Japan’s national health care system, which like all of the other’s we have explored thus far, is universal, According to McKinsey Quarterly, “Japan’s citizens are historically among the world’s healthiest, living longer than those of any other country. Infant mortality rates are low, and Japan scores well on public-health metrics while consistently spending less on health care than most other developed countries do.” Japan’s health care spending consumes about 8 percent of GDP.
Despite these successes, the Japanese system is riddled with problems – some of which have no easy solution.
According to the National Coalition on Health Care (NCHC), Japan provides health care to all of its citizens under two large categories: National Health Insurance (NHI), and Employees’ Health Insurance (EHI). The EHI covers individuals in medium to large companies, national and local government, and private schools. Small businesses are covered through a government-run plan within the EHI. The NHI covers workers in the agriculture, forestry, and fishery industries; the self-employed, and the unemployed. Finally, there is also a national health program for those aged 70 and above, which is funded by the other two. Private insurance is rarely utilized in Japan.
Insurance premiums are compulsory, salary-based, and split between the employee and employer – the average contribution rate is about 4 percent (excluding bonuses). The system includes more than 4000 public and private payers. There is no discrimination based on health status, or pre-existing conditions; and insurers do not earn a profit.
There is no control over access; no gatekeepers; and few controls over the supply of care. There is also no central control over the hospitals – most of which are private institutions – a majority operating regularly in the red. In an effort to dampen the use of medical services, there is substantial cost-sharing among the insured. Members of the EHI pay 20 percent of hospitalization charges and 30 percent of the costs for outpatient care, in addition to prescription co-pays; however, there is an out-of-pocket ceiling. Members of the NHI pay 30 percent of in and outpatient costs, plus prescription co-pays, all of which are also capped.
According to the NCHC, covered services include in and outpatient care, home care, dental, prescriptions, long-term care, home nursing for the elderly, prosthetics, and cash benefits for childbirth. Costs that are not covered include additional fees incurred through hospital care, routine physical exams, some dental services, over-the-counter drugs, daily expenses incurred in health facilities (such as food), and some prosthetics. The plans also do not cover orthodontics, cosmetic surgery, vaccinations, abortions, injuries incurred while drunk or fighting, or treatment outside of Japan.
Physicians are paid on a fee-for-service basis standardized through a Medical Fee Table; and for drugs, the NHI price list. Even though the government has attempted to control costs by slashing reimbursement rates, this has not curbed the demand for health services. It could be argued the cuts actually incentive more care as wealth in the country grows, while co-payments decline.
The system also lacks a mechanism to distribute medical resources evenly. As a result, emergency rooms turn away tens of thousands of individuals in need of care each year. According to McKinsey, “Japan has three to four times more CT, MRI, and PET scanners per capita than other developed countries do, most of which “are woefully underutilized.”
Contributing to the emergency room crisis is the fact that hospital salaries are significantly lower than private clinics. There are also too many hospitals; most of which are small and have too few specialists to operate them. Many also lack the appropriate units to adequately service particular needs – for example, intensive care. In addition, many individuals seeking care through this medium do so unnecessarily for an ailment that a primary physician could have addressed at a lower cost.
In addition to the supply problem, demand is rising as the traditionally healthy diet of the Japanese is being replaced with more Western options, leading to an increase in obesity and diabetes. McKinsey defines four factors that account for the rising costs that Japan will experience over the next several decades if it does not pursue better measures of control over the health care industry: advances in medical technology; a rise in wealth among the population (encouraging more care); aging; and shifting treatment patterns based on the prevalence of different diseases.
As mentioned above, Japan has traditionally relied on controlling costs by cutting fees and prices, and the system does not offer incentives or rewards for best practices, or positive health outcomes. As a result, quality suffers. Furthermore, controlling costs by cutting fees is not sustainable, and does little to slow the growth of demand.
According to McKinsey, the Japanese system promotes overutilization because providers are encouraged to provide unnecessary services in order to make up for declining reimbursement rates. “On average, the Japanese see physicians almost 14 times a year, three times the number of visits in other developed countries.” Furthermore, “Our analyses suggest a direct relationship between the number of beds and the average length of stay: the more free beds a hospital has, the longer patients remain in them.”
In addition, providers bill separately for each service (i.e. to examine the patient, write a prescription, and fill it). Therefore, it should not be surprising that the Japanese use prescription drugs significantly more than other industrialized countries.
The quality of care varies because the hospital network is too fragmented, resulting in too few procedures performed in each location, and less specialized experience. Accreditation standards are also weak; professionals receive lifetime medical licenses, and there is no central authority to oversee training or criteria. As a result, the standards are much less stringent in Japan than other developed countries. The Japanese health care system also lacks incentives to encourage quality care. They do not collect information on patient outcomes, or adverse events, and thus, there is no way for consumers to compare providers. Finally, new treatments are delayed. Doctors are overworked, which makes it difficult to participate in clinical trials; and the agency tasked with approving drugs and equipment is understaffed.
Despite such positive health outcomes, the Japanese system has many areas of improvement for which to aspire; but reform efforts have not been popular. There are fears that the country would go into recession if it were to raise the consumption tax. An increase in premiums would hurt individuals and the competitive advantage currently held by employers, and higher co-payments would increase the burden of cost-sharing by individuals, which is already between 20 and 30 percent – though the fee schedule still keeps this amount relatively low.
Nonetheless, the system has much to boast about, and room for internal efficiencies. It could change its fee schedule and rework the incentives offered to providers. If the Japanese considered weighted capitation, they could incentivize the consolidation of their fragmented hospital network. There should be more centralized control over accreditation standards, and procedures implemented to track health outcomes – and make the results public. This would put pressure on hospitals to perform.
In the next article, we will look at the health care system in France, which has one of the most family friendly social insurance schemes in the world.
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*If you would like to submit a health care story, with the possibility of seeing it published here, please send me an email message at jennyk1981@gmail.com.
