Health care systems in transition II. Japan, Part I. An overview of the Japanese health care systems

Journal of Public Health Medicine Vol. 20, No. 1, pp. 29-33 Printed in Great Britain Health care systems in transition II. Japan, Part I. An overview of the Japanese health care systems Yumiko Arai and Naoki Ikegami Keywords: Japan, health care Introduction Japan, which was devastated by World War n, has since achieved unprecedented improvements in the health status of its citizens. 1 In 1950, the estimated life expectancy at birth was 50 years in males and 53.9 years in females. In 1994, this had increased to 76.6 years in males and 83.0 years in females, the longest in the world. 2 This has been achieved without a relatively high level of expenditure on health care provision: 3 ' 4 Japan spends only 7.3 per cent of its GDP on health services, which is the lowest after the UK (6.9 per cent) among the seven major industrialized countries according to data of the Organization for Economic Co-operation and Development (OECD). 3 Moreover, in contrast to other developed countries, where inequalities in health are perceived as a serious problem, 6 " 8 such perceptions do not exist in Japan. This is at least partly due to the fact that Japan has one of the most equal income distributions in the world. According to a survey conducted by the Ministry of Health (MHW) in 1993, more than 65 per cent answered that the standard of their living was higher than average and only 9 per cent said that they were poor. 9 Despite this apparently rosy picture, the Japanese health care system is now facing two major problems. The first is financing. One reason why Japan managed to contain the ratio of health care cost to GDP was because of the continuous growth in the economy. However, the boom years ended in the 1980s whereas health care costs have continued to increase. The growth of the elderly population is perceived to be a major factor contributing to this increase. The ratio of those aged 65 and over has increased from 6 per cent in 1970 to 12 per cent in 1990, and is projected to reach 25 per cent in the year 2020. 2 How to provide care for an aged society with low economic growth is the number one challenge facing Japan. The second is quality of service delivery. 10 '" Although Japan is noted for the quality for its manufactured products, this reputation does not extend to health care. According to opinion polls, Japan ranked lowest in satisfaction among the major nations surveyed. 12 Although this could be ascribed to the inherent tendency among the Japanese not to respond too positively to items in questionnaires, 13 visitors to Japan have noted the lack of formal quality control mechanisms in the Japanese hospitals. 14 Current hearth care provision Health care financing Each Japanese citizen must belong to an insurance plan (Table 1), which can be broadly divided into: (1) the insurance system for employees and their dependants; (2) the insurance system for the self-employed, their dependants, and pensioners. For the employees' insurance system the co-payment rate is 10 per cent for employees and for dependants, 20 per cent for inpatient care and 30 per cent for out-patient care. This system can be subdivided into the following four segments (Table 1): (1) the society-managed insurance for large companies; (2) the government-managed insurance for workers in small enterprises of fewer than 300 employees; (3) the mutual aid associations for workers in the public sector, (4) seaman's insurance. The insurance for self-employed people and their dependants is further divided into the following two sectors: (1) citizen's for which the municipal Government acts as the insurer, (2) the citizen's associations, which insure members in the same occupation, such as carpenters. Under this system, the co-payment rate is 30 per cent for both in-patient and out-patient care. This scheme covers Research Unit for Nursing, Caring Sciences & Psychology, National Institute for Longevity Sciences, 36-3 Gengo, Obu-Shi, Aichi, 474-8522, Japan. Yumiko Arai, Head of Research Unit Department of Health Policy and Management, School of Medicine, Keio University, Tokyo, Japan Naoki Ikegami, Professor and Chairman Address correspondence to Dr Yumiko Arai. Oxford University Press 1998

30 JOURNAL OF PUBLIC HEALTH MEDICINE Table 1 Status of plans in Japan, 1995 Sector Health insurance Plan population covered (%) Covered by Geriatric Hearth Act (%) Employees Society-managed Government-managed Seamen's insurance Mutual-aid associations Total 26.0 30.1 03 9.4 65.8 3.0 5.2 7.0 4.0 Self-employed and pensioners Citizen's (CHI) CHI associations Total 30.8 3.2 34.1 19.1 one-third of the population, and the insurance system for employees covers the remaining two-thirds of the population. 15 In addition to the above two systems, there is a pooling fund created by the Geriatric Health Act in 1983. This pays for all health care costs incurred by the elderly aged 70 and over regardless of the plan: it also covers those who are aged between 65 and 69 years and who are bedridden. Each plan must contribute a sum to this pooling fund; they are calculated in such a way that no plan is forced to shoulder a disproportionate burden of the cost of insuring the elderly (Table 1). Health care provision In contrast to the highly regulated financing, health care delivery is functionally undifferentiated. There are essentially only two types of health care providers: office-based doctors and hospitals. Approximately 80 per cent of the hospitals are private and more than 90 per cent of office-based doctors are in the private sector. 16 ' 17 As shown in Fig. 1, hospitals are divided as follows: (1) private sector hospitals; (2) public sector and university hospitals. The latter receive direct subsidies from the Government Although office-based doctors may appear to operate like general practitioners (GPs) in the United Kingdom, they are distinctively different for the following three reasons. First, the same fee schedule applies to both private-practice doctors and hospitals in Japan; in the United Kingdom, there are different payment systems for hospitals and GPs. Second, office-based doctors tend to specialize although much of their work is primary care. They do not necessarily act as gatekeepers to secondary care as British GPs do; indeed, anyone can go to a hospital without obtaining a referral. Hence, there is not a clear Society-managed Governmentmanaged health insurance V Citizen's health insurance Public-sector and university hospitals Government Figure 1 Flow of money in Japanese Health Care.

GENERAL OVERVIEW OF JAPAN 31 distinction in function between office-based doctors and hospital-based doctors. Advantages and disadvantages of the current system Advantages Equity All Japanese citizens have universal access to health care regardless of their ability to pay. For example, a 1988 survey demonstrated that neither the utilization rate nor the health care expenditure per person was affected by an individual's income. 3 Only 0.4 per cent gave economic reasons for not visiting a doctor. 3 Such equity has been achieved mainly because neither the insurers nor providers are allowed to negotiate differential arrangements in relation to prices and quality. 3 ' 4 The national fee schedule is applied to all patients regardless of the system they belong to, and regardless of the provider from whom they receive services. The fee schedule lists all the procedures and products that can be paid for by and sets their prices. This schedule is subject torevisionevery two years. In short, despite pluralistic insurance carriers, the payments to providers are standardized, and charges and benefits are fixed across the whole system. Figure 1 shows how money flows in the present system. For employees in small companies (government-managed health insurance), who are on average less well off and less healthy, the Government directly subsidizes 14 per cent of expenditures. For the self-employed, the least wealthy and healthy, the Government subsidizes half of the costs. These subsidies make the Japanese system distinctively egalitarian. In addition, although the co-payment rate may seem high, any out-ofpocket co-payments by patients in a given month over the amount of 63 600 yen (~ 318), and 35400 yen (~ 177), for those who are on income support are reimbursed regardless of the insurance plan. 15 These schemes allow all Japanese citizens universal access to health careregardlessof their ability to pay. Low cost: cost containment There are two schemes which enable the Government to control not only the price but also the volume of care provided. First, some of the fees, such as for most surgical operations, are set at such a low level that they do not cover the providers' costs. This is why surgery is mostly provided in public-sector or university hospitals which have access to direct subsidies (Fig. 1). Second, each provider isrequiredto submit itemized claims to the third party payers; these claims are subsequently inspected by the fund's designated panel of doctors. Overall, if egalitarian principles are to be upheld, then the health care system must be so structured that it remains affordable for the poor, or to put it more practically, expenditure remains at a level which the Government is willing to pay for the health care of the poor. Thus, more egalitarian systems tend to have low health expenditures, whereas the contrary holds true for the United States. However, a truly egalitarian system would lead to dissatisfaction among the powerful and rich. It is for this reason that there is private health insurance in the United Kingdom. In Japan, such a blatant system would be unpalatable. Instead, more affluent patients provide 'gifts', a long-standing point of grievance for patients, but which acts as a safety valve. This takes the form of monetary gifts to the attending doctor, usually given when patients are about to be discharged, and tends to be customary for private beds. Disadvantages Excessive laboratory tests and prescription of drugs The fee-for-service system has resulted in excessive provision of certain services, especially when the fee is higher than the cost of production. Such services include drugs and laboratory tests. For example, the drug price set by the MHW is higher than the actual market price by 11 per cent, a difference which used to be even greater. As doctors usually dispense their prescribed medication, this has given doctors strong economic incentives to over-prescribe drugs or to dispense drugs with higher profit margins. As a result, the ratio of drug expenses to the total medical expenditure in Japan is 30 per cent whereas it is 16 per cent in the United Kingdom. 17 ' 18 Also, the usage of third-generation antibiotics is more extensive than elsewhere.'' Such an excessive use of drugs appears to have affected patients' help-seeking behaviour and the way in which they consult their doctors. Japanese mothers tended to ask for antibiotics when their children suffer from a common cold even if GPs do not believe that antibiotics will be effective. 19 Moreover, not only is drug usage excessive, but there are doubts about efficacy and safety, as the approval process and clinical trials are not well established. 18 Lack of quality assurance system The Japanese health care system has been constantly criticized for a lack of quality assurance systems. 11 ' 14 ' 20 ' 21 In particular, the development of systematic postgraduate training has been slow. 22 Although each specialty has established its certification process, only 10 per cent of those accredited have gone through formal training; the rest have been exempted from undergoing formal training in recognition of their clinical experience. Moreover, the Japan Medical Association has maintained the principle that doctors are free to proclaim any specialty they wish, and that accreditation will not lead to any differences in reimbursement In addition, most of the hospitals do not have quality assurance schemes, e.g. medical audit. There seems to be an organizational culture in which evaluation and quality assurance have come to be regarded as policing. One reason is that,

32 JOURNAL OF PUBLIC HEALTH MEDICINE in many cases, most of the doctors in an hospital clinical department have received both their undergraduate and postgraduate training in the same university hospital. Hence they tend to be unaccustomed to outside criticism, no matter how well intended. However, growing public pressure for greater accountability may force doctors to change their present attitude in the future. Lack of control on the volume of care provided The fee-for-service system has had a distorting effect on patient volume. As most fees are controlled, providers have economic incentives to see more patients. For example, in out-patient care, an office-based doctor sees an average of 49 patients per day; 13 per cent of the office-based doctors see more than 100 patients per day. 3 Moreover, the absence of functional differences between office-based doctors and hospitals, combined with the absence of effective gate-keeping, hasresultedin overcrowding in university and other large hospitals, resulting in long waiting times and extremely short consultation time. People often complain of a 'three hour wait and three minute consultation'. Apparently, patients have a preconception that quality of care in university hospitals is better, which has contributed to overcrowding in these hospitals. Overall, even if fees are totally regulated, providers still compete with each other to maximize the number of patients seen, especially in out-patient care, because patients have free choice of providers. Discussion and conclusion Japan stands at the top of the world health league table with the longest life expectancy and the lowest infant mortality. 1 However, it would be naive to conclude that such performance has been achieved by the health care system. 10 Japan's excellent health indices may have been more due to economic success, the high level of education, low crime rate and a sense of conformity in society. 20 " 23 Whatever the reason, the improvement in health indices has led Japan to be the fastest ageing society in the world.. The following two problems, inherent in the Japanese system, have become manifest, partly as a result of the abovedescribed demographic changes. First, the fee-for-service system, which is procedure orientated, is not suited for the reimbursement of a number of services, including long-term care. 24 As described above, some doctors have had economic incentives to over-prescribe medications and over-use laboratory tests. 1 ' With an increase in the number of the elderly, such over-treatment has become one of the major causes of cost escalation. To control this, the Government introduced a new scheme in 1990, whereby a hospital with a high proportion of geriatric patients, which meets the standards of staffing, is allowed to opt for a new payment scheme of inclusive per diem payment In 1994, 840 of a total of 1613 geriatric hospitals took this option." This new scheme, which is not adjusted for case-mix, however, has caused adverse selections; some hospitals may admit only those who are at lesser risk. To prevent such moral hazard, one of the authors has proposed a payment scheme which controls for case-mix. 25 Second, the development of home care in Japan has lagged behind that of the United Kingdom or Scandinavian countries. 26 This may be due to over-reliance on informal care based on Confucian values; for a long time, the Government let family members look after the elderly without giving them adequate support. 27 This was possible as life expectancy used to be much shorter; it was, therefore, assumed that informal care provided sufficient services to the elderly. However, changes in social structure, such as the rise of the nuclear family and more women entering the labour force, have made such informal care difficult. 27 " 28 To tackle this, the Government proposed a 10- year strategy, the 'Gold Plan', aimed at providing a long-term care infrastructure. 29 Initial targets were generally met by 1994. Re-estimation of needs of the elderly led the Government to revise and upgrade the targets of the schedule in 1994, and the project was renamed the 'New Gold Plan'. 30 In addition, the Government has proposed a new social insurance scheme for long-term care, which would rapidly change the present system. 31 ' 32 Whether this new insurance scheme can successfully co-ordinate health and social services remains to be seen, but professional boundaries need to be broken down for longterm care to succeed. 33 " 35 No health care system is perfect Strict regulation in financing has resulted in equity at a relatively low cost Such a policy, together with high levels of education and economic success, has enabled Japan to become the healthiest nation when measured in terms of longevity and infant mortality. At the same time, the fee-for-service system has resulted in the excessive usage of medication, a lack of control on the volume of treatment, and a lack of quality assurance schemes. Such disadvantages may worsen as Japan's population rapidly ages. Whether the current reforms will be able to successfully remedy the current defects in the health care system remains to be seen. Whatever the result, other countries can learn from the events that have occurred and will occur in the future in Japan. References 1 Marmot MG, Smith DS. Why are the Japanese living longer? Br Med J 1989; 299: 23-30. 2 MHW. 77K latest trends of vital statistics in Japan. Tokyo: Health and Welfare Statistics Association, 1996. 3 Ikegami N. Japanese health care: low cost through regulated fees. Health Affairs 1991; 10: 87-109. 4 Ikegami N. Japanese health care in Japan. Science 1992; 258: 614-618. 5 OECD. Caring for frail elderly people: policies in evolution. Paris: OECD, 1996.

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