Been out of town on business and haven’t kept up with my health care series. I’ll pick up where I left off.
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 in 1993, compared with 17.1 percent in Germany and 11.3 percent in the United States (table 3).
Because of legal caps, patient cost-sharing has been low historically (about 15 percent on average for the nonelderly and 5 percent for the elderly); therefore this has not been a major problem in Japan so far.
- 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
Public Health Insurance in Japan – Tetsuo Fukawa
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
Preventative care and maternity
- Large employers may provide some preventive care
- Health insurance covers little preventive care
- It provides only cash payment for normal pregnancy because
- Pregnancy is not considered an illness in Japan.
Cost Containment All patients except the elderly face higher cost-sharing.
- Employer-based health insurance
- Employees pay 10% coinsurance for their care
- Dependents pay 20 percent for inpatient care
- Dependents pay 30 percent for outpatient care
National Health Insurance
- Regular patients pay 30 percent coinsurance
- Retired employees within the National Health Insurance scheme pay 20 percent
- Dependents pay 20 percent for inpatient care and 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. 
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 day; 13 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.
 JAPANESEHEALTH CARE:LOW COST THROUGHREGULATED FEES http://content.healthaffairs.org/cgi/reprint/10/3/87.pdf