The Japanese System
Today we lay out the case for the Japanese Healthcare system and again taken from the CATO institute. The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World Michael D. Tanner Cato Institute: Policy Analysis
Japan
Japan has a universal health insurance system centered primarily around mandatory, employment-based insurance. On the surface, Japan’s national health insurance program defies easy description, comprising some 2,000 private insurers and more than 3,000 government units. However, in a broader sense, the system encompasses four principal insurance schemes.
The Employee Health Insurance Program requires companies with 700 or more employees to provide workers with health insurance from among some 1,800 “society managed insurance” plans. Nearly 85 percent of these plans cover a single company and can be thought of as similar to the self-insurance plans operated by many large U.S companies. Most of the rest are industry-based. About 26 percent of the population participates in these plans. (128)
Such plans are financed through mandatory employer and employee contributions, effectively a payroll tax. The total contribution averages around 8.5 percent of wages. It is generally split evenly between employer and employee, although some companies assume slightly more than half the contribution. As a result, workers contribute about 45 percent of payments overall. (129) It should be noted that studies have found that the majority of the burden of the employer’s contribution to health insurance is borne by the employees in the form of reduced wages. (130)
These contributions are frequently insufficient to operate the insurance plans. In 2003, more than half lost money. (131) A number of companies have responded by dissolving their individual plans and entering larger industry-based plans. However, growing costs continue to pressure many businesses.
Workers in businesses with fewer than 700 workers must enroll in the government run, small-business national health insurance program. This plan covers about 30 percent of the population and is funded primarily through mandatory contributions, around 8.2 percent of wages, and supplemented by government funds. (132)
The self-employed and retirees are covered under the Citizens Insurance Program administered by municipal governments. Funding comes primarily from a self-employment tax, but additional revenues come from an assessment on the society-managed insurance programs discussed above and the small business program. General revenue contributions from the national government are used to plug shortfalls.
Finally, the elderly are covered through a fund financed by contributions from the other three schemes, as well as contributions from the central government. The elderly do not pay directly into this plan, known as the Roken, but contribute to the plan they were enrolled in while employed. The Roken is simply a cost sharing mechanism. (134)
A number of small programs exist to handle special populations such as farmers, fishermen, and government workers. The unemployed remain under their former employers’ plan, although they are not required to continue contributing. Private supplemental insurance exists, but very few Japanese carry it. Private health insurance pays for less than 1 percent of total Japanese health care spending.
Benefits under all four schemes are extremely generous, including hospital and physician care, as well as dental care, maternity care, prescription drugs, and even some transportation costs. There are no restrictions on hospital or physician choice and generally no preauthorization or gatekeeper requirements. Significant co-payments accompany most services, ranging from 10 percent to, more commonly, 30 percent (capped at $677 per month for a middle-income family). As a result, the average Japanese household pays about $2,300 per year out of pocket.(135) Overall out-of-pocket expenditures amount to roughly 17 percent of total health care spending.
The vast majority of hospitals and clinics in Japan are privately owned, but because the government sets all fee schedules, the distinction between privately and publicly owned is irrelevant for patients. Reimbursement for both hospitals and clinics is on a fee-for-service basis, with the government setting fees and prescription prices.
The fee schedule is identical for inpatient and outpatient treatment. Because hospitals must absorb both physician and capital costs from the same level of reimbursement, the tendency has been to shift patients to outpatient services. (136) Recently, some attempts have been made to introduce alternate reimbursement mechanisms for hospitals, including DRGs and Diagnosis and Procedure Combinations— classification systems that tie reimbursements more closely to the resources that a particular patient consumes. But the medical establishment has resisted, and only about 80 hospitals participate in the experiment. (137)
Hospital physicians are salaried employees. Nonhospital physicians work in the private sector and the government sets their reimbursement schedules. Generally, reimbursement is on a fee-for-service basis, although recently some chronic conditions have been “price bundled” into a single fee. Reimbursement schedules are set within the context of an overall global budget on health spending, but the division of resources is the subject of extensive negotiation with providers.
The fee schedule reflects both the Japanese style of medicine and attempts to contain costs. For example, because of a strong cultural bias against invasive procedures, surgery tends to be reimbursed at a much lower rate than nonsurgical procedures. (138)
The fee-setting system has had serious corruption problems. Because the fees for each of more than 3,000 procedures or services are set individually and adjusted every two years on an individual basis, it is possible to manipulate particular fees without attracting much attention. (139) In 2004, a group of dentists was indicted for bribing the fee-setting board. (140)
In addition, the reimbursement schedule for physicians creates an incentive for them to see as many patients as possible. The result is assembly line medicine. Two-thirds of patients spend less than 10 minutes with their doctor; 18 percent spend less than 3 minutes. (141)
On the other hand, the Japanese, like Americans, practice a very technology-intensive style of medicine. Capital investment in technology has been given high priority, and the Japanese have at least as much access to technology such as MRI units, CT scanners, and lithotripters as patients in the United States.(142) Because the government imposes uniform fee schedules on hospitals, there is no price competition. Instead, hospitals attempt to lure patients by having the best technology. While this can benefit patients, it has also led to queues at the best hospitals and a black market with “under the table” payments for faster access. (143)
Some restrictions have been added in the last few years, capping the number of diagnostic imaging procedures that a hospital can perform in a calendar month, as well as reducing the fees for those services.(144) These changes have not led to visible rationing yet but could in the future.
To date, Japan has done a fairly good job of controlling costs without resorting to the rationing common in many universal care systems. This is due in part to factors outside the health care system, such as generally healthy lifestyles, low vehicle accident rates, low crime rates, low rates of drug abuse, and other cultural factors.(145) One study estimated that 25 percent of the difference in health care spending between the United States and Japan is attributable to a lower incidence of disease and 15 percent to less aggressive practice styles.(146) But rationing has also been avoided through the management of the health care system and the imposition of significant consumer cost sharing.
Nonetheless, spending is beginning to escalate, especially in government-managed programs such as the Roken, where there has been less of an attempt at cost sharing and cost containment. As one observer explained:
We Japanese have a tendency to go to the hospital even when we have only minor ailments such as the flu, headaches, or stomach aches. If medical expenses are not high and we do not feel well, then why not go see a doctor and get some medication. . . . The result, of course, is that waiting rooms of clinics and hospitals are full of people. Everyone is welcome and there are, in fact, regular customers. Sometimes elderly people come to see a friend and the hospital waiting room becomes a sort of salon. (147)
This problem is aggravated by the demographics of a rapidly aging society. By some estimates, the elderly are responsible for 90 percent of the aggregate increase in Japan’s health care costs. (148) If current trends continue, Japan will almost triple its government spending on health care in the next 20 years.(149) And the situation will only grow less stable with time. Japan is expected to lose 35 million workers by 2050, with 35 percent of its population in retirement. (150) This raises questions of how a system that relies on payroll taxes for funding can continue to fund rising costs even as its payroll base shrinks.
Japan
Japan has a universal health insurance system centered primarily around mandatory, employment-based insurance. On the surface, Japan’s national health insurance program defies easy description, comprising some 2,000 private insurers and more than 3,000 government units. However, in a broader sense, the system encompasses four principal insurance schemes.
The Employee Health Insurance Program requires companies with 700 or more employees to provide workers with health insurance from among some 1,800 “society managed insurance” plans. Nearly 85 percent of these plans cover a single company and can be thought of as similar to the self-insurance plans operated by many large U.S companies. Most of the rest are industry-based. About 26 percent of the population participates in these plans. (128)
Such plans are financed through mandatory employer and employee contributions, effectively a payroll tax. The total contribution averages around 8.5 percent of wages. It is generally split evenly between employer and employee, although some companies assume slightly more than half the contribution. As a result, workers contribute about 45 percent of payments overall. (129) It should be noted that studies have found that the majority of the burden of the employer’s contribution to health insurance is borne by the employees in the form of reduced wages. (130)
These contributions are frequently insufficient to operate the insurance plans. In 2003, more than half lost money. (131) A number of companies have responded by dissolving their individual plans and entering larger industry-based plans. However, growing costs continue to pressure many businesses.
Workers in businesses with fewer than 700 workers must enroll in the government run, small-business national health insurance program. This plan covers about 30 percent of the population and is funded primarily through mandatory contributions, around 8.2 percent of wages, and supplemented by government funds. (132)
The self-employed and retirees are covered under the Citizens Insurance Program administered by municipal governments. Funding comes primarily from a self-employment tax, but additional revenues come from an assessment on the society-managed insurance programs discussed above and the small business program. General revenue contributions from the national government are used to plug shortfalls.
Finally, the elderly are covered through a fund financed by contributions from the other three schemes, as well as contributions from the central government. The elderly do not pay directly into this plan, known as the Roken, but contribute to the plan they were enrolled in while employed. The Roken is simply a cost sharing mechanism. (134)
A number of small programs exist to handle special populations such as farmers, fishermen, and government workers. The unemployed remain under their former employers’ plan, although they are not required to continue contributing. Private supplemental insurance exists, but very few Japanese carry it. Private health insurance pays for less than 1 percent of total Japanese health care spending.
Benefits under all four schemes are extremely generous, including hospital and physician care, as well as dental care, maternity care, prescription drugs, and even some transportation costs. There are no restrictions on hospital or physician choice and generally no preauthorization or gatekeeper requirements. Significant co-payments accompany most services, ranging from 10 percent to, more commonly, 30 percent (capped at $677 per month for a middle-income family). As a result, the average Japanese household pays about $2,300 per year out of pocket.(135) Overall out-of-pocket expenditures amount to roughly 17 percent of total health care spending.
The vast majority of hospitals and clinics in Japan are privately owned, but because the government sets all fee schedules, the distinction between privately and publicly owned is irrelevant for patients. Reimbursement for both hospitals and clinics is on a fee-for-service basis, with the government setting fees and prescription prices.
The fee schedule is identical for inpatient and outpatient treatment. Because hospitals must absorb both physician and capital costs from the same level of reimbursement, the tendency has been to shift patients to outpatient services. (136) Recently, some attempts have been made to introduce alternate reimbursement mechanisms for hospitals, including DRGs and Diagnosis and Procedure Combinations— classification systems that tie reimbursements more closely to the resources that a particular patient consumes. But the medical establishment has resisted, and only about 80 hospitals participate in the experiment. (137)
Hospital physicians are salaried employees. Nonhospital physicians work in the private sector and the government sets their reimbursement schedules. Generally, reimbursement is on a fee-for-service basis, although recently some chronic conditions have been “price bundled” into a single fee. Reimbursement schedules are set within the context of an overall global budget on health spending, but the division of resources is the subject of extensive negotiation with providers.
The fee schedule reflects both the Japanese style of medicine and attempts to contain costs. For example, because of a strong cultural bias against invasive procedures, surgery tends to be reimbursed at a much lower rate than nonsurgical procedures. (138)
The fee-setting system has had serious corruption problems. Because the fees for each of more than 3,000 procedures or services are set individually and adjusted every two years on an individual basis, it is possible to manipulate particular fees without attracting much attention. (139) In 2004, a group of dentists was indicted for bribing the fee-setting board. (140)
In addition, the reimbursement schedule for physicians creates an incentive for them to see as many patients as possible. The result is assembly line medicine. Two-thirds of patients spend less than 10 minutes with their doctor; 18 percent spend less than 3 minutes. (141)
On the other hand, the Japanese, like Americans, practice a very technology-intensive style of medicine. Capital investment in technology has been given high priority, and the Japanese have at least as much access to technology such as MRI units, CT scanners, and lithotripters as patients in the United States.(142) Because the government imposes uniform fee schedules on hospitals, there is no price competition. Instead, hospitals attempt to lure patients by having the best technology. While this can benefit patients, it has also led to queues at the best hospitals and a black market with “under the table” payments for faster access. (143)
Some restrictions have been added in the last few years, capping the number of diagnostic imaging procedures that a hospital can perform in a calendar month, as well as reducing the fees for those services.(144) These changes have not led to visible rationing yet but could in the future.
To date, Japan has done a fairly good job of controlling costs without resorting to the rationing common in many universal care systems. This is due in part to factors outside the health care system, such as generally healthy lifestyles, low vehicle accident rates, low crime rates, low rates of drug abuse, and other cultural factors.(145) One study estimated that 25 percent of the difference in health care spending between the United States and Japan is attributable to a lower incidence of disease and 15 percent to less aggressive practice styles.(146) But rationing has also been avoided through the management of the health care system and the imposition of significant consumer cost sharing.
Nonetheless, spending is beginning to escalate, especially in government-managed programs such as the Roken, where there has been less of an attempt at cost sharing and cost containment. As one observer explained:
We Japanese have a tendency to go to the hospital even when we have only minor ailments such as the flu, headaches, or stomach aches. If medical expenses are not high and we do not feel well, then why not go see a doctor and get some medication. . . . The result, of course, is that waiting rooms of clinics and hospitals are full of people. Everyone is welcome and there are, in fact, regular customers. Sometimes elderly people come to see a friend and the hospital waiting room becomes a sort of salon. (147)
This problem is aggravated by the demographics of a rapidly aging society. By some estimates, the elderly are responsible for 90 percent of the aggregate increase in Japan’s health care costs. (148) If current trends continue, Japan will almost triple its government spending on health care in the next 20 years.(149) And the situation will only grow less stable with time. Japan is expected to lose 35 million workers by 2050, with 35 percent of its population in retirement. (150) This raises questions of how a system that relies on payroll taxes for funding can continue to fund rising costs even as its payroll base shrinks.
Labels: healthcare reform, Japan
posted by Anonymous at 5:35 AM
2 Comments:
Those worthless elderly retirees are such a burden to the socialists! And, they cost sooo much money to take care of. What a problem! Rationing is the inevitable result.
At least Hari Kari replaces the need for Death Panels.
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