Nursing and Health Sciences (1999), 1, 45–48

Research Article

Healthcare system in Japan

Toyoaki Yamauchi, md, nd, phd
Oita University of Nursing and Health Sciences, Oita, Japan

Abstract In Japan, each person is obligated to enroll in a national health insurance plan. Based on
egalitarianism, the system is managed by the government and it finances almost the entire
healthcare needs. However low the total healthcare expenditure in Japan is compared with other
major countries, the statisticscause concern for the Japanese population for the future growth of
its health care. Even though the Japanese healthcare system faces many problems at present, it
provides everyone with a sense of security. The key to its success is the sense of and art of
balance in healthcare policy making.

Key words egalitarianism, healthcare reform, health insurance system, Japan.

INTRODUCTION PUBLIC HEALTH INSURANCE SYSTEM

One of the greatest problems facing Japan is its
rapidly aging population. The average life expectancy
is the highest in the world: 76.57 years for males and
82.98 for females, while the birth rate is nearly the
lowest (United Nations, 1992).
Japan faces the highest growth rate in the world
of the aging population. According to the advan-
cing medical technologies and reducing numbers of
children, in 2025, one-quarter of the Japanese po-
pulation will be ‘aged’ (65 years and older). Every 2.5
individuals between 15 and 64 years old will have to
support one aged person.
In 1995, 14.5% of the population was over 65 years
(Statistics Bureau Management and Coordination
Agency of Japan, 1995). The government estimates
this will increase to 25% by 2018, 25.8% in 2025, and
28.4% in 2045. It will not be until 2090 that the over-
65 population falls below 25% again (Institute of
Population Problems of Japan, 1992).
If all elderly people are able to remain healthy,
the statistics might not be so alarming. However, if
the present trend continues, by 2025 the number of
bedridden and senile elderly will be three times what
it is today.
Correspondence address: Toyoaki Yamauchi, Oita University of Nursing
and Health Sciences, 2944-9 Megusuno Notsuharu, Oita 870-1201,
Japan.
Received 15 December 1998; accepted 7 January 1999.
In 1961 Japanese health insurance plans were estab-
lished. The law obligates each person to enroll in one
of the three main categories: the Employees’ Health
Insurance (EHI), the National Health Insurance
(NHI), or the Health Insurance for the Elderly
(HISE). The structure is similar to a nationwide uni-
fied health maintenance organization (HMO) system.
Controlled by the government, the plans are managed
by each health insurance society or association. Al-
most all physicians in Japan have contracts with all
plans. The system is designed so that if a person
moves, provided he or she is covered by the Japanese
public insurance, the insured person can expect to pay
the same amount for the same amount of care. The
fees are set and regulated by the government.
The system finances almost all the healthcare
needs, including dental, emergency, acute, chronic,
home, and preventive care. The Japanese government
plays such a highly centralized role in the running of
the system that physicians and corporations have little
freedom to make policies. In spite of this, the system
offers the Japanese population the total freedom to
choose any physician, hospital or clinic, regardless of
their enrolling plan.
The Employees’ Health Insurance is designed for
employees and dependents. If a person works full-
time, or at least more than three-quarters the hours of
a full-time worker, for a company or organization that
has joined an EHI plan, he or she is eligible for this
insurance.
46
Under EHI plans, the employer and the employee
each pay half of the premium. The premium is based
on the employee’s average monthly income and is
unaffected by the number of dependents. The ongoing
rate is 8.2% of the average monthly income.
Employees’ Health Insurance benefits differ some-
what among different health insurance societies or
associations. The benefits are as follows:
(1) Co-payment: The policyholder pays 20% of
medical costs, including prescribed medicines.
Dependents pay 20% of the cost on inpatient care
and 30% of the cost of outpatient care, including
prescribed medication.
(2) Reimbursement for high-cost medical care.
Reimbursement for care received without insurance
coverage.
(3) Reimbursement for transportation to the
hospital.
(4) Reimbursement for extra nursing cares.
Reimbursement for specified medical equipment and
treatment.
(5) Coverage of medical costs for injuries caused
by a third party.
(6) ‘Non-normal’ pregnancy and childbirth.
(7) Sickness/injury allowance.
(8) Funeral expenses.
The NHI is a plan mainly for the self-employed
and retired, and their dependents. Policyholders and
dependents are treated equally with equal benefits.
With the exception of the 30% co-payment, many
NHI benefits are the same as those of EHI plans.
However, the local government or individual NHI
associations decide the details according to the re-
sources and needs of the population they serve. The
premium is calculated by taking into consideration
income, assets, the number of people covered in one
household, and the amount necessary to keep the
community’s health care functioning. Some adjust-
ments are made for those with very high or very
low incomes. At present, the highest annual premium
any household can be charged is approximately
$4100.
The Retiree Health Care System (RHC) is part of
the NHI. The RHC is for a person who has been an
EHI policyholder for 20 years (10 years if he or she
is under 40), who is no longer working, and who is
too young for the HISE. Upon joining, membership
continues until the person qualifies for the HISE.
The RHC system is generally the same as the NHI
system.
In 1973, the new social service system for the
elderly was established, in which people over 70 years
(in some communities, over 65) could receive medical
care without co-payment. The government reim-
T. Yamauchi
bursed one-third of those medical costs and commun-
ities reimbursed the rest. Establishing this system led
to many hospitalizations due to ‘social’ not medical
needs. Nine years later, the HISE was established to
provide a ceiling for the healthcare cost for the
elderly population. This is a supplementary system
for those 70 years and over (65, if bedridden), and
their dependents. Those who are eligible continue to
participate in the EHI or the NHI plans as a policy-
holder or dependent, paying the premium as is re-
quired. However, certain benefits are also available
from the HISE.
Those who qualify can receive outpatient care at
any department of any one clinic or hospital with a
co-payment of approximately $9 only per month.
The inpatient co-payment is approximately $6 per day
(less for those with low income). Inpatient hemo-
philiacs and those on kidney dialysis are exceptions
and pay no more than $90 per month.
Even though the structure of the Japanese health
insurance system is divided into three categories, the
financial resources for each have been merged into a
common source. This was established when the HISE
system was started in 1992. In 1995, the financial
resource for the EHI was $130 million in total:
$108 million from premiums, $9 million from the
government, and $13 million from co-payments. Total
financial resources for the NHI was $66 million: $25
million from premiums, $25 million from the govern-
ment, $4 million from communities, and $12 million
from total co-payment. The government contributes
20% of the financial resources for the HISE, and
communities contribute 10%. The remainder is
assigned to premiums and the EHI and NHI re-
sources. The EHI and the NHI contribute the same
percentage of each total financial resource to make
up the financial resource of the HISE. Total financial
resources for the HISE in 1995 were $76 million. The
government paid $23 million, and co-payment by
policyholders totaled $4 million. The EHI and NHI
funding contributes the remainder of the $49 million.
The EHI paid $33 million to the HISE, and the NHI
covered $16 million of the HISE financial resources.
This means that the EHI and NHI contribute 25% of
their resources to the HISE.
CURRENT PROBLEMS OF THE JAPANESE
HEALTHCARE SYSTEM
Total expenditure on health in Japan is 7.28% of
its gross domestic product (GDP). In contrast, the
USA spends 14.12% of USA GDP (Organization for
Economic Cooperation and Development, 1993). The
Japanese health care
USA has the highest spending percentage among
the Organization for Economic Cooperation and
Development (OECD) countries. Japan is currently
ranked 18th in its spending percentage.
However low the percentage of the total health-
care expenditure is to GDP in Japan, it causes con-
cern for the Japanese population who are interested
in its future growth. Estimations indicate that the per-
centage of the total healthcare expenditure to GDP
in Japan will be 7.6% in 2000, 9% in 2010, and 11% in
2025. This increase is considered the result of in-
creasing medical costs, especially the cost for highly
technological procedures and medications. The costs
of X-ray and laboratory tests occupy approximately
15% of total medical costs in Japan, which is unusual
compared to other countries. The number of magnetic
resonance imaging (MRI) devices is growing in Japan;
24.3% of MRI in the world are in Japan (Miller
Freeman Inc, 1992). The number of MRI for every
1 000 000 population was 13.5; the highest in the world
in 1992.
Basic medical fees are inexpensive in Japan; for
example, the fee for an initial office visit is set at $20,
a revisit is $6, and a hospital admission fee per day
is $35. Usually the prescription of drugs and the
distribution of drugs are done at the same facility.
The ‘difference’ of the actual cost of the drug and
the statutory price for the drug is a hidden profit to
the facility where drugs are prescribed and dispensed.
Many facilities make up for their losses with this
‘difference’. The percentage of the cost of medication
in Japan is over 30%, compared with 10–20% in many
leading countries.
The percentage of health care for the elderly is
currently 30% of the total expenditure on health in
Japan; however, it is estimated to become 35% in
2000, 42% in 2010, and 50% in 2025. This means that
more financing resources must be shifted to elderly
care.
STRATEGIES FOR THE JAPANESE
HEALTHCARE REFORM
In September 1997, new reforming strategies were
implemented. The new rules are as follows: (i) the co-
payment of policyholders of the EHI was raised to
20% (previously 10%); (ii) the fixed amount of co-
payment of the people in the HISE system will be
gradually raised from $9 per month to $12 per month
over 3 years; and (iii) a new fixed fee system for
prescribing medication was added. The fees are set
based on the number of the kinds of drugs that are
prescribed.
47
These strategies mainly depend on increasing the
healthcare charges for the people of Japan. Kurasawa
et al. (1997) highlighted that the new rules may only
function temporarily for 2 years at most.
Even though the Japanese health insurance reim-
bursement system follows an HMO system, physicians
charge fees to the funds of each health insurance
system on a fee-for-service basis. No limit or manage-
ment exists for the amount of care. A new reimburse-
ment system, such as diagnosis-related groups, must
be implemented. Nurses would be the best personnel
for care management.
Another strategy is reducing the costs for the
elderly care. Until now, the Japanese national medical
insurance system has also paid for all care costs for
the aged population. Outside the medical insurance
payment system, the reimbursements for care services
have not been established enough. Many aged people
have been hospitalized for receiving care that is
supported by public financing. These ‘social’ hospital-
izations are believed to occupy and waste a certain
percentage of the total healthcare cost in the national
medical insurance system.
The scarcity of home helpers and a lack of nurses
and caregivers at nursing facilities, which encouraged
the excessive use of medications and other restraints,
have all contributed to the high percentage of bed-
ridden elderly. Japan’s goal is now to reduce the
number of its bedridden elderly, to increase its pool of
caregivers, and to revise its present insurance system
for the elderly.
There is evidence of a move from a ‘cure-intensive’
system to a more preventative and ‘care-intensive’
one. Government pamphlets now list recommenda-
tions for stimulating the elderly to keep active. Public
facilities and services for the elderly are expanding,
and private firms are stepping in with even better, if
expensive, innovations.
In 1989 the Health and Welfare Ministry launched
the ‘Gold Plan’, a 10-year project to improve health-
care and welfare services for the elderly. It calls for a
drastic increase in the number of home-helpers, short-
term stay facilities, day care centers, and home-care
support centers, as well as an increase in special
nursing homes, halfway houses, and assisted-living
facilities.
The ‘Gold Plan’ was revised and launched as the
‘New Gold Plan’ by the Health and Welfare Ministry
in 1994. Because of the lack of mature national
consensus for the plan, the Congress of the year of
1995 did not establish the actual status of the ‘New
Gold Plan’. The establishment of a public support
system is required, but the resources for that are still
uncertain. Politicians would like to appeal to the
48
public about what provisions they will make available
to the people; however, they do not wish to discuss
who pays and how much it costs the social support
system (Arioka & Miyazaki, 1996).
LESSONS FROM JAPAN
Even though the Japanese healthcare system faces
many problems today, the Japanese health insurance
system provides the Japanese population with a sense
of security. The relative success in maintaining quality
and controlling cost may be due in part to character-
istics of the social and political structure and cultural
values of Japan. Egalitarianism is dominant in Japan.
The Japanese people place a high value on maint-
aining social harmony, and they are not keen to
criticize authority. Therefore, they are likely to comply
with governmental policies and conform to expected
behaviors, without any significant objections, except in
the most extreme circumstances. Thus, this endows
the government with the ability to enact programs
quickly and efficiently.
The feasibility of adapting some of the concepts
from the Japanese healthcare system largely depends
on how well they blend into the requirements of the
American culture and its political system. However, it
is worth stressing that when the Japanese government
tried to initiate the national health insurance system,
political leaders had to persuade many who were
opposed to the change, including employers and
physicians. The key to success is in the sense and art
of balance in the policy making.
CONCLUSION
The national burden ratio is defined as a percentage
of all the mandatory costs to the national gross in-
T. Yamauchi
come. Mandatory costs consist of taxes and social
security costs, including healthcare costs, elderly
care costs, and pensions costs. Currently, Japan’s
national burden ratio is 37.2%, 23.1% for taxes, and
14.1% for social security. The national burden ratio in
Japan is estimated to become 50% in 2025 (The Asahi
Newspaper, 1996). Now is the time and perhaps the
last chance to establish a new global social system and
to escape from the future crisis of the Japanese
society. That type of service that would be provided
and the maintenance of such a system must be
discussed and established in Japan.
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