The current Japanese healthcare system can be best understood by reviewing its origins. Japan’s health insurance program is a combination of two separately developed structures: employment-based health insurance and residence-based National Health Insurance (kokumin kenko hoken). Today, these two structures combine to form the basis of one of the largest health insurance programs in the world covering nearly the entire Japanese population and Japan’s long-term residents, over 127 million people.
Employment-based health insurance- Securing military and labor power
Prior to the 1920s, a form of health and life insurance was offered to workers through what were known as private mutual aid associations (minkan kyosai kumiai) for private sector workers and public mutual aid associations (kangyo kyosai kumiai) for public sector workers. Employers and workers could voluntarily contribute to these associations although benefits and contribution rates varied. This system transitioned to the current government regulated employment-based health insurance system in 1927 after the 1922 Health Insurance Law, which mandated that health insurance be offered to employees of firms with ten or more employees through what are known as corporate health insurance associations (kenko hoken kumiai).1 Like other parts of the health insurance system, these associations offer beneficiaries benefits and rates decided by the government. Despite its shaky start and initial financial instability, the program gained momentum as military labor needs increased and was further expanded to include firms with five or more employees in 1934. These programs have evolved into the two employer-based health insurance schemes that exist today: one for the public sector and employees of large companies and one for employees of small to medium sized companies.
National Health Insurance- Toward universal health coverage
Residence-based health insurance was delivered prior to the twentieth century through a system called the Jyorei system. Residence-based National Health Insurance (NHI) in its current form was established after the passage of the National Health Insurance Law in 1938, the same year the Ministry of Health and Welfare (the current MHLW) was established. The implementation of residence-based health insurance, however, was largely complicated by World War II. In addition, NHI was not successful in covering the entire population because municipalities, which were charged with local administration of NHI, were not mandated to establish local programs. As a result, approximately one-third of the population remained uninsured in 1956.2 To address this, an amendment to the National Health Insurance Law was passed in 1958 mandating that all municipalities establish and administer residence-based NHI programs. This push led to full coverage of the population by 1961.3 NHI covered 50% of healthcare costs at that time. In 1968, the benefit increased to cover 70% of healthcare costs. Overtime, cost-sharing has been adjusted. See Health Insurance System for more information.
Coverage for the older population
In 1972, Japan forged a unique health insurance structure for older persons when it subsidized their 30% cost-share burden within NHI, effectively making healthcare free for most of those 70 and over through the reallocation of public funds.4 Between 1973 and 1980 healthcare spending for the older population increased more than fourfold leading to sustainability concerns and the eventual passage of the 1982 Health Care for the Aged Law. This law, which was implemented in 1983, put an end to free care for the elderly by requiring that older persons pay a small copayment.5 In addition, this legislation cross-subsidized the NHI program by transferring revenue from employment-based health insurance. As a result of these two reforms, the Health Care for the Aged Law is considered one of the most critical pieces of healthcare legislation in Japanese health policy history.
Free Healthcare for Older Persons: The biggest mistake in Japanese health policy
Free healthcare for older persons is known by the government in Japan as the “biggest mistake in Japanese health policy” (according to former officials of the MHLW). While it drastically improved access to care facilities for older persons, it resulted in the over-provision of care and products, including pharmaceuticals. Older patients flooded hospital waiting rooms and these areas quickly became social centers for this population. A typical conversation between two older persons in a waiting room at that time may have gone something like this: “How strange! It seems Mrs. Yamada isn’t here today. She must not be feeling well.” Hospitals essentially became a place to spend one’s free time. Because no-cost health care created such moral hazard, the government moved to revise the policy to include patient cost-share. However, implementing a co-payment after providing the service for free was politically challenging and the process ultimately took 30 years.
As health care needs shifted from acute to chronic health issues, the need for a system that allows for health care and long-term care to be provided continuously grew increasingly important. However, the financial burden associated with long-term term care made it difficult to fold this system into the existing health care insurance system, so a new system was established.
The Long-term Care Insurance Act was passed in 1997 providing coverage for institutional-based care, home health care services, and community-based services for those over 65 as well as those between 40 and 64 with aging-related disabilities. Long-term Care Insurance spurred the growth of a new profession known as “care management,” which is covered under this scheme. Care Managers serve as the central access point for benefits.6 Long-term care insurance, in contrast to health care insurance, places a limit on the benefits that beneficiaries can receive. After beneficiaries surpass this limit, all services must be paid out-of-pocket.
Other healthcare legislation
Other notable healthcare legislation includes the 2006 Health Insurance Reform,7 which established a separate insurance scheme for those over 75,8 and the 1948 Medical Care Act, which is one cause of the current geographical imbalance of healthcare facilities. The Medical Care Act has since undergone six revisions, each of which has attempted to better align facility use with community needs.9 See Major Legislation for more information on the Medical Care Act and subsequent revisions.
The most recent major health policy legislation is the Health Care System Reform Law of 2015. This law, which will go into effect in 2018, moves oversight of the residence-based NHI from the municipal level to the prefectural level. To support this transition, this law provides prefectures with increased authority and responsibility related to financing and the health care delivery system, making this “the biggest change to health care since the establishment of the modern health care system,” as stated by an official of the MHLW.
Health Care Policy Shifting toward Prefectures?
Prefectures have long been involved in designing health care strategy, but their role is increasingly growing. Because vast differences related to population dynamics, hospital structures, medical and long-term care needs, and health care resources persist between regions, health policy must be responsive to local circumstances if it is to adequately meet people’s needs.
The Community-based Care Plan, which outlines policies directly related to the design of the health care delivery system, including the number and location of hospital beds and hospitals, requires significant input from prefectures in confronting issues such as the misdistribution of physicians. In addition, the Strategy for Realigning Health Care Costs* requires action at the prefectural level. Prefectures acknowledge that there is much they could and should be doing, but a common concern among these governments is the lack of human resources, specifically those with knowledge about health policy. Developing these resources and supporting them to remain in local areas is an issue that is expected to become more urgent.
*In order to control health care costs (or as the government phrases it, “realign costs”), prefectural governments are required to create 5 year plans. The purpose of these plans is to encourage governments to establish a variety of measures, including those related to tobacco control, the use of generic drugs, the reduction of hospital stay length, and the delivery of health check-ups and health guidance.
1 Sugita Y. The 1922 Japanese Health Insurance Law. Harvard Asia Quarterly 2012; 14: 36-43.
2 Ikegami N. Universal Health Coverage for Inclusive and Sustainable Development. Washington, D.C.: World Bank Group, 2014.
3 Ikegami N. Universal Health Coverage for Inclusive and Sustainable Development. Washington, D.C.: World Bank Group, 2014..
4 Tatara K, Okamoto E, Allin S. Health systems in transition. Copenhagen: World Health Organization, European Observatory on Health Systems and Policies, 2009. Page 39
5 Ikegami N. Universal Health Coverage for Inclusive and Sustainable Development. Washington, D.C.: World Bank Group, 2014. Page 23
6 Tatara K, Okamoto E, Allin S. Health systems in transition. Copenhagen: World Health Organization, European Observatory on Health Systems and Policies, 2009.
7 Esmail N. Health care lessons from Japan. Vancouver, B.C.: Fraser Institute, 2013.
8 Ikegami N. Universal Health Coverage for Inclusive and Sustainable Development. Washington, D.C.: World Bank Group, 2014. Page 43
9 Tatara K, Okamoto E, Allin S. Health systems in transition. Copenhagen: World Health Organization, European Observatory on Health Systems and Policies, 2009.