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Ikegami N Japan, Health System of. In: Kris Heggenhougen and Stella Quah,
editors International Encyclopedia of Public Health, Vol 4. San Diego:
Academic Press; 2008. pp. 1-8.
Author's personal copy

Japan, Health System of
N Ikegami, Keio University School of Medicine, Tokyo, Japan
2008 Elsevier Inc. All rights reserved.

With a population of 127 million, Japan has the second that patients were expected to pay according to their
largest economy in the world. Its macro health indices ability, and therefore munificently if they had the means.
of life expectation at birth and infant mortality are among This norm served a useful purpose for the government. It
the best, while the percentage of the gross domestic product was absolved of the responsibility of providing public
(GDP) consumed by health expenditures at 8.0% is 18th assistance for medical care because the practitioners
among the OECD countries (OECD, 2005). This impressive duty to provide services and the patients obligation to
record could partly be explained by the fact that less pay were not directly connected.
demand is placed on the system in the way of crime, illicit Medical practice was an exception to the rigidly divided
drug use, traffic accidents, and human immunodeficiency society of that time because it was open to all classes
virus (HIV) prevalence compared with most developed and there was competition based on skill. Practitioners
countries (Ikegami and Campbell, 1995; Campbell and recognized a hierarchy among themselves, with those
Ikegami, 1998). However, the health-care system should appointed as personal physicians to the feudal lord
deserve some credit for providing universal coverage and being ranked the highest. Compared with Western
egalitarian access to care without the existence of long nations, there was little development of guilds and pro-
waiting lists that have plagued other countries with socia- fessional identity among traditional practitioners in Japan.
lized medicine (Ikegami, 2005). Another distinguishing aspect was the lack of institutional
Japans health-care system has evolved to its present care for the sick and indigent by religious organizations or
state by incremental adjustments rather than by radical by the government. The selfless practice of philanthropy
restructuring. Thus, to better understand the present sys- was not a religious duty for the popular Buddhist and Shinto
tem, the three sections on delivery, financing, and reim- sects, which promised the granting of secular wishes, nor
bursement will begin with their historical background. was it a secular duty under the Confucian ideology favored
The reimbursement system has been the principal mech- by the rulers, which emphasized practical ethics. Care of the
anism for containing costs by controlling the flow of ill, disabled, and elderly, was regarded as the responsibility
money from the financing system to the delivery system. of the family (Ikegami, 1995).
This article will conclude by briefly reviewing the possi- With the inauguration of the Emperor Meiji in 1868,
ble scenarios for the future. the government embarked on a policy of rapid Westerni-
zation. However, little could be allocated to health care
because the country was facing foreign aggression and
Delivery System internal discord: The limited resources had to be invested
in defense and building the industrial infrastructure.
Historical Background
Thus, the government decided to target their resources
Japan already had a well-established network of practi- in establishing a state of the art medical school at Tokyo
tioners mainly in traditional Chinese medicine (TCM) by University, to which German physicians were invited as
the middle of the eighteenth century. Medication was the professors. Its graduates went on to become the faculty
main treatment, to the extent that these practitioners were of other national universities as they later came to be
often known as apothecaries. Payment was theoretically established. The general population continued to receive
made only for the cost of medication since it was regarded care from the preexisting traditional practitioners, who
as morally unacceptable to charge fees for performing a together with their sons as their successors, were uncon-
humane service. However, the unstated quid pro quo was ditionally given a license to practice. However, new

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2 Japan, Health System of

entrants had to graduate either from a university medical The Present System
school or from a vocational school and then sit for the
One-third of physicians practice in clinics that are almost
license examination. Unlike other East Asian nations,
always solo practices and have no access to hospital facil-
official recognition of TCM was limited to granting a
ities, while two-thirds are hospital-based. Approximately
license to practice acupuncture and moxa.
80% of the hospitals are in the private sector, usually
Following the policy decision to adopt Western medi-
owned and operated by physicians. Investors are prohibited
cine, the government established hospitals for teaching
from opening for-profit hospitals in Japan. The remaining
purposes and for treating infectious diseases, but most
20% are in the public sector, which includes those owned
hospitals were opened and managed by physicians as an
by quasi-public organizations such as the Red Cross. How-
extension of their private clinics. Hospitals were not asso-
ever, since the public-sector hospitals are subsidized by the
ciated with care for the indigent; in fact, hospitals were the
central or local governments, they tend to provide most of
first to introduce regular fees because they were not
the high-tech care. The delivery system is still weighted
constrained by the old rule of not demanding payment
toward outpatient care, so that Japan has one of the highest
from patients. The hospital was regarded as very much the
rates of physician visits and the lowest rates of hospital
doctors workplace, and a medical doctor as the director
admissions among advanced industrialized countries
carried both clinical and administrative responsibilities.
(OECD, 2005). Waiting lists for inpatient care are limited
Nurses were trained almost solely for the purpose of
to a few prestigious hospitals, and patients who cannot
assisting physicians since the family continued to provide
wait are referred to their affiliated hospitals (Ikegami and
care even after the patient had been admitted to a
Ikeda, 1996).
The biomedical healthcare system is characterized by
Because of the lack of trained physicians and well-
the following features (Ikegami, 2005). First is the lack of
equipped hospitals, a close and long-standing relationship
standardization and quality control. Most hospital physi-
developed between the professor and chair of the univer-
cians have been appointed to their positions within the
sity clinical departments and their affiliated hospitals.
closed network of hospitals affiliated with the university
Physicians tended to remain attached to their university
clinical department. Although two-thirds of the physi-
clinical departments and to practice in the hospitals that
cians are now certified as specialists, only about half
were affiliated with each department. The hierarchical
have undergone a formal postgraduate training process,
and closed structure of physicians retarded the develop-
and the rest have been grandfathered in based on their
ment of professional specialist organizations. Since career
experience. Regarding hospitals, an accrediting organization
advancement depended on the evaluation by their profes-
was created in 1997 with funds provided by the Ministry of
sors, young physicians tended to focus more on research
Health and Welfare (MHW; the MHW merged with the
than on acquiring clinical skills. Their objective lay in
Ministry of Labor to become the Ministry of Health, Labor
obtaining the research degree of Doctor of Medical Sci-
and Welfare, MHLW, in 2001), the Japan Medical Associa-
ence, which came to be regarded as a mark of professional
tion ( JMA), and other provider and payer organizations.
competence by the public because there was no formal
Although roughly one-quarter of all hospitals are now
system of certification as specialists. Most physicians went
accredited and the survey results have become available
into private practice in mid-life, upon which they would
on the web ( JCQHC, 2006), accreditation has not conferred
lose their access to hospital facilities. Thus, physicians in
tangible advantages to the hospital in the way of more
clinics usually focused on primary care, but those trained
reimbursement or waiving of government inspections.
in ENT, ophthalmology, etc., continued to practice within
Second is the lack of differentiation between general-
their specialties; also, not a few physicians later expanded
ists and specialists, and between acute-care and long-
their clinics to hospitals.
term-care (LTC) facilities. As noted, certification as a
After the defeat in World War II, the occupying forces
specialist has been slow to develop. Physicians may pro-
tried to reform the system based on the American model
fess and practice in any specialty they may choose, while
with some limited success. The two-tiered system of
patients can directly access any physician they wish,
medical education was abolished by upgrading or closing
including those in tertiary hospitals. LTC came to be
vocational schools and a national licensure examination
provided by the health-care system because of the slow
was made mandatory for all upon graduation. Nurses took
development of social services and by the decision to
on the responsibility of caring from the families and were
provide free (no coinsurance) care to elders in 1973.
made more independent from physicians. The post-war
The expensive and inefficient medicalization of LTC
economic growth led to a major expansion of the delivery
was one factor contributing to the establishment of the
system, with the number of hospital beds increasing by
public LTC insurance in 2000 (Campbell and Ikegami,
threefold from 1954 to its peak in 1993. However, the
2000; Ikegami, 2007). However, the transfer of LTC to the
hierarchical yet competitive system has remained resis-
new program has remained incomplete, with a majority of
tant to change (Ikegami, 2005).

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Japan, Health System of 3

the hospital LTC beds still being covered by health insur- benefits gradually decreased. In the first period, the
ance and functioning as de facto nursing homes. driving force came from the military, which was
Third is the high level of hospital beds at 14.3 per 1000 concerned about the physical condition of the draftees,
population, while the staffing level of nurses remains low and by extension, of their potential mothers, as the war
at one nurse for two inpatients. These factors, together with China intensified in the 1930s. In particular, they
with the lack of differentiation between acute care and wished to improve the health status in rural villages where
LTC, have contributed to the long average length of stay, the majority of the population lived by extending cover-
36 days (if LTC hospital beds are excluded, this would still age and by developing health-care facilities. Their efforts
be 20 days) (MHLW, 2006a). were successful to the extent that, at its peak in 1943, 70%
of the population was covered. The second period was
from 1945 to 1961, when after the post-World War II
Financing System chaos had subsided, the major political parties vied to
establish a welfare state. The MHW increased subsidies
Development of Social Health Insurance
to the Citizens Health Insurance (CHI) for the self-
Health insurance in Japan began with coverage of govern- employed, who were managed by the municipalities. In
ment personnel and employees in a few paternalistic 1961, when the last municipalities established their CHI,
private companies from late in the nineteenth century. universal coverage was achieved (Figure 1).
Social health insurance (SHI) was formally legislated in The third stage was from 1961 to 1982 when differences
1922, with the objectives of preempting labor unrest and in benefits were decreased by increasing subsidies to the
improving the productivity of workers. Initially, coverage CHI. It culminated in 1973, when the coinsurance rate
was restricted to only blue-collar workers, representing came to be waived entirely for the elderly (70 and over),
only 3% of the population, but, unlike other countries, it and lowered from 50% to 30% in the CHI and dependants
included those working in small firms. The reason was not of the employee-based plans. In the same year, the coin-
political demand, but probably administrative conve- surance came to be waived when the amount exceeded
nience because small-firm employees were also covered 30 000 Yen per month in all the plans. However, 1973 was
by the same workmans compensation system. In any case, the year when the economic growth slowed down as a
since small firms did not have the management capability result of the oil crisis. At the same time, expenditures,
or large enough pools to manage their own systems, the especially for the elderly, increased more than predicted
government had to take on the responsibility. This role of and had doubled by 1980, as many hospitals became de facto
the government as the largest insurer, rather than just as a nursing homes providing LTC, an unforeseen result of
coordinator of insurance plans, is one reason that MHW providing free medical care for the elderly.
has played a dominant and direct role in negotiating with This set the stage for the last period from 1982 to the
providers (Ikegami and Campbell, 1995; Campbell and present, with benefits becoming more equal by making
Ikegami, 1998). them less generous to those who had previously been
The development of SHI could be divided into four favored. Legislation passed in 1982 led to the introduction
periods: In the first and second, the population covered of a 10% coinsurance for employees, and a small token
expanded, and, in the third and fourth, the differences in payment for every visit made and for every day of


80% CHI
Percent of population



40% GMHI

20% SMHI

'27 '31 '39 '40 '43 '49 '53 '58 '61 '70 '80 '90
Figure 1 Growth in the percentage of population covered by health insurance in Japan. Reproduced with permission from
Campbell JC and Ikegami N (1998) The Art of Balance in Health Policy Maintaining Japans Low-cost Egalitarian System. Cambridge,
UK: Cambridge University Press.

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4 Japan, Health System of

hospitalization for the elderly. For employees, the rate was low-income bracket or the individual has chronic dis-
increased to 20% in 1997, and later to 30% in 2003. These eases), then the coinsurance rate above this amount is
increases did not impact the utilization rate for outpatient reduced to 1%.
care, but they did decrease benefit expenditures (Cabinet The insurance plans could be grouped into three tiers,
Office, 2005). For the elderly, the flat rate was gradually each enrolling approximately one-third of the population,
increased, and in 2003, was changed to an across-the- according to the degree they rely on subsidies from the
board 10% coinsurance rate. In 2003, the coinsurance national government (Figure 2). The first tier consists of
rate for the elderly with incomes above that of the average plans established by the public sector, Mutual Aid Asso-
employee was increased to 20%, and in 2006 to 30% ciation (MAA), and by large companies, the Society of
(Ikegami, 2006). Managed Health Insurance (SMHI). These plans do not
receive any subsidies. The second tier is a single plan
managed by the MHLW, the Government Managed
The Present System
Health Insurance (GMHI), for those employed in small
Virtually all residents in Japan have compulsory coverage to medium-size companies. The GMHI is subsidized at
either by the health plan provided by their employer or 14% of its benefit expenditures. The third tier consists of
by the municipality where they reside if self-employed plans established by the municipalities, the Citizens
or pensioners. Dependants are covered by the plan of Health Insurance (CHI), for the self-employed and pen-
the household head. There is virtually no choice sioners. The CHI plans are subsidized on average for half
of plans, either by the employer or the employee, and of their benefit expenditures by the national government
all plans provide essentially the same benefits that (40% if the average income of the enrollees in the plan is
include unrestricted access to virtually all providers, high, up to 80% if the average income is low). Most
drugs, dental care, and some preventive services (Campbell municipalities also provide subsidies from their general
and Ikegami, 1998). The coinsurance rate is 30%, with expenditure budget to decrease the premium rate on
the exception of most elderly (70 years old or older who those with low income. Another measure to narrow the
pay 10%), children (3 years old or under who pay 20%), differences in the premium rate among the plans is the
and those with designated chronic diseases. However, if pooling fund that finances the health expenditures of
the monthly coinsurance amount exceeds on average the elderly. All SHI plans must contribute to this fund
80 100 Yen ($720, the ceiling amount is higher if the on an equal basis, regardless of the percentage of elderly
individual has a high income and lower if in the they have actually enrolled.

Employers Employees Non-employees


Co-pays Government


Fee schedule

Clinics Public sector
Figure 2 Flow of money in the Japanese health-care system. CHI, Citizens Health Insurance; GMHI, Government-Managed Health
Insurance; SMHI, Society-Managed Health Insurance; MAA, Mutual Aid Association. Reproduced with permission from Campbell JC
and Ikegami N (1998) The Art of Balance in Health Policy Maintaining Japans Low-cost Egalitarian System. Cambridge, UK:
Cambridge University Press.

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Japan, Health System of 5

However, the financing system is under pressure from local level of wages or cost of living. While this may
two factors. The first is the rapid aging of society. The seem to be unfair, it has contributed to a more equitable
proportion of the population 65 and over has doubled from geographical distribution because the higher wages that
10% in 1985 to 20% in 2005 and is projected to be 28% in the health-care workers demand in large, urban medical
2025 (NIPSSR, 2003). In the employment-based SMHI centers is compensated by the fact that their physicians
plans, contributions to the pooling fund have increased to are willing to accept lower remunerations for the profes-
the extent that they made up 37% of expenditures in 2004 sional satisfaction of practicing in these settings. On the
(Kenporen, 2006). The second is from the governments other hand, workers in a rural or small hospital, or clinic,
austerity measures. Beginning in 1991, Japan entered into are willing to work at lower wages, but the physicians
a long period of economic depression. The decline in tax would only do so if offered more payment. The only
revenue and the tax cuts made to heat the economy have major exception to this nationally uniform reimburse-
resulted in government debts that have accumulated to ment is in the case-mixed-based payment which was
1.8 times the GDP in 2006 (MOF, 2006; Nikkei BP, 2006). introduced in a limited way for acute inpatient care in
Since one-quarter of the National Medical Expenditure 2003 for hospitals meeting prescribed standards. In this
(NME) is financed by central government taxes, there has case, the per-diem reimbursement rate is adjusted by a
been a strong pressure to contain the NME, and, in parti- conversion factor specific to each hospital that reflects the
cular, the amount that is publicly financed. The govern- amount it would have received if reimbursed by the
ment has pledged that every effort will be made to reduce former fee-for-service form of payment.
all expenditures before taxes will be increased, which Services, drugs, and devices not listed in the fee sched-
was why the coinsurance rates have been increased, even ule cannot be provided in combination with those that are
though expenditures have been relatively contained. Par- covered during the course of the same treatment. Should
enthetically, the average premium rate for the SMHI has they be provided, then all costs, and not just that of the
actually declined from 7.547% in 2003 to 7.484% of uncovered services, must be paid out of pocket, with the
annual income in 2004 (Kenporen, 2006). exceptions of the services listed in the Specified Medical
Costs. These mainly consist of extra charges for hospital
rooms with more amenities and new technology still under
Reimbursement System development. Thus, the only other sources of revenue for
providers are the subsidies to public-sector hospitals and
Basic Structure of the Fee Schedule
services provided outside the SHI. However, the latter
The present fee schedule ultimately derives from the services are confined to the normal delivery of babies
fee-for-service payment designed for clinical physicians (for which a lump cash payment is made to the enrollee),
when the Health Insurance Act was implemented in 1926. preventive measures (covered either by the local govern-
Dispensing was the most important component, so much ment public health program or as part of occupational
so that the basic unit of payment was based on the fee for a health), and cosmetic surgeries (Ikegami, 2006). Paren-
days dosage. To this day, many physicians offices and thetically, extracts of Chinese herbal medicine are covered
hospitals still dispense drugs. Another legacy is that the if listed in the SHI formulary and prescribed by a physician
fee schedule does not distinguish between payment made for patients meeting the designated conditions.
to physicians and that to hospitals so that both services are
listed together in the fee schedule. Hospitals are paid on
Revising the Fee Schedule
the same basis as clinics with no explicit mechanisms for
reimbursing capital expenditures or administrative costs. There are three steps in the revision of the fee schedule
Hospital-based physicians, who are all employees except made every 2 years. First, at the macro level, the cabinet
the owner, receive fixed salaries and are treated in a decides on the global rate of revision, with the Ministry of
similar way to the staff employed by solo practitioners in Finance demanding a decrease, the JMA lobbying for an
their clinics for reimbursement purposes. increase, and the MHLW playing a key role by providing
The fee schedule plays a key role in linking the the data and technical expertise. Since one-quarter of the
financing and delivery systems by serving as the valve National Medical Expenditure (NME, excludes subsidies
that controls the money flowing from all insurance plans to public-sector hospitals, OTC drugs, etc., included in the
to all providers (Figure 2). It has maintained equity by OECD data) is funded from the national governments tax
making the benefit package essentially the same for all revenue, this rate must be set so that the allocated amount
insurance plans, contained costs by restricting other will remain within the general expenditure budget.
sources of revenue to the providers, and reduced admin- Second, the price of drugs set by the payment system is
istrative costs. The fees and prices are uniform throughout revised primarily according to the results of a market-
Japan and, in principle, are the same for university hospi- price survey. The government researches the current
tals and clinics, and do not adjust for differences in the price of each drug through a survey of providers and

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6 Japan, Health System of

on-site inspections of the wholesale distributors books. It the NME can be calculated. Although the revision process
normally finds their prices are lower than that set by the tends to become heated as the specialty and hospital
SHI because of the competition among the distributors. groups lobby the MHLW and the JMA, care has been
Accordingly, the fee schedule price of each drug is revised taken to maintain the balance among the providers: Hos-
to reflect its volume-weighted average market price. The pitals versus clinics, acute care versus chronic care, and so
margin allowed between the latter and the revised price forth. This balancing principle has inhibited rapid changes
has been progressively decreased from 15% in 1990 to the and minimized conflict. It has kept important constituents
present level of 2%. Since dispensing has become less from becoming too dissatisfied and, if dissatisfied, allowed
profitable, the percentage of prescriptions dispensed by them to hope to do better in the subsequent fee-revision
outside pharmacies declined to 53% in 2005 (MHLW, process 2 years later (Ikegami, 2005).
2006b). Independent of this survey, the price of new
drugs that had sales greater than the amount estimated
Trends in Medical Expenditures and Prices
by the manufacturers and the price of brands that have
had generics introduced since the previous revision are Figure 3 shows the annual percentage increases in the
unilaterally decreased. These factors have led to a contin- GDP and the NME, and the global revision rate from
uous downward spiral of prices and to a decrease in the 1980 to 2002. Since health and fiscal policy is focused on
ratio of health expenditures consumed by drugs from 39% the nominal NME, rather than the per capita or deflated
of the NME in 1981 to 20% in 2003 (Iryo Hoken Seido amount, analysis will be made using these figures.
Kenkyukai, 2005). The savings made from these decreases The first point to note is the relationship of the NME
in drug prices have been allocated to increases in service to the GDP. When averaged out for the period from 1980
fees. However, drug expenditures have been contained to 2002, NME increased at an annual rate of 5.0%, com-
less than one would expect because of the introduction pared to GDP at 4.0%. However, the pattern is quite
of new drugs. The price of a new drug is set by evaluating different in the 1980s, when the economy expanded at
the degree of innovativeness and effectiveness with a the rate of 6.4%, and after 1990, when the rate was just
comparator, and its price in the United States, Germany, 2.0%. From 1980 to 1989, since the NME grew at about the
France, and the United Kingdom. The price of devices is same rate as the GDP, the ratio remained constant at around
set and revised in a similar way. 5%. However, after 1990, the economy declined sharply; in
Third, service fees are individually revised, within the the latter half of the decade, the nominal growth rate of
budgetary limits set by the first two steps, and not by GDP became zero or even negative. During this deflation-
applying a global revision rate across the board as a ary period, the growth rate of NME actually declined, but
conversion factor. The fees for those that have shown less so than that of the GDP, so that its share increased from
inappropriately large increases in volume may be cut 4.6% in 1990 to 6.0% in 1999. After 2000, the gap has ceased
dramatically. For example, in the 2002 fee schedule revi- to expand as cost-containment efforts were intensified.
sion, the fee for a head MRI was reduced from 16 600 Yen The second point is the impact of revisions in the
(US$138) to 11 400 Yen (US$95). Such examples of con- national fee schedule on NME growth. It can be seen
taining costs via micromanagement of the fee schedule in that the global revision rate has had a substantial effect
the biennial fee revisions have been multiplied many on the NME, with the correlation of the annual increase
times over and have blunted increases in costs stemming rate between the two indices being 0.78 for the years
from the expanded use of high-tech equipment. Paren- studied. It should be also noted that medical inflation
thetically, despite these cuts in fees for MRI, which have was sharply constrained during this entire period, averag-
also been made in the past, Japan has the highest per ing only 0.46% per year, which is 1 percentage point
capita number of MRIs in the world (OECD, 2005) lower than the consumer price index (CPI) of 1.46%.
because they have spurred the development of low-priced After 2002, the revision rate was a net zero in 2004 and
types of MRI. decreased by 3.16% in 2006.
The second and third decisions are made by the Central The third point is, because medical inflation has been
Social Insurance Medical Care Council of the MHLW, minimal, the bulk of the increase can be attributed to
which is composed of representatives from providers and three factors: Population growth, population aging, and
payers, and those to represent public interest. The objec- other (the residual). Demographic factors have had a
tive basis for making the latter decision is provided from constant effect due to declines in birth rate and increases
the survey of the financial condition of hospitals and in the proportion of the elderly: The two together have
clinics made by the MHLW in the year prior to the contributed to an average annual growth rate of 1.8% in
revision: If a particular specialty or type of facility is the NME. The other category includes changes in volume
found to be making a large profit, then fees in that area (the number of patient visits and hospital days) and
are likely to be reduced. In addition, the MHLW conducts advances in technology. While it is not possible to sepa-
a survey of the claims data to estimate the volume of each rate out these factors, since volume has tended to
item, so that the effect of revising any particular item on decrease, almost all the increases in the residual could

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Japan, Health System of 7



















































National Gross Fee-schedule

medical domestic prices
expenditures product

Figure 3 Annual changes in gross domestic product, national medical expenditures and average fees, Japan, 19802002.
Reproduced with permission from Ikegami N and Campbell JC (2004) Japans health care system: Containing costs and attempting
reform. Health Affairs 23(3): 2636.

be ascribed to advances in technology. The average annual In the delivery system, the 47 prefectures will be given
increase of the other category was 2.8%, which is lower greater responsibility to coordinate services within each
than that of the GDP, and negates the widely held belief major disease group (such as cerebral strokes), to shorten
that advances in technology must inevitably drive up the average length of stay, and to implement preventive
health-care costs (Ikegami and Campbell, 2004). services for the early detection and intervention of the
metabolic syndrome (MHLW, 2006c; Ogata, 2006). In the
financing system, the prefecture will become the unit for
Prospects for the Future restructuring health plans and also that of the new inde-
pendent health insurance plan that will enroll all elders
While Japan has managed to maintain equity and contain 75 and over. Should the SHI plans fail to meet targets,
costs by relying on the fee schedule, both the delivery and then their contributions to the new plan that enrolls all
the financing systems are under pressure to reform. In the elders 75 and over will be increased by up to 10%. Thus,
delivery system, the laissez-faire policy of permitting phy- the fiscal responsibility will be gradually devolved from
sicians to open clinics and profess any specialty has led to the MHLW to the prefectures. Each prefectures pre-
their uneven distribution. In particular, there is a shortage mium level would reflect the communitys needs, willing-
of hospital-based pediatricians and obstetricians as their ness to pay, and the efficiency of the delivery system.
work-load is heavy and compensations low, when com- However, whether the prefectures are up to this chal-
pared with clinic-based physicians. Moreover, the patients lenge and whether costs can be contained by the reform
trust has eroded as medical errors have come to be reported plan remain questionable. Prefectures do not have expe-
in prestigious hospitals (Leflar and Iwata, 2005). In the rienced staff who can take a proactive role in health policy.
financing system, the cross-subsidization among plans to Coordinating services among providers will be difficult
equally share the cost of caring for the elderly has become since they tend to be functionally undifferentiated and
increasingly difficult to sustain as society ages. Cutting fees therefore compete with, rather than compliment, each
to absorb the increases in the NME due to population aging other. Shortening the average length of stay may decrease
and advances in technology will also become more difficult hospital costs but would be offset by increases in home
because this would ultimately lead to reducing the income and community care and LTC costs. Systematic screening
of health-care workers. This would not be a practical solu- of metabolic syndrome may not lead to the improvement
tion because labor is likely to become in shorter supply as of life style by counseling as envisioned, but to aggressive
the economy started to grow again in 2002. treatment, which would increase immediate costs without
To meet this challenge, in June, 2006, the Diet passed a any assurance of containment in the future (Thorpe and
comprehensive package of reform drafted by the MHLW. Howard, 2006). Perhaps most important, the degree to

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8 Japan, Health System of

which decisions on revisions of the fee schedule would be Campbell JC and Ikegami N (1998) The Art of Balance in Health
Policy Maintaining Japans Low-cost Egalitarian System.
transferred to the prefectures remains unclear because it Cambridge, UK: Cambridge University Press.
raises the issue of geographical equity. Campbell JC and Ikegami N (2000) Long-term care insurance comes to
An alternate solution advocated by the Economic and Japan. Health Affairs 19(1): 2639.
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International Encyclopedia of Public Health, First Edition (2008), vol. 4, pp. 1-8