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Journal of Nursing Administration:
International Perspectives

Japan's Healthcare System

Anders, Robert L. DrPH, APRN, CNAA

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Robert L. Anders, DrPH, APRN, CNAA, Professor and Director of International Affairs, School of Nursing, University of Hawaii, Honolulu, Hawaii.

Japan now enjoys both the lowest infant mortality and the longest life expectancy in the world.1 The country's per capita healthcare expenditure is the lowest among the industrialized world.2 In 1996, in US dollars, the United States spent per capita approximately $3,800 and Japan spent $1,976 on healthcare.

A number of reasons may contribute to the lower costs and seemingly healthier population in Japan than the United States. One major factor is that Japan is a wealthy country with a highly educated population. The number of non-Japanese living and working in Japan are few; thus, Japan enjoys a homogeneous society. In addition, Japan has a universally available health insurance program that stresses preventative care. Theoretically, access to healthcare is available to all.

Despite these positive statistics, the Japanese healthcare system is in the mist of reform not seen in this country of 125 million citizens since it rebuilt its healthcare system at the end of World War II. Critics charge that longevity and low infant mortality rate may have little or no relationship to the Japanese healthcare system. The healthcare system often lacks quality and comfort. Overcrowded waiting rooms, long wait times, and a short 3-minute office visit are standard.3

In a Forbes Magazine article, "Bad Medicine," Weinberg states: "In the US last year (1996) 26,200 patients received defibrillators. In Japan, which has nearly half of our population, about 100 people got them."4(p46) Weinberg believes that the Ministry of Health and Welfare, in an effort to control costs, denies patients access to the latest technology and medications that can save lives as well as improve their quality of care. Office visit reimbursement is limited to $8 and that low rate forces physicians to look for income in other places. They find it in long hospital stays in physician-owned facilities.

Physicians also prescribe numerous medications that they sell to their patients after a substantial price markup. In Japan, 28% of its healthcare costs are spent on prescription drugs versus 9% in the United States. Because of a lucrative domestically owned pharmaceutical and medical supplies and equipment industry, few foreign companies have been able to sell their products in Japan. Surgeons as well as other physicians complain that the health ministry will not allow the importation of the latest technology and medications in the misguided attempt to keep medical costs under control.

According to an article in the New York Times,5 the middle-aged men who run the Ministry of Health and Welfare usually take years and sometimes decades to approve new drugs. But, a new US manufactured drug took these men only 6 months to approve. The drug is Viagra. This approval comes at a time when the Ministry had not in decades approved low-dose birth control pills made in the United States. Following the public uproar over the quick approval of this "male sex pill," the Ministry finally authorized birth control pills in the summer of 1999.

Universal health insurance systems were implemented in 1961. Since that time, healthcare costs have increased approximately 14.2% annually. In 1990, Japan spent 6.7% of the gross national product (GNP) on healthcare. As of 1996, the amount increased to 12.7% of the GNP.3 As a percentage of the national income, the amount spent on medical expenses has steady climbed from 20.9% in 1990 to 29.1% in 1997. In 1998, for the first time in 37 years, the rate dropped 1.1% to 28.8%.6

Given the rapidly aging population, healthcare costs are predicted to continue to climb without some radical changes to the insurance and healthcare systems. It is estimated that more than 25% of the citizens will be over 65 years of age by 2025. In Japan, the numbers of elderly who are senile or bedridden will be threefold what it is in 1999.7

The number of hospital beds per 1,000 people is higher in Japan than in any other industrialized country. The ratio of physicians per population is among the lowest in the world at 1.4 per 1,000. Japan also has the longest length of hospital stay in the world. It is twice that of Switzerland, which is second in rank to Japan. For example, uncomplicated cataract surgery in Japan requires a 1-week hospital stay. In contrast, in the United States, the procedure is done on an outpatient basis. Theoretically, the lengthy hospital stay is because of the Japanese philosophy that patients need substantial rest following medical procedures or while recovering from illnesses.2

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Types of Healthcare Facilities

Japan has a number of different types of healthcare facilities, including clinics and hospitals. There are a number of diverse hospitals, including university-affiliated, national, company, and specialized function facilities. As of 1994, Japan had 7,108 private hospitals, 1,375 public hospitals, and 392 national hospitals. No for-profit or investor-owned hospitals and clinics are allowed in Japan.3

Clinics can have up to 20 beds and the patients cannot be hospitalized in a clinic more than 48 hours. Physicians own 94% of the clinics.8 The clinics, which provide primary care, are usually located in the community. There may be just one physician or several physicians who provide medical care in the clinics. The waiting time to be seen is usually less than in hospital clinics. The governmental rules for staffing and equipment requirements are less than those for hospitals. Physicians in these clinics usually cannot admit patients to hospitals. Thus, individuals who need further treatments are referred to a hospital-based physician. Because of the financial strains occurring in Japan, many smaller hospitals are restructuring into clinics, thus increasing the number of clinics.

Hospitals, on the other hand, have more than 20 beds. The Ministry of Health and Welfare regulates these organizations, which must meet requirements for staffing ratios, facilities, and equipment. By law, a physician must be the chief executive of the hospital. Thus, few professional hospital administrators manage the facilities. Hospitals employ their own medical staff to provide both outpatient and inpatient care. Although the Japan Medical Association is encouraging community practice where physicians based in the community can admit and treat patients in the hospitals, this practice is rarely seen.

Clinical services offered in general hospitals in Japan are similar to those found in the United States. Most types of medical specialists are available. However, in the larger hospitals, the waiting times in the outpatient clinic are long as most do not use an appointment system. In addition, the patient often sees a different staff physician on each visit. As mentioned, the physicians also tend to prescribe a number of medications and may order an excessive number of medical tests.

The Ministry of Education regulates the university hospitals, which are affiliated with medical and dentistry schools. Their primary mission is the education of healthcare professionals. Patients are expected to allow students to participate in their healthcare. The quality of medical care is thought to be better in these hospitals than in other facilities because it is supervised as well as provided by university faculty. The professors tend to have current medical knowledge and equipment and supplies are usually the best available.

As in other hospitals, waiting times in the outpatient clinic is long and seldom do patients see the same physician. Usually, at the initial visit the patient is seen by a faculty member and follow-up visits are conducted by student doctors. Because of the demand for surgery from university professors, the waiting time for elective surgery is generally long.3

National hospitals are affiliated with national universities or are national specialty centers focusing on research and specific diseases. These facilities specialize in areas such as psychiatry, Hansen disease, tuberculosis, heart disease, and cancer. These hospitals are located throughout Japan, and anyone can receive medical care at them. Originally developed to provide healthcare for company employees, company hospitals are few, but they are open now to everyone. A slight discount may be given to employees and their families. Two of the largest company hospitals are Kansai Power Plant in Osaka and Japan Rail Central Hospital in Tokyo.3

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Health Insurance System

The Japanese insurance system aims for universal coverage; it is open to all, including most foreign residents living in Japan. Patients can select any healthcare agency or physicians. Regardless of income status, everyone has equal coverage and access to care. The universal government-managed insurance system2 is an employment-based, multipayer, compulsory system. The system reimburses physicians and hospitals on a fee-for-service point system.6

The insurance system is divided into two primary models: the employees' health system and the Kukuho system. The employees' system is subdivided into four systems: (a) government managed insurance for employees of small business; (b) the insurance program for large companies; (c) the mutual aid associations for teachers and public employees; and (d) the Health Program for the Elderly, which is financed by the first three insurance programs. The Kukuho applies to the self-employed, farmers, and so on.2 Private insurance programs are also available to provide supplemental coverage.

Insurance programs are financed primarily through premiums paid by employees and employers. Each person typically pays 50% of the premium, which is generally approximately 8.5% of the employee's salary. For the Kokuho system, premiums are based on the family's level of income and number of family members. Premiums in the other salary-based systems are relatively high for young and high-income individuals. Local and national governments also provide financial support to the insurance systems. Their support is limited primarily to supplementing the income of the Kokuho and programs for employees of small companies.

All insurance programs require a co-payment that varies depending on the plan. Generally, the patient pays between 20% of the inpatient care and 30% of the outpatient charges. Usually drug coverage that also includes a co-payment is provided. Co-payment fees, fixed for patients in the Health Program for the Elderly, vary from approximately $5 per outpatient visit to $10 per day for inpatient care. For lower income individuals, fees are even less. In addition, all plans have an annual cap on the patient's out-of-pocket costs. The government also offers low interest loans to individuals needing assistance in paying their medical bills.

The current co-payment requirements are a result of a 1997 change in the insurance system. Previously, the co-payment was 10% for outpatient and 20% for inpatient care. With the downturn in the economy, the amount of insurance premiums collected dropped. This caused the national insurance program to suffer its first major deficiency. Given the generous benefit plans with little co-payment, policy makers implemented a 100% increase in the out-of-pocket fees. Thus, as mentioned, the percent of money spent on medical care dropped 1.1% in 1998. However, many of the insurance plans are still operating with increased government supplements. The increase in the co-payment is seen as a short-term solution.

The Central Social Insurance Council, known as Chuikyo, determines the amount of reimbursement for all health plans. Unlike in the United States, which has moved toward a managed care prospective payment system, Japan still uses a fee-for-service reimbursement program. The fee schedule is managed under a point system. Every medical procedure is assigned a point value. Each point is worth approximately $0.08 (US). The amount of reimbursement depends on the number of points. For example, the system encourages physicians and hospitals to maximize the points to increase the reimbursement. The physicians can make more money from prescribing and selling medications and seeing patients than in performing minor medical procedures. Thus, Japan has a much lower rate of invasive treatment.

In 1997, the government instituted caps on points given for drugs and for dispensing them. It is also actively encouraging the dispensing of medications through pharmacies. Pharmaceutical spending continues to place a financial strain on the cost of healthcare.6

The current point system, heavily influenced by the Japanese Medical Association, encourages the status quo. Because physicians own most of the clinics, the association lobbies on their behalf. Thus, hospitals that want to introduce high technology are hampered in their efforts. Nursing reimbursement has also been kept low, thus contributing to a lower ratio of nurses per patients in hospitals.9

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Lessons from Japan

The universal access to healthcare and uniformity of the benefit plans are a distinct advantage of the Japan system. Regardless of socioeconomic status, all citizens receive care. In addition, if patients do not have money for co-payments, special loan programs are available to cover the shortage.

From a cost perspective, Japan has kept its healthcare costs lower than the United States through a system of strict price controls, using a point system. This point system is a mandatory mechanism that virtually covers all healthcare goods and services. All patients, providers, and suppliers are subject to this fee structure. A key factor in this system is that high technology procedures receive a lower reimbursement rate, whereas primary care procedures receive a high payment. Thus, the system encourages more outpatient visits at the expense of highly technical hospital care.10 As mentioned, the emphasis on making outpatients care more profitable does tend to inflate the number of office visits, prescription drugs, and follow-up visits. However, an increase in volume in these areas is thought to be less costly than the introduction of high technology procedures. A national uniform payment system also decreases the administrative costs of the health plans.

The mandatory requirement that all citizens belong to a health plan is another plus. Employers and employees as well as the self-employed are required to enroll in an insurance plan. Family members are also included in the insurance coverage. Although Japan does not have a single-payer system controlled by the government, all plans have local government or regional insurance managers. These officials are watchdogs for cost controls. The Ministry of Health and Welfare has similar regulators who monitor the costs of healthcare for the government plans.

The local, prefecture (state), and national governments also provide subsidies for healthcare. Presently, approximately 25% of the costs are covered by various levels of government. If healthcare costs climb, then taxes will have to be increased, thus providing an incentive to monitor costs closely.8

Another lesson from Japan relates to its compulsory nursing care insurance program that will be implemented in April 2000. The plan requires that all citizens aged more than 40 years enroll in the program and pay a monthly fee of approximately $22 (US) per month. The fee is slightly higher for those aged 40 to 65 and less for those more than 65. As with other insurance programs in Japan, employers pay half of the fee. The local governments also subsidize the plan. Citizens can receive support or care at home, in special nursing homes for the elderly, in intermediate facilities, or in skilled nursing units. People who are bedridden or suffer from dementia, or those without support who may develop these conditions, are eligible for care. Home nursing support as well as the use of a case manager is also available.

The Ministry of Health and Welfare hopes that the implementation of this insurance program will help to decrease the costs associated with caring for Japan's aging population.3 The United States lacks any long-term care program for its elderly. Perhaps as Japan gains more experience with this program, it usefulness in the United States can be more closely examined.

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Challenges Ahead for Japan

According to Campbell and Ikegami,9 five quality problem areas remain. The first is the long waiting time and short consultation time patients have when seeing their physician. Because the larger hospitals are seen as having better quality of care, their waiting times can be longer than that at clinics. Some hospitals have tried an appointment system; however, because they will loose revenue by increasing the length of consultations times and fearing that patients who want appointments cannot be accommodated, this system is not widely used.11

The second quality issue is the lack of informed consent. Although informed consent is beginning to be discussed in Japan, it is rarely practiced. Physicians frequently assume a paternalistic attitude toward their patients. For example, it is still common for a physician not to tell patients if they have cancer. The limited number of malpractice suits also contributes to a lack of physician accountability.9,12

The third issue is run down and inadequately staffed hospitals. Although the government provides guidelines for staffing, the regulations are frequently not monitored. The amount of floor space per patient is less than one third of that found in the United States. Less than 10% of the hospital rooms are private or semiprivate. The number of staff is less than a third of that found in the United States. The nursing staff ratio per patient is approximately 0.68 versus 1.58 found in the United States.9

The fourth quality area according to Campbell and Ikegami9 is the low rate of basic research related to both the quantity and quality of care. Citation rates for Japanese articles reporting scientific studies in high-quality journals are less than half of that found in the United States. A primary reason is the lack of research funding. Private funding groups are also limited because of the lack of tax deductions for such grants.

The fifth area of concern is the quality of professional judgment, diagnosis, and treatment. Medical education is 6 years with 2 additional years of residency recommended. Medical education tends to be idiosyncratic from one institution to the next. Physicians tend to remain in the same institutional health system where they were educated, thus, limiting exposure to other providers and professors from other universities. No specialty boards exist. The Japanese Medical Association maintains that physicians are free to identify themselves as a specialist in any field.

No peer review system is found in Japan. No "best practice" approach is used. The total quality management concepts so often found in many Japanese businesses are absent in the practice of medicine and nursing. Instead, students are trained more in an apprenticeship method. In nursing, an effort is being made to move all graduates toward a Bachelor of Science degree. However, the movement is problematic because of a lack of qualified faculty to teach in the new programs.9

Although Japan has its challenges concerning quality of healthcare, overall it provides some valuable lessons for the United States. The mandatory insurance system with its emphasis on primary care seems sensible. The closely monitored and centralized pricing structure for all medical supplies and services also seems essential to cost containment. The movement to improve the quality of nursing education through the development of many new bachelor's degree programs is to be applauded.

The aging population can quickly consume a larger share of the gross national product. Policy makers in Japan seem to be making changes to ensure the financial viability of their healthcare system. The answers to the quality of care issues will unfold as Japan enters the 21st century.

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