3. The Health Insurance System
Second edition

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The Health Insurance System | Japan's Health Insurance System

Overview of the health insurance system
Japan’s constitution, established in May of 1947, clearly states thatcitizens have the right to health, and that the advancement andpromotion of social welfare, social security, and public health arewithin the scope of government responsibilities [i]. In 1961, as aresult of government-led social welfare measures, Japan achieved
universal health coverage (UHC).1
Characteristics of Japan's UHC system are as follows:
Enrollment in public health insurance is compulsory, regardless of
citizenship, for all those who have resided in Japan for threemonths or more. Rather than being freely selected by enrollees,public health insurance schemes are designated according toemployment status, age, and residence. If an enrollee is neither thehead of household nor eligible through his or her own employer,then the scheme is designated based on the head of household’s
employment status, age, and residence.
Regardless of the health insurance scheme in which residents ofJapan are enrolled, they are free to choose their own healthcare
providers as well as their frequency of treatment. In Japan, thissystem is referred to as a "Free Access System," and according toFree Access, as long as residents hold proof of insurance, they may
receive necessary medical services when sick or injured for a fixed
contribution rate.2＜Column＞Free Access and Freedom ofPractice
Patients are free to receive care from theprovider of their choice. For example, a man
working at a company in Tokyo can make an
outpatient visit to a specialist at a university
hospital near his office during his spare timeand later that same weekend be seen by aphysician at a clinic near his home in Kanagawa
Prefecture. According to guidelines, referral
letters are required for outpatient visits atlarge hospitals; however, in most cases,
patients are free to see specialists at large
hospitals as long as they are willing to pay
additional fees of a few thousand yen.
Physicians also have freedom of practice.
Moreover, if physicians have acquired medical
licenses, they may exercise freedom bypracticing in any specialties regardless ofwhether or not they hold specialized
certifications. It is possible, for example, for asurgeon to practice as an "Internist/Orthopedic
Surgeon," and it is not uncommon to see signs
outside clinics that list multiple specialties.

As a result, out of convenience, some patients seek outpatient
visits at secondary emergency medical facilities mainly intended forpatients in need of hospitalization and surgery, despite having only minor illnesses, and such "visits of
convenience" have been recognized as problematic. In order to safeguard the medical sector from exhaustion due
to issues such as human resource shortages, primary care physicians and flat, per-visit copayments are being
discussed as ways of helping patients to select appropriate occasions for treatment that are in line with thefunctions of each provider.3[i] Article 25 of the Japanese Constitution states that "All people shall have the right to maintain the minimum
standards of wholesome and cultured living" and that "The State shall use its endeavors for the promotion andextension of social welfare and security, and of public health."

1 Ministry of Health, Labour and Welfare "Annual Health, Labour and Welfare Report 2007" http://www.mhlw.go.jp/wp/hakusyo/kousei/07/dl/0101.pdf(accessed 25 January 2018)
2 Ministry of Health, Labour and Welfare "Japan's Health Insurance System" http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000Hokenkyoku/0000172084.pdf (accessed 25 January 2018)
3 Cabinet Office, Government of Japan "The Current Situation Regarding the Primary Care System" http://www8.cao.go.jp/kiseikaikaku/kaigi/meeting/2013/wg2/kenko/131009/item3_5.pdf (accessed 25 January 2018)© 2019 Health and Global Policy InstituteInsurance benefits and patient cost-sharing
Regardless of which of the three public health insurance schemes in which one is enrolled, benefit packages
essentially remain the same. Enrollees are unable to select schemes themselves, so even though slight differences
do exist between benefits, such as add-ons for disease prevention and health promotion, these differences do not
influence enrollment. In all three schemes, benefits cover services such as hospitalization, outpatient visits,transportation costs for psychiatric treatments, prescription medications, home-visit nursing, and dental care.
Co-insurance rates for medical costs remain the same across all insurance schemes, and are designated, instead,depending on age and employment status. Co-insurance for residents under 70 years of age is set at 30%. It is also
set at 30% for those aged 75 and over but still earning incomes comparable to the current workforce. Co-insurance
is set at 20% for children under 6 (prior to compulsory education), and it is also set at 20% for residents 70 to 74,
while it is set at 10% for low-income earners aged 75 and over.4
Overview of the High-Cost Medical Expense Benefit System
In order to prevent catastrophic medical expenses from overburdening household finances, the High-Cost Medical
Expense Benefit System subsidizes medical costs in excess of monthly, out-of-pocket (OOP) thresholds. These
thresholds vary depending on the ages and incomes of beneficiaries. For example, in the case of an enrollee aged
69 years or under earning an approximate income of between 3.7 and 7.7 million yen, the monthly ceiling or
maximum payment is calculated as [80,100 yen + (medical costs - 267,000 yen) x 1%]. The High-Cost Medical
Expense Benefit System plays a major role in ensuring Financial Risk Protection (FRP) within the healthcare
system.5 High-cost medical expense subsidies in FY2013 totaled around 1.6772 trillion yen for people under age
75 and totaled around 5.429 billion yen for people 75 and over. In the 10-year period from 2004 to 2013, those
totals rose by factors of approximately 1.56 and 1.65 respectively. When viewed as a whole, total allowances forhigh-cost medical expenses are increasing.6
System of insurance premiums
The methods for calculating insurance premiums vary depending on the public health insurance scheme, so
premiums paid by enrollees also vary. In schemes such as those managed by Health Insurance Societies and theJapan Health Insurance Association (JHIA), employers are responsible for half the cost of premiums. Health
Insurance Society and JHIA premiums are calculated by multiplying the premium contribution rate by the averageamount of monthly remuneration (such as monthly pay, delimited at reasonable intervals, received by an insured
person from an employer). Premium contribution rates vary from Health Insurance Society to Health InsuranceSociety and from one branch of the JHIA to another.
The methods for calculating premiums within the National Health Insurance (NHI) system vary according to region.
Premiums are determined based on four factors—income (levied on the head of household's income), assets(levied on the head of household's assets), equality (calculated per enrollee), and equity (calculated perhousehold).
In this way, premiums vary depending on the enrolled health insurance scheme, but in general, premiums rise inrelation to income, since they are calculated based on factors such as income. Premiums cover not only thebenefits of enrollees themselves, but also the benefits of those in the age 65 to 74 bracket as well as the 75 andover bracket. Consequently, because there are gaps in the income levels of enrollees among health insurance
schemes, fiscal adjustments are undertaken among schemes to stabilize financial resources.

4

Ministry of Health, Labour and Welfare "Overview of Our Country's Healthcare System " http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000Hokenkyoku/0000172084.pdf (accessed 1 September 2017)
5 Ministry of Health, Labour and Welfare "To Users of the High-Cost Medical Expense Benefit System" http://www.mhlw.go.jp/file/06-Seisakujouhou12400000-Hokenkyoku/0000161153.pdf (accessed 1 September 2017)
6
Ministry of Health, Labour and Welfare "Re-examination of the High-Cost Medical Expense Benefit System" http://www.mhlw.go.jp/file/05-Shingikai12601000-Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000138069.pdf (accessed 16 October 2017)© 2019 Health and Global Policy InstituteOverview of health insurers
Japan's over 3,000 insurers can roughly be divided based on the three types of insurance that they provide—
employer-based health insurance, residence-based National Health Insurance (NHI), and health insurance forpeople aged 75 and over. Health insurance for people 75 and over is primarily supported by public funding as well
as by contributions from employer-based health insurance and NHI.
―Employer-Based Health Insurance
Employer-based health insurance can be subdivided into 3 schemes. The first of these schemes is managed byHealth Insurance Societies, aimed mainly at large companies, provided by over 1,300 insurers, and eligible forpublic subsidies in the case of financial difficulties. The second scheme is managed by Mutual Aid Associations(MAAs), aimed at government workers, and ineligible for public subsidies. The third scheme is administered by
the Japan Health Insurance Association (JHIA) and aimed at employees of small- to medium-sized companies.
Besides enrollee premiums, the majority of the JHIA's financial resources are comprised of Health InsuranceSociety premiums and public funding. Aspects such as the number of enrollees and standard premiums vary by
scheme.7
Health Insurance Societies were established as public corporations under the National Health Insurance Act. 8
Societies are organized by single companies (Single Health Insurance Societies) as well as by business owners
within the same industry (General Health Insurance Societies). Enrollees in Health Insurance Society plans
numbered 29.17 million at the end of August, 2016, and there were 1,357 associations as of April 1, 2017. The
JHIA was established based on the National Health Insurance Act as an insurer for the employees and families ofsmall- to medium-sized businesses that are unable to establish Health Insurance Societies. Enrollees in JHIA plans
numbered 37.18 million at the end of August 2016. Premium levels vary among regional branch offices. In cases
where a Health Insurance Society becomes unable to operate and disbands due to reasons such as financial
difficulties, beneficiaries thus far enrolled in the society-managed plan are then enroll in a JHIA associationmanaged plan. In other words, the JHIA assumes the role of a safety net for employer-based health insurance.
Mutual Aid Associations were established based on Mutual Aid Laws as insurers for national government workers.
At the end of March, 2014, there were eighty-five MAAs, and enrollees numbered 8.91 million. Similar to Health
Insurance Societies, premium levels vary depending on the MAA in which one is enrolled.
―Residence-Based National Health Insurance
The residence-based National Health Insurance (NHI) system is the health insurance scheme that covers the selfemployed, unemployed, and retirees under 75 years of age. In other words, the NHI acts as the medical safety net
for sustaining the health of residents in the sense that it insures those not otherwise enrolled in insurance schemes.
Management of the NHI was shifted from the national to the prefectural level in 2018, and the system is currently
administered at the municipal level. The stated goal of this shift was to strengthen the financial foundations of
the NHI, which continues to run a deficit, by placing fiscal management responsibility in the hands of prefectural
governments, thus securing stable fiscal management and efficient business operations. Under the current system,
NHI enrollees pay premiums, but 50% of the actual costs for benefits are covered by public funding. The system isfinancially unstable and faces structural challenges, including a high average enrollee age composition, lowaverage enrollee income levels, and low average enrollee payment rates (both premiums and taxes).9―Health Insurance for the Elderly
The Medical Care System for the Advanced Elderly, as mentioned in Section 1, was introduced in 2008. All people
aged 75 and over are obliged to enroll, and all enrollees become insured individuals, with no distinction between
7 National Federation of Health Insurance Societies "Healthcare Coverage Seen Through Charts, 2017 Edition,” Gyosei Corporation, p.57-59.
8 National Federation of Health Insurance Societies "Basics of the Health Insurance System" http://www.kenporen.com/health-insurance/m_knowledge/(accessed 25 January 2018)
9
Ministry of Health, Labour and Welfare "Reform of Health Insurance System " https://www.kantei.go.jp/jp/singi/syakaihosyou_kaikaku/dai4/siryou2.pdf(accessed 20 October 2017)© 2019 Health and Global Policy Institutesupporters and dependents. The system is administered at municipal as well as prefectural levels. To promotetransparency and accountability regarding the expenses and medical costs that accompany the aging of the
population, the system for people 75 and over has been made virtually independent from the NHI system.
Premiums are calculated at the prefectural level based on health expenditures from the previous two years andare deducted from the individual pensions of enrollees. Since premium payments from enrollees themselves only
cover around 10% of medical costs, the Medical Care System for the Advanced Elderly is supported by public
subsidies along with fiscal adjustments from the two aforementioned insurance schemes.10

Income and expenditures by health insurance scheme
As shown in Figure 3-1-1, a process of fiscal adjustments takes place among insurers. Contributions for people
aged 75 and over, payments for people ages 65 to 74, and contributions to retirement funds are designated as
expenditures of the Japan Health Insurance Association (JHIA), Health Insurance Societies, and Mutual Aid
Associations (MAAs). These expenditures are subsidies for people aged 75 and over from within the income of theMedical Care System for the Advanced Elderly, subsidies for people ages 65 to 74 from within the income of theresidence-based NHI, and retirement premiums. As Figure 3-1-1 also shows, the ratio of income (comprised ofinsurance premiums and state liability funds) to expenditures (comprised of insurance benefit payments) varies
among insurers. As can also be seen, the portion of income within the Medical Care System for the Advanced
Elderly and the National Health Insurance (NHI) system that is covered by the National Treasury greatly exceeds
the portion covered by insurance premiums. In other words, the fiscal management situation is so severe that noother choice remains but to rely on the National Treasury.

10 Ministry of Health, Labour and Welfare "Our Country's Health Insurance"

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/iryouhoken01/index.html (accessed 20 October 2017)© 2019 Health and Global Policy InstituteStructure of the medical care system serving people aged 65 and overIn terms of fiscal adjustments within the medical care system for the elderly, as shown in Figure 3-1-2, about 50%of the financial resources for the Medical Care System for the Advanced Elderly (75 and over) are covered by publicfunding (National : Prefectural : Municipal = 4:1:1), 40% are covered by contributions from individual insurers (i.e.
paid from the premiums of the working class), and around 10% are covered from premiums paid by enrollees
themselves. The scale of medical expenses for those aged 75 and over has reached 16.8 trillion yen (FY2017 basebenefit expenses of 15.4 trillion yen combined with out-of-pocket (OOP) patient expenses of 1.3 trillion yen).11 In
principle, contributions paid out of the premiums from the labor force are determined proportionally according
to each insurer's number of enrollees aged zero to 74. Since this per-capita contribution depends on the numberof enrollees, insurers with weak financial standing shoulder a heavy burden. Therefore, in order to burden each
insurer based on their financial capacity, the apportionment of the required contribution from each insurer has
been gradually adjusted, with the proportion of the contribution required from employer-based insurers startingat one-half of what they should owe in FY2015, then rising to two thirds in FY2016, and eventually to the total
amount in FY2017.12

11 Ministry of Health, Labour and Welfare "Our Country's Health Insurance"

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/iryouhoken01/index.html (accessed 20 October 2017)12 Ministry of Health, Labour and Welfare "Expense Burdens (Total Fee Allocation)" http://www.mhlw.go.jp/file/05-Shingikai-12601000Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000140159.pdf (accessed 25 Jan 2018)© 2019 Health and Global Policy InstituteTo resolve imbalances among the fiscal burdens shouldered by insurers that result from the unequal distributionof enrollees ages 65 to 74, each insurer's burden is fiscally adjusted based on the proportion of the population
ages 65 to 74 that they enroll. As a result of these fiscal adjustments, unlike in the Medical Care System for the
Advanced Elderly, people ages 65 to 74 remain insured under the same various schemes in which they werepreviously enrolled. As shown in Figure 3-1-2, prior to fiscal adjustment, the benefit payments for those ages 65
to 74 are initially shouldered 80% by schemes such as residence-based National Health Insurance (NHI) and 20%
by the other insurers, but this imbalance is fiscally adjusted among insurers such that in the end, benefits areshouldered 35% by schemes such as residence-based NHI, and 65% by the other insurers.13

System of publicly insured medical services
As previously mentioned, under Japan’s system of Universal Health Coverage (UHC), citizens are enrolled in atleast one of the public health insurance schemes. The following section explains Japan's system of insuranceapplicable services as well as the payment system for incurred medical expenses. The premise of this payment
system is a medical service fee scheme. Medical service fees are the fees received by insured healthcare providers
as compensation for publicly insured medical services and pharmaceuticals. After a patient visits a provider andpays the co-insurance portion of the incurred medical expenses (the total medical service fee), the provider thenrequests the remaining portion of the medical service fee from the insurer.
As also described in detail in Section 7, medical service fees are set based on discussions held by the Ministry of
Health, Labour and Welfare at the Central Social Insurance Medical Council, and a fee review is conducted once
every 2 years. Medical service fees are scored using a system of points, with one point valued at 10 yen.14

13 Ministry of Health, Labour and Welfare "Our Country’s Health Insurance"

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/iryouhoken01/index.html (accessed 20 October 2017)14
Ministry of Health, Labour and Welfare "The Medical Service Fee Scheme" http://www.mhlw.go.jp/bunya/iryouhoken/iryouhoken01/dl/01b.pdf(accessed 25 January 2018)© 2019 Health and Global Policy InstituteFigure 3-1-3 shows the flow of charges and payments for medical
services covered by public insurance. When a patient carrying
proof of insurance visits a medical provider, they pay coinsurance of 10% to 30% to the provider for received treatments
based on their age and income. The 70% to 90% of the incurred
medical fees that are excluded from co-insurance are covered bypublic funding from sources such as paid insurance premiums
and taxes. Providers covered under the health insurance system
submit claims for reimbursement of this 70% to 90% to Claims
Review and Reimbursement Organizations (CRROs) such as the
Health Insurance Claims Review & Reimbursement Services(HICRRS) and the National Federation of Health InsuranceSocieties (Kenporen). CRROs review whether insurance claims
are reasonable, charge insurers for the remaining portion of
medical service fees to be paid to the provider, receive thesepayments from health insurers, and pay them as reimbursement
to providers. In other words, the role of CRROs is to review
medical service fee statements (detailed insurance claim
receipts) submitted by medical providers and process medical
service fee payments based on the results of those reviews.

＜Column＞ Insurer functions are entrusted
to Claims Review and Reimbursement
Organizations?
Claims Review and Reimbursement
Organizations (CRROs) established in eachprefecture are in charge of sending invoices toinsurers and receiving reimbursement forproviders. Under this system, after a service isprovided and co-insurance is received from thepatient, the provider requests reimbursementfrom the insurer for the remaining portion of
the medical service fee. In order to facilitate
payment of medical service fees, the Health
Insurance Claims Review & Reimbursement
Services (HICRRS) and the National Federationof Health Insurance Societies (Kenporen) haveestablished prefectural branches that handle
the processing of medical service fee
payments.

CRROs confirm whether or not services provided to patients conform to insurance rules (E.g. Rules forProfessionals in Charge of Insurance-Covered Healthcare Services and related notices). One issue that has beenraised is that although all claims must be reviewed according to the same set of rules, reimbursement disparities© 2019 Health and Global Policy Instituteremain among prefectural branches of CRROs because criteria for determining the validity of claims often vary bybranch.15

15

Ministry of Health, Labour and Welfare "Improving Operational Efficiency of the Payment Fund / Development Plan—Schedule Overview"
http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-Hokenkyoku/0000169999.pdf (accessed 16 October 2017)© 2019 Health and Global Policy Institute3.2

The Health Insurance System | Japan’s Long-Term Care Insurance System

Overview of the Long-term Care Insurance System
The Long-term Care Insurance System was launched in 2000 as a system for society as a whole to support thelong-term care of the elderly. Municipalities operate as insurers, and all citizens over the age of 40 are covered bythis system. In comparison to other countries, this system is quite generous in terms of the levels of coverage andbenefits. More than 5 million people were eligible for Long-term Care Insurance as of April 2016.16
Foundations of the Long-term Care Insurance System
The foundations of Japan’s Long-term Care Insurance are described in detail in Section 1. Under the Elderly
Welfare System that existed in the past, municipal governments were given the final say in the selection of services,and since users could not select services, the content of services tended to be uniform. In addition, since service
fees were based on a patient’s ability to pay, people with middle- and high-level incomes shouldered heavy
burdens, and general hospitals began to face problems related to long-term hospitalizations for long-term care.
Along with the rapid aging of the population, the number of people requiring long-term care as well as the lengthof care itself increased, and long-term care needs grew greater and greater. At the same time, the status quo inwhich families traditionally met the needs of the elderly began changing, with shifts toward nuclear families andthe aging of the generation that provided care.17
After taking into account issues and changes such as these, Japan developed the Long-term Care Insurance System
as a way for society as a whole to support the long-term care of the elderly.
Basic principles of the Long-term Care Insurance System○ Independence support: To go beyond simply providing necessary long-term care and also support theindependence of elderly people.
○ User-oriented system: To provide users integrated access to health and welfare services from diverse entities
at the their own discretion.
○ Social insurance system: To employ a social insurance scheme with a clear relationship between benefits andburdens.
Long-term Care Insurance enrollees and premiums
Enrollees in Long-term Care Insurance are divided into two categories—Those aged 65 and over (Category 1
Insured) and those ages 45 to 64 who are concurrently enrolled in other medical insurance schemes (Category 2
Insured).
○ Category 1 Insured: Eligible for services regardless of whether they receive Certification for Long-term Care
Need or Certification for Support Need.
○ Category 2 Insured: Eligible for services only after they receive Certification for Long-term Care Need or
Certification for Support Need due to aging-related diseases (specified diseases).

16 Ministry of Health, Labour and Welfare (2016) “A survey on the state of current long-term care benefits”

http://www.mhlw.go.jp/toukei/saikin/hw/kaigo/kyufu/16/index.html (accessed 19 November 2017)17
Ministry of Health, Labour and Welfare “The current and future role of the public Long-term Care Insurance System” http://www.mhlw.go.jp/file/06Seisakujouhou-12300000-Roukenkyoku/201602kaigohokenntoha_2.pdf (accessed 19 November 2017)© 2019 Health and Global Policy InstituteAt the end of FY2015, Category 1 Insured numbered 33.82 million people, and Category 2 Insured numbered 42.04
million people (according to retrospective, monthly averages published in 2017).18,19
Category 1 enrollees (age 65 and over) pay their healthinsurance and Long-term Care Insurance premiums <Column> Why age 40 and over?
separately. Premiums and insurance rates are set by Surrounding the establishment of the Long-term
Care Insurance System, there was a great deal ofmunicipalities and pegged to nine standardized levels ofdebate centering on the justification behindincome. 20 For Category 2 enrollees (ages 40 to 64), healthinsurance and long-term care insurance premiums are paid targeting people aged 40 and over. Amidst
various opinions, there was support for targeting
together in a lump sum.21
people aged 20 and over or 60 and over, but it
was pointed out during consultations on theLong-term Care Insurance System in 1996 at theCouncil on Health and Welfare for the Elderly thatonce people pass the age of 40, the likelihoodthat they will have to care for their parents andthus need social support increases. As a result,the decision was made to enroll people aged 40
and over since long-term care costs should be
supported by society as a whole. It was throughsuch discussions that the current system took
shape. (MHLW, 2006)

18 Ministry of Health, Labour and Welfare (2015) “Annual report on Long-term Care Insurance”

http://www.mhlw.go.jp/topics/kaigo/osirase/jigyo/15/dl/h27_gaiyou.pdf (accessed 25 January 2018)
19
Ministry of Health, Labour and Welfare “Long-term Care Insurance premiums for the Category 2 Insured persons”
http://www.mhlw.go.jp/topics/kaigo/osirase/jigyo/15/dl/h27_hihokensha.pdf (accessed 25 January 2018)20 Ministry of Health, Labour and Welfare “Overview of the FY2018 Budget (Draft) (Health and Welfare Bureau for the Elderly)”
https://www.mhlw.go.jp/wp/yosan/yosan/18syokanyosan/dl/gaiyo-13.pdf (accessed 6 July 2018)21
Ministry of Health, Labour and Welfare “The Long-term Care Insurance System” http://www.mhlw.go.jp/file/06-Seisakujouhou-12300000Roukenkyoku/2gou_leaflet.pdf (accessed 21 November 2017)© 2019 Health and Global Policy InstituteCost of Long-term Care Insurance
As show in figure 3-2-1, half of the financing for Long-term Care Insurance comes from enrollee premiums, while
the other half comes from public funding. The budget for long-term care benefit pay-outs was set at 9.6 trillion
yen in FY2016. Funds were sourced from Category 1 premiums (2.1 trillion yen), Category 2 premiums (2.7 trillionyen), the national treasury (2.2 trillion yen), prefectures (1.4 trillion yen), and municipalities (1.2 trillion yen).
Similar to medical expenses, long-term care expenses are increasing annually along with increasing benefit costs,
and this trend is expected to continue in the future given the ageing of society in Japan.22

Imbalances in funding and financial burdens exist among prefectures as a result of the fact that prefectures withhigh proportions of people over age 75 face rising benefit pay-outs, and prefectures with low average income
levels face falling revenues. Financial actions are being taken, with five percent out of the 26% share of funding
provided by the National Treasury subject to fiscal adjustments. The system of adjustments bears close
resemblance to initiatives within the Medical Care System for the Elderly (explained in Section 1.2) in the sensethat both systems are designed to help reduce imbalances among the fiscal resources of different insurers.

22

Ministry of Health, Labour and Welfare “The current and future role of the public Long-term Care Insurance System” http://www.mhlw.go.jp/file/06Seisakujouhou-12300000-Roukenkyoku/201602kaigohokenntoha_2.pdf (accessed 21 October 2017)© 2019 Health and Global Policy InstituteUsage of care services and the Certification of Long-term Care NeedTo use long-term care services, applications are submitted tomunicipal government offices or Comprehensive Community<Column> The number of users at the time
Support Centers. To qualify, applicants must receive Certification ofof the establishment of the Long-termLong-term Care Need or Certification of Needed Support. Upon
Care Insurance System
receipt of certification, care managers prepare plans for applicants,
Before establishing the Long-term Careenabling them to use a variety of services.
Insurance System, care for the elderly was
A person’s level of required care (classified as Preventative Support
split between a system of welfare for the
Level 1 or 2, or Long-term Care Level 1 through 5) is determined byelderly and a system of healthcare for the
a committee of specialists that takes into consideration a written elderly. To ensure that people who haddiagnosis from an attending physician and an on-site survey that been receiving welfare services could
addresses 74 items related to the activities of the person’s daily life.
continue to use the same services in the
The appropriateness of the person’s level of care is then re- new system, certification criteria were
evaluated every two years or following marked deterioration inrelaxed. This led to an immediate increase inhealth.23 The yearly trend in the number of people requiring care is the number of users requiring in-home careshown in figure 3-2-2.
or light care (Preventative Support Level 1 /To address the fact that demand for long-term care does not Long-term Care Level 1), thus creating
decrease and to curb the continual growth in the population
bottlenecks and long-waiting lists at
requiring light degrees of care (Preventative Support Level 1 / Long- intensive care nursing homes. (Ikegami
term Care Level 1), the 2006 revision of the Long-term Care Naoki, 2017)
Insurance Act introduced preventive care services. At that point,
recipients previously certified to receive Care Level 1 were split into
Long-term Care Level 1 or Preventative Support Level 2 depending on whether their condition seemed likely to
improve or remain the same.

Figure 3-2-2: Yearly trend in number of people requiring care/support(Thousand people)
7,000
6,000

5,611

5,000
4,086
3,840

4,000
3,000
2,000
1,000

3,445

452

2,983

409

473

2,562 377
337 389363 389
355
563
484

419

701

0

322

875
390

486

426
596

463
493
522
611

4,324 4,355
465

486

521

544

552
645

4,527
499

499

1,240 1,328
593

669

513

4,846
559

575

587

626

736

713

645

705

750

802

821

849

636
1,056

4,673

5,063
591
638
698
897

5,305

611

607
692
665
743

5,838
605
709
766

721
948

965

989

1,026

1,046 1,110

6,058
603
726
790

6,203
601

Number requiring transitory care 5

744

Number requiring transitory care 4

810

Number requiring transitory care 3

1,060 1,080 Number requiring transitory care 2

1,170 1,220 Number requiring transitory care 1

1,423 895

769

784

847

907

838

858

651

668

802

660

766

627

709

508
527

550

572

601

664

690

764

820

871

890

718

Number requiring support 2
Number requiring support 1

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Number requiring support/transitory care2013 2014 2015

Source: Created by HGPI and PwC based on data from the “2015 annual report on the state of the nursing-care insurance system” by the Ministry of Health, Labour and Welfare

23 Ministry of Health, Labour and Welfare “The Long-term Care Insurance System” www.mhlw.go.jp/file/06-Seisakujouhou-12300000-

Roukenkyoku/2gou_leaflet.pdf (accessed 21 September 2017)© 2019 Health and Global Policy Institute3.3

The Health Insurance System |Private Health Insurance

Roles played by private health insurance under universal health coverage
Private health insurance mainly plays roles complementary to the public health insurance system such as
guaranteeing services that are not covered by public benefits, guaranteeing additional expenses incurred during
periods of illness, and guaranteeing income security during leaves of absence.24,25
In addition, when taxpayers pay life insurance premiums, long-term care insurance premiums, or individual
annuity insurance premiums, they can receive certain income-based deductions. These are called life insurance
deductions, and they reduce the burdens of income tax and residence tax.

Background of rapid growth in the private health insurance sector
Insurance policies such as those for healthcare and cancer are classified as third-sector insurance policies (Foradditional information, please refer to the Glossary). Entry into the third-sector insurance industry was firstpermitted only to foreign life insurance companies in the early 1970s, but after drastic industry reforms in 1995
and the full liberalization of the third-sector insurance market in 2001, domestic companies were also allowed tosell insurance.26 The number of in-force health insurance contracts in the third-sector has been consistently on
the rise,27 and such contracts have become the main life insurance product. In recent years, new product types
such as special medical insurance (medical insurance with relaxed underwriting regulations) for "people withchronic illnesses and pre-existing conditions" have been developed for people who previously had difficulty joining
private health insurance plans. Against this backdrop, the number of in-force contracts in the private healthinsurance sector has been increasing annually. In 2016, the number of medical insurance contracts that specificallycovered services such as hospitalization and surgical security in their main life insurance sections had grown to
35.29 million.28

Future expectations for the role of private health insurance
The current public health insurance system in Japan offers a wide range of benefits and is a Free Access system.
The fact that private health insurance plays a limited role compared with other countries can also be explained byfactors such as the High-cost Medical Expense Benefit System and the ban on mixed medical treatments. The needfor private health insurance is gradually changing due to epidemiologic shifts, increasing demand for treatmentsof cancer, which is now the leading cause of death in Japan, and the expansion of advanced medical care services.
As a result, the role of private health insurance is expected to transition in the future alongside reforms to the
public health insurance system.29,30 Japan’s declining birth rate, aging population, and technological innovations
24 Tajika Eiji, Kikuchi Jun (2012)“The Role of Government and Private Insurance in Medical Security: A Theoretical Framework and Case Studies by Country”

http://www.mof.go.jp/pri/publication/financial_review/fr_list6/r111/r111_02.pdf (accessed 21 November 2017)25 Nakahama Takashi (2006) “The Role of Private Medical Insurance—Through Comparison Between Japan and the United States”
https://www.jstage.jst.go.jp/article/jsis/2007/596/2007_596_596_69/_pdf (accessed 21 November 2017)26 Serizawa Nobuko (2010) “Third-sector insurance market” http://dspace.lib.niigata-u.ac.jp/dspace/bitstream/10191/16657/1/90_249-271.pdf (accessed
21 November 2017)
27 The Life Insurance Association of Japan “2017 Life Insurance Trends” http://www.seiho.or.jp/data/statistics/trend/pdf/all.pdf (accessed 21 November
2017)28
The Life Insurance Association of Japan “2017 Life Insurance Trends” http://www.seiho.or.jp/data/statistics/trend/pdf/all.pdf (accessed 21 November
2017)
29 Nakahama Takashi (2006) “The role of private health insurance -through comparison between Japan and the US- “
https://www.jstage.jst.go.jp/article/jsis/2007/596/2007_596_596_69/_pdf (accessed 21 November 2017)30
Kawaguchi Hiroyuki, “International Comparison of Public Medical Security System and Private Medical Insurance - Role Sharing of Public and Private
Funding and Its Function –” Retrieved from http://www.seijo.ac.jp/pdf/faeco/kenkyu/196/196-kawaguchi.pdf (accessed 21 November 2017)© 2019 Health and Global Policy Instituteare also expected to raise national medical care expenditures, so revisions of public health insurance may result
in reduced ranges of coverage. The private insurance plans currently offered in the market primarily cover limited
services for fixed fees; however, it is predicted that in the future, these private plans will expand to cover medical
services no longer covered publicly.

© 2019 Health and Global Policy Institute