MyVision

No.12 2015.8

Towards Fully-fledged
Reform of Japanʼs Medical
Care SystemJapanʼs total medical expenses are already approaching the 40 trillion yen level,
and are expected to increase annually in future. While the domain of medicalcare has traditionally been regarded as off-limits, the implementation of systemic reforms in this area and the realization of increased efficiency in the allocation of medical resources have become urgent issues against the rapid aging ofJapanʼs population and the difficult state of the nationʼs public finances. How
can we increase the quality of Japanʼs medical care while controlling spiraling
medical expenses? In this issue of My Vision, we seek pointers towards fundamental solutions.

CONTENTS
Expert Opinions

How should we realize the high quality of medicalcare while controlling medical expenses?
Rethink the health insurance system Review the scope of insurance
coverage decided by the Central
Hiroshi Yoshikawa
Professor, Graduate School of Economics, The University Social Insurance Medical Councilof Tokyo
Ryosuke Tsuchiya

Aging in place: realizing prevention to Chair Person of The Board, Kanagawa Prefectural
Hospital Organization
end-of-life care in the community
Classify pharmaceuticals according
Satoko Hotta
Professor, International University of Health and Welfare
to eﬀectivenessGraduate School
Koichi Kawabuchi

Insurers hold the key to increased eﬃciency Professor, Tokyo Medical and Dental University
Toshiaki Akatsuka

Advisor, National Federation of Health Insurance Societies(Former Director, Denso Health Insurance Society)

About this Issue

Yuri Okina

Expert Opinions

How should we realize the high qualityof medical care while controlling medical
expenses?
What should we do to control Japanʼs spiraling medical expenses?
What measures should we take to enable us to increase the quality of medical care while limiting medical
expenses within a reasonable scope?
In this issue of, we seek opinions from academics and practitioners in the fields ofmacroeconomics, medical economics, and public policy, and a Health Insurance Society official.

Interviewer: Nao Toyoda, NIRA Senior Researcher
Editor: Kazuyoshi Harada
Period of interviews: March - April 2015

Rethink the health insurance system
Hiroshi Yoshikawa
Professor, Graduate School of Economics, The University of TokyoJapan’s system of medical care is highly regarded, having achieved
the world’s longest average lifespan among the nation’s population at
a level of medical expenditure (as a percentage of GDP) similar to theaverage level for other developed nations. However, the nation’s medical expenditure is expected to increase 1.5-fold by 2025, when Japan’s baby boom generation reaches the age of 75 and above. The
funding of this expenditure is an issue that must be addressed. It isessential that we somehow control the increase in medical expenditure, which is rising annually.
We must ensure, however, that the quality of Japan’s medical caredoes not decline as a result of robust controls on the financial front. Inorder to do so, we should rethink the basic concepts of the health insurance system and redesign it in order to enable support for funding
for the treatment of major health risks to be shared between all users.
One of the mainstays of Japan’s public health insurance system, thelittle-known High-cost Medical Expenses Benefits System, places anupper limit (the standard figure is 93,000 yen) on monthly medical
expenses to be borne by the patient in order to ensure that high-cost
medical treatment does not place excessive pressure on household
budgets. This system will be rationalized with the introduction of theSocial Security and Tax Number System this fall. The system should
be designed to enable the costs to be borne by the patient to be cumulative, with no more than an upper limit amount to be paid to theclinic or hospital. A total lifetime amount for medical expenses
should also be set as an upper limit for expenses to be borne by theindividual. This type of system would offer peace of mind to the Japanese public. Alternatively, we should consider doing away with thecurrent 30% level of payment by the individual in the case of smallrisks such as colds and cuts, and increase the individual burden, forexample by setting a fixed amount.
Another issue to be addressed is the correction of the disparity inmedical expenses between regions which would remain even after

adjustment for illnesses and the rate of aging of the population. It has
been indicated that differences in the number of hospital beds and thenumber of physicians between Japan’s regions affects medical expenses in each region. It will be important for Japan’s regions to display leadership and to forge plans giving consideration to regional
characteristics in cooperation with regional medical associations anduniversity hospitals in the formulation of the Vision for Regional
Medical Care which is now under discussion. I have high expectations regarding the initiatives of regional medical associations in particular. ■A specialist in macroeconomics, Professor Yoshikawa makes proposals forthe resolution of issues facing Japan’s economy from the perspective ofKeynesian economics. He stresses that innovation rather than population
decline will be the chief factor inﬂuencing the nation’s economic growth.

Aging in place: realizing prevention toend-of-life care in the community
Satoko Hotta
Professor, International University of Health andWelfare Graduate School
It has been pointed out that policies which make the reduction ofcosts their target tend not to succeed. It is essential that we make ourprimary target the realization of increased quality of life (QOL) in asustainable form, and seek a model in which costs are reduced as aresult of our efforts to take the living out of our natural spans into ourown hands.
Most people in Japan do not wish to have their lives extended artificially, and want to die in their own homes. Despite this, by international
standards, many people in Japan spend the last chapter of their lives unconscious, confined to a hospital bed. We need to collect and share stories of peaceful death in the community where the patient lived, and of
the fact that this way of passing does not involve significant costs.
A large-scale apartment complex in Tokyo’s Shinjuku Ward inMy Vision No.12

which the percentage of elderly residents has climbed beyond 50%
has established a “community infirmary” office which responds to thevarious minor anxieties related to medical and nursing care which arisein the daily lives of the elderly. It is reported that this initiative organizedby community nurses has become a hub of mutual support that is forming links within the local community, to the extent that residents no longer needlessly call out ambulances, as was the case in the past.
A physician in Higashiomi City in Shiga Prefecture is creating theconditions for his patients to die peaceful deaths by asking them what
they want to do when they are no longer able to eat in order to clarify
their wishes, and sharing this information with their families and thepeople around them.
Making it possible to continue to live securely with dignity and aging in place even when illness makes life difficult requires different
competencies of specialists than standard acute phase medicine. The
key will be to present the patient with an outlook for the future andoffer choices based on the principle that it is the patient who guides
the care, while transcending the standpoints of patient and specialist,
working to strengthen a feeling of “team spirit” between the two asresidents of the same community. ■benefits through the presentation of data and evidence at the upstream process stage, before symptoms worsen.
There is no decisive measure that will reduce medical expenses.
The key will be to accumulate and analyze medical examination andtreatment data, and to link clinics and hospitals and verify the effectiveness of processes from prevention to treatment through the use of
IT and the sharing of data, all the while considering how to make thesystem more efficient. ■Professor Hotta took her present position in April 2015, following terms as aVisiting Professor at Utrecht University and a Researcher at The Netherlands
Institute for Social Research, and as a Researcher at the Japan Institute for Labour Policy and Training.

The process of development of new treatments and new drugs isongoing, in addition to which the number of elderly citizens withchronic diseases is increasing as a result of the extension of the lifespan. We should accept the consequent increase in medical expenses
as a given, and focus our attention on how best to allocate the burdenof financing these expenses between tax, insurance and individual
payments. Certainly it will be necessary to curb wasteful medical expenditure, but over-prescription or redundant prescription of drugs
and similar instances of excessive expenditure amounts to no morethan several tens of billions of yen, against a total medical expenditure approaching 40 trillion yen. If we nitpick over these numbers,
we risk ignoring the essential issues.
The biggest issue here is changing the fact that insurance coverage
extends even to treatments which have little scientific basis. In orderto do so, it will be necessary to change the way that the Central Social Insurance Medical Council decides on the scope of public insurance coverage and payments for medical treatment. The way that theCouncil decides on drug prices is something like labor-management
negotiations, a complex and unscientific process. It would be a goodidea to institute a two-stage process, in which, prior to the review bythe Council (which is highly susceptible to political pressure), medical experts decided on its legitimacy. This would mean that it would
no longer be necessary to extend insurance coverage to treatments
the effectiveness of which cannot be verified by medical data, which
would help to control medical expenses. In addition, we could prevent insurance coverage being extended to colds and other minor ailments that can be cured by rest, and apply it instead where it is truly
necessary.
I am also in favor of mixed treatment (the combination of treatment that is covered by public insurance and treatment that is notcovered by public insurance) as a further development in this direction. People who are not in agreement with this type of system argue
that it is unfair, and will only allow the rich to receive treatment, but
this argument does not take the fundamental principle into consideration. We should allow people to take their own risks and pay theirown way in the case of treatments the effectiveness of which has notbeen proven, and view it as an opportunity to obtain data from clinical trials as an adjunct to tests.

Insurers hold the key to increased efficiency
Toshiaki Akatsuka
Advisor, National Federation of Health Insurance Societies(Former Director, Denso Health Insurance Society)Japan’s Health Insurance Societies are the only organizations in
the country that possess data concerning medical examinations andmedical expenses, and are able to quantitatively analyze medical dataand perform cost-benefit studies. Health insurers should play a majorrole in correcting increasing medical expenses. Denso Heath Insurance Society works in cooperation with companies to offer services
that encourage members to improve their lifestyles in order to maintain their health and prevent illness.
For example, follow-up surveys of medical data for the past 10years show that the medical expenses of individuals measured ashaving BMI of 25 or above are twice those of individuals with BMI
in the healthy range in 10 years’ time. Medical expenses are fourtimes higher if these individuals develop high blood pressure. If medical expenses are considered by the specific field of medicine, expenditure on dental care is seen to be the highest. Patients with gum disease also have a high rate of concurrent illnesses, and insurance
offices which have made efforts to promote preventive dentistry havebeen successful in reducing total medical expenses per person. Focusing on preventive dentistry increases dental expenses, but reduces
total medical expenses. In addition to improving members’ quality oflife, it is beneficial from the financial perspective. Making information of this type visible to members is having an effect in changing
thinking.
Japanese companies are world leaders in terms of quality control
and increasing efficiency, but the nation’s medical care industry isconservative, and even today is lagging behind on the system and IT
fronts. The initiatives that I have mentioned are examples of successin the application of the type of QC activities and process management that would be employed in a manufacturing plant to healthcare,enabling medical expenses to be controlled by managing health risks
and convincing health insurance society members of the potential

During his period of service with Denso Health Insurance Society, Mr. Akatsuka actively pushed ahead with the introduction of the use of IT, for example
through the creation of a system able to electronically cross-reference medical examination data and health insurance claim data.

Review the scope of insurance coverage decided
by the Central Social Insurance Medical CouncilRyosuke Tsuchiya
Chair Person of The Board, Kanagawa Prefectural Hospital Organization

Dr. Tsuchiya is a surgeon. He makes policy proposals regarding the directionof reforms of Japan’s medical and nursing care systems and the future design of the nation’s social security system from the perspective of a practitioner and a hospital director.

Classify pharmaceuticals according toeﬀectiveness
Koichi Kawabuchi
Professor, Tokyo Medical and Dental University
17,700 pharmaceuticals are covered by the Japanese health insurance system. Very few nations extend public health insurance coverage to this many drugs. In order to correct Japan’s rapidly increasing
pharmaceutical expenses, it will be necessary to create a win-win situation for the pharmaceutical industry, physicians, medical organizations and health insurance pharmacies, encompassing insurers andpatients also, and little by little establish a trend towards socialchange. This is essential, because simply encouraging a shift towards
generic drugs would dampen the motivation to develop new drugs.
The main point to be observed here would be to reform the drug
price system by instituting a framework in which the entities which
do the work receive the remuneration, while giving consideration tocost versus benefit.
What I would propose is a three-tier classification of drugs in relation to insurance coverage based on their effectiveness. For example,
drugs that could potentially become over-the-counter drugs (ThirdTier) would be subject to insurance coverage, but the amount to bepaid by the patient could be increased to between 50% and 90%. In
actual fact, 129 prescription drugs could be reclassified as over-thecounter (OTC) drugs. The market scale here would be approximately
1.5 trillion yen, and the initiative would allow us to reduce medicalexpenses. OTC drugs are taken for granted throughout the world, but
their scope is limited in Japan. The Second Tier would cover longterm listed drugs that are out of patent, and for which generic versions have already been developed. Here, we could decide on a fixed
upper limit price, and the patient would pay the excess.
High-priced drugs with outstanding records for effectiveness andsafety and revolutionary new drugs would be classified in the First
Tier. Here, because development costs are so high, I would propose
the type of system in use in the U.S. and Germany, in which manufacturers are able to freely set prices, in order to boost development
incentives. However, because these drugs would remain expensive
access would be limited, and so the burden on patients could be eased
by reducing the amount to be paid by the individual to the 10% level.
Changing the scope of application of public health insurance andthe rate of payment by the individual by classifying drugs into several groups on a scientific basis, as described above, would enable us toharmonize fiscal discipline with strategies for growth. ■Professor Kawabuchi stresses the necessity for the implementation of structural reforms by the government in order to ensure the sustainability of
medical and nursing care beneﬁts, which are increasing at a faster rate thanpublic pensions. His areas of specialization are medical economics, medical
policy, and management in the medical industry.

This is a translation of a paper originally published in Japanese.
NIRA bears full responsibility for the translation presented here.
Translated by Michael Faul.

About this Issue

Towards Fully-ﬂedged Reform of Japanʼs Medical Care System

It is predicted that the rapid aging of Japan’s population andprogress in medical technology will result in an increase in thenation’s medical expenses in the future. The guarantee of excellent, advanced medical care in order to ensure a healthy, longlived population and to assist individuals battling intractable diseases is an urgent issue for Japanese society. At the same time, itwill be essential to consider how to reconcile the control of increases in medical expenditure with improvement of the qualityof medical care in order to realize a sustainable medical system
and improve the severe state of the nation’s public finances.
At present, measures to control expenditure on social security
are under discussion by the government and within the rulingparty, looking towards the achievement of the government’s target
for fiscal soundness, the realization of a primary balance surplus
in fiscal 2020. It is expected that a variety of proposals designed
to increase the efficiency of medical expenditure will be includedin the measures for the realization of fiscal soundness to be compiled by the government in June, and there is increasing attention
focused on these proposals. For this issue of My Vision, we therefore asked specialists and practitioners in public finance and various fields of medicine their opinions regarding what we must do,from a medium- to long-term perspective, in order to increase thequality of medical care while controlling medical expenses.
The shared perspective that becomes apparent in this issue of
My Vision is that it is not enough to simply apply measures to con-trol expenditure; it will rather be necessary to go back to thedrawing board and reconsider the philosophies behind the various
mechanisms that support the health of Japan’s citizens. For example, we might consider the best direction for the application ofhealth insurance, redesigning the system to enable the financingof treatment for major medical conditions to be supported by all
members of the system, and insurers could begin to implement
fully-ﬂedged efforts to increase the quality of life of their members. In the area of end-of-life care, specialists could propose
modes of care which would enrich the lives of patients, and thepatients themselves could select the care that they wished to receive. Giving consideration to Japan’s future aging society, it willbe essential for individuals involved in medical care and Japan’scitizens themselves to look squarely at the issues and discuss notjust how to cure illnesses, but also how to create an environmentthat promotes health and enables individuals to choose their wayof living.
The opinions of the experts collected in this issue of My Visioncontain numerous suggestions that it will be necessary to ponder
deeply if we are to realize a sustainable and high-quality medicalsystem.
Yuri Okina, NIRA Executive Vice President(Vice Chairman of the Japan Research Institute, Limited)

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