Volume 1, Special Edition | Current Kampo Medicine 2005

Medical Insurance in Japan
Naoya Ono
Department of Health Promotion and Human Behavior, Division of Health Determinants,
School of Public Health, Graduate School of Medicine, Kyoto University

Foreword
The practice of Kampo medicine in Japan is sustained by the country’s medical system. The reason that
Kampo medicine is so widely used for medical purposes is due to its acceptance by medical insurance. The medical
system in Japan is not the same as that in other countries. With a unique Japanese framework, and operated
through the political support of the Health, Labor and Welfare Ministry; the Japanese medical system hassustained the health of the Japanese people. When considering the role played by Kampo medicine in Japanese
healthcare, it is extremely important to look at how Kampo medicine is managed within the medical system.
As noted in other parts of this journal, the reasons that physicians educated in Western medicine can practiceKampo medicine are (1) drugs used in Kampo medicine can be dispensed easily, and (2) the existence of 148 typesof these drugs which have a high level of compliance in their use. After learning a certain degree of traditional
medical concepts, physicians introduce these drugs into their own clinical practice. Utilizing these drugs, and theinsurance system that sustains their operation, they perform clinical tests and independent research, including
research based on the accumulation of case studies and comparative studies.
Meanwhile, there are medical institutions, though not many, which provide medical treatment based on
Kampo medicine, at their own expense. In particular, there are many places that use herbal medicine astherapeutic drugs. While more than 160 types of herbal medicine are accepted by healthcare insurance, it isfinancially difficult for herbal medicine to be used with health insurance treatment. This is due to such problems
as their excessively low cost, the fact that they require a great deal of manpower and shelf space, and the difficulty
in securing pharmacists who posses a high degree of knowledge in this area. While providing medical treatment at
one’s own expense is much simpler than providing health insurance treatment, it is another form of Kampo
medicine practiced in Japan.
This article, written by Ono, explains the medical system in Japan. The overall theme is much larger than
Kampo medicine, and has very little to do with clinical Kampo medicine. Nevertheless, we have included it to letreaders know that medical treatment is based on this system. This article also contain s information that will be
useful to people who intend to study about the Japanese medical system.
Editorial Staff

1. History of Development of the Medical System(1) Medical Security System and Social Security
Broadly defined, Social Security in Japan includes
protection and pensions for victims of war. Narrowly
defined, it means public assistance (livelihood
assistance), social welfare (for the physically disabled,
mentally disabled, elderly, children, single mothers,etc.), social insurance (medical insurance, annuity
insurance,
nursing
insurance,
unemployment
insurance, industrial injury insurance, etc.) and publichealth (tuberculosis, infectious disease, drug-related
measures,waterworks
anddrainage,waste
management, etc.). Other than exceptional cases suchas people who receive livelihood assistance based on
low income (0.8% of the total Japanese population), allJapanese citizens currently have a form of medical
insurance, which is one of the medical services
guaranteed to all Japanese citizens.

(2) History of the Medical Security System① Structure of Universal Health Insurance System
The history of medical insurance in Japan dates backto the establishment of the Health Insurance Law in1922. This law became institutionalized for employees
at factories and elsewhere, amid the rise of the labor
movement during the development period of
capitalism at the beginning of the 20th century.
Subsequently, in 1938, the system of national healthinsurance was established for individual proprietors
and farmers. As a result, in 1945 approximately 60% of
the Japanese population had medical insurance.
However, with the chaos of World War II, it became
impossible to provide sufficient healthcare to people,
and the system was in danger of collapsing. With theeconomic and social reconstruction after the war, theconstruction of a genuine system of social security
began. And the system of medical insurance, which
had been on the brink of collapse, was also
reconstructed.

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The national treasury assumed the burden of
government-managed health insurance in 1954. In
1963 a 3-year period of health insurance provision
which had been in place thus far was abolished, thetime limitation on insurance during recuperation waseliminated, and plans to improve health insurance
were discussed.
Meanwhile, based on revisions in 1954, themanagement of national health insurance wasrevamped from the regular Blue Cross system
conducted by individual cities, towns and villages, topublic management by municipalities. In addition, it
became compulsive for municipalities managing
national medical insurance to make this insurance
available to residents. In order to stabilize the financesof national health insurance, based on revisions in
1955, a system of national treasury assistanceequivalent to 20% of recuperation expenses becamelaw.
Under such conditions, the National Health
Insurance Law was completely revised in 1958, and a
yearly plan was decided for the realization of universal
health insurance over a period of four years. In 1961, asystem of national health insurance was put into effectin all municipalities for individual proprietors andfarmers who did not have employee’s health insurance.
The result was universal health insurance in Japan,
based on employee’s health insurance and national
health insurance. After that, it became compulsive for
all Japanese citizens to have either employee’s healthinsurance or national health insurance – both of which
are forms of social insurance.
② Establishment of Healthcare System for the
RetiredIt is a qualification requirement that people
receiving employee’s health insurance in Japan be
employed at a place of business enumerated in the law.
After an employee retires because he or she hasreached retirement age or for another reason, that
employee is no longer employed at the place ofbusiness, and as a general rule will no longer receive
employee’s health insurance – but instead will receive
national health insurance.
The level of health insurance for such aged retirees
drops at a time when their need for healthcare is on
the rise, resulting in the problem whereby they must
depend on the national treasury and national healthinsurance premiums to pay their healthcare expenses.
For this reason, a medical care system for the retired
was established in 1984 to ensure fairness in theprovision of healthcare and the burden of its costs
throughout the lifetime of people who receive
employee’s health insurance, and to correct70

irrationality between medical care systems. While therate increases at which healthcare is provided to aged
retirees who formerly had employee’s health insurance
but who have since begun receiving national healthinsurance, this system pays for that healthcare by the
insurance premiums from retirees who had been
receiving employee’s health insurance and bycontributions from employee’s insurance.
③ Establishment of Health Insurance System for the
Elderly
As mentioned above, due to the relationshipbetween employee’s insurance and National Health
Insurance, the percentage of elderly people who have
National Health Insurance increases as society ages.
Furthermore, as the structure of employment inJapanese society changes from primary industry to
secondary industry, and from secondary industry totertiary industry, the younger segment of society
switches to employee’s insurance rather than National
Health Insurance. As a result, the age composition of
insurants with National Health Insurance has
gradually risen. In 1998, the average age of people
with an insurance policy was 51.3 years for National
Health Insurance through municipalities, 36.9 years
for government-managed health insurance, and 33.6
years for union-managed health insurance. The
percentage breakdown for elderly people with healthinsurance is 25.3% for National Health Insurance
through municipalities, 5.7% for government-managed
health insurance and 2.8% union-managed for healthinsurance.
If the situation by which the age composition of
insurants is made light of is projected into insurance
area of finance, if there were no system of adjustment
between types of coverage, the higher the age
composition in a system of insurance the more difficult
it becomes to finance that system. And overall the
insurance premium revenue obtained from elderly
people is not as large as that obtained from theyounger segment. Meanwhile, as far as expenses areconcerned, since the per-person healthcare costs forthe elderly is five times that of the younger segment,
as the percentage of elderly people increases soincrease healthcare costs. (As a result, in 1999,
healthcare costs for the elderly accounted for 38%, or
11.8 trillion yen, of the total of 30.9 trillion yen innational healthcare costs. What’s more, the percentageof healthcare costs for the elderly increases each year.)Also, in 1973, based on revisions in the Elderly
Welfare Law, a system was established whereby
so-called free healthcare costs for the elderly (theamount for which the individual elderly person is
responsible under healthcare insurance), are paid for
at public expense. With the subsequent rapid increase

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in healthcare costs for the elderly, there has been morepressure for the financing of National Health
Insurance.
For this reason, the difference in age composition
among insurers that comes with the aging of society
has been corrected – and from the viewpoint of
spreading the burden of healthcare costs for theelderly fairly among the Japanese people a healthservice system for the elderly was established in 1983.
Also, health and medical treatment measuresprovide for the treatment of disease – and based on theknowledge that comprehensive measures for thehealth of the elderly have been lacking, not only does
the health service system for the elderly deal withproblems of finance, but it also has to do withcomprehensive insurance for the elderly, which
includes measures for preventing and detecting
disease early on, during the prime of life, so that theincreasing number of elderly people can live healthy
lives.
④ Establishment of a System of Nursing Insurance
As society ages there has been a sudden increasein the number of people who require nurses, including
those who are bedridden and those who suffer fromdementia. Meanwhile, changes in social conditions,
including the growing number of nuclear families andthe social advancement of women, have witnessed adecrease in the function of nursing provided byfamilies.
However, since nursing service for the elderly wasformerly provided under two different types ofcoverage – welfare coverage for the elderly andinsurance coverage for the elderly – there was adisproportion in the burden of cost and usage
procedure, so that the situation was inadequate forcomprehensive nursing measures. For this reason, sothat elderly people who require nursing or care will beable to lead meaningful lives in accordance with theirown ability, a system of nursing insurance coverage
was established in April 2004, to provide
comprehensive
service,includinginsurance,
healthcare and welfare services, based on user
selection.
⑤ Maintenance of the System for Healthcare
Provision
The modern healthcare system in Japan began in
1874 with the establishment of the medical system.
The National Healthcare Law was subsequently
established in 1942, and with the difference between
hospitals and clinics being clarified, a system for
permitting physicians to establish clinics was put into
effect.

After the war, in 1948, the Healthcare Law, on
which the system for healthcare provision in Japan isbased, was established. Also, with the Doctor and
Dental Practitioner Law being gradually put into place,there has been a quantitative expansion of healthcare
provision for acute medical treatment.
Subsequently, with changes in the structure ofdisease and the aging of society, there has been areview of the system of healthcare provision.
In 1985, a healthcare planning system byprefecture was introduced for the purposes of revising
the system of healthcare provision locally as part of
the first round of revisions of the Healthcare Law, andobtaining the cooperation of healthcare facilities. Also,an adequate number of hospital beds have beenrealized.
In 1992, the Healthcare Law was revised a second
time for the purposes of (1) realizing conceptual
regulations for providing healthcare, and (2) thesystemizing the function of medical facilities withtechnologically advanced hospitals and extended careunits having been systematized.
Furthermore, when the Healthcare Law wasrevised for a third time in 1997, (1) informed consent
regulations were realized, (2) extended care units wereexpanded into clinics, (3) community health support
hospitals were systematized, and (4) the system of
healthcare planning was reviewed.
When the Healthcare Law was revised for a thirdtime in 2000, (1) a distinction was made between beds
for general patients and beds used for the purpose ofrecuperation, and the provision of healthcare waspromoted to suit the condition of the individual
patient; (2) there was an easing of required
regulations; (3) there was a securing of the observanceof hospital arrangement standards; and (4) measures
were adopted for easing advertising regulations.
2. Structure of Disease
The structure of disease in Japan has changed
from acute infectious disease to chronic lifestyledisease, based on such things as improvement innourishment, higher hygienic standards, advances inmedicine and medical technology, and changes inhealth awareness. In view of the annual transition in
the percentage of cases of hospitalized treatment,
there has been a remarkable decrease in infectious andparasitical diseases, with a drastic increase in diseaseofcirculatoryorgan
systems,
including
cerebrovascular trouble, as well as neoplasm such as
cancer. Also, death ratio according to cause of deathindicates a sudden decrease in the death rate fromThe Journal of Kampo, Acupuncture and Integrative Medicine (KAIM)

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tuberculosis, and an increase in the death rate from
cerebrovascular disease and malignant growths.
3. Healthcare Costs(1) Total Healthcare Costs and Their Breakdown
National healthcare costs in Japan are on an
upward trend, even under conditions of slumping
economy. Healthcare costs reached 30,933,700 million
yen in 1999, or 244,200 yen per person.
This notion of national healthcare costs represents
the cost for treating ailments among the Japanese
population at medical facilities over a 1-year period.
These costs are calculated based on expenditures for
public healthcare insurance. Included in national
healthcare costs are medical treatment fees, theresponsibility of patients to pay for a portion of thecosts, the cost of providing medicine, nursing costs,
and transportation costs. However, expenses fornormal birth, expenses required for medical checkups
for the maintenance and promotion of health, expenses
for amenity bed, and a portion of the construction costs
for public medical institutions are not included. Also,
as a general rule, since healthcare costs are free ofconsumption tax, there are no taxes for their expense.
In Japan, the details of medical practice, theadministering of medication and medical examinations
appear in statements submitted by medical
institutions as the foundation of a progress payment
system based on a nationally standardized medical
treatment fee bill used by both hospitals and clinics.
And so, by totaling up the amount paid based on
medical fee statements, the particulars and monetaryamounts of medical treatment performed at medical
facilities are understood on the national level. And
based on such social insurance statistics, national
healthcare costs are determined with the addition ofdata other than social insurance, including healthcare
costs paid for at public expense.
Including the cost of purchasing medicine, publichealth expenses (including medical checkups andvaccinations), managerial and operational costs, andresearch and development costs, this corresponds tothe total healthcare costs of the OECD. Total
healthcare costs in Japan (1998) are 7.4% of the GDP,
which ranks number 18 among nations belonging to
the OECD. However, in terms of monetary amount,
this represents 283,558 million dollars, second only to
the 1,125,555 million dollars of the United States. The
per-capita healthcare cost is 2,242 dollars for Japan(ninth), with Germany at 2,697 dollars (fifth), France
at 2,324 dollars (eighth), and the Netherlands at 2,172
dollars (tenth) – which means that there is not such a
big difference in per-capita healthcare cost among
these nations.

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Looking at the breakdown of healthcare costs inJapan in terms of national healthcare costs (fiscal
1999) by consultation type, general consultation costs
involving admittance to the hospital account for 36.8%,
dental clinics account for 8.2%, dispensing pharmacies
account for 7.8%, costs for meals and medical
preparations when patients are admitted to thehospital account for 3.5%, health service facilities forthe recuperation of the elderly account for 2.5%, andhome nursing and medical costs for the elderly accountfor 0.3%.
Breaking things down by category of expense at
medical institutions (fiscal 1998), personnel costs
involving healthcare attendants account for 50.9%, thecost of medical supplies accounts for 19.4%, the cost of
medical materials accounts for 6.1%, and consignment
expenses account for 5.2%. By fiscal resources (fiscal
1999), public expenses account for 32.9%, the cost of
insurance premiums accounts for 52.5%, with othercosts accounting for 14.7%.
(2) Healthcare Costs for the Elderly
Healthcare costs for people of the age of 70 andolder (including bedridden people between the ages of
65 and 70) (hereinafter referred to as “healthcare
costs for the elderly”) reached 11,804 billion yen in
fiscal 1999. The trend for increasing healthcare costs
for the elderly is remarkable, with these costs
accounting for 38% of total national healthcare costs.
Breaking down national healthcare costs by maincauses for this increase, increase in populationaccounted for 0.2% of the 3.7% increase in fiscal 1999,
the aging population (change in the population
composition by age level) accounted for 1.6%, withother increases (change in the structure of disease,advances in healthcare, etc.) accounting for 1.9% of thetotal increase – which means that the effect of aging isgreat. Also, while the total cost of national healthcare
increased by 3.7%, the increase in healthcare costs foryoung people was 1.0%, with the increase inhealthcare costs for the elderly at 8.4%.
The reasons that the cost of healthcare for theelderly causes healthcare costs to increase are becauseof the increase in the population of elderly people, andbecause of the fact that per-capita healthcare costs forthe elderly are five times greater than the costs ofhealthcare for young people. When comparing thedifference between healthcare costs for the young andold in Japan to that in American and European
countries based on data from the OECD, the differencein Germany is 2.68 times (1994) and the difference inFrance is 3.00 times (1993), so that the difference
between the young and old is generally between 2 and4 times – which means that this difference is higher in

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Japan than in Western countries. In Japanconsideration must be given to the fact that the costs ofnursing have traditionally been calculated ashealthcare
costs,duetoso-called“socialhospitalization,” whereby people are hospitalized at
medical institutions due to such factors as outdated
nursing services provided to the elderly, although
medical treatment might not be necessary.
The cause of high healthcare costs for the elderly
has to do with each of the three elements of healthcare
cost per capita. Among the three elements, the“consultation rate” is an index indicating how often aperson with healthcare insurance is seen at a medical
institution per month. In this case, the number of
instances of consultation is the same as the number ofbills for medical treatment issued by medical
institutions, with one bill per patient issued by each
medical institution. The consultation rate for theelderly is 6.2 times that of young people for patients
who are hospitalized, and 2.6 times that of young
people for outpatients.
The next element, “number of days per instance,”
is the average of the actual number of days of
consultation per month as indicated in the
consultation fee statements from medical institutions.
The number of days per instance for elderly people is
1.3 times greater than that number for young people
who are hospitalized, and 1.4 times greater than that
number for young people who are outpatients.
The “per-day consultation cost,” which is theconsultation cost (billed to the medical insurance eachmonth) divided by the actual number of days ofdiagnosis and treatment, means the unit price of
healthcare service. This per-day consultation cost for
the elderly is 0.9 times greater than that for young
people who are hospitalized, which means that it isless for the elderly than for the young. The per-day
consultation cost for outpatients is 1.2 times greaterfor the elderly than it is for young people.
As indicated above, the reason that the cost ofhealthcare for the elderly is higher than it is for young
people is due to the fact that the consultation rate forthe elderly is much higher than it is for young people,
both for patients who are hospitalized and for
outpatients. Amid this situation it is surmised thatelderly people, who have numerous adult lifestylediseases such as diabetes and high blood pressure,frequently consult physicians at medical institutions.
Furthermore, with the free access in the Japanese
healthcare system which enables patients to choose
the medical institution where he or she will consult aphysician, it is believed that other reasons include thefact that there is a smaller percentage of elderly people

who take the responsibility of healthcare costs uponthemselves, and the fact that the excessive number ofhospital beds and outdated nursing services promoteso-called social hospitalization.
Of course, the average life expectancy in Japan is
77 years for men and 84 years for women, both ofwhich are the highest in the world. With the average
healthy life for men and women in Japan at 74.5 years,
the WHO, both in quality and equality, ranks theJapanese insurance and healthcare systems number
one in the world. However, with the further advance of
aging in the future, it is estimated that national
healthcare costs will reach 81 trillion yen in 2025, 45
trillion yen, or 56%, of which will be accounted for byhealthcare costs for the elderly. These national
healthcare costs account for 12.5% of the national
income, for an increase of approximately 1.7 times thatof the 7.5% figure for 2000.
Before there is a sudden rise of healthcare costs forthe elderly, it is important for Japan to establish
measures for the prevention of disease and general
healthcare, keeping in mind the matter of lifestyledisease. In addition, Japan faces the urgent task ofreforming the system of healthcare for the elderly.
4. System for Providing Healthcare(1) Amnesty for the System of Providing Healthcare inJapan
The system for providing healthcare in Japan has
the following nine features. (1) There is a system inplace by which physicians and dentists are free toestablish clinics if they notify the prefectural governorof that establishment. (2) Hospital doctors are working
doctors. (3) There are no restrictions on consultation
fees. (4) There is a high percentage (approximately
80% of the number of facilities) of private hospitals(medical corporations); there is a high percentage ofsmall and mid-sized hospitals with 200 beds or less(approximately 70% of the number of facilities). (5)Some clinics have beds, and clinics are equipped withmedical equipment and facilities. (6) Hospitals takeoutpatients, and the consultation rate for thosepatients is high. (7) It is prohibited for hospitals or
clinics to operate for profit. (8) People are free tochoose the medical institution where they will consult
a physician. (9) On the average, patients in Japanremain hospitalized for more days than patients inmany of the other countries belonging to the OECD;
Japanese hospitals have more beds per patient thanmany of the other countries belonging to the OECD;
Japanese hospitals have a fewer number of physicians
and nurses on staff per bed than many of the othercountries belonging to the OECD.

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(2) Medical Facilities
Broadly speaking, medical facilities can be divided
into three categories: hospitals, clinics and maternity
clinics.
Hospitals are medical facilities that have at least
twenty beds, and must receive permission from theprefectural governor to be established.
Some hospitals, known as “technologicallyadvanced hospitals,” provide advanced healthcare, andbased on an application submitted by the individual
hospital are individually approved by the Ministry of
Health, Labor and Welfare to perform development,
evaluation and training in advanced healthcare.
Specifically speaking, these include university
hospitals and national cancer centers, with 82 such
facilities having been approved as of April 2002.
Also, from the viewpoint that family doctors anddentists should be supported in order to ensure
healthcare in local regions, there exists a system of“hospitals supporting local healthcare,” approved by
the prefectural governor. As a condition for being
approved, hospitals supporting local healthcare must
provide healthcare to referred patients, provide
support to local healthcare facilities by such means as
the joint-utilization of facilities and equipment andmaking facilities and equipment openly available,
provide emergency medical care, and train healthcare
attendants in the local region. As of April 2002, there
were 35 facilities that had been so approved.
Clinics either are medical facilities that have nobeds at all or have hospitalization facilities of 19 beds
or less. If a physician or a dentist opens a clinic, he or
she must notify the prefectural governor (the mayor of
the city or special district where the public healthcenter is set up). If a person other than a physician or adentist opens the clinic, he or she must receive
permission from the prefectural governor (the mayor of
the city or special district where the public healthcenter is set up).
Maternity clinics are medical facilities that either
have no beds at all or have hospitalization facilities of
9 beds or less, and where midwives work. If a midwife
opens a clinic, she must notify the prefectural governor(the mayor of the city or special district where thepublic health center is set up). If a person other than a
midwife opens a clinic, that person must receive
permission from the prefectural governor (the mayor of
the city or special district where the public healthcenter is set up). The prefectural governor must grant
permission to a facility that so applies if its structuralequipment and stationed personnel conform to acertain standard. However, the prefectural governor
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might not grant permission for the establishment ofsuch a facility if the person applying for permission
intends to operate that facility for profit.
(3) Healthcare Attendants
The number of doctors and dentists in Japan is on
an upward trend each year, and as of 2000 there were
255,792 doctors and 90,857 dentists. While this is lessper capita than those numbers for other advanced
nations, Japan achieved the target of having “150doctors and 50 dentists per 100,000 people by 1985,”
which was set in 1970. In order to ease the excessive
number of personnel in the future, the university
admission capacity has been decreased.
And in efforts to improve quality and raise thelevel of clinical ability, clinical training for graduates
was systemized and enhanced.
The number of nursing personnel per capita inJapan is on the same level as that in other advanced
nations, but the number of nurses per hospital bed
remains low. According to the forecast regarding
recipients of nursing services in December 2000,
demand at the end of 2001 will exceed supply byapproximately 35,000 people due to such factors as therealization of a more cordial system of nursing,
improvements in working conditions, and the carrying
into effect of a system of nursing insurance coverage.
However, it is forecasted that supply and demand willbalance out at about 1,300,000 people by 2005.
There are two types of nurses. One is the so-calledassociate nurse, who receives a license after passing atest offered by the prefectural governor. The other isthe regular nurse, who receives a license after passing
a test offered by the minister of health, labor andwelfare. The former changing to the latter and theimprovement of quality have become issues.
(4) Healthcare Corporations
According to the Healthcare Law, a hospital, or aclinic where doctors and/or dentists work, or a
corporation or foundation that intends to establish ahealth service facility for the elderly may make thatfacility into a healthcare corporation. The approval of
the prefectural governor (or the minister of healthlabor and welfare, for two or more businesses) is
required to establish a healthcare corporation. As
conditions for approval to establish a hospital, theestablisher must have a capital adequacy ratio of 20%
or more, and there must be three directors, one
inspector, and as a general rule the chief director must
be a doctor or a dentist.
A healthcare corporation is prohibited from having
a dividend of surplus, and any contingent business is

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limited to being within the scope of the training ofhealthcare practitioners. What’s more, as a generalrule business for profit is prohibited.
Healthcare corporations are subject to thefollowing taxes: corporation tax (the same tax rate as a
joint stock company) and enterprise tax (anything
having to do with social health insurance treatment
rewards is tax-free, and tax rate reductions apply toanything having to do with diagnosis and treatment
chosen at the discretion of the patient).
Included among healthcare corporations are“specified healthcare corporations” which, based on theSpecial Taxations Measures Law, are approved by theminister of finance as a corporation which meets
certain conditions, including operating a business
which has a high level of public interest, and/or which
is publicly managed. Also included among healthcare
corporations are “special healthcare corporations”
which, based on the Special Taxations Measures Law,
are approved by the prefectural governor for meetingthe same conditions. Special healthcare corporations
receive corporation tax rate reductions. And special
healthcare corporations are allowed to operate certain
types of business for profit.
(5) Evaluation of Medical Practice
Against a backdrop of increased popularawareness for healthcare and rising concern among
affiliates for the quality of healthcare, the Project for
the Evaluation of Hospitals by a Third Party was
carried into effect in 1997.
Through this evaluation project, the quality ofdiagnosis and treatment, nursing, and other careprovided by a medical institution, patient satisfaction
and the situation of management are evaluated by theJapan Council for Quality Health Care, as a third
party from a neutral standpoint, based on a requestfrom the hospital. If the results of the evaluation are ofa certain standard or above, a certificate of approval isissued to the hospital. Although hospitals are notrequired to undergo this evaluation, 725 hospitals hadreceived a certificate of approval as of August 2002.
From the viewpoint of improving the quality ofhealthcare, progress can be expected from theevaluation of medical practice by a third party. But inorder to promote this trend hospitals are now allowed
to publicize the results of their healthcare evaluation.
And through revisions of healthcare fees in 2002, theinclusion of palliative care has become a condition for
approval by the Japan Council for Quality Health Careand for ISO certification.

5. Healthcare Insurance Coverage(1) Classification of Coverage① Employee’s InsuranceA) Beneficiaries and Insurers
Depending on the beneficiaries to whom thecoverage applies, types of healthcare insurance areroughly divided into employee’s insurance (occupation
insurance) for employees and their families, andNational Health Insurance (regional insurance) for
people engaged in the agriculture and fishingindustries and individual proprietors.
And depending on the difference in beneficiaries,
employee’s insurance is divided into health insurance(union-managed
healthinsurance
andgovernment-managed health insurance), seaman’s
insurance and insurance for the different kinds ofmutual aid unions. Health insurance coverage forgeneral employees is the biggest, accounting for
approximately 55% of all subscribers. Under thesystem of health insurance coverage, offices of thenational government, corporate offices (including
offices), and private offices engaged in certain types ofbusiness which regularly employ five or more people
are offices of compulsive application, and all employees
who work at those offices are compulsion application
insurants. Nearly all types of businesses are deemedbusinesses to which this insurance applies. Classifying
health insurance coverage from the point of view of
insurers, this insurance can be divided into
government-managed health insurance that is
manageddirectly by
the government, andunion-managed health insurance that is managed by ahealth insurance union established individually or
jointly by the owner or owners of the business.

Union-managed Health Insurance
Health insurance unions are public corporations
not affiliated with the government, and are
established individually or jointly by the owner orowners of businesses which employee 300 people ormore per one or two or more places of business.
(Actually an individual union has 700 or more people,
while an integrate union has 3,000 or more people – inorder to secure its ability to diffuse risk.) Healthinsurance unions are made up of business owners,
employees of places of businesses who have employee’s
insurance, and people who have arbitrary insurance.
Health insurance unions manage the union members
who are insured and the heath insurance itself. Since acertain number of subscribers are needed to establish
a health insurance union because of the necessity todiffuse risk, union-managed insurance is mainly forpeople who are insured through large corporations.
The number of health insurance unions at the end of
March 2001 was 1,756.

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Government-managed Health Insurance
The government manages the health insurance ofpeople with insurance that is not managed by a union.
Government-managed health insurance is mainly for
employees of small and medium-sized businesses who
have insurance.

Other Types of Employee’s Insurance
The mutual aid union is a system of healthcare
insurance coverage that was established for special
occupations to serve people with seaman’s insurance
and civil servants.
People insured under the system of seaman’s
insurance include captains and crewmembers ofvessels which meet certain requirements. This type of
insurance, which is managed by the government,
accounts for 0.2% of all subscribers (as of the end of
March 2000).
Mutual aid unions provide coverage for workers inspecific occupations, including civil servants. This
coverage is divided according to specific occupation.
Currently there are three types of mutual aid unions.
These are mutual aid unions for employees of thenational government, mutual aid unions for employees
of local governments, and mutual aid unions for
personnel of private schools. Mutual aid unions
account for 7.9% of all subscribers (as of the end of
March 2000).

Benefit Rate
The benefit rate for healthcare benefits is 80% for
the insurant, 80% if a family member is hospitalized,
and 70% for outpatient treatment. However, after
April 2003, all of these will be 70%, with 30% as a
co-payment. (The benefit rate for infants under three
years old is 80%.)
For union-managed health insurance, in order toreduce the co-payment of insurants, authorization has
been granted by the Ministry of Health, Labor andWelfare to arbitrarily apply fringe benefits beyond thebenefits stipulated by law, according to the financial
situation of each individual union.

Responsibility for Pharmaceutical Expenses

B) Benefits

Details of Benefits
Healthcare insurance is a system of coverageagainst financial loss, including that resulting from
illness, injury, death and birth, and is provided for the
purpose of treating ailments. The scope of theseinsurance benefits is stipulated to include medical
examinations, medicine and materials used in medical
treatment, medical treatment such as surgery andother procedures, the management of the recuperationof patients at home as well as nursing and other formsof care required for that recuperation, and admittanceto a hospital or clinic as well as nursing and otherforms of care required for recuperation. There is notime limit involved. Employee’s insurance is provided
not only to the employee who has the insurance, butalso to a specified range of nonworking dependents.
Benefits are broadly divided into healthcare
benefits and cash benefits. Healthcare benefits are thehealthcare services provided through healthcare
insurance. In Japan a person with insurance receives
healthcare services at a medical institution designatedby the Ministry of Health, Labor and Welfare as aninsurance medical institution. As a general rule, that
insurant only needs to pay a co-payment, while the76

rest of the healthcare cost is paid by the insurer to the
medical institution as a benefit in kind. When an
insurant cannot receive a benefit in kind – for example,
in a circumstance when he or she has had no choice
but to receive medical treatment overseas – theinsurant pays the entire medical bill and is later
reimbursed for that amount by the insurer. Cashbenefits include cash benefits for sickness andmaternity benefit money as compensation for taking
off from work, transportation expenses as a benefit forcompensation of actual expenses, lump-sum payments
for childbirth and childcare, and funeral costs.
Childbirth expenses are not only paid as healthcare
benefits, but also as cash benefits in lump-sum
payments for childbirth and childcare.

If a patient who regularly goes to a medical
institution receives medication, he or she pays aportion of that cost as a co-payment, based on the typeand quantity of the medication. However, after April
2003 there will be no co-payment.

Meals During Hospitalization
Regarding the cost of meals during hospitalization,
for all forms of coverage the patient pays a standard
amount determined by the cost of food for the average
household (780 yen per day; and for people with low
income 650 yen per day for the first three months of
hospitalization, and 500 yen per day after fourmonths), and the rest is paid through the healthcare
insurance as meal recuperation expenses duringhospitalization.

High Medical and Recuperation Cost Coverage
Furthermore, in order to ease the effect of highhealthcare costs on household finances, all types of
insurance coverage have incorporated a system
whereby if a patient’s co-payment exceeds a certain
amount, he or she is afterwards reimbursed for theexcessive amount through health insurance coverage.
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(healthcare costs – 361,500 yen) x 1%. However, theamount is determined by a person’s income.
Based on the reimbursement afterwards for highmedical and recuperations cost, the effective benefit
rate is 80.2% for union-managed insurance, and 78.8%
for government-managed insurance.

Specific Recuperation Cost
It is prohibited for healthcare service which
exceeds the level provided for by the medical
treatment fee point table to be claimed by being added
to the usual co-payment, or to combine insured
diagnosis and treatment with diagnosis and treatment
outside the realm of insurance coverage and collectfrom the patient the cost of the diagnosis andtreatment outside the realm of insurance coverage(principle of the prohibition of combined diagnosis andtreatment). In other words, for diagnosis andtreatment, or for the administering of medicine, which
are not covered by healthcare insurance benefits – thatis to say, those which are not listed in the medical
treatment fee point table or among the standard prices
of medicine – all of the healthcare treatment regarding
the patient in question shifts from the object of theinsurance claim and becomes outside the realm of
insurance coverage, and the patient is responsible forthe entire amount. However, a system of specified
healthcare coverage has been adopted to address the
emergence of new technology and the diversification ofpatients’ needs, against a backdrop of remarkableadvances in medical technology in recent years. Amongthe costs for lifestyle service and having a pleasantenvironment (amenities) (for example, special costs forprivate rooms, and services including special dental
materials such as gold teeth), and the healthcare costs
accompanying advancements in technology andresearch and development, the costs for normal service
and healthcare are paid for through healthcare
insurance as specific recuperation costs, with othercosts being outside the realm of insurance coverage.
C) Fiscal Resources
Insurance premiums and the national treasury
cover health insurance business costs.

Insurance Premiums
Insurance premiums are calculated by multiplying
the premium rate by the standard monthly salary(determined regularly once every year) paid to an
employee, and are collected monthly. Standard
monthly salaries are classified from Grade 1 (98,000yen) to Grade 39 (980,000), and each insurant falls
under one of those grades depending upon his or her
salary.

Premium Rates for Union-managed Insurance
Premium rates for union-managed insurance aredetermined by the various health insurance unions,
within the range of 3.0% to 9.5%, with the approval of
the Ministry of Health, Labor and Welfare. The
average premium rate for all unions in March 2003
was 8.514%. As a general rule, the responsibility forthe payment premium is split between the employer
and the insurant. However, the maximum percentagethat the insurant can be responsible for is 4.5%, andthe amount that the employer are responsible for may
be increased to more than half of the premium amount.
As of March 2003, the average premium rate for allunions was 4.787% for business owners, and 3.727%
for insurants. The premium amount for which an
insurant is responsible is withheld by the employer
from the insurant’s pay, and the employer are
obligated to make the premium payment. The level ofpremium payment responsibility (fiscal 1998) is
159,000 yen for insurants (364,000 yen when theamount for which business owners are responsible foris included).

Premium Rates for Government-managed Insurance
Premiumrates
forgovernment-managed
insurances range from 6.6% to 9.1%, and can bechanged by the minister of health, labor and welfare
through deliberation of the Social Security Council. In
2001 the rate was 8.5%. The insurance premium issplit between the insurant and the employer. The levelof premium payment responsibility (fiscal 1998) is
152,000 yen for insurants (333,000 yen when theamount for which business owners are responsible foris included).

Special Insurance Premiums
Bonuses are normally paid in Japan. The
proportion of the bonus to total salary varies fromindividual to individual. In order to ensure fairness inpremium payment responsibility, a special insurance
premium is collected from the bonus, which is separate
from the monthly insurance premium. Healthinsurance unions can set the rate of premiums forunion-managed health insurance within the 1.0%
range and collect those premiums accordingly.
However, it is left up to the unions to decide whether tocollect the premiums. The rate for special insurance
premiums of government-managed health insurance is1%, and the responsibility of paying these premiums is
split between the employer and the insurants. The
insurants’ responsibility is exempted by 2/5, and thenational government pays the difference. After April
2003, a total salary system for levying insurance
premiums against bonuses as they are levied against
standard salary will be introduced.

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Responsibility of National Treasury
Since union-managed health insurance is left to theautonomous management of health insurance unions,as a general rule the national treasury is not
responsible for making those payments, with the
exception of a portion of the clerical expenses. However,Blue Cross, which faces a stringent financial situation,
receives assistance for an extremely small fixedamount.
For government-managed health insurance, in
addition to clerical expenses the national treasury is
also responsible for paying 13.0% of benefit costs, and16.4% of the health contributions for the elderly (to be
discussed later). The reason that union-managed
health insurance is so generously subsidized at public
expense is because since the insurants are mainly
employees of small and medium-sized business theirsalary level is lower than that of employees of large
corporations. And so the relative burden of paying
their insurance premiums is eased by the nationaltreasury.
② National Health Insurance CoverageA) Beneficiaries and Insurers
National Health Insurance coverage is acompulsory system of healthcare insurance forindividual proprietors, people engaged in the
agriculture and fishing industries, and retirees who
are not eligible for employee’s insurance. It represents
the last opportunity for universal health insurance.
Even foreigners can receive this insurance as long as
they are registered as an alien and are expected to stayin Japan for a period of one year or longer.
Insurers of National Health Insurance are mainly
cities, towns and villages which are basicmunicipalities, of which there are 3,242 nationwide.
They cover 33.4% of all subscribers. In addition to thisare National Health Insurance unions, which are
made up of health insurance groups of individual
proprietors of the same industry. Currently, the main
professions and industries which have National
Health Insurance unions are physicians, dentists,
pharmacists, the food sales industry, the engineeringand construction industries, cosmetology, the bathing
industry, and lawyers. There are 166 of these unions
nationwide. These do not cover all individual
proprietors; and some of them cover the whole nation,
while others cover individual prefectures. These
unions account for 3.4% of all subscribers.
B) Benefits
There are benefits for recuperation costs. There
are also benefits required by law, including those formeals and recuperation costs during hospitalization,
specific recuperation costs, recuperation costs, at-home78

nursing and recuperation costs, high cost healthcare,lump-sum payments for childbirth and childcare,funeral costs, and transportation costs. In addition
there are arbitrary benefits in the form of cash benefits
for sickness and cash benefits for childbirth which may
be arbitrary according to municipal ordinances orunion regulations. Each of these types of insurance
benefits are similar in content too those of healthinsurance coverage.
The rate of healthcare benefits is 70% (30% is the
responsibilityoftheinsurant).
Withthereimbursement that is received afterwards because ofhigh healthcare costs, the effective benefit rate is
78.4% for National Health Insurance throughmunicipalities.
C) Fiscal Resources

Insurance Premiums
The method and level of insurance premiums
differs from municipality to municipality, and aredetermined by individual ordinances and/or rules.
However, it is common among all municipalities tocollect premiums directly from insurants. There are
two types of systems of insurance premiums: one iscollected as a premium literally as a National Health
Insurance premium; the other is collected as a
National Health Insurance tax as a type of local tax.
Currently, many municipalities use the tax type ofsystem, but aside from the difference in their legal
characteristics, the calculation methods for both arebasically the same.
There are two types of National Health Insurance
premiums. One is the portion that an insurant is
responsible for paying, based on what he or she iscapable of paying (capable percentage), calculated as alevy standard on the amounts of his or her income andassets, which are determined based on the municipal
citizens tax levied by the municipality in which he or
she resides. The other is the portion that an insurant
is responsible for paying, based on the profit that he or
she earns (profit percentage), calculated by a fixedamount for each insurant or for his or her household,which is based on the amount of profit that theinsurant receives. As a general rule the ratio between
the capable percentage and the profit percentage isfifty-fifty.
However,inactuality,inmanymunicipalities the ratio accounted for by capable
percentage is higher. Individual premiums for each
insurant in a household are paid in one lump sum by
the head of that household, adding together thecapable percentage and the profit percentage of each
insurant. The responsibility level for insurance
premiums per household (fiscal 1998) was 154,000 yen
for National Health Insurance through municipalities.

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Since the premium imposed on low-income earners issometimes too burdensome, measures have been taken
to reduce the burden of those premiums. Those eligible
for these measures are households whose income of theprevious year was below the basic exemption
equivalent value, and households who fell below thebasic exemption equivalent value when a fixed amount
was deducted per insurant, excluding the head of thehousehold. In each case, the portion that an insurant is
responsible for paying, based on the profit that he or
she earns, is reduced to 60% and 40%, respectively.

Responsibility of National Treasury
The national treasury is responsible for paying
50% of health insurance contributions for elderly
people. In addition, the national government also pays
one half of the portion of reductions on insurance
premiums of low-income earners carried out bymunicipalities, with the remainder being the
responsibility of prefectures and municipalities.
Generally, many of the people with National Health
Insurance are low-income earners, and many of thosepeople are only capable of paying a small amount inpremiums. Also, since their employer is not
responsible for paying their premium as is the case forpeople with employee’s insurance, a sound means of
insurance financing is made possible throughassistance by the national government for high rates
and large amounts of money. In other words, in order
to assure fairness regarding the benefits andresponsibilities between types of coverage, the lower
the financial capability of the insurance system, thehigher the rate of assistance.
③ Healthcare Coverage for Retirees
Basically speaking, since elderly retirees subscribe
to National Health Insurance after retirement, thelevel of their benefits drops at a time when their needfor healthcare increases, and the burden of paying
those healthcare costs lies mainly with the nationaltreasury and other subscribers to National Health
Insurance. In order to correct this irrationality, asystem of healthcare coverage for retirees wasestablished in 1984.
The
entities enforcing
this systemaremunicipalities, which are the insurers of National
Health Insurance. The beneficiaries are people whohave National Health Insurance (except for elderly
people who receive healthcare), elderly people who
receive pensions based on pensioners laws (for theright to receive a total pension for an elderly, theperson must have subscribed for 20 years or more; orfor people beyond the age of forty, for 10 years) andtheir nonworking dependents.

The fiscal resources needed for this system of
insurance coverage are comprised of the premiums(tax) that retired insurants pay for National Health
Insurance, and recuperation benefit expense grants
covered by donations of insurers of employee’s
insurance. The amount of the recuperation benefit
expense grants is the amount remaining after
deducting the National Health Insurance premiums
for retirees who had employee’s insurance (tax) fromthe amount which is half of the costs required for
healthcare benefits for retirees who had employee’s
insurance and the contributions for the healthcare costfor the elderly who had employee’s insurance, and thisis delivered each year to municipalities from the Social
Insurance Medical Fee Payment Fund. The costs ofpaperwork regarding the healthcare of retirees for therecuperation benefit expense grants and the Social
Insurance Medical Fee Payment Fund are covered inpart by the recuperation benefit expense contributions
collected from insurers of employee’s insurance
through this fund, and by clerical work expense
contributions. For this, the amount that each insurer
must contribute is the amount of the total
contributions divided by the total of the standard
compensation amount paid by each insurer.
The healthcare benefit rate is 80% for retirees who had
employee’s
insurance.
For
their
nonworking
dependents, it is 70% for outpatient care, and 80% for
hospitalization. However, after April 2003, all of thesebenefit rates will be 70%.
④ Health Insurance Coverage for the Elderly
Under the Elderly Health Law, comprehensive
health-related business, including the prevention andtreatment of disease, and function training thereof, iscarried out to ensure sound health maintenance andadequate healthcare for Japanese citizens in their oldage, for the purpose of improving the health ofJapanese citizens and improving the welfare of theelderly. And based on the spirit of self-help and unity
among Japanese citizens, in addition to constantly
endeavoring to maintain and improve their health,with an awareness of the physical and mental changes
which accompany aging, and distributing the burdenof healthcare costs for the elderly fairly, the basic
philosophy of this law is to provide adequate healthservices to the elderly at the place of work, locally andat home, in accordance with one’s age, and mental andphysical condition, in order to maintain people’s healthin old age.
In addition to
healthcare
benefits, thehealth-related business based on this law includes thedelivery of health notebooks, health education, healthcounseling, health checkups, function training andat-home or on-site instruction, all of which are carriedout by municipalities.

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Municipalities are in charge of healthcare-related
matters for the elderly under the Elderly Health Law.
The beneficiaries of this healthcare for elderly
residents of the municipality in question are those whohave healthcare insurance, and who are 75 years ofage or older, or who are 65 years of age or older but
have been recognized by the mayor of the municipality
in question as being disabled (so-called bedridden) as
prescribed by government ordinance.
The healthcare benefits received are the same as
those received under the healthcare insurance laws,
and the costs charged for this healthcare are based on
medical fees for the elderly.
The responsibility for a portion of elderly patientshas been fixed since the establishment of the Elderly
Health Law in 1988, and the level of that
responsibility differs from the responsibility for a
portion of young patients, with a 20% or 30% portion of
the responsibility being set at fixed rates lower thanthose for young people who require it.
The amount has been raised based on revisions to
the law, and a system has been introduced for revision
based on the rate of fluctuation of consumer prices
since 1995. Currently, while the ability of elderly
people to pay for healthcare costs has increased due tomaturation of pensions, the sense of responsibility forthis payment has increased among young people. An
appropriate relationship of responsibility that takes
root in the unity between generations is a precondition
for maintaining Japanese Social Security in the future.
For this reason, rather than the uniform assumptionthat the elderly are weak, the idea is becoming moreprevalent that elderly people should be responsible forthe portion of their healthcare costs that is suited totheir financial ability.
With the reforms in the healthcare insurance
system in 2000 came the idea that elderly people
should be responsible for a suitable portion of theirhealthcare costs, and revisions were made to change
the fixed 10% rate of responsibility for a portion ofpatients who had thus far been paying a fixed amount.
However, so that the responsibility of elderly people
would not increase to an excessive amount, amaximum monthly amount has been established, withpreferential measures being established for physicians
running their own practices to allow them to choose
the system of fixed amount from the viewpoint of therequired paperwork load.
Furthermore, with the reforms in the healthcare
insurance system in 2002, the age of elderly people
eligible for this healthcare increased from those 70
years of age or older to those who are age 75 or older,
for a gradual increase in the rate of the public expense
80

load from 30% to 50% over a 5-year period. Also, thepercentage for which the patient himself or herself isgenerally responsibility was increased to 10% (20% for
people whose income exceeds a certain amount).
However, starting from the age of 70 patients are
generally responsible for paying the same 10% as
patients who are age 75 or older.
Thirty percent (to gradually increase to 50% overthe 5-year period starting in January 2002) of fiscal
resources for the necessary benefit costs for healthcare
for the elderly are covered at public expense, with thenational government responsible for 2/3, prefectures
for 1/6 and municipalities for 1/6. The remaining 70%
is donated by insurers of government-managed healthinsurance, union-managed health insurance andNational Health Insurance through municipalities. In
addition to the above-mentioned portion paid for at
public expense, the donated funds are theresponsibility of the national treasury, with 16.4% forgovernment-managed health insurance and 50% for
National Health Insurance through municipalities.
This results in tax fiscal resources of about 50% of
benefit costs for healthcare for the elderly, when the
30% which is paid for at public expense is combinedwith the donations from the national treasury.
(2) Healthcare Covered at Public Expense
Healthcare covered at public expense is a system ofcoverage by which the national government or local
authorities compensate patients for the cost of medical
treatment and/or other healthcare expenses, using
taxes as a fiscal resource. In healthcare covered at
public expense, for diseases which require treatment
from the point of view of the national government,
including tuberculosis, mental disease and legal
communicable diseases, patients are compensated forthe cost of medical treatment, while economicallyand/or socially-disadvantaged people, including
low-income earners, the physically disabled, elderly
people, children, people wounded in war, andatom-bomb survivors, are compensated for all or a
portion of their healthcare expenses.
Some healthcare covered at public expense
includes healthcare costs for which the priority of the
responsibility is with the public expense andhealthcare costs for which the priority is withhealthcare insurance. All or a substantial amount ofhealthcare costs for which the priority of the
responsibility is with public expense is covered by thenational government or local authorities, with theremaining portion being applied to insurance. The
remainder of the insurance benefits (the portion forwhich the patient is responsible) or a certain amountof healthcare costs for which the priority is withhealthcare insurance is covered at public expense.

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(3) Nursing Insurance System
In the past there were two different types ofcoverage – welfare for the elderly and healthcare forthe elderly. But there were disproportions in the usage
procedures and the responsibility of users, andproblems occurred in the provision of service based on
government measures for welfare for the elderly. In
addition to restructuring both types of coverage, asystem of nursing insurance was established in April
2000 as a system of social health insurance which
would allow users to use the service that they
themselves chose.
Under the nursing insurance system, the insurers
are municipalities, with the national government,
prefectures, healthcare insurers, and pension insurers
providing important support. The insurants are
divided into two categories: first insurants, who are
age 65 or older, and second insurants, who arehealthcare insurance subscribers between the ages of
40 and 64. The benefit rights and responsibility forpaying premiums differ between the two categories.
Benefits from nursing insurance are provided for a
first insurant if it is determined that he or she requires
nursing or another form of support. Benefits fromnursing insurance are provided for a second insurant if
it is determined that he or she is bedridden with a
specific disease, as stipulated by the Nursing
Insurance Law, or otherwise requires nursing or
another form of support.
To obtain these insurance benefits an elderly
person who is determined to require nursing or amember of his or her family applies with themunicipality for these benefits, and that person mightthen be recognized as requiring these benefits by thenursing recognition examination committee of thatmunicipality. Those committees are made up of people
with academic backgrounds in health insurance,
healthcare or welfare. The committee findings are
based on results from a computer based on an
examination of the physical and mental condition of
the elderly person (first judgment), and a written
report by the physician in charge. Then, after theapplicant is notified by the municipality of the resultsof recognition for the requirement of nursing, if he or
she has any objections to those results, that person
may challenge those results with the prefectural
government or the nursing insurance examinationcommittee.
After being recognized as requiring nursing, if thenursing is to be provided at the patient’s home, thepatient or his or her family member may then submit arequest to a company that provides at-home nursing
care for a care plan to be drawn up, taking into

consideration the recognized degree of nursing
required, the wishes of the patient and the situation of
his or her family. If the nursing care is to be provided
at a nursing facility, the facility will draw up the care
plan.
Service provided to patients who require care athome include home help service and day service. Oneof these types of service are then provided based on thecare plan, with the user responsible for paying 10% of
the cost. It is the same for nursing care provided at anursing facility, with the patient responsible for paying
10% of the cost all services provided, with the
exception of meals. If the user desires special services
which he or she has chosen, these services may beprovided if the user pays the entire cost of the services.
Fifty percent of the cost of the required nursing
benefits is covered by the public expense, with the
exception of that portion which is the responsibility of
the user at the time that the service is rendered. The
breakdown is that national government pays 25% of
the total, with the prefecture or municipality paying
for 12.5%. The 50% of the cost other than the portion
covered at public expense is covered by the insurance
premiums paid by the insurant. The breakdown
between 2000 and 2002 was 17% for first insurants
and 33% for second insurants.
Insurance premiums for first insurants are
determined for each municipality in accordance withincome level. People whose pension exceeds a certain
amount have the premium deducted from theirpension. All others pay the municipality on their own.
Insurance premiums for second insurants are
determined based on the method of calculation of thehealthcare insurance to which they subscribe. The
healthcare insurer collects these premiums in
one-lump payments with the healthcare insurance.
(4) Financial Conditions of Healthcare Insurers
Financial conditions of the systems of healthcare
insurance have shown deficits across the board.
Taking a look at the closing of accounts ofgovernment-managed healthcare insurance, net losses
have appeared continuously since 1995, with losses of
316.3 billion yen in fiscal 1999. If things continue as
they are, it is believed that the 803.9 billion yen
reserve fund from the end of fiscal 1999 will bottom out
in fiscal 2002.
Union-managed healthcare insurance has
also recorded total losses of 203.3 billion yen (forecast
for the end of fiscal 1999), with the total number ofunions showing losses at approximately 70%. With thisincrease in the number of unions showing losses,
insurance premiums of healthcare insurance unions

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are at an average of 8.51%, which is higher than the
8.5% for government-managed healthcare insurance.
There has also been an increase in the number ofunions which have been dissolved.
The difference between revenues and expenditures infiscal 1999 for National Healthcare Insurance throughmunicipalities showed an overall loss of 119 billion yen.
Amid this worsening financial situation, withindividual insurers which are municipalities showing
losses of an approximate 61%, many municipalities arecarrying over their fiscal resources for deficit financing
from general accounting to special accounting for
National Healthcare Insurance.
6. Medical Treatment Fee System(1) Mechanism of Health Insurance Treatment
A distinguishing feature of the Japanese healthinsurance system is that rather than the insurer
concluding a contract directly with the medical
institution, the medical institution is specified by thesecretary-general of the local social insurance based on
an application by the medical institution.
The specified medical institution is obligated toprovide the insurant with recuperation benefits,
including medical treatment, as a health insurance
medical institution, with the medical fees being paidby the insurer to the health insurance medical
institution through an examination payment
organization as the cost of the examination.
When receiving medical treatment, insurants pay
the portion of the cost for which they are responsible atthe payment desk of the health insurance institution.
What’s more, not only the medical institution but thephysician who is actually in charge of the recuperationmust be registered with the secretary-general of thelocal social insurance as a health insurance physician(double specified system of health insurance
treatment). Accordingly, when receiving healthinsurance treatment, insurants must go to thespecified insurance medical institution and receive
this treatment by a registered health insurancephysician.
Presently, this applies to almost all medical
institutions in Japan.
Although all of the medical treatment activities forthe same patient are performed by the same medical
institution, the reason that insurance medical
treatment is specified as double is because all of the
medical treatment is administered to the patient by
the physician, and based on this, that physician must
personally decide what medication, injections ortreatment to administer, and bear the responsibility
thereof.
82(2) Summary of Medical Treatment Fee System
As the cost of recuperation benefits provided byinsurance medical institutions, the specified amountthat must be paid to the healthcare institution is the
medical treatment fee – and the amount remaining
after subtracting (from the total medical treatmentfee) the portion which is the responsibility of thepatient is paid to the healthcare institution. The
medical treatment fee is made up of those diagnostic
fees specified in detail, including those for
examinations,administereddrugs,
injections,
treatment, surgery and tests, as well as the basic fees
for hospitalization. The medical treatment fee isrevised just about every two years. The medical
treatment fee is indicated in points, with 1 point
equaling about 10 yen.
Or the medical treatment fee is determined whenthe minister of health, labor and welfare asks theCentral Social Insurance Medical Council* for its
views.
In the guaranteed healthcare of Japan, as a
general rule healthcare services provided for the
purpose of curing disease are not for the cost ofhealthcare, but rather they are provided as a benefit to
the insurant as healthcare services for direct diagnosis
and treatment, under the principal of benefit in kind.
However, aside for some exceptions, there are twosystems of coverage: the system by which therecuperation costs are paid in cash afterwards, and thesystem of cash benefits.
The Social Insurance Medical Fee Payment Fundand the National Health Insurance Federation, after
received payment consignment, pay medical fees to theinsurance medical institutions for the value of
healthcare treatment provided. The amount iscalculated by the physician’s medical treatment fee
point table for physicians, the dentist’s medical
treatment fee point table for dentists, and thepharmaceutical fee point table for pharmacies. These
point tables are characterized as unit price tables fordiagnoses, used to evaluate diagnoses.
Medical fees are revised as part of the Survey in
Economic Conditions on Health Care which is
conducted once every two years. This revision is madeto ensure sound medical business management overall,heeding the deliberation of the Central Social
Insurance Medical Council, and giving overall
consideration to trends in prices and wages, advancesin medical science and healthcare, and the various
situations surrounding medical treatment, including
the financial situation of insurers.

The Journal of Kampo, Acupuncture and Integrative Medicine (KAIM)

Volume 1, Special Edition | Current Kampo Medicine 2005

* Central Social Insurance Medical Council: This council is made up of people involved in diagnosis andtreatment (8 committee members representing physicians, dentists and pharmacists), people involved in
payment (8 committee members representing insurers of health insurance, seaman’s insurance, and National
Health Insurance, as well as business owners and ship owners), and people representing the public interest (4committee members representing the public interest). Appointment of committee members representing the
public interest must be approved by both Houses of the National Diet.

Sources
1) Trends in National Hygiene (edited by the Health and Welfare Statistics Association, 2003)
2) White Papers on Public Welfare and Labor, 2003 edition (supervised by the Ministry of Health, Labor andWelfare); Gyosei, 2003
3) White Papers on Healthcare, 2003 edition (supervised by the Medical Treatment Economic Research
Organization); planned by the Japan Medical Treatment Project, 2003
4) White Papers on Medical Business (edited by the Editorial Committee of Medical Business); planned by theJapan Medical Treatment Project, 2003
5) Introduction of Social Security 2004 (edited by the Editorial Committee of Introductive Social Security);
Chuohoki Publishers, 2004
6) Problems and Perspectives for Reform of Medicare System (edited by the Office of Reform of Elderly Medicare
System, the Ministry of Health, Labor and Welfare); Gyosei, 2001
7) Introduction of Medical Insurance and National Health Insurance Drug Price System (edited by the ResearchCommittee for NHI Price System, Association of Tokyo Medical Products Manufacturing Industry); Tokyo
Medical Products Manufacturing Company, 2001

The Journal of Kampo, Acupuncture and Integrative Medicine (KAIM)83