Japanese Health Policy
Second edition

What is Japan Health Policy NOW?
Created in 2015 by Health and Global Policy Institute (HGPI), Japan Health Policy NOW (JHPN) is the only
centralized platform in the world on Japanese health policy available in both Japanese and English.
As the world’s attention turns to Japan, one of the world’s fastest ageing countries, there is increasing interestin Japanese health policy and a growing need to share information on Japan’s health policy with the world.
JHPN is committed to addressing this need by delivering factual information about the Japanese health system,
Japanese health policy stories of interest, recent Japanese health policy news, and a resource list for those whowant to learn more about Japanese health policy.
For more information, please see
http://japanhpn.org/en/jhpn/© 2019 Health and Global Policy InstituteIntroduction ｜ Guidance for the Reader
Japan Health Policy Now is provided for a wide audience of stakeholders in the healthcare industry. It is intended
to be a high level overview of the healthcare environment in Japan. It is updated about once every 2 years or so.
For those of you reviewing, we have some suggestions on how you might approach the document to optimize
your time.
For those who are in the healthcare industry but new to Japan or are generally interested in the healthcare
environment in Japan, this document will serve as a well-rounded primer. It covers the policy environment,
healthcare system, hospital, and product (e.g. medical device and pharma) sectors. It also introduces some key
trends which will be moving the standard practices into the future. This last section is highlighted with comments
and perspectives from various stakeholders in the system.
Executives in the Pharmaceutical or Medical Product Industries
JHPN can serve as a reference in many ways as it identifies key practices, statistics, and trends. For example,
section 3 covers the healthcare provider system and section 5 provides an overview of medical products such as
pharmaceuticals, medical devices, generics, and novel technologies. The document ends covering key trends into
the future.
Public and Regulatory Officials
Japan is an important part of the global healthcare ecosystem. For global public and regulatory officials, there aresome important sections covering key practices in the Japanese health insurance system. In addition, the final
section of this document discussions key future trends and their impacts to Japan’s healthcare system.
Academia
Academia is playing an increasingly important part of the overall healthcare environment around the world. And
Japan is no exception. JHPN can serve as a resource for these key partners relative to the medical productindustries and the healthcare provider system.
JHPN has a wide variety of information which can provide any reader with an overview of the healthcare system
in Japan. We hope you find this useful as a key reference.

© 2019 Health and Global Policy InstituteContents
1. Background ……………………………1
1.1 Japan’s geography and demographics
1.2 The history of public healthcare insurance
1.3 Overview of major legislation

2. Process and Players ……………………………14
2.1 Japan’s government
2.2 The Policy-making process
2.3 Health Policy Players

3. The Health Insurance System ……………………………23
3.1 Japan's Health Insurance System
3.2 Japan’s Long-Term Care Insurance System
3.3 Private Health Insurance

4. The Healthcare Delivery System ……………………………37
4.1 Overview of Japan’s Healthcare Delivery System
4.2 Classification of Medical Facilities and Hospital Beds in Japan
4.3 Numbers of Medical Professionals
4.4 Regional Medical Care Delivery System Maintenance

5. Medical Cost Optimization Measures……………………………47
5.1 Medical Cost Optimization Plans
5.2 Disease Prevention and Health Promotion by Insurers

6. Medical Drugs/Medical Devices……………………………52
6.1 Pharmaceuticals
6.2 Generic Drugs
6.3 Non-prescrition Drug
6.4 Medical Devices

7. Financing……………………………60
7.1 Trends in Medical Expenditures
7.2 The Medical Service Fee System
7.3 Medical Facility Management

8. Indications for the Future……………………………74
9. Supplement: Interview……………………………76© 2019 Health and Global Policy Institute1.1

Background ｜ Japan’s geography and demographics

Japan is an island nation in eastern Asia with an area of 377,887 square kilometers that is comprised of over 6,800
islands, including Honshu, Hokkaido, Kyushu, Shikoku, and Okinawa. Japan contains 47 self-governing
administrative divisions referred to as prefectures.
The total population hovers around 127 million people, with about 90%
living in urban areas. As of 2015, about 36.5% of the total population
resided in Tokyo, Kanagawa Prefecture, Osaka, Aichi Prefecture, orSaitama Prefecture. Among these, the largest proportion was in Tokyo,
which was home to 10.7% of the total population of Japan.1.

An ageing population with a declining birthrate 2,3
An ageing population coupled with a low birth rate are two major
concerns facing Japan and its healthcare system.
Those aged 65 and over comprised 27.3% of the total population as of
October 1, 2016. This figure is expected to approach 40% by 2060.
The old-age dependency ratio (the ratio of people aged 65 and over topeople between the ages of 15 and 64) in 2015 was highest in Akita
Prefecture (60.7) and Kochi Prefecture (59.2), and lowest in Okinawa
Prefecture (31.2) and Tokyo (34.3).
The overall fertility rate in Japan was 1.45 in 2015. This rate was lowest inTokyo (1.24) and highest in Okinawa (1.96).

Life expectancy and main causes of mortality
The people of Japan enjoy one of the highest life expectancies in theworld, with the average being 91.35 years for females and 84.95 years formales.4 Mortality rates for the top nine causes of death in 2015 are listed
in the following table (according to data from the Ministry of Health,Labour and Welfare (MHLW) and the Organisation for Economic Cooperation and Development (OECD)).
According to the World Health Organization (WHO), 79% of all deaths
were related to non-communicable diseases (NCDs) in 2014. Amongst
these, 30% of deaths were caused by cancers, 29%, by cardiovasculardiseases, and 12%, by other NCDs.5＜Column＞Ageing in TokyoJapan is not ageing across all regions at
the same rate. Large metropolitan areas,such as Tokyo, Osaka, and Nagoya are at
the forefront of aging in Japan.
According to Tai Takahashi*, between
2010 and 2025, the population of those
aged 75 and over will grow by 7 million
people, more than half of whom willreside in the Greater Tokyo Area (Tokyo,
Kanagawa, Chiba, and Saitama), Osaka,
and Nagoya. These three regions,however, comprise a mere 2% of Japan’s
total land area, underscoring the urban
nature of Japan’s “super-ageing society.”
Takahashi also points out that Tokyo
faces serious additional challenges
regarding the number of care facility
beds, which is equal to just half thenational average. This shortage may
become increasingly serious as the
population continues to age.
*Reference: “Regional Differences in thePeak of Healthcare Demand and theLevel of Medical-Social Resources:
Rebuilding a Medical-Social Service
Delivery Structure,” Presentation byProfessor Tai Takahashi of theInternational University of Health andWelfare at the 9th Meeting of theCommittee on National Social Security
Reform, 2013.

1 Statistics Bureau, Ministry of Internal Affairs and Communications (14 April 2017). Demographic forecast. (accessed 15 September 2017) Retrieved from:http://www.stat.go.jp/data/jinsui/2016np/index.htm#a05k28-b
2 Cabinet Office (2017). White paper on ageing society. (accessed 24 July 2017) Retrieved from: http://www8.cao.go.jp/kourei/whitepaper/w2017/zenbun/29pdf_index.html
3
Director General for Policy Planning and Evaluation, Ministry of Health Labour and Welfare (2017). Vital statistics in Japan. (accessed 24 July 2017)Retrieved from: http://www.mhlw.go.jp/toukei/list/dl/81-1a2.pdf
4 Cabinet Office (2017). White paper on ageing society. (accessed 24 July 2017) Retrieved from: http://www8.cao.go.jp/kourei/whitepaper/w2017/zenbun/29pdf_index.html
5World Health Organization (2014). Noncommunicable diseases country profiles 2014: Japan. (accessed 24 July 2017) Retrieved from:http://www.who.int/nmh/countries/jpn_en.pdf?ua=1

1© 2019 Health and Global Policy InstituteCause of death

Mortality rate
(per 100,000)6290.3

OECD average mortality rate
(per 100,000)7*
211

Heart disease

156.5

122

Pneumonia

97.8

n/a

Cerebrovasculardisease
Senility

94.1

69

55.5

n/a

Accident

31.5

n/a

Suicide20.7

12.4 in 2011

Liver disease

12.7

n/a

Tuberculosis

1.7

n/a

Cancer*Where available

Ranked by the burden that each disease places on the lives of sufferers as
measured in DALYs (Disability-Adjusted Life Years)*, the most critical diseases
within the Japanese population are cancers, cardiovascular diseases, diabetes,
neuro-psychiatric diseases, musculoskeletal diseases, respiratory diseases,
other NCDs, external injuries, and infectious diseases.8It is expected that theburden of life-style related diseases and degenerative diseases will increase
alongside demographic changes such as ageing.
The World Bank estimated in 2015 that the under 5 mortality rate (U5MR) forJapan stood at 3 per 1,000 live births and the maternal mortality ratio was 6
per 100,000 live births. These figures reflect a decrease of nearly 50% whencompared to data from 1990.9*DALYs are an indicator of disease burden which assesses the amount of harmcaused to health by specific diseases and injuries. DALYs are calculated byadding the total of years of life lost (YLL) due to premature death and the yearsof life lived with disability (YLD).

＜Column＞A population on track
to decline, with low expectations
for growth even among the
population aged 65 and over
Between 2010 and 2040, thepopulation aged 65 and over will
increase by 9 million. Over thesame time period, the population
under age 65 will decrease by 30
million. Starting sometime aroundthe year 2040, it is expected thatgrowth in the older population willplateau, while the working
population will sharply decrease,causing the overall population toshrink by around 15%. This will
increase the proportion of people
aged 65 and over in Japanesesociety.

6

Ministry of Health Labour and Welfare (2017). Vital statistics in Japan. (accessed 2 February 2018) Retrieved from:http://www.mhlw.go.jp/toukei/list/dl/81-1a2.pdf
7 OECD (2015). Health at a Glance 2015: OECD Indicators. Paris: OECD Publishing, 2015.
8 World Health Organization (2015). Japan: WHO statistical profile. (accessed 24 July 2017) Retrieved from: http://who.int/gho/countries/jpn.pdf?ua=1
9
The World Bank (2015). Mortality rate, under-5 (per 1,000 live births). (accessed 24 July 2017) Retrieved fromhttp://data.worldbank.org/indicator/SH.DYN.MORT

2© 2019 Health and Global Policy Institute1.2

Background ｜ The history of public healthcare insurance

The current Japanese healthcare system can be best understood by reviewing its origins. The public healthinsurance program in Japan is a combination of three separately developed structures—the employment-based
health insurance system, the residence-based National Health Insurance system, and the medical insurance
system for those aged 75 and over. Today, these three structures combined form the basis of one of the largest
healthcare insurance programs in the world, covering nearly all Japanese citizens and long-term residents, over
127 million people. In light of historical circumstances and following numerous revisions to the Health Insurance
Act since its introduction in 1922, these insurance systems are administered by a variety of insurers.

The history of the public health insurance program in JapanThe beginnings of Japan’s system of public health insurance system
After sweeping through England from the second half of the 18th century and throughout the 19th century, theindustrial revolution finally reached Japan. Japan’s industrial revolution began in earnest when state-owned
enterprises were privatized in the second half of the 19th century. Just like the rest of the world, this caused a
sharp increase in the number of Japanese laborers working in environments such as coal mines and factories. As
a result, issues surrounding the improvement of working conditions and the protection of workers’ rights became
urgent due to labor movements and social movements. This led to the enactment of the Factory Act in 1916, which
regulated employment and compelled factory owners to provide support to workers in the event of workplace
injury or fatality.
However, labor movements started by labor unions were based on socialism, and resistance to socialism remained
a major hurdle for the Japanese government. The government did not view the labor movement as entirely
dangerous. It distinguished between moderate reform and radical reform and worked to prevent confrontations
between social classes by permitting moderate labor movements using a Bismarck-style “Carrot and stick”
approach. The “stick” in this approach refers to actions that suppressed labor movements. The first “carrot”
appeared in 1922, when the Health Insurance Act came into effect. The main purpose of this act was to provide
compensation to workers or their families in the event that a worker had a workplace accident or fell ill while noton the job. The concept of the Health Insurance Act itself dates back to the 1890s, when Minister of Home Affairs
Shinpei Goto started discussions within the government after recently returning to Japan from a study trip toGermany. However, the topic did not become a priority issue for the government, so many years of effort wererequired before it was finally enacted. Also, at the time, health insurance for laborers was considered morestrongly an industrial policy rather than a medical policy, so it was under the jurisdiction of the same ministry as
the Factory Act, the Ministry of Agriculture and Commerce.
Meanwhile, the Great Depression began in the United States in 1929. Shockwaves were sent through Japan’s
farming communities when export prices for agricultural products to the U.S. fell one after another, starting with
exports of raw silk thread. An additional blow fell when a bumper crop in 1930 sent the price of rice plummeting,further compounding the economic problems already facing Japan’s farming communities. Entering the 1930s,
farming communities became an important source of manpower for the Japanese military, so the health andnutritional status of their people became an issue of military strength. The Ministry of Home Affairs began toconsider establishing an insurance system for the general populace starting with those in farming villages thatwould provide wide coverage for people who were not employees. It is said this decision was based upon the fact
© 2019 Health and Global Policy Institute3that the long-established “Jorei” system for providing community healthcare similar to medical aid associations
already existed in every region of Japan, particularly in farming communities. The decision was also influenced by
the fact that the Health Insurance System that had been created for employees was already starting to show
results. It is also said that the Japanese government made this decision after seeing the results of similar systems
in Sweden and Denmark.
The former National Health Insurance Act was submitted to the Diet in 1937, but ended up classified as unresolved andrejected after the dissolution of the House of Representatives. When the Ministry of Health and Welfare (now the
Ministry of Health, Labour and Welfare) was formed the following January, in 1938, income restrictions that had been
an insurance prerequisite were abolished, and insurance became available to non-employees. The condition that
insurance be employment-based was also abolished for both the insured and those not covered by employee insurance.
This system was replaced by a system in which insurance was provided through location-based insurance associations
that viewed municipalities as independent units. This formed the basis of the current system of residence-based
National Health Insurance that was enacted in March 1938.
The successful establishment of universal health coverage(UHC)
After World War II ended in 1945, the Supreme Commander for the Allied Powers (SCAP) issued the "Three principles
of public assistance" for Japan, making the government responsible for ensuring equality and minimum standards ofliving. This meant the government had to be more proactive in maintaining the health of the people. In 1948, theprevious National Health Insurance system was revised, making it a rule that the insured were under the jurisdiction of
local governments rather than regional associations. However, given the economic situation after the war, there werestill problems that prevented National Health Insurance from becoming widespread. Even by 1956, one-third of the
population of Japan was still unenrolled in any form of health insurance. Due to this, the then Prime Minister Ichiro
Hatoyama declared the establishment of "Comprehensive＜Column＞Free healthcare for people aged
health insurance that covers all citizens" in his annual speech on
policy guidelines. This was a massive step forward in the effort
70 and over: The “biggest mistake” in theto insure everyone. The current National Health Insurance Law
history of health policy in Japanwas enacted in 1958. It made regional governments legallyFree healthcare for the elderly is now
responsible for the administration of insurance associations andconsidered by the Government of Japan to becompelled all citizens to enroll in the public insurance scheme if
the “biggest mistake in the history of healththey were not already covered by employee's insurance or apolicy in Japan” (according to a former MHLW
Mutual Aid Association (MAA). That same year, a new Public
official). While drastically improving access to
Health Insurance act was enacted. After a grace period of 3
healthcare among the older population, theyears, public health insurance unions were established in all
system resulted in over-provision of care andmunicipalities, allowing Japan to successfully achieve a worldmedical products, including pharmaceuticals.
class system of universal healthcare in 1961.10 ,11 ,12Older patients flooded hospital waiting rooms
to the extent that they essentially became
Coverage for the older population
centers of social activity for some people.
In 1973, Japan forged a unique health insurance structure forDuring that era, it was not uncommon to hear
its older population, reallocating public funds to subsidize thetwo older people in a waiting room joke, “Ms.
30% of costs typically covered by patients within the NHI costYamada isn’t here today. She must not be
sharing scheme and effectively making healthcare free forfeeling well!” The moral hazards created bypeople aged 70 and over.13 Japan simultaneously introduced
free healthcare were so extreme that thea high-cost medical care benefit system which at first covered
government moved to revise the policy for
only family members of employees via the employmentpeople aged 70 and over, re-requiring costbased health insurance, not extending to employees
sharing. However, this proved tremendously
themselves. Later, employees along with their families camedifficult politically, with the entire processultimately
taking 30 years.
10 Kitayama, T. (2011). Explaining the Institutional Change of Health Politics in Japan: Localities
Nationalized?. Yukikaku Publishing Co., Ltd.
11 Sakaguchi, T. (1977). The History of Japan’s Social Insurance Systems. Keiso Shobo
12 Yoshihara, K., & Wada, M. (2008). The History of Japan’s Health Insurance Systems. Toyo Keizai Inc.
13

Ministry of Health, Labour and Welfare (2016). The status of medical care for the elderly. (accessed 29 January 2018) Retrieved fromhttp://www.mhlw.go.jp/file/05-Shingikai-12601000-Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000125580.pdf

4© 2019 Health and Global Policy Instituteto enjoy the benefits of this system via National Health Insurance, when employment-based health insurance
finally grew to also cover employees. Between 1973 and 1980, healthcare spending for people aged 70 and overincreased more than fourfold, leading to sustainability concerns and the eventual passage of the 1982 Public Aidfor the Aged Act. This act, implemented in 1983, put an end to free healthcare for the elderly by requiring thatthey pay small copayments.14 In addition, this legislation helped to subsidize the NHI program by transferring
revenue from employment-based health insurance to NHI. As a result, the Public Aid for the Aged Act is considered
one of the most critical pieces of healthcare legislation in the history of Japanese health policy.

The Health Services Scheme for the Aged and the medical care system for the retired
The Public Aid for the Aged Act of 1982 created the basis for the Health Services Scheme for the Aged. This scheme,
which was administered by municipalities, covers people aged 75 and over as well as those bedridden aged 65
and over (People aged 70 or over born prior to September 30, 1932, were covered by the Health Services Scheme
for the Aged). Funding for the scheme was provided by contributions from medical insurers, public funds, andpartial contributions by the insured. This scheme was in place for nearly 25 years, only being revised in 2008. There
were many reasons for the revision. Chief among them was the lack of transparency regarding distribution of
medical expense burden between the young and the old. Through the scheme, a part of every premium
contributed by the members of any health insurance plan was transferred to municipal governments. In otherwords, the groups collecting premiums (insurance schemes) were not the same as the groups paying contributions(municipalities), making it difficult to know how contributions were actually spent. This scheme was finallydiscontinued in April 2008 alongside the creation of the Medical Insurance System for the Latter-Stage Elderly
targeting people aged 75 and over.15 The cost-sharing details between the young and the old are much moretransparent in this system. Furthermore, this system established governmental unions in prefectural associations
across the country to act as central locations for the collection and payment of insurance premiums. This system
also has clearly defined regulations regarding the responsibilities of management and the use of public finances.
In addition to the previously mentioned systems, in 1984, the Government created the Retired Persons Healthcare
System to relieve the building pressure on public finances brought on by increasing numbers of retirees leaving
employment-based insurance schemes and coming under the coverage of NHI. The Retired Persons Healthcare
System covered people aged 65 and under who were enrolled in NHI, people on employee pensions for overtwenty years, and people who elected to receive retirement pensions after the age of forty and had done so for
10 years or more. Dependents were also covered by this system if they satisfied a fixed set of accreditation criteria.
This system was administered by municipal governments, and funding was sourced from premiums contributedby system members, as well as premiums paid to employment-based health insurance plans. The Retired Persons
Healthcare System itself was discontinued following the establishment of the Medical Insurance System for the
Latter-Stage Elderly in April 200816.

A new medical insurance system framework for the older population
The 2006 reform of the Japanese medical system is tremendously important when trying to understand healthpolicy in Japan. This reform created a new healthcare system for people aged 75 and over. A number of reasons
led to the creation of this new system. The first was related to Japan’s residence-based insurance, a part of NHI
that covers people residing in Japan who are not enrolled in employment-based health insurance plans. The healthinsurance system was set up such that when people retired who had formerly been enrolled in employment-based
health insurance plans, they would then be enrolled in Community Health Care Plans.17 Since people generally
14 Ikegami Naoki (2014). Universal Health Coverage for Comprehensive and Sustainable Development – Synthesis of research in 11 countries. Japan Center

for International Exchange. (accessed 29 January 2018) Retrieved from http://www.jcie.or.jp/japan/pub/publst/1453/1453all.pdf
15 Ministry of Health, Labour and Welfare. Changes to the healthcare system for the elderly. (accessed 22 August 2017) Retrieved fromhttp://www.mhlw.go.jp/bunya/shakaihosho/iryouseido01/info02d-25.html
16 Ministry of Health, Labour and Welfare. Amendments to the medical insurance system. (accessed 22 August 2017) Retrieved fromhttp://www.mhlw.go.jp/bunya/shakaihosho/iryouseido01/taikou05.html
17 Ministry of Health, Labour and Welfare. The medical insurance system of Japan. (accessed 22 August 2017) Retrieved fromhttp://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-Hokenkyoku/0000172084.pdf

5© 2019 Health and Global Policy Instituteretire at older ages, the average age of the population enrolled in NHI (via these plans) grew older and older astime passed. This shift placed enormous financial pressure on the NHI since older people tend to incur greater
medical expenses. The 2006 reform aimed to respond to this structural challenge by establishing a framework thatallowed people aged 75 and over to be supported by society as a whole. Specifically, a new system was set up
requiring people aged 75 and over to cover 10% of their medical expenses, while the remaining 90% is covered by
the working population and public funds. A framework was also created by insurers to adjust costs for people
aged 65 to 74 by having them enroll in either Community Health Care Plans or employment-based healthinsurance. The framework for those aged 75 and over came to be known as the Medical Insurance System for the
Latter-Stage Elderly, while the framework for those aged 65 to 74 supports people considered to be “Early-stage”
elderly.

The Long-Term Care Insurance System
Prior to the establishment of the Long-Term Care Insurance System, welfare and medical care for the elderly weredelivered via separate systems. In terms of welfare, municipal governments selected the types of services people
were eligible for as well as the institutions from which they could receive the services. Service recipients had nosay in these matters. Service fees were decided according to the incomes of recipients and the incomes of theirdependents, leading to heavy burdens for middle-class households. As for medical care for people aged 75 andover, a lack of infrastructure for welfare services limited society’s ability to provide long-term care to people inneed of services, including daily care in hospitals and care related to specific medical treatments which required
longer periods of hospitalization.18
As the Japanese population has aged, the focus of the healthcare field has shifted from acute illnesses toward theprovision of integrated and continuous medical and nursing care for those with chronic conditions. Fewer andfewer families are now living with their elderly relatives compared to in the past, and the average age of family
members providing care to elderly relatives is increasing. The combined effect was an increase in the number ofpeople with no option for medical care but a long-term hospital stay, which put a strain on public finances. The
Long-Term Care Insurance Act of 1997 was created to address this issue. This act established the Long-Term Care
Insurance System, which covers all people aged 65 and over, as well as people aged 40 and over who are in needof long-term care. This system gives users the freedom to select the type of services they need, as well as theirservice providers. This act also created the position of “Care Managers” who are able to assist users in selecting
care providers.19 Users are charged 10% of the medical fees for the services they select, irrespective of theirincome (although above a certain level of income, they are charged 20%). The system differs from NHI bymandating a “maximum amount of financial support.” After a certain level of support, users must cover the costsof all excess services.

Other healthcare legislation
Implemented in 1948, the seminal Medical Care Act defined criteria for the basic medical services to be provided
by public hospitals. 20 The Medical Care Act has since undergone eight revisions in order to better align theprovision of medical facilities with community needs as well as to introduce the system of Medical Care Plans.
A more recent piece of major health policy legislation is the Health Care System Reform Act of 2015, whichchanged the shape of the healthcare insurance system. This act, which will go into effect in 2018, moves oversightof the residence-based NHI from the municipal level to the prefectural level. To support the transition, this act
provides prefectures with increased authority and responsibility related to financing and healthcare delivery
18 Ministry of Health, Labour and Welfare (2015). The current state of the public nursing-care insurance system and its future role. (access 22 August 2017)Retrieved from http://www.mhlw.go.jp/file/06-Seisakujouhou-12300000-Roukenkyoku/201602kaigohokenntoha_2.pdf
19 Ikegami Naoki (2017). Medical care in Japan; Its history and organization – Direction of future reforms. Nikkei Book Publishing Company.
20
Ministry of Health, Labour and Welfare (2007). 2007 White Paper of the Ministry of Health, Labour, and Welfare. (accessed 29 January 2018) Retrieved
from http://www.mhlw.go.jp/wp/hakusyo/kousei/07/dl/0101.pdf

6© 2019 Health and Global Policy Institutesystems. As one MHLW official put it, it is “the biggest change to healthcare in Japan since the establishment of
the modern healthcare system.”

7© 2019 Health and Global Policy Institute1.3

Overview of major legislation

Year

PolicyDetails

1922

Establishment of the Health
Insurance Act

・Provided health insurance to employees with a certain level ofincome1938

Establishment of the National
Health Insurance Act

・Established National Health Insurance (NHI), a residence-based
insurance program for farmers, the self-employed, the retired,
and the non-employed, administered by municipal governments
on a voluntary basis

1939
1942

Establishment of the Ministry of
Health and Welfare
Establishment of Health
Insurance for Employees Act
Health Insurance Act amended

・Provided health insurance to employees working at financial
companies etc.
・Integrated the Health Insurance Act and Health Insurance For
Employees Act
・Introduced a system of partial cost-sharing

1948

Establishment of the Medical
Care Act・Legislated the establishment and management of hospitals,
clinics, and other facilities, as well as their scope and number of
personnel

1958

National Health Insurance Act
amended・Mandated that all municipalities establish and administer
residence-based NHI programs
・NHI became compulsory for those not covered by other plans

1961

Universal Healthcare achieved

・Landmark achievement in Japanese health policy history madepossible through the expansion of NHI after all municipalities
were mandated to administer a NHI program in 1959
・Out-of-pocket responsibility becomes 0% for insured people
with employee insurance, 50% for dependents, and 30% for
those enrolled in NHI・Establishment of high-cost medical expense system

1963
1972

Establishment of the Act on
Social Welfare for the Elderly

・Establishment of special elderly care homes

Act on Social Welfare for the
Elderly amended

・Created a new structure for those 70 and over and made care
free for nearly all people age 70 and over・Legislation related to home help

・Reduced copayments within NHI for other enrollees
1973

Health Insurance Act amended

・Establishment of medical expenses for the elderly payment
system・Fixed rate of state aid for Government-Managed Health
Insurance

1982

Public Aid for the Aged Act・Retracted free care for those aged 70 and over by imposing asmall co-payment8© 2019 Health and Global Policy Institute・Stipulated coverage of medical expenses for the elderly via
fiscal adjustment among insurers. Treated people aged 70 andover separately from the existing health insurance system,
subsidizing costs via public funding (national government 2/3,
prefectural governments 1/6, municipal governments 1/6) andcontributions from insurers in the existing health insurance
system.
1985

The first revision to the 1948
Medical Care Act

・Introduced regional medical planning for the management of
hospital beds

1990

“Eight Acts” 21related to welfare
amended・Municipalities were obligated to formulate municipal
healthcare plans for the elderly

1993

The second revision to the 1948
Medical Care Act

・Specified “advanced care hospitals” and created a new
structure for “health facilities for long-term recuperation”

1997

Establishment of the Long-TermCare Insurance Act

・Launched a mandatory social insurance program that covers
care for older people with health issues, partially relieves
caregiver burdens, and addresses the needs of the aging
population

The third revision to the 1948
Medical Care Act

・Launched the regional medical care support hospital system

Partial revision of the Health
Insurance Act

・High-cost medical expense system amended

2000

・Set general regulations for informed consent
・Revised the upper limit for health insurance premium rates
・Abolished out-of-pocket expenditures on medicine related tothe elderly
・Revised a portion of expenditures related to the elderly

The fourth revision to the 1948
Medical Care Act

・Introduced a bed classification system that required hospitals toreport hospital bed use under the categories of “general” or“treatment”
・Implemented 2-year mandatory clinical training period for
doctor licensing
・Made medical safety management systems legally mandatory
for all medical facilities

2002

Partial revision of the Health
Insurance Act

・Revised out-of-pocket expenditures
・Introduced total compensation system for health insurance
premiums
・Increased insurance premium rate for Government-Managed
Health Insurance
・Revised calculation method for medical expense contributions
for the elderly
・Other measures, including those to strengthening the financial
foundation of NHI

21 Eight welfare-related acts: (1) Act on Social Welfare for the Elderly, (2) Act on Welfare for Physically Disabled Persons, (3) Act on Welfare for Mentally

Retarded Persons, (4) Child Welfare Act, (5) Act on Welfare for Mothers with Dependents and for Widows, (6) Social Welfare Act, (7) Aid for the Aged Act,and (8) Social Welfare and Medical Business Corporation Act

9© 2019 Health and Global Policy Institute2005Long-Term Care Insurance Act
amended・Established preventive benefit and regional support projects forthe creation of a preventative medicine system
・Following a review of facility benefits, it become no longer
possible to use benefits for expenses relate to food and housing
at long-term care facilities. A supplementary benefits program
for low income users is set up
・Created of community-based services to establish new service
systems, enhance residential services, improve the integrated
community care system, strengthen support for middle-income
households, and coordinate medical care and nursing care /establish a clearer division of roles
・Established insurance fees for primary beneficiaries thatreflected, in detail, the ability of that person to pay expenses,
following a review of the state of medical expenditures and the
management system for such expenditures. Also revised thelong-term care licensing system, strengthened insurer functions,and revised cost-sharing schemes and other issues.

2006

Health Care Reform Act

・Established a new medical care service system targeted atpeople aged 75 and over・Establish a public corporation to hand over the administrationof Government-Managed Health Insurance for employees of
SMEs from the national Government to the prefectural
governments

Partial revision of the Health
Insurance Act

・Formulated a medical cost optimization plan to optimize
medical expenses over the medium- to long-term, such as
lifestyle disease measures and the correction of long-term
hospitalization fees
・Revised the content and scope of insurance benefits
・Abolished medical facilities that only provided long-term care・Established a new medical care service system for the elderly

2008

The fifth revision to the 1948
Medical Care Act

・Promoted public information about healthcare facilities at theprefecture level

Long-Term Care Insurance Act
and Act on Social Welfare for the
Elderly amended

・Created a business management system under laws andregulations for nursing care service providers
・Issued advance notification on the suspension or abolition ofnursing care service providers
・Made the clarification of services at the time of a nursing careservice provider suspension or abolition mandatory.

2008

Cabinet Order to revise part ofenforcement ordinance for the
Health Insurance Act etc.

・Revised the calculation criteria for high-cost medical expenses

Summary Report of the National
Conference on Social Security

・Established the introduction of a hospital bed function
reporting system and a vision for community care・Established requirements for payment related to high cost longterm care and calculation standards related to nursing care・Called for the strengthening of the roles of prefectures andtransitioning of NHI management to prefectures© 2019 Health and Global Policy Institute10

・Revised the medical corporation system and social welfare
corporation system
・Called for collaboration between medical care and nursing careand construction of an integrated community care system
・Called for Financial support to promote the reform of theprovision of medical and nursing care services
・Called for a studies on training general practitioners,
communicating information to the public, the duties of medical
professionals, and the establishment of team medical care.
Emphasized that data should be continuously collected andperiodically reevaluated.
・Called for the stabilization of the health insurance system,
ensuring fairness in cost-sharing related to insurance premiums
・Called for prioritization and efficiency improvements related to
medical benefits (a correction of the range of eligible medical
treatment etc.)
2009

2011

Cabinet Order to revise part ofenforcement ordinance for the
Health Insurance Act
Establishment of the Act Revisinga Portion of the Long-Term Care
Insurance Act to Strengthen theFoundation of Long-Term Care
Services

・Revised the Childbirth Lump-Sum Allowance and benefit for thechildbirth of a family member (increase of 40,000 yen)・Strengthened collaborations between medical and nursing careproviders. Promoted comprehensive support (integrated
community care system) for caregivers etc. who cooperate withmedical care, nursing care, prevention, housing, and living
support services.
・Established Long-Term Care Service Plans based on anunderstanding of the regional needs and issues in the places
where people live, created a 24-hour regular and periodic careservices and complex services
・Extended the date for the elimination of hospital beds used only
for long-term care・Promoted the supply of housing with in-home care services forthe elderly

2012

National Health Insurance Act
amended・Transferred the financial administration of NHI programs fromthe municipal level to the prefectural level to strengthen thefinancial basis of NHI

2013

Partial revision of the Health
Insurance Act and other acts

・Took measures including the two-year extension of fiscal
support for the Japan Health Insurance Association which waspreviously in place from 2010 to 2012 (These include: 1.
government subsidies, and 2. methods by which insurers could
handle money owed to support healthcare for those age 75 andover)・Raised the share of healthcare expenditures incurred by theJapan Health Insurance Association that were covered byGovernment subsidies from 13% to 16.4% for two years

11© 2019 Health and Global Policy InstituteEstablishment of social security
reform program

・Clarified items to be examined for a reform of the healthcare
system and the long-term care insurance system
・Established a system for the reporting of hospital bed functions
・Considered all aspects of the total compensation ratios forsupporting people aged 75 and over・Revised out-of-pocket expenditures among people aged 70 to
74 years old
・Revised the high-cost medical expenditure system

2014

Establishment of the Law to theRelated Acts for Securing
Comprehensive Medical andLong-Term Care in theCommunity

・Set up new funds within prefectures that utilize consumption
tax revenue to promote strong collaboration between medicalcare and nursing care・Created the requirement that medical institutions report thefunctions of hospital beds (beds for intensive , acute, recovery, orchronic patients) to prefectural governors in order to ensure theefficient and effective provision of healthcare in each
community. Also created the requirement that prefectures
formulate a regional medical vision for their local healthcare
systems based on that.
・Enhanced community support projects and shifted funds forpreventative medicine benefits to community support projects inorder to foster a comprehensive regional care system and ensure
fair cost-sharing.

2014

Cabinet Order to revise part ofenforcement ordinance for the
Health Insurance Act

・Revised the Childbirth Lump-Sum Allowance.

The sixth revision to the 1948
Medical Care Act

・Promoted integrate care and the analysis of hospital bed
information through the creation of the Bed Classification System
and Integrated Community-based Care Plan

・Revised criteria for calculating high-cost medical care benefits
and combined medical treatment costs for high-cost long-term
care・Introduced measures to address physician and nurse shortages
・Introduced a classification renewal system for hospitals
recognized as “advanced treatment hospitals”
・Introduced measures to improve the work environment for
healthcare workers
・Promoted home healthcare
・Promoted the improvement of the clinical trial system
・Introduced a system to investigate medical accidents
・Revised the healthcare corporations system
Establishment of Act for Securing
Comprehensive Medical andLong-Term Care・Implemented measures aimed at ensuring the efficient andeffective provision of medical care at the community level
・Established the integrated community care system and revised
cost-sharing to be more fair.

12© 2019 Health and Global Policy Institute2015

Establishment of the Act Revisinga Portion of the National Health
Insurance Act to Build a
Sustainable Health Insurance
System・Transferred responsibility for the fiscal management of NHIfrom municipal governments to prefectural governments

The seventh revision to the 1948
Medical Care Act

・Established a system for the creation of corporations topromote regional medical collaborations

・Increased insurance premiums for employees of large
corporations and civil servants・Established "patient offer system" that allows users to cover
medical expenses through a combination of insurance benefits
and out-of-pocket funding.

・Revised the medical corporation system
2017

The eighth revision to the 1948
Medical Care Act

・Established regulations on governance reforms at advanced
treatment hospitals
・Established restrictions on what medical institution websites,
publications, and so on, can say (restrictions on false or
exaggerated claims).

2017

Cabinet Order to revise part ofenforcement ordinance for the
Health Insurance Act
Establishment of the Act Revisinga Portion of the Long-Term Care
Insurance Act to Strengthen the
Integrated Community Care
System・Revised calculation criteria for high-cost medical expenditures
among insured people over 70 years old
・Created a system to make it possible for municipal governments
to make use of insurer functions and work toward helping
patients live independently and toward preventing sick patientsfrom growing worse.
・Established a new kind of nursing-care insurance facility thatcombines functions such as daily medical management and endof-life care and terminal care with living facilities.
・Set out requirements for people using Long-Term Care
Insurance with high-cost medical expenditures who werepreviously asked to cover 20% of their expenses to now cover
30%.

2018

Prefectural Unitization of NHI・Transferred responsibility for fiscal management of NHI frommunicipal governments to prefectural governments.

13© 2019 Health and Global Policy Institute2.1

Processes and players｜Japan’s government

The Constitution of Japan, created in 1946 and implemented in 1947, laid the foundation for Japan’s parliamentary
system of government. This system is divided into three branches: the legislative branch, the executive branch,and the judicial branch. Power is separate and checks and balances exist between the three branches.
The legislative branch
The legislative branch is comprised of the country’s sole law-making body, the National Diet. The Diet has two
Houses, the House of Representatives and the House of Councilors, both comprised of members elected by the
public. Members of each House are required to serve on at least one standing committee during ordinary sessions,which begin in January and last 150 days, with one extension possible.

14© 2019 Health and Global Policy InstituteThe executive branch
The executive branch is comprised of the Cabinet Office, endowed withadministrative authority, and led by the Prime Minister. The House ofRepresentatives nominates the Prime Minister, who is then officiallyappointed by the Emperor and designates the ministers of state whocomprise the Cabinet. The constitution stipulates that the majority ofministers of state be selected from the Diet.22 The Cabinet Secretariat
provides support to the Cabinet and the Prime Minister.
State Ministers remain in office until they are dismissed by the Prime
Minister or the Lower House passes a no-confidence resolution (orrejects a confidence resolution). Within 10 days of the passing of a noconfidence resolution (or a rejection of a confidence resolution) either
the House of Representatives is dissolved or the members of the
Cabinet collectively resign. The Cabinet includes the Cabinet Office,Cabinet Agencies, and 11 Ministries, including the Ministry of Health,Labour and Welfare, and the Ministry of Finance. These central
government offices carry out various policies and draft cabinet bills.23

The judicial branch
The judicial branch is comprised of the Supreme Court and four types oflower courts. The Supreme Court is endowed with the power of judicial
review and ensures that legislation and actions taken by the Cabinet andthe Diet are constitutional. The Supreme Court’s chief justice isappointed by Cabinet nomination and official appointment by theEmperor. The other 14 justices are appointed by the Cabinet. Justiceappointments to the Supreme Court are periodically reviewed inintervals of 10 years, starting with the first general election of House ofRepresentatives following their appointment until the judge reaches the
mandatory retirement age of 70. Appointments may be terminatedthrough a majority vote, although this has yet to happen. Below theSupreme Court are high courts, district courts, family courts, andsummary courts. Most trials involve one to three judges. In 2009,
criminal trials began to include the general public through the use of lay
judges.24＜Column＞Frequent national elections
Japan has frequent national elections.
Including Parliamentary (Diet) elections,
there were 7 elections between 2005
and 2015 – that’s one election every 1.5
years. Lower House elections are held
so frequently (once every 2.5 years overthe past 10 years) that it is notuncommon for Members of the Lower
House to leave office withoutcompleting a full four-year term. In
addition, every three years, an electionis held for half of the Upper House. This
election has significant impact as itserves as a mid-term evaluation of theadministration. Add to this the local
elections held nation-wide every four
years, and the municipal elections
which, in a real sense, are actual
contests between the ruling andopposition parties, and the number ofelections further increases. As a result,the government, the ruling party, andeach political party must pay criticalattention to elections, which leads to acertain level of instability in politics and,what some consider, an easy avenue forthe influential voices of older persons toaffect policy (for this reason, Japan issometimes called a “Silver
Democracy”).

22 Ministry of Internal Affairs and Communications. Types of Elections. (Accessed 30 January 2018) Retrieved fromhttp://www.soumu.go.jp/senkyo/senkyo_s/naruhodo/naruhodo03.html#chapter1
23
Cabinet Office. Pamphlet on the organization and functions of the Cabinet. (Accessed 30 January 2018) Retrieved fromhttp://www.cao.go.jp/about/pmf_index.html
24 Court of Justice. Lay judge system. (Accessed 30 January 2018) Retrieved from http://www.saibanin.courts.go.jp/topics/saibanin_jissi_jyoukyou.html

15© 2019 Health and Global Policy Institute2.2

Process and players ｜The Policy-making process

Although a significant part of Japanese health policy is dictated by revisions made to the fee schedule, bills passed
through the legislative process form the structural base of policy, including the government budget. The Japanese
fiscal year starts in April and ends in March. The legislative process follows this timeline, with budget bills
prioritized so that they can be passed by the start of the next fiscal year each April. Health legislation and otherbills are submitted to the Diet by either the Cabinet or by members of the Diet.25

Cabinet deliberations
The Cabinet submits bills to the Diet, and barring emergencies, these bills go through a lengthy process of draftingand deliberations that typically include the following steps.26,27
Problem identification and information gathering
Cabinet members survey stakeholder interests and gauge media reports. To inform discussions, they often consult
healthcare practitioners and interview various stakeholders and experts to gather information and sample
opinions.
Cabinet council discussions28
Inside the Japanese cabinet there is a large number of councils on topics ranging from space policy to suicide
prevention. Councils that hear health policy related discussions include standing councils, such as the Social
Security Council and the Committee on Health Insurance, and ad-hoc councils, which are convened to address
matters that require a particular level of expertise or to gather a broad range of opinions.
Evaluation of bills by the Cabinet Legislation Bureau
Prior to being introduced at Cabinet Meetings, bills submitted by the Cabinet are wholly evaluated by the Cabinet
Legislation Bureau. The Cabinet Legislation Bureau conducts preparatory evaluations of bills drafted, as a matterof course, by government agencies and ministries.29
Evaluation of proposed bills by ruling party
The Evaluation Committee of the ruling party, which has usually been the Liberal Democratic Party over the courseof the modern era in Japan, conducts evaluations of bills. Without support from the ruling party, bills will die at
this stage. If the ruling party backs a bill, it is circulated in the Cabinet.
Prior to submission to the Diet, a Cabinet decision on the bill is madeFactors considered in Cabinet decisions include the urgency of the bill and how the bill will fit alongside existinglaws. Once the Cabinet decides to proceed with a bill, the bill will be submitted to the Diet in February or Marchby the Prime Minister.

25

Cabinet Legislation Bureau. How a bill becomes a law. (Accessed 30 January 2018) Retrieved from http://www.clb.go.jp/law/index.html

26 Cabinet Legislation Bureau. How a bill becomes a law. (Accessed 30 January 2018) Retrieved from http://www.clb.go.jp/law/index.html
27 Iwabuchi Yutaka (2013). Handbook of Japanese health policy formulation and structure. Chuohoki Publishing. p.32-41
28 Cabinet Office. Gathering of the deliberative council. (Accessed 30 January 2018) Retrieved from http://www.cao.go.jp/council.html
29

Cabinet Legislation Bureau. From the drafting of a bill to the passing of a law. (Accessed 20 April 2018) Retrieved fromhttp://www.clb.go.jp/law/process.html

16© 2019 Health and Global Policy InstituteDeliberations in the Cabinet
Other bills are submitted by members of the House of Representatives or by members of the House of Councilors.
In addition to the signature of the member who officially proposes a bill, it must also garner the signature of
approval of at least a set number of other members. The bill is then given to the Presiding Officer of the proposing
member’s House. Once a bill enters the Diet, deliberations take place in both the House of Representatives andthe House of Councilors. Deliberation usually includes discussions in a Standing Committee, question and answer
sessions involving the proposing member or the Prime Minister, and voting at a public hearing or a committee.
Bills which survive these processes may pass into law via one of three paths:
・If at least half of all the members of both the House of Representatives and the House of Councilors vote for abill, it passes
・If one house approves the bill but the other house rejects it, a Conference Committee comprised of members ofboth houses may be called to develop a proposal on which both Houses can agree
・A bill rejected by the House of Councilors after approval by the House of Representatives may still pass if it isapproved once more by the House of Representatives with the two-thirds or more of the members voting in favorof the bill30 (this principle is known as the “superiority of the House of Representatives.” This special privilege
exists because the House of Representatives is viewed as more reflective of national opinion given that terms areshorter and that the House of Representatives may be dissolved at any time at the discretion of the Prime
Minister.)Once a bill is approved, the Cabinet informs the Emperor. Following that, the bill must be promulgated into law
within 30 days.
Revision of the system for reimbursement of medical fees
Another important process that shapes health policy in Japan is the revision of the NHI fee schedule. This takes
place once every two years. For further information about this process, please see Cost Control (Section 7.2).

30

House of Representatives. The prerogatives of the cabinet. (Accessed 1 February 2018) Retrieved fromhttp://www.shugiin.go.jp/internet/itdb_annai.nsf/html/statics/kokkai/kokkai_kengen2.htm

17© 2019 Health and Global Policy Institute2.3

Process and Players| Health Policy Players

Health policy in Japan, similar to other advanced countries, is a high-stakes arena involving a variety of
stakeholders. The following is an overview of the main health policy players in Japan.

Central government and administrative agencies
Public administrative agencies supervise and regulate healthcare through control of the health insurance system.
Specifically, government organizations oversee health insurance contracts between the government andhealthcare agencies. This power is provided through the 1922 Health Insurance Act.31 These organizations are also
responsible for regulating pharmaceutical industry practices, including clinical trials, post-market research, andmanufacturing. These regulations are created and carried out by various bureaus in the Ministry of Health, Labourand Welfare (MHLW). For example, the evaluation of new drug and medical device applications is the
responsibility of the Pharmaceutical and Medical Device Agency (PMDA).32

Ministry of Health, Labour and Welfare
MHLW, a Ministry of the central government, was originally established in 1938 as the Ministry of Health andWelfare, and came into its current form after it merged with the Ministry of Labour in 2001.33 As of July 2015,
MHLW includes 16 councils, 8 regional bureaus of health and welfare, a labor department in every prefecture,
incorporated administrative agencies (including PMDA and the National Hospital Organization, which operates
143 national hospitals as external departments), and government-affiliated corporations such as the Japan
Pension Service. In addition, MHLW’s head office houses multiple internal bureaus with various functions. The
main bureaus that influence health policy include the following:34
Health Insurance Bureau: Plays an active role in bi-annual fee schedule revision and supports healthcare system
improvements
Health Policy Bureau: Researches and proposes various policy options in relevant policy areas to respond to thechanging demographic and morbidity profile in Japanese society, including healthcare delivery, staff assignment,
and health technology
Health Service Bureau: Focuses on regional healthcare, health promotion, measures to address infectious
diseases, sanitation, and organ transplantation.
Pharmaceutical and Food Safety Bureau: Establishes policies to ensure the safety and efficacy of pharmaceuticals,
medical devices, and cosmetics. It also establishes regulations for hospitals and supervises blood derivatives. Thisbureau is also charged with addressing the mislabeling of drugs, illicit drug use and stimulants.
Social Welfare and War Victims’ Relief Bureau: Addresses a myriad of social welfare issues including
homelessness and social relief. This bureau also administers services for families affected by World War II.
Health and Welfare Bureau for the Elderly: Promotes policies related to the Long-term Care Insurance System
and welfare services for the elderly in order to support the aging society.
Pension Bureau: Plans and implements the public pension system and corporate pension system.
Labour Standards Bureau: Oversees the health and safety of workers, including working hours, workers’ accident
compensation, and wages.

31 Ministry of Health, Labour and Welfare. Understanding the system of health insurance (Accessed 31 January 2018) Retrieved fromhttp://www.mhlw.go.jp/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/dl/shidou_kansa_01.pdf
32Pharmaceuticals and Medical Devices Agency. Outline of PMDA. (accessed 31 January 2018) Retrieved from https://www.pmda.go.jp/files/000219906.pdf
33
Ministry of Health, Labour and Welfare. The beginnings of the Ministry of Health, Labour and Welfare
34 Ministry of Health, Labour and Welfare. Main work (Duties). (Accessed 31 January 2018) Retrieved fromhttp://www.mhlw.go.jp/kouseiroudoushou/shigoto/18© 2019 Health and Global Policy InstituteEqual Employment, Children and Families Bureau: Plans policies that support working families and the well-beingof children.

19© 2019 Health and Global Policy InstitutePharmaceuticals and Medical Devices Agency (PMDA)
PMDA, established in 2004, is an independent administrative agency35, responsible for evaluating the quality andeffectiveness of new drug and medical device applications, post-market safety, and addressing damages related
to adverse health effects. The agency is comprised of multiple offices, including the Office of International
Programs, which liaises with non-Japanese applicants and inquiries; the Office of Regulatory Science, which works
to build Japan’s regulatory science capacity, and the Office of Cellular and Tissue-based Products, which focuseson biologics and tissue-engineered medical products. Through various policies and organizational strategies,
PMDA has been successful at bringing the average review time of standard review products down from 22 months
in 2008 to 11.3 months as of the end of August 2015. The average review time of priority review products wentfrom 15.4 months in 2008 to 6.1 months in 2012, and as low as 8.7 months as of the end of August of 2015.36

Central Social Insurance Medical Council
The Central Social Insurance Medical Council, or Chu-i-kyo inJapanese, is run by staff of MHLW’s Health Insurance Bureau(HIB) and convenes to advise the Minister of Health, Labour andWelfare on health insurance and health services. The Council
includes representatives from the payer side, the provider side
and academics representing the public interest. While it
conducts various discussions throughout the year, its main role
is to debate and set fee schedule revisions for medical services
and pharmaceuticals and National Health Insurance (NHI) drug
prices.37
Ministry of Finance Budget Bureau
The Budget Bureau (BB) of the Ministry of Finance overseas
subsidies to NHI through its jurisdiction over the national
budget. It is one of the foremost players in healthcare policy.
The subsidies, which are in essence government spending, arecomprised of revenue from taxes as well as funds borrowed by
the government. The BB has the most influence during the biannual fee-schedule and drug-price revision, when it works with
MHLW’s HIB to establish the global rate of price revision. As
stakes are high in this process, revisions involve lengthy
negotiations with a variety of actors.38＜Column＞Lining up from the early morning to
see Chu-i-kyo
Some will say that if there is one terms nonJapanese people should remember related tohealth policy in Japan, it is “Chu-i-kyo,” theabbreviated name for the Central Social Insurance
Medical Council (CSIMC). Chu-i-kyo is the mostimportant government council involved in healthpolicymaking. Every stakeholder in the field
watches the movement of this Council closely.
Regulations stipulate that it publish its meeting
proceedings and that meetings be open to thegeneral public. Chu-i-kyo attracts great attention
once every two years between Fall and February,
just before the fee schedule revision, which takes
place in April. During this short time period,
Council members engage in detailed discussions
around the fee schedule revision. In order to stay
informed of discussions, members of the media,
the pharmaceutical industry, and the healthcare
sector usually line up from the very early morning
to get a ticket to sit in during meetings (tickets arehanded out on a first-come, first-served basis). It
is common to see the Council’s meeting room,
which comfortably seats 10 people, filled withover 100 people up to 3 hours before a meeting isscheduled to begin.

35 Pharmaceuticals and Medical Devices Agency. (PMDA) (accessed 11 October 2017) Retrieved from https://www.pmda.go.jp/about-pmda/outline/0001.html
36 Pharmaceuticals and Medical Devices Agency. Our achievements up until now (2016) and challenges for the future. (accessed 11 October 2017)Retrieved from https://www.pmda.go.jp/files/000215764.pdf
37 Ministry of Health, Labour and Welfare. About the Central Social Insurance Medical Council. (accessed 30 January 2018) Retrieved fromhttp://www.mhlw.go.jp/shingi/2005/03/dl/s0309-4e3.pdf
38Ikegami Naoki (2014）Universal Health Coverage for Comprehensive and Sustainable Development – Synthesis of research in 11 countries. Japan Center

for International Exchange. (accessed 29 January 2018) Retrieved from http://www.jcie.org/japan/j/pdf/pub/publst/1452/1452all.pdf

20© 2019 Health and Global Policy InstituteThe Liberal Democratic Party
The Liberal Democratic Party (LDP) has been at the forefront of health policy since the end of the occupation by
U.S. Forces in the early 1950s. During that time of political transition, healthcare emerged as a focal point of
debate and the LDP, the ruling party then, took the lead by pushing for universal health coverage, thus garnering
a wide support base. Through amendments to the National Health Insurance Act in 1958, which aimed to expand
health insurance coverage, the LDP established systems of insurance for the unemployed, retired, self-employed
and irregularly employed in every municipality throughout Japan, achieving universal health coverage in theprocess.39 Since then, the LDP has continued to play an active role in health policy through legislative action andpolitical leadership built atop relationships with bureaucratic circles and interest groups. Since the start of Japan’scurrent healthcare system, the LDP has dominated politics and held the majority in the Diet almost the entire time,with the exception of an 11-month period between 1993 and 1994 and the 3 years between 2009 and 2011.

The Japan Medical Association40
Approximately 55% of physicians in Japan are members of the Japan
Medical Association (JMA), by far the most prominent health policy
interest group. The JMA works closely with bureaucrats, government
agencies, and the majority party (which, throughout modern history,
has overwhelmingly been the LDP) to protect physician autonomy andprofessional interests.
The JMA has seats on the Central Social Insurance Medical Council,
which sets the NHI fee schedule. In addition to official appointments,
the JMA regularly issues informal recommendations and engages in
active lobbying, which exerts a strong influence on health policyrelated legislation. However, even when opposed to certain proposed
revisions, it is not uncommon for it to make concessions orcompromises to ensure smooth relations with the government. For
example, during the Koizumi Administration (2001-2006), attempts tointroduce market-based approaches into the healthcare field by lifting
the ban on the mixed billing and approving management of hospitals
by investment institutions were met with major pushback from the
JMA. Although no major reforms materialized, this opportunity forreform did conclude with some minor changes to the existing system.

＜Column＞3 Doctors’ Association
As is the case in other countries, physiciangroups have a large amount of influenceon health policy in Japan. In Japan, theJapan Medical Association, the Japan
Dental Association, and the Japan
Pharmaceutical Association are referred tocollectively as the “3 Doctors’ Association”
because of the unrivaled presence thesegroups have amongst health-relatedorganizations. There are nearly 50 otherprofessional associations, including theJapanese Nursing Association, the All Japan
Hospital Association and the Japan
Pharmaceutical Manufacturers
Association, that work to maintainfavorable relationships with thegovernment and the ruling party in order
to affect the policy environment.

Prefectural governments
The Medical Service Act stipulates that prefectural governments oversee medical facilities and providers within
the prefecture. In contrast with the administrative agencies of the government, which supervise the contracts andpayment systems, prefectural governments monitor adherence to regulations related to the establishment of
medical facilities, staffing, and the management of pharmaceuticals and other products. This role for prefectural
governments was introduced in the 1985 revision of the Medical Service Act. Prefectural governments also havejurisdiction over the establishment of healthcare centers, and measures addressing diseases and sanitation.
Health centers are also established by government-designated cities and special wards.41

39Ikegami Naoki (2014）Universal Health Coverage for Comprehensive and Sustainable Development – Synthesis of research in 11 countries. Japan Center

for International Exchange. (accessed 30 January 2018) Retrieved from http://www.jcie.org/japan/j/pdf/pub/publst/1452/1452all.pdf
40 Ikegami Naoki (2014）Universal Health Coverage for Comprehensive and Sustainable Development – Synthesis of research in 11 countries. Japan Center

for International Exchange. (accessed 29 January 2018) Retrieved from http://www.jcie.org/japan/j/pdf/pub/publst/1452/1452all.pdf
41
Ministry of Health, Labour and Welfare. Regional healthcare. (accessed 1 February 2018) Retrieved fromhttp://www.mhlw.go.jp/stf/seisakunitsuite/bunya/tiiki/index.html

21© 2019 Health and Global Policy InstituteMunicipal governments
Currently, local governments such as municipal town halls set public health policy related to disease prevention
and family health through community health centers. The 1982 Healthcare for the Aged Act increased municipal
involvement by asking municipal governments to increase health services for the elderly, including healthinstruction and health screenings. The 2002 Health Promotion Act called for municipal governments to actively
participate in community health planning.42

42

Ministry of Health, Labour and Welfare. Health Promotion Act – Background Information. (accessed 1 January 2018) Retrieved fromhttp://www.mhlw.go.jp/shingi/2004/12/dl/s1202-4g.pdf

22© 2019 Health and Global Policy Institute3.1

The Health Insurance System | Japan's Health Insurance System

Overview of the health insurance system
Japan’s constitution, established in May of 1947, clearly states thatcitizens have the right to health, and that the advancement andpromotion of social welfare, social security, and public health arewithin the scope of government responsibilities [i]. In 1961, as aresult of government-led social welfare measures, Japan achieved
universal health coverage (UHC).43
Characteristics of Japan's UHC system are as follows:
Enrollment in public health insurance is compulsory, regardless of
citizenship, for all those who have resided in Japan for threemonths or more. Rather than being freely selected by enrollees,public health insurance schemes are designated according toemployment status, age, and residence. If an enrollee is neither thehead of household nor eligible through his or her own employer,then the scheme is designated based on the head of household’s
employment status, age, and residence.
Regardless of the health insurance scheme in which residents ofJapan are enrolled, they are free to choose their own healthcare
providers as well as their frequency of treatment. In Japan, thissystem is referred to as a "Free Access System," and according toFree Access, as long as residents hold proof of insurance, they may
receive necessary medical services when sick or injured for a fixed
contribution rate.44＜Column＞Free Access and Freedom ofPractice
Patients are free to receive care from theprovider of their choice. For example, a man
working at a company in Tokyo can make an
outpatient visit to a specialist at a university
hospital near his office during his spare timeand later that same weekend be seen by aphysician at a clinic near his home in Kanagawa
Prefecture. According to guidelines, referral
letters are required for outpatient visits atlarge hospitals; however, in most cases,
patients are free to see specialists at large
hospitals as long as they are willing to pay
additional fees of a few thousand yen.
Physicians also have freedom of practice.
Moreover, if physicians have acquired medical
licenses, they may exercise freedom bypracticing in any specialties regardless ofwhether or not they hold specialized
certifications. It is possible, for example, for asurgeon to practice as an "Internist/Orthopedic
Surgeon," and it is not uncommon to see signs
outside clinics that list multiple specialties.

As a result, out of convenience, some patients seek outpatient
visits at secondary emergency medical facilities mainly intended forpatients in need of hospitalization and surgery, despite having only minor illnesses, and such "visits of
convenience" have been recognized as problematic. In order to safeguard the medical sector from exhaustion due
to issues such as human resource shortages, primary care physicians and flat, per-visit copayments are being
discussed as ways of helping patients to select appropriate occasions for treatment that are in line with thefunctions of each provider.45[i] Article 25 of the Japanese Constitution states that "All people shall have the right to maintain the minimum
standards of wholesome and cultured living" and that "The State shall use its endeavors for the promotion andextension of social welfare and security, and of public health."43 Ministry of Health, Labour and Welfare "Annual Health, Labour and Welfare Report 2007" http://www.mhlw.go.jp/wp/hakusyo/kousei/07/dl/0101.pdf(accessed 25 January 2018)
44 Ministry of Health, Labour and Welfare "Japan's Health Insurance System" http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000Hokenkyoku/0000172084.pdf (accessed 25 January 2018)45 Cabinet Office, Government of Japan "The Current Situation Regarding the Primary Care System" http://www8.cao.go.jp/kiseikaikaku/kaigi/meeting/2013/wg2/kenko/131009/item3_5.pdf (accessed 25 January 2018)23© 2019 Health and Global Policy InstituteInsurance benefits and patient cost-sharing
Regardless of which of the three public health insurance schemes in which one is enrolled, benefit packages
essentially remain the same. Enrollees are unable to select schemes themselves, so even though slight differences
do exist between benefits, such as add-ons for disease prevention and health promotion, these differences do not
influence enrollment. In all three schemes, benefits cover services such as hospitalization, outpatient visits,transportation costs for psychiatric treatments, prescription medications, home-visit nursing, and dental care.
Co-insurance rates for medical costs remain the same across all insurance schemes, and are designated, instead,depending on age and employment status. Co-insurance for residents under 70 years of age is set at 30%. It is also
set at 30% for those aged 75 and over but still earning incomes comparable to the current workforce. Co-insurance
is set at 20% for children under 6 (prior to compulsory education), and it is also set at 20% for residents 70 to 74,
while it is set at 10% for low-income earners aged 75 and over.46
Overview of the High-Cost Medical Expense Benefit System
In order to prevent catastrophic medical expenses from overburdening household finances, the High-Cost Medical
Expense Benefit System subsidizes medical costs in excess of monthly, out-of-pocket (OOP) thresholds. These
thresholds vary depending on the ages and incomes of beneficiaries. For example, in the case of an enrollee aged
69 years or under earning an approximate income of between 3.7 and 7.7 million yen, the monthly ceiling or
maximum payment is calculated as [80,100 yen + (medical costs - 267,000 yen) x 1%]. The High-Cost Medical
Expense Benefit System plays a major role in ensuring Financial Risk Protection (FRP) within the healthcare
system.47 High-cost medical expense subsidies in FY2013 totaled around 1.6772 trillion yen for people under age
75 and totaled around 5.429 billion yen for people 75 and over. In the 10-year period from 2004 to 2013, those
totals rose by factors of approximately 1.56 and 1.65 respectively. When viewed as a whole, total allowances forhigh-cost medical expenses are increasing.48
System of insurance premiums
The methods for calculating insurance premiums vary depending on the public health insurance scheme, so
premiums paid by enrollees also vary. In schemes such as those managed by Health Insurance Societies and theJapan Health Insurance Association (JHIA), employers are responsible for half the cost of premiums. Health
Insurance Society and JHIA premiums are calculated by multiplying the premium contribution rate by the averageamount of monthly remuneration (such as monthly pay, delimited at reasonable intervals, received by an insured
person from an employer). Premium contribution rates vary from Health Insurance Society to Health InsuranceSociety and from one branch of the JHIA to another.
The methods for calculating premiums within the National Health Insurance (NHI) system vary according to region.
Premiums are determined based on four factors—income (levied on the head of household's income), assets(levied on the head of household's assets), equality (calculated per enrollee), and equity (calculated perhousehold).
In this way, premiums vary depending on the enrolled health insurance scheme, but in general, premiums rise inrelation to income, since they are calculated based on factors such as income. Premiums cover not only thebenefits of enrollees themselves, but also the benefits of those in the age 65 to 74 bracket as well as the 75 andover bracket. Consequently, because there are gaps in the income levels of enrollees among health insurance
schemes, fiscal adjustments are undertaken among schemes to stabilize financial resources.

46

Ministry of Health, Labour and Welfare "Overview of Our Country's Healthcare System " http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000Hokenkyoku/0000172084.pdf (accessed 1 September 2017)47 Ministry of Health, Labour and Welfare "To Users of the High-Cost Medical Expense Benefit System" http://www.mhlw.go.jp/file/06-Seisakujouhou12400000-Hokenkyoku/0000161153.pdf (accessed 1 September 2017)48
Ministry of Health, Labour and Welfare "Re-examination of the High-Cost Medical Expense Benefit System" http://www.mhlw.go.jp/file/05-Shingikai12601000-Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000138069.pdf (accessed 16 October 2017)24© 2019 Health and Global Policy InstituteOverview of health insurers
Japan's over 3,000 insurers can roughly be divided based on the three types of insurance that they provide—
employer-based health insurance, residence-based National Health Insurance (NHI), and health insurance forpeople aged 75 and over. Health insurance for people 75 and over is primarily supported by public funding as well
as by contributions from employer-based health insurance and NHI.
―Employer-Based Health Insurance
Employer-based health insurance can be subdivided into 3 schemes. The first of these schemes is managed byHealth Insurance Societies, aimed mainly at large companies, provided by over 1,300 insurers, and eligible forpublic subsidies in the case of financial difficulties. The second scheme is managed by Mutual Aid Associations(MAAs), aimed at government workers, and ineligible for public subsidies. The third scheme is administered by
the Japan Health Insurance Association (JHIA) and aimed at employees of small- to medium-sized companies.
Besides enrollee premiums, the majority of the JHIA's financial resources are comprised of Health InsuranceSociety premiums and public funding. Aspects such as the number of enrollees and standard premiums vary by
scheme.49
Health Insurance Societies were established as public corporations under the National Health Insurance Act.50
Societies are organized by single companies (Single Health Insurance Societies) as well as by business owners
within the same industry (General Health Insurance Societies). Enrollees in Health Insurance Society plans
numbered 29.17 million at the end of August, 2016, and there were 1,357 associations as of April 1, 2017. The
JHIA was established based on the National Health Insurance Act as an insurer for the employees and families ofsmall- to medium-sized businesses that are unable to establish Health Insurance Societies. Enrollees in JHIA plans
numbered 37.18 million at the end of August 2016. Premium levels vary among regional branch offices. In cases
where a Health Insurance Society becomes unable to operate and disbands due to reasons such as financial
difficulties, beneficiaries thus far enrolled in the society-managed plan are then enroll in a JHIA associationmanaged plan. In other words, the JHIA assumes the role of a safety net for employer-based health insurance.
Mutual Aid Associations were established based on Mutual Aid Laws as insurers for national government workers.
At the end of March, 2014, there were eighty-five MAAs, and enrollees numbered 8.91 million. Similar to Health
Insurance Societies, premium levels vary depending on the MAA in which one is enrolled.
―Residence-Based National Health Insurance
The residence-based National Health Insurance (NHI) system is the health insurance scheme that covers the selfemployed, unemployed, and retirees under 75 years of age. In other words, the NHI acts as the medical safety net
for sustaining the health of residents in the sense that it insures those not otherwise enrolled in insurance schemes.
Management of the NHI was shifted from the national to the prefectural level in 2018, and the system is currently
administered at the municipal level. The stated goal of this shift was to strengthen the financial foundations of
the NHI, which continues to run a deficit, by placing fiscal management responsibility in the hands of prefectural
governments, thus securing stable fiscal management and efficient business operations. Under the current system,
NHI enrollees pay premiums, but 50% of the actual costs for benefits are covered by public funding. The system isfinancially unstable and faces structural challenges, including a high average enrollee age composition, lowaverage enrollee income levels, and low average enrollee payment rates (both premiums and taxes).51―Health Insurance for the Elderly
The Medical Care System for the Advanced Elderly, as mentioned in Section 1, was introduced in 2008. All people
aged 75 and over are obliged to enroll, and all enrollees become insured individuals, with no distinction between
49 National Federation of Health Insurance Societies "Healthcare Coverage Seen Through Charts, 2017 Edition,” Gyosei Corporation, p.57-59.
50 National Federation of Health Insurance Societies "Basics of the Health Insurance System" http://www.kenporen.com/health-insurance/m_knowledge/(accessed 25 January 2018)51
Ministry of Health, Labour and Welfare "Reform of Health Insurance System " https://www.kantei.go.jp/jp/singi/syakaihosyou_kaikaku/dai4/siryou2.pdf(accessed 20 October 2017)25© 2019 Health and Global Policy Institutesupporters and dependents. The system is administered at municipal as well as prefectural levels. To promotetransparency and accountability regarding the expenses and medical costs that accompany the aging of the
population, the system for people 75 and over has been made virtually independent from the NHI system.
Premiums are calculated at the prefectural level based on health expenditures from the previous two years andare deducted from the individual pensions of enrollees. Since premium payments from enrollees themselves only
cover around 10% of medical costs, the Medical Care System for the Advanced Elderly is supported by public
subsidies along with fiscal adjustments from the two aforementioned insurance schemes.52

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

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

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/iryouhoken01/index.html (accessed 20 October 2017)26© 2019 Health and Global Policy InstituteStructure of the medical care system serving people aged 65 and overIn terms of fiscal adjustments within the medical care system for the elderly, as shown in Figure 3-1-2, about 50%of the financial resources for the Medical Care System for the Advanced Elderly (75 and over) are covered by publicfunding (National : Prefectural : Municipal = 4:1:1), 40% are covered by contributions from individual insurers (i.e.
paid from the premiums of the working class), and around 10% are covered from premiums paid by enrollees
themselves. The scale of medical expenses for those aged 75 and over has reached 16.8 trillion yen (FY2017 basebenefit expenses of 15.4 trillion yen combined with out-of-pocket (OOP) patient expenses of 1.3 trillion yen).53 In
principle, contributions paid out of the premiums from the labor force are determined proportionally according
to each insurer's number of enrollees aged zero to 74. Since this per-capita contribution depends on the numberof enrollees, insurers with weak financial standing shoulder a heavy burden. Therefore, in order to burden each
insurer based on their financial capacity, the apportionment of the required contribution from each insurer has
been gradually adjusted, with the proportion of the contribution required from employer-based insurers startingat one-half of what they should owe in FY2015, then rising to two thirds in FY2016, and eventually to the total
amount in FY2017.54

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

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/iryouhoken01/index.html (accessed 20 October 2017)54 Ministry of Health, Labour and Welfare "Expense Burdens (Total Fee Allocation)" http://www.mhlw.go.jp/file/05-Shingikai-12601000Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000140159.pdf (accessed 25 Jan 2018)27© 2019 Health and Global Policy InstituteTo resolve imbalances among the fiscal burdens shouldered by insurers that result from the unequal distributionof enrollees ages 65 to 74, each insurer's burden is fiscally adjusted based on the proportion of the population
ages 65 to 74 that they enroll. As a result of these fiscal adjustments, unlike in the Medical Care System for the
Advanced Elderly, people ages 65 to 74 remain insured under the same various schemes in which they werepreviously enrolled. As shown in Figure 3-1-2, prior to fiscal adjustment, the benefit payments for those ages 65
to 74 are initially shouldered 80% by schemes such as residence-based National Health Insurance (NHI) and 20%
by the other insurers, but this imbalance is fiscally adjusted among insurers such that in the end, benefits areshouldered 35% by schemes such as residence-based NHI, and 65% by the other insurers.55

System of publicly insured medical services
As previously mentioned, under Japan’s system of Universal Health Coverage (UHC), citizens are enrolled in atleast one of the public health insurance schemes. The following section explains Japan's system of insuranceapplicable services as well as the payment system for incurred medical expenses. The premise of this payment
system is a medical service fee scheme. Medical service fees are the fees received by insured healthcare providers
as compensation for publicly insured medical services and pharmaceuticals. After a patient visits a provider andpays the co-insurance portion of the incurred medical expenses (the total medical service fee), the provider thenrequests the remaining portion of the medical service fee from the insurer.
As also described in detail in Section 7, medical service fees are set based on discussions held by the Ministry of
Health, Labour and Welfare at the Central Social Insurance Medical Council, and a fee review is conducted once
every 2 years. Medical service fees are scored using a system of points, with one point valued at 10 yen.56

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

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryouhoken/iryouhoken01/index.html (accessed 20 October 2017)
56
Ministry of Health, Labour and Welfare "The Medical Service Fee Scheme" http://www.mhlw.go.jp/bunya/iryouhoken/iryouhoken01/dl/01b.pdf(accessed 25 January 2018)28© 2019 Health and Global Policy InstituteFigure 3-1-3 shows the flow of charges and payments for medical
services covered by public insurance. When a patient carrying
proof of insurance visits a medical provider, they pay coinsurance of 10% to 30% to the provider for received treatments
based on their age and income. The 70% to 90% of the incurred
medical fees that are excluded from co-insurance are covered bypublic funding from sources such as paid insurance premiums
and taxes. Providers covered under the health insurance system
submit claims for reimbursement of this 70% to 90% to Claims
Review and Reimbursement Organizations (CRROs) such as the
Health Insurance Claims Review & Reimbursement Services(HICRRS) and the National Federation of Health InsuranceSocieties (Kenporen). CRROs review whether insurance claims
are reasonable, charge insurers for the remaining portion of
medical service fees to be paid to the provider, receive thesepayments from health insurers, and pay them as reimbursement
to providers. In other words, the role of CRROs is to review
medical service fee statements (detailed insurance claim
receipts) submitted by medical providers and process medical
service fee payments based on the results of those reviews.

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

CRROs confirm whether or not services provided to patients conform to insurance rules (E.g. Rules forProfessionals in Charge of Insurance-Covered Healthcare Services and related notices). One issue that has beenraised is that although all claims must be reviewed according to the same set of rules, reimbursement disparities29© 2019 Health and Global Policy Instituteremain among prefectural branches of CRROs because criteria for determining the validity of claims often vary bybranch.57

57

Ministry of Health, Labour and Welfare "Improving Operational Efficiency of the Payment Fund / Development Plan—Schedule Overview"
http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-Hokenkyoku/0000169999.pdf (accessed 16 October 2017)30© 2019 Health and Global Policy Institute3.2

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

Overview of the Long-term Care Insurance System
The Long-term Care Insurance System was launched in 2000 as a system for society as a whole to support thelong-term care of the elderly. Municipalities operate as insurers, and all citizens over the age of 40 are covered bythis system. In comparison to other countries, this system is quite generous in terms of the levels of coverage andbenefits. More than 5 million people were eligible for Long-term Care Insurance as of April 2016.58
Foundations of the Long-term Care Insurance System
The foundations of Japan’s Long-term Care Insurance are described in detail in Section 1. Under the Elderly
Welfare System that existed in the past, municipal governments were given the final say in the selection of services,and since users could not select services, the content of services tended to be uniform. In addition, since service
fees were based on a patient’s ability to pay, people with middle- and high-level incomes shouldered heavy
burdens, and general hospitals began to face problems related to long-term hospitalizations for long-term care.
Along with the rapid aging of the population, the number of people requiring long-term care as well as the lengthof care itself increased, and long-term care needs grew greater and greater. At the same time, the status quo inwhich families traditionally met the needs of the elderly began changing, with shifts toward nuclear families andthe aging of the generation that provided care.59
After taking into account issues and changes such as these, Japan developed the Long-term Care Insurance System
as a way for society as a whole to support the long-term care of the elderly.
Basic principles of the Long-term Care Insurance System○ Independence support: To go beyond simply providing necessary long-term care and also support theindependence of elderly people.
○ User-oriented system: To provide users integrated access to health and welfare services from diverse entities
at the their own discretion.
○ Social insurance system: To employ a social insurance scheme with a clear relationship between benefits andburdens.
Long-term Care Insurance enrollees and premiums
Enrollees in Long-term Care Insurance are divided into two categories—Those aged 65 and over (Category 1
Insured) and those ages 45 to 64 who are concurrently enrolled in other medical insurance schemes (Category 2
Insured).
○ Category 1 Insured: Eligible for services regardless of whether they receive Certification for Long-term Care
Need or Certification for Support Need.
○ Category 2 Insured: Eligible for services only after they receive Certification for Long-term Care Need or
Certification for Support Need due to aging-related diseases (specified diseases).

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

http://www.mhlw.go.jp/toukei/saikin/hw/kaigo/kyufu/16/index.html (accessed 19 November 2017)
59
Ministry of Health, Labour and Welfare “The current and future role of the public Long-term Care Insurance System” http://www.mhlw.go.jp/file/06Seisakujouhou-12300000-Roukenkyoku/201602kaigohokenntoha_2.pdf (accessed 19 November 2017)31© 2019 Health and Global Policy InstituteAt the end of FY2015, Category 1 Insured numbered 33.82 million people, and Category 2 Insured numbered 42.04
million people (according to retrospective, monthly averages published in 2017).60,61
Category 1 enrollees (age 65 and over) pay their healthinsurance and Long-term Care Insurance premiums <Column> Why age 40 and over?
separately. Premiums and insurance rates are set by Surrounding the establishment of the Long-term
Care Insurance System, there was a great deal ofmunicipalities and pegged to nine standardized levels ofdebate centering on the justification behindincome. 62 For Category 2 enrollees (ages 40 to 64), healthinsurance and long-term care insurance premiums are paid targeting people aged 40 and over. Amidst
various opinions, there was support for targeting
together in a lump sum.63
people aged 20 and over or 60 and over, but it
was pointed out during consultations on theLong-term Care Insurance System in 1996 at theCouncil on Health and Welfare for the Elderly thatonce people pass the age of 40, the likelihoodthat they will have to care for their parents andthus need social support increases. As a result,the decision was made to enroll people aged 40
and over since long-term care costs should be
supported by society as a whole. It was throughsuch discussions that the current system took
shape. (MHLW, 2006)

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

http://www.mhlw.go.jp/topics/kaigo/osirase/jigyo/15/dl/h27_gaiyou.pdf (accessed 25 January 2018)61
Ministry of Health, Labour and Welfare “Long-term Care Insurance premiums for the Category 2 Insured persons”
http://www.mhlw.go.jp/topics/kaigo/osirase/jigyo/15/dl/h27_hihokensha.pdf (accessed 25 January 2018)
62 Ministry of Health, Labour and Welfare “Overview of the FY2018 Budget (Draft) (Health and Welfare Bureau for the Elderly)”
https://www.mhlw.go.jp/wp/yosan/yosan/18syokanyosan/dl/gaiyo-13.pdf (accessed 6 July 2018)
63
Ministry of Health, Labour and Welfare “The Long-term Care Insurance System” http://www.mhlw.go.jp/file/06-Seisakujouhou-12300000Roukenkyoku/2gou_leaflet.pdf (accessed 21 November 2017)32© 2019 Health and Global Policy InstituteCost of Long-term Care Insurance
As show in figure 3-2-1, half of the financing for Long-term Care Insurance comes from enrollee premiums, while
the other half comes from public funding. The budget for long-term care benefit pay-outs was set at 9.6 trillion
yen in FY2016. Funds were sourced from Category 1 premiums (2.1 trillion yen), Category 2 premiums (2.7 trillionyen), the national treasury (2.2 trillion yen), prefectures (1.4 trillion yen), and municipalities (1.2 trillion yen).
Similar to medical expenses, long-term care expenses are increasing annually along with increasing benefit costs,
and this trend is expected to continue in the future given the ageing of society in Japan.64

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

64

Ministry of Health, Labour and Welfare “The current and future role of the public Long-term Care Insurance System” http://www.mhlw.go.jp/file/06Seisakujouhou-12300000-Roukenkyoku/201602kaigohokenntoha_2.pdf (accessed 21 October 2017)33© 2019 Health and Global Policy InstituteUsage of care services and the Certification of Long-term Care NeedTo use long-term care services, applications are submitted tomunicipal government offices or Comprehensive Community<Column> The number of users at the time
Support Centers. To qualify, applicants must receive Certification ofof the establishment of the Long-termLong-term Care Need or Certification of Needed Support. Upon
Care Insurance System
receipt of certification, care managers prepare plans for applicants,
Before establishing the Long-term Careenabling them to use a variety of services.
Insurance System, care for the elderly was
A person’s level of required care (classified as Preventative Support
split between a system of welfare for the
Level 1 or 2, or Long-term Care Level 1 through 5) is determined byelderly and a system of healthcare for the
a committee of specialists that takes into consideration a written elderly. To ensure that people who haddiagnosis from an attending physician and an on-site survey that been receiving welfare services could
addresses 74 items related to the activities of the person’s daily life.
continue to use the same services in the
The appropriateness of the person’s level of care is then re- new system, certification criteria were
evaluated every two years or following marked deterioration inrelaxed. This led to an immediate increase inhealth.65 The yearly trend in the number of people requiring care is
the number of users requiring in-home careshown in figure 3-2-2.
or light care (Preventative Support Level 1 /To address the fact that demand for long-term care does not Long-term Care Level 1), thus creating
decrease and to curb the continual growth in the population
bottlenecks and long-waiting lists at
requiring light degrees of care (Preventative Support Level 1 / Long- intensive care nursing homes. (Ikegami
term Care Level 1), the 2006 revision of the Long-term Care Naoki, 2017)
Insurance Act introduced preventive care services. At that point,
recipients previously certified to receive Care Level 1 were split into
Long-term Care Level 1 or Preventative Support Level 2 depending on whether their condition seemed likely to
improve or remain the same.

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

5,611

5,000
4,086
3,840

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

3,445

452

2,983

409

473

2,562 377
337 389363 389
355
563
484

419

701

0

322

875
390

486

426
596

463
493
522
611

4,324 4,355
465

486

521

544

552
645

4,527
499

499

1,240 1,328
593

669

513

4,846
559

575

587

626

736

713

645

705

750

802

821

849

636
1,056

4,673

5,063
591
638
698
897

5,305

611

607
692
665
743

5,838
605
709
766

721
948

965

989

1,026

1,046 1,110

6,058
603
726
790

6,203
601

Number requiring transitory care 5

744

Number requiring transitory care 4

810

Number requiring transitory care 3

1,060 1,080 Number requiring transitory care 2

1,170 1,220 Number requiring transitory care 1

1,423 895

769

784

847

907

838

858

651

668

802

660

766

627

709

508
527

550

572

601

664

690

764

820

871

890

718

Number requiring support 2
Number requiring support 1

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

Number requiring support/transitory care2013 2014 2015

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

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

Roukenkyoku/2gou_leaflet.pdf (accessed 21 September 2017)34© 2019 Health and Global Policy Institute3.3

The Health Insurance System |Private Health Insurance

Roles played by private health insurance under universal health coverage
Private health insurance mainly plays roles complementary to the public health insurance system such as
guaranteeing services that are not covered by public benefits, guaranteeing additional expenses incurred during
periods of illness, and guaranteeing income security during leaves of absence.66,67
In addition, when taxpayers pay life insurance premiums, long-term care insurance premiums, or individual
annuity insurance premiums, they can receive certain income-based deductions. These are called life insurance
deductions, and they reduce the burdens of income tax and residence tax.

Background of rapid growth in the private health insurance sector
Insurance policies such as those for healthcare and cancer are classified as third-sector insurance policies (Foradditional information, please refer to the Glossary). Entry into the third-sector insurance industry was firstpermitted only to foreign life insurance companies in the early 1970s, but after drastic industry reforms in 1995
and the full liberalization of the third-sector insurance market in 2001, domestic companies were also allowed tosell insurance.68 The number of in-force health insurance contracts in the third-sector has been consistently on
the rise,69 and such contracts have become the main life insurance product. In recent years, new product types
such as special medical insurance (medical insurance with relaxed underwriting regulations) for "people withchronic illnesses and pre-existing conditions" have been developed for people who previously had difficulty joining
private health insurance plans. Against this backdrop, the number of in-force contracts in the private healthinsurance sector has been increasing annually. In 2016, the number of medical insurance contracts that specificallycovered services such as hospitalization and surgical security in their main life insurance sections had grown to
35.29 million.70

Future expectations for the role of private health insurance
The current public health insurance system in Japan offers a wide range of benefits and is a Free Access system.
The fact that private health insurance plays a limited role compared with other countries can also be explained byfactors such as the High-cost Medical Expense Benefit System and the ban on mixed medical treatments. The needfor private health insurance is gradually changing due to epidemiologic shifts, increasing demand for treatmentsof cancer, which is now the leading cause of death in Japan, and the expansion of advanced medical care services.
As a result, the role of private health insurance is expected to transition in the future alongside reforms to the
public health insurance system.71,72 Japan’s declining birth rate, aging population, and technological innovations
66 Tajika Eiji, Kikuchi Jun (2012)“The Role of Government and Private Insurance in Medical Security: A Theoretical Framework and Case Studies by Country”

http://www.mof.go.jp/pri/publication/financial_review/fr_list6/r111/r111_02.pdf (accessed 21 November 2017)67 Nakahama Takashi (2006) “The Role of Private Medical Insurance—Through Comparison Between Japan and the United States”
https://www.jstage.jst.go.jp/article/jsis/2007/596/2007_596_596_69/_pdf (accessed 21 November 2017)
68 Serizawa Nobuko (2010) “Third-sector insurance market” http://dspace.lib.niigata-u.ac.jp/dspace/bitstream/10191/16657/1/90_249-271.pdf (accessed
21 November 2017)
69 The Life Insurance Association of Japan “2017 Life Insurance Trends” http://www.seiho.or.jp/data/statistics/trend/pdf/all.pdf (accessed 21 November
2017)
70
The Life Insurance Association of Japan “2017 Life Insurance Trends” http://www.seiho.or.jp/data/statistics/trend/pdf/all.pdf (accessed 21 November
2017)
71 Nakahama Takashi (2006) “The role of private health insurance -through comparison between Japan and the US- “
https://www.jstage.jst.go.jp/article/jsis/2007/596/2007_596_596_69/_pdf (accessed 21 November 2017)72
Kawaguchi Hiroyuki, “International Comparison of Public Medical Security System and Private Medical Insurance - Role Sharing of Public and Private
Funding and Its Function –” Retrieved from http://www.seijo.ac.jp/pdf/faeco/kenkyu/196/196-kawaguchi.pdf (accessed 21 November 2017)35© 2019 Health and Global Policy Instituteare also expected to raise national medical care expenditures, so revisions of public health insurance may result
in reduced ranges of coverage. The private insurance plans currently offered in the market primarily cover limited
services for fixed fees; however, it is predicted that in the future, these private plans will expand to cover medical
services no longer covered publicly.

36© 2019 Health and Global Policy Institute4.1

The Healthcare Delivery System｜Overview of Japan's Healthcare
Delivery System

Under universal health coverage (UHC), and because Japan's healthcare delivery system ensures unrestricted
access, patients are able to receive care at any medical facility throughout the country. Another characteristic ofJapan's healthcare delivery system is that it is primarily managed by private organizations, with private hospitals(medical corporations) accounting for 70% of all hospitals and owning 50% of all hospital beds. When viewed froman international perspective, the number of hospital beds per capita in Japan is comparatively high, the average
length of hospitalization is long, and the number of healthcare professionals per bed is low. For example, as shownin Figure 4-1-1, although the average length of hospitalization is falling, it remains long in comparison to othercountries. On the other hand, it is important to recognize that simple comparisons are not possible, since thetypes of hospital beds used for calculations vary by country.73

73

Ministry of Health, Labour and Welfare "Current Situation and Issues Regarding the Healthcare Provision System" http://www.mhlw.go.jp/file/05Shingikai-12601000-Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000184301.pdf (Accessed 2018, Feb.1)

37© 2019 Health and Global Policy Institute4.2

Healthcare Delivery System｜Classification of Medical Facilities
and Hospital Beds in Japan

Medical facilities in Japan can be divided into medical clinics (inpatient/outpatient), dental clinics, and hospitals.
As can also be seen from Figure 4-2-1, medical clinics account for most medical facilities.

Hospitals and medical clinics are distinguished in Japan based on their numbers of beds. Facilities with 20 or more
beds are referred to as "hospitals," while facilities with 19 or fewer beds or lacking in-patient accommodations
are referred to as "clinics." As of 2015, Japan had 8,480 hospitals, 7,961 in-patient medical clinics, 93,034 outpatient clinics, and 68,737 dental clinics. Looking at the changes in medical facilities from 1987 to 2015, thenumber of hospitals declined by a factor of 0.86, while the number of out-patient clinics grew by a factor of 1.7.74

74

Ministry of Health, Labour and Welfare "Survey of Medical Facilities" http://www.mhlw.go.jp/toukei/saikin/hw/iryosd/15/dl/02_01.pdf (Accessed 2017,
Nov.20)38© 2019 Health and Global Policy InstituteHospitals and clinics can be broadly categorized by the organizations that manage them. There are national, public,social insurance organization, corporate, and private facilities, among others. As can also be seen from Figure 42-2, private hospitals continue to be the main healthcare provider within Japan's healthcare delivery system, but
corporate clinics are gaining prominence. This characteristic of Japan's healthcare delivery system is unique, since
the majority of hospitals in other countries such as the United Kingdom and France are public facilities.75

The types of hospitals operating in Japan include general hospitals, advanced treatment hospitals, regional
support hospitals, clinical research hospitals, psychiatric hospitals, and tuberculosis hospitals. Among these,advanced treatment hospitals, regional support hospitals, and clinical research hospitals have requirements thatvary from those of general hospitals regarding matters such as staffing. Only hospitals that fulfill theserequirements may be licensed to operate.76

75 Ministry of Health, Labour and Welfare "Survey Research Regarding the Actual Situation of Medical Corporations Outside of Japan"

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/kenkou_iryou/iryou/igyou/igyoukeiei/anteika.html (Accessed 2017, Nov.20)
76
Ministry of Health, Labour and Welfare "Ministry of Health, Labour and Welfare 2015 Fiscal Year Edition White Papers "http://www.mhlw.go.jp/wp/hakusyo/kousei/17-2/dl/02.pdf (Accessed 2017, Nov.27)

39© 2019 Health and Global Policy InstituteHospital beds in Japan are classified as general beds, long-term care beds, psychiatric beds, infectious disease
beds, and tuberculosis beds77. Although prior to the 4th revision of the Medical Care Act in 2000, “long-term carebeds” and “general beds” were combined in a single category referred to as “other beds,” this category was split
to facilitate more circumstance-appropriate healthcare delivery. As can be seen in Figure 4-2-3, most hospital beds
are general beds.

In terms of general hospital bed trends, due to healthcare expense burden mitigation measures implemented
after the achievement of universal health coverage such as the High-Cost Medical Expense Benefit System, publicdemand for medical care increased, and in accordance, the numbers of hospitals and hospital beds increased aswell. It is also worth noting the reality that general hospital bed numbers are propped up by many "socially
hospitalized" patients who are unable to leave hospitals and return home due to financial hardships or otherreasons.78
By 2025, all members of the Baby Boomer generation (those born between 1947 and 1949), will reach age 75 orover, inducing sharp increases in social security costs, including long-term care expenditures and medical careexpenditures. With the aging of the Japanese population predicted to progress even more rapidly in the future, it
is important for Japan to effectively utilize its limited medical resources. To ensure patients are able to accessappropriate care at the appropriate facility regardless of their location or situation, the government is functionallydifferentiating medical facility beds according to needs, aiming to reduce the number of hospital beds to between
1.15 and 1.19 million by 2025.

77 Ministry of Health, Labour and Welfare "Ministry of Health, Labour and Welfare 2015 Fiscal Year Edition White Papers "http://www.mhlw.go.jp/wp/hakusyo/kousei/17-2/dl/02.pdf (Accessed 2017, Nov.27)
78 National Federation of Health Insurance Societies (2017) Healthcare Coverage Seen Through Charts, 2017 Edition,” Gyosei Corporation, p.43

40

© 2019 Health and Global Policy InstituteAs shown in Figure 4-2-4, there are large disparities among prefectures in terms of the number of hospital beds.
The number of hospital beds per 100,000 people is about three times higher in Kochi Prefecture, where it is thehighest, than in Kanagawa Prefecture, where it is the lowest. In efforts to realize a more ideal future healthcaredelivery system, Japan is addressing such regional disparities by formulating Regional Medical Care Visions (See
Section 4.4) and reporting hospital bed functions and needs to prefectural governors.

Kanagawa

41© 2019 Health and Global Policy Institute4.3

The Healthcare Delivery System｜Numbers of Medical Professionals

As shown in Figure 4-3-1, nurses are the fastest-growing category among medical professionals in Japan, while
the number of doctors has remained relatively constant, only increasing by about 4,000 people per year.

Although doctor shortages previously pointed out in obstetrics and general surgery have been in decline since
1994, regional maldistribution of doctors remains an issue, so a variety of actions are being undertaken. Specificexamples include (1) supporting increases in university admissions by utilizing regional frameworks; (2) supporting
regional medical support centers; (3) supporting clinical departments that suffer from shortages such as obstetrics
and pediatrics; (4) supporting clinical training programs, (5) supporting a new system of medical specialists; and(6) organizing conferences to discuss the demands of medical practitioners. Regarding point (5), althoughimplementation of the new medical specialist system was originally planned for FY2017, it was postponed until
FY2018 due to concerns that the system might cause significant confusion in regional medical institutions.79
Concerning the new medical specialists system, which has been the subject of much debate related to the impactthat it will have on regional healthcare in terms of the maldistribution of physicians, many have thus far expressed
concerns about the consistency of accreditation standards for specialists under the independently managed
academic institutions and the maintenance of physician quality. The new system has been constructed with theaim of improving that quality and providing high-quality medical care. Specifically, a framework has been
79

Ministry of Health, Labour and Welfare "2. Physician Maldistribution Countermeasures" http://www.mhlw.go.jp/file/05-Shingikai-12601000Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000184302.pdf (Accessed 2018, Feb.1)

42© 2019 Health and Global Policy Instituteestablished for appointing neutral, third-party organizations and for the consistent evaluation and certification of
specialist accreditation and specialist development programs.80

80

Ministry of Health, Labour and Welfare "2. Physician Maldistribution Countermeasures" http://www.mhlw.go.jp/file/05-Shingikai-12601000Seisakutoukatsukan-Sanjikanshitsu_Shakaihoshoutantou/0000184302.pdf (Accessed 2018, Feb.1)

43© 2019 Health and Global Policy Institute4.4

The Healthcare Delivery System｜Regional Medical Care Delivery
System MaintenanceRegional governments are also launching various measures in response to the issues of the medical delivery
system. Along with establishing efficient, high-quality regional healthcare delivery systems, via the creation ofregionally comprehensive systems and by enforcing the Acts for Securing Comprehensive Medical and Long-TermCare in the Community (intended to promote the comprehensive maintenance of medical and long-term caresystems in each region), governments are taking major actions to establish Regional Medical Care Visions within
their Medical Care Plans (MCPs) and to construct regionally comprehensive care systems. The sections below
highlight specific actions.81

Medical Care Plans
The obligation to create Medical Care Plans (MCPs) was established in the 1985 revision of the Medical Care Act,with the objective of promoting regional healthcare delivery systems by encouraging the efficient use of medical
resources. Regional governments formulate MCPs based on the actual regional circumstances they face as theywork to maintain their healthcare delivery systems. MCPs include measures for the management of hospital bed
numbers and the maintenance of systems needed to provide high-quality healthcare.
Each MCP must address points such as the following: (1) five diseases (cancer, stroke, acute myocardial infarction,
diabetes mellitus, and psychiatric disorders); (2) five project areas (emergency care, care in the case of a disaster,care in remote areas, perinatal care, and pediatric/emergency pediatric care); (3) goals to be achieved for in-homecare; (4) medical collaboration systems; (5) securing of human resources in the healthcare field; (6) promotion of
information provision to the public; (7) ensuring safety in the healthcare field; (8) promotion of secondary andtertiary healthcare; and (9) standardization of calculations for general hospital bed numbers.
Regional governments typically review their MCPs in accordance with revisions to the Medical Care Act. Following
the sixth revision of the Medical Care Act in 2014, in order to "formulate regionally comprehensive care systems
along with efficient, high-quality healthcare delivery systems," regional governments have been working tocomprehensively ensure medical and long-term care, to establish hospital bed function reporting systems, toformulate regional care plans, and to establish Regional Medical Care Vision Councils.82

Regional Medical Care Visions
Medical and long-term care expenses are predicted to increase rapidly in 2025, when the Baby Boomers reach theages of 75 years or over. Growth in the elderly population varies by region, so in order to effectively and efficiently
distribute healthcare resources commensurate with each region’s functional needs, and based on the recognition
that it is crucial each region maintain a healthcare system that can provide high-quality healthcare services in linewith the circumstances of patients—whether they require acute, recovery, or chronic care—it was decided thateach region should establish a “Regional Medical Care Vision” within its Medical Care Plan.
The Medical Care Act, revised in accordance with the Acts for Securing Comprehensive Medical and Long-TermCare in the Community, stipulated the establishment of plans (regional MCPs) aimed at ensuring the future of
medical delivery systems. Those plans must set out Regional Medical Care Visions that include the matters
81 Ministry of Health, Labour and Welfare "Promotion of Comprehensive Long-term and Medical Care Act" http://www.mhlw.go.jp/file/06-Seisakujouhou-

12600000-Seisakutoukatsukan/0000038005_1_2.pdf (Accessed 2018, Feb.2)
82
Ministry of Health, Labour and Welfare "Regional Inclusive Care System"
http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/hukushi_kaigo/kaigo_koureisha/chiiki-houkatsu (Accessed 2017, Oct.20)

44© 2019 Health and Global Policy Institutespecified via an MHLW ordinance such as standards for promoting the functional differentiation of hospital beds
and regional collaboration. Prefectural governments must establish Regional Medical Care Visions that consider
the future necessity of each medical function per vision category by making use of estimates of future regional
demands and reported information. Governments must incorporate this information into their MCPs. This process
helps to further promote functional differentiation across medical institutions.
Regional Medical Care Visions include the 2025 healthcare demands (categorized by inpatient/outpatient, disease,etc.), the ideal healthcare delivery system that the region aims to create by 2025 (extent of necessity for medical
facilities in each secondary health management area etc.), and the measures/policies necessary for realizing thesesystems.

Other Major Policies
The Comprehensive Strategy to Accelerate Dementia Measures (The New Orange Plan)83
Aging of the population has turned dementia into one of Japan’s major issues. By 2025, roughly 7 million people
will be living with dementia. Currently, 1 in 5 people aged 65 or over live with dementia in Japan, but by 2025 that
number will rise to 1 in 7. In such a society, it will be important to think beyond merely supporting those withdementia and also focus on how to help them live better lives. To that end, MHLW has been seeking a wide arrayof opinions from various stakeholders, including people living with dementia and their families. Based on those
opinions and in cooperation with other related ministries and agencies, the MHLW formulated the “New Orange
Plan.”
Overview of New Orange Plan Goals⚫ Promote understanding and raise awareness about dementia (E.g. run awareness-raising campaigns andtrainings for dementia supporters)⚫ Provide appropriate medical and long-term care according to the stage of the disease(E.g. provide thorough, patient-centered medical and long-term care, encourage people to take measures toprevent the onset of dementia, and develop systems for early diagnosis and treatment)⚫ Strengthen early-onset dementia policies (E.g. raise and spread awareness)⚫ Support caregivers for people living with dementia (E.g. create early-stage dementia Integrated Support
Teams (IST) involved in early diagnosis and treatment)⚫ Promote the creation of aging- and dementia-friendly communities (E.g. enact abstract initiatives such as forlivelihood support as well as concrete initiatives such as for the creation of easily livable environments)⚫ Promote R&D and the dissemination of results on topics such as dementia prevention methods, diagnostic
methods, treatment methods, rehabilitation techniques, and long-term care models (E.g. clarify thepathophysiology of dementia)⚫ Emphasize viewpoints of people living with dementia and their families (E.g. grasp the needs of those in theearly stages of dementia and support their quality of life)
Cancer Countermeasures84
In Japan, cancer has been the leading cause of death since 1981. In 2015 alone, 370,000 people died from cancer.
In light of this situation and with the objective of further enhancing cancer countermeasures, the Cancer Control
Act was established in June 2006, and enforced in April 2007. In June of 2007, in order to comprehensively andsystematically promote cancer countermeasures, Phase One of the Basic Plan to Promote Cancer Control
Programs was formulated.
The First Term of the Basic Plan (FY2007 - FY2011) laid out the establishment of "Designated Cancer Care
Hospitals," the strengthening of palliative care delivery systems, and the improvement of regional cancer registries.
83 Ministry of Health, Labour and Welfare "Comprehensive Strategy for the Promotion of Dementia Measures (New Orange Plan)”

http://www.mhlw.go.jp/stf/seisakunitsuite/bunya/0000064084.html (Accessed 2018, Mar.2)
84
Ministry of Health, Labour and Welfare "Basic Plan for Promoting Cancer Countermeasures" http://www.mhlw.go.jp/file/04-Houdouhappyou-10901000Kenkoukyoku-Soumuka/0000181862.pdf (Accessed 2018, Mar.2)

45© 2019 Health and Global Policy InstituteThe Second Term of the Basic Plan (FY2012 - FY2016) tackled such issues as pediatric cancer, cancer education,and cancer patient employment. To add to that, in December of 2015, the "Plan to Accelerate Cancer Control
Programs" was formulated.
Although a variety of efforts were made via such cancer countermeasures, Japan was unable to achieve its 10year goal set in FY2007 of "decreasing the age-adjusted cancer mortality rate by 20% (for those under 75 years ofage)." In light of the situation, Japan needs to strengthen preventive policies even further from here on out. It isalso important to increase the rate of screenings for the early detection and treatment of cancers.
The overall goal for the Third Term of the Basic Plan to Promote Cancer Control Programs (FY2017 - FY2022) statesthat "The Japanese public, including cancer patients, will aim to understand and overcome cancer." A categorized
outline of the policies of this Term is shown below.
・Cancer prevention(1) Primary prevention of cancer; (2) Cancer screenings and early detection (secondary prevention)
・Improvement of Cancer Treatments(1) Genomic medicine; (2) Surgical therapy, radiation therapy, chemotherapy, and immunotherapy; (3) Team care;(4) Rehabilitation; (5) Psychological and emotional support;(6) Rare and treatment-resistant cancer (measuresaccording to the characteristics of each cancer); (7) Childhood cancer, AYA (Adolescent and Young Adult) cancer,
and cancer in the elderly; (8) Pathological diagnosis; (9) Cancer registration; (10) Efforts aimed at early
development and approval of pharmaceuticals and medical devices
・Living with cancer(1) Palliative care from the time of diagnosis; (2) Counseling and support, communication of information; (3)Countermeasures/support based on community cooperation; (4) Social issues including the employment of cancer
patients; (5) Countermeasure that correspond to developmental life stages. Cancer research, human resource
development, cancer education, and raising public awareness make up the foundation that supports these threepillars.
The following points are also listed as necessary for the comprehensive and systematic promotion of cancer
countermeasures: further strengthening of collaboration and cooperation among stakeholders; formulation ofplans by prefectural governments; efforts by the public, including cancer patients; cooperation with patientorganizations; implementation of necessary fiscal measures and budget optimization/prioritization; progressassessments and reviews of the Basic Plan.

46© 2019 Health and Global Policy Institute5.1

Medical Cost Optimization Measures｜Medical Cost Optimization Plans

Japan is implementing a variety of cost-optimizing measures in order to suppress excessive increases in medical
costs. Among them are Medical Cost Optimization Plans, which set out general targets and medical cost estimation
methodology. In line with the targets and methods indicated in the National Medical Cost Optimization Basic
Policies, each prefectural government must also prepare its own Medical Cost Optimization Plan.85
The initial National Plan was executed in two phases. The first phase spanned FY2008 to FY2012 and the second,
FY2013 to FY2017. The goals of these five-year phases were to "reduce the length of average hospital stays" andto "improve the implementation rates of Specific Medical Examinations." A third phase was created following thecompletion of the second, slated to last from FY2018 to FY2023. With optimization as the stated goal, this six-year
phase will continue to promote efforts to improve the implementation rates of Specific Health Examinations, while
newly including "efforts to prevent the worsening of diabetes," "promotion of the use of generic drugs," and "theappropriate use of pharmaceuticals (including issues related to redundant prescriptions and concomitant use).”The new phase also takes into account hospitalization cost estimates based on the results of promoting functional
differentiation of hospital beds.

The Concrete Direction of the National Medical Cost Optimization Basic Policies from 2018 Onwards
At the end of FY2017, a Ministerial Notice was issued on the Basic Policies for Medical Cost Optimization. In termsof a concrete direction for these policies, the notice discussed the calculation formulas used by prefectures toestimate medical cost targets (outpatient expenses and inpatient expenses) as well as efforts taken by prefecturesto promote the optimization of medical costs (numerical target-setting when possible). Specific issues discussed
in that notice are listed below:
・Outpatient Medical Expenses
Prefectural medical cost targets are to be set based on historical trends. From FY2023 these targets will reflect
the effects of medical cost optimization efforts. These effects will be reviewed in two stages. In the first stage,
Japan will review medical cost reductions achieved via efforts to meet national targets for Specific Health
Examinations and Specific Health Guidance implementation rates as well as targets for the use of generic drugs.
In the second stage, Japan will work to reduce regional disparities in medical costs per capita by strengthening
incentive measures for health-promotion such as the implementation of point-based healthcare systems and also
by promoting efforts to reduce redundant prescriptions.
・Inpatient Medical Expenses
Japan will estimate inpatient expenses based on the outcomes of efforts to differentiate hospital beds by function
and promote collaboration among medical facilities. Regarding the functional differentiation of hospital beds,
Japan will work to shorten the amount of time that patients spend in advanced-acute and acute beds and lengthen
the amount of time spent in recovery beds. In terms of regional disparities among inpatient expenses, because astrong correlation exists between hospitalization costs and the numbers of beds in each region, prefectural
governments are being asked to formulate Medical Cost Optimization Plans consistent with their Regional Medical
Care Visions. Ultimately, Japan will aim to cut hospitalization costs in half.

85

Ministry of Health, Labour and Welfare "Revision of Basic Policies for Medical Cost Optimization / Plans for Medical Cost Optimization"
http://www.mhlw.go.jp/file/05-Shingikai-12401000-Hokenkyoku-Soumuka/0000148008.pdf (Accessed 2017, Nov.27)

47© 2019 Health and Global Policy Institute・Visualizing Regional Disparities
The National Government will conduct data analyses using Japan’s National Database (NDB) to bring into viewprefectural disparities among medical costs, generic drug usage, and redundant prescriptions / concomitant drug
usage. Summarized results from these analyses will be provided as datasets to prefectural governments as
reference material for analyses.

48© 2019 Health and Global Policy Institute5.2

Medical Cost Optimization Measures｜Disease Prevention and
Health Promotion by Insurers

The Health Science Council's Community Health and Nutrition Team released an interim report on September 15,
2005, entitled "Future Promotion of Lifestyle Disease Countermeasures." That report cited challenges such as thefollowing regarding the promotion of lifestyle disease countermeasures: insufficient sampling reliability of
populations at risk for lifestyle diseases and insufficiently thorough health guidance; the need for thorough,evidence-based health examinations and guidance; the need for further improvements in the quality of healthexaminations and guidance; insufficient presentation of concrete strategies and programs by the National
Government; and insufficient general understanding of the current situation / insufficient data for policy
evaluations. The creation and strengthening of lifestyle disease countermeasures was deemed necessary in orderto address these issues. 86 To that end, “Specific Health Examinations” and “Specific Health Guidance” were
formulated in April 2008. Furthermore, in order to successfully "extend the nation's healthy life expectancy," (animportant measure within the Japan Revitalization Strategy), it was decided that health insurance associations
would be required to draw up and implement Data Health Plans and that corporations would be required topromote corporate wellness efforts.87

Specific Health Examinations / Specific Health Guidance
The Japanese government has formulated treatment plans for medical practitioners—Specific Health
Examinations and Specific Health Guidance—in an effort to tackle lifestyle diseases, which are causal factors inapproximately 60% of deaths each year in Japan. Specific Health Examinations and Specific Health Guidance focus
on treating metabolic syndrome in adults ages 40 to 74. This is done through a two-step process. Patients firstreceive Specific Health Examinations. For patients identified as being at high risk for developing lifestyle diseases
and who can expect preventative effects from lifestyle changes, public health nurses then provide Specific Health
Guidance, supporting the re-examination of lifestyle choices. The MHLW created this program with the goal of
reducing the number of people suffering from lifestyle diseases such as diabetes by 25% between FY2008 andFY2017. Based on that goal, individual insurers are expected to create plans to promote Specific Health
Examinations and Specific Health Guidance for enrollees. These plans are created based on basic measures laidout by the national government such as Specific Health Examinations.
At present, the actual implementation rate for Specific Examinations among all insurers is 50.1%. When broken
down by insurer type, implementation rates vary considerably, with municipal sections of the NHI at 36.3%, theNational Health Insurance Association at 46.7%, the Japan Health Insurance Association at 45.6%, National
Seamen's Insurance at 46.8%, Health Insurance Societies at 73.9%, and Mutual Aid Associations at 75.8%. Althoughrates for Health Insurance Societies and Mutual Aid Associations exceed 70%, rates remain low for other insurers,
such as municipal sections of the NHI. Implementation rates for Specific Health Guidance, when compared to rates
for Specific Health Examinations, are significantly low for every single insurer, with municipal sections of the NHI
at 23.6%, the National Health Insurance Association at 8.9%, the Japan Health Insurance Association at 12.6%,
National Seamen's Insurance at 6.9%, Health Insurance Societies at 18.2%, and Mutual Aid Associations at 19.6%.88
86

Ministry of Health, Labour and Welfare "Future Promotion of Lifestyle Disease Countermeasures (Interim Summary)"
http://www.mhlw.go.jp/shingi/2005/09/s0915-8.html (Accessed 2017, Nov.21)
87 Ministry of Health, Labour and Welfare "Section 1: Background and Aims of the Data Health Plan" http://www.mhlw.go.jp/file/06-Seisakujouhou12400000-Hokenkyoku/0000069365.pdf (Accessed 2018, Feb.7)
88 Ministry of Health, Labour and Welfare "2015 Fiscal Year Implementation Status of Specific Health Examinations and Specific Health Guidance"
http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-Hokenkyoku/0000173319.pdf (Accessed 2018, Feb.2)49© 2019 Health and Global Policy InstituteOne reason for low Specific Health Guidance implementation rates is that same-day blood test results areunavailable, so it can take several months from screening to guidance.89

Data Health Plans
In response to the development of advanced population aging and following Japan’s monetary and fiscal policies
as the “Third Arrow” of Abenomics, the Japan Revitalization Strategy was announced, setting "extension of thenation's healthy life expectancy" as an important goal. During the first phase of this initiative, between FY2015
and FY2017, in order to realize that goal and as a new approach for disease prevention and health promotion, allhealth insurers were required to prepare and publish Data Health Plans. These plans laid out strategies that each
insurer would take to maintain and improve the health of its enrollees based on analyses of health and claims
data. As of April 2018, the second phase of Data Health Plans was implemented and is now headed for full-scale
implementation. Similar initiatives are also required for the municipal sections of NHI. By preparing and utilizing
Data Health Plans, it is hoped that health insurers will move toward the operation of more effective healthcare
programs.
One goal for the creation of Data Health Plans is to promote the effective and efficient implementation healthcare
programs via plan-do-check-act (PDCA) cycles based on analyses of health and claims data. Another goal is therealization of healthy workplaces through collaborative health programs in which businesses cooperate withinsurers on initiatives to create healthy working environments and improve the health awareness and lifestyle
habits of employees.90 This goal is clarified within the Basic Policies on Economic and Fiscal Management andReform 2016 (“Big-Boned Policies”) approved by a Cabinet order in 2016 which states that “Further collaboration
between corporate wellness and data health measures will be promoted by corporations.” There are high hopes
for preventative medicine and health promotion measures implemented by insurers.

Corporate Wellness
Corporate wellness is the act of thinking about employee healthcare from an administrative perspective andundertaking strategic actions. It has been pointed out that increasing national medical costs will further worsen
the fiscal situations of insurance associations and other insurers. This will lead to increases in insurance premiums,
in turn requiring increased contributions from insured individuals and corporations. In addition, as the workingage population shrinks in concert with continual birthrate decline and ageing of the population, there is concernthat the overall health of the working population will suffer, reducing the abilities of companies in Japan to secure
human resources and leading to overall decreases in corporate productivity. For corporations, the maintenanceand improvement of employee health combined with optimization of medical costs and improvements in
productivity can all be considered investments in the future.91
In addition, the promotion of employee health can improve a corporation’s public image, increase productivity,
contribute to organizational revitalization, and improve corporate performance. The Ministry of Economy, Tradeand Industry (METI) has selected corporations that are strategically engaging with corporate wellness, recognizing
one company in each industry as a "Corporate Wellness Brand.” Through this initiative, the government is building
the social capital of companies and encouraging them to further promote corporate wellness.
In July of 2017, MHLW published the "Collaborative Health Guidelines for the Promotion of Data Health andCorporate Wellness." These guidelines summarize the significance of collaborative health efforts, and offer
89 Ministry of Health, Labour and Welfare "Future Measures for Increasing the Implementation Rates of Specific Health Examinations and Specific Health

Guidance" http://www.mhlw.go.jp/stf/shingi/2r9852000002e0cn-att/2r9852000002e0hh.pdf (Accessed 2018, Feb.2)
90 Ministry of Health, Labour and Welfare "Primer on the Creation of Data Health Plans" http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000Hokenkyoku/0000178352.pdf (Accessed 2018, Feb.2)
91 Ministry of Health, Labour and Welfare "The Corporate ‘Workplace Wellness’ Guidebook ~ Recommendations for Promoting Health ThroughCollaboration and Cooperation ~ (Rev.1st ed.)" http://www.meti.go.jp/policy/mono_info_service/healthcare/kenkokeiei-guidebook2804.pdf (Accessed
2018, Feb.9)50© 2019 Health and Global Policy Institutepractical examples for both business owners and insurers such as health insurance associations on what efforts
may be effective for promoting employee health, advancing business-insurer collaborations, and putting
corporate wellness techniques into practice. In other words, these guidelines aim to make "Data Health"implemented by insurers such as health insurance associations and "Corporate Wellness" implemented bybusiness owner, function more effectively when utilized in combination.92

The Promotion of Incentives for Individuals and Insurers
The strengthening of incentives for individuals and insurers is yet another way to encourage preventative medicine
and health promotion.
As an incentive for encouraging preventative medicine practices and health promotion in individuals, someinsurers in Japan are implementing “healthcare points” systems or offering support such as for insurance
payments. For example, enrollees who make the effort to receive Specific Health Examinations or who improvetheir examination results might receive health-related goods or discount coupons for future examinations.93
In terms of strengthening incentives for insurers in order to make it easier, among other things, for them to fully
apply their functions according to their unique characteristics, the following measures were included within policy
revisions such as that of the National Health Insurance Act of 2015: (1) the establishment of insurer effort support
systems for residence-based NHI, and the evaluation of objective indices and creation of subsidies for initiatives
such as those aimed at preventing the worsening of diabetes; and (2) comprehensive reviews (implemented from
FY2018) of the systems used for calculating financial support for people aged 75 and over who are enrolled inhealth insurance or mutual aid associations that evaluate insurers based on not only their reported results fromSpecific Health Examinations or Specific Health Guidance, but also on multiple other indices such as cancer
treatment initiatives or collaborations with businesses. Reforms of the system for calculating contributions fromhealth insurance associations and mutual aid associations for those aged 75 and over were implemented from
FY2018, emphasizing incentives for insurers’ efforts such as those aimed at disease prevention and healthpromotion. The reforms are expected to have far-reaching but minor implications in terms of penalties for many
insurers, while introducing step-wise reductions in insurers’ financial contributions according to their level ofachievement on certain indices.

92 Ministry of Health, Labour and Welfare "Data Health and Collaborative Health Guidelines for Promotion of Corporate Wellness"

http://www.mhlw.go.jp/stf/houdou/0000170819.html (Accessed 2018, Feb.9)
93 Ministry of Health, Labour and Welfare「Insurer Incentives」http://www.mhlw.go.jp/file/05-Shingikai-12601000-Seisakutoukatsukan-

Sanjikanshitsu_Shakaihoshoutantou/0000163331.pdf (Accessed 2018, Nov.28)

51© 2019 Health and Global Policy Institute6.1

Medical Drugs/Medical Devices｜Pharmaceuticals

Definition of New Drugs
New Drugs (Originator drugs) are medical drugs which are clearly differentiated in active ingredients, dosage,administration, indication and efficacy from drugs which have already been approved. New Drugs mainly consistof drugs containing new active ingredients, new ethical combination drugs, drugs with a new administration route,drugs with a new indication, drugs in new dosage forms, and new dosage drugs.

Pharmaceutical Product Approvals
To manufacture, distribute and sell new drugs, pharmaceutical companies must first obtain marketing approval
from the PMDA. Approvals are made by the PMDA based on an evaluation of the new drug’s efficacy and safety
information obtained via clinical trials. Clinical trial information and filing documents must conform to the quality,
GLP and GCP requirements defined by the MHLW.
In addition to the standard approval process, the MHLW has implemented to mechanisms for expedited reviews
and approvals of innovative pharmaceutical products.
To address the development lag between Japan and other major markets, the MHLW implemented the “Sakigake”
review policy in 2014 that awards prioritized reviews and expedited approvals for products that are developed for
and filed for first in Japan. To be eligible for “Sakigake” reviews, new drugs must meet all of the following criteria:
1) innovative new mechanism of action, 2) degree of severity of the target indication, 3) high degree ofeffectiveness, and 4) a desire to develop and file first in Japan.
Furthermore, In 2017, the MHLW implemented the “Conditional Expedited Approval” Policy for drugs that address
disease states with small patient populations with limited treatment options and large unmet medical needs forwhich the execution of confirmatory clinical trials are difficult. The policy enables pharmaceutical companies tofile for approval with efficacy and safety data generated from non-confirmatory trials, such as phase II trials, on
the condition that additional safety and surveillance measures, including the use of real world data, areimplemented. It is expected that this policy will support the development of novel treatments including iPS cellbased genetic therapies.

Pharmaceutical Reimbursement Pricing
Once marketing approval is obtained, manufacturers must apply for reimbursement pricing under the National
Health Insurance (NHI) system. The NHI reimbursement price is the price at which payors reimburse medical
institutions for pharmaceutical products used to treat patients.
Initial NHI Reimbursement prices that are set by the MHLW’s Central Medical Council based primarily on thecomparable based method when similar approved products already exist on the market, or the cost based method
for novel therapeutics with no similar approved products.
In addition, the MHLW has also implemented pricing premiums to both incentivize the development of innovative
products while constraining the reimbursement prices of products whose degree innovativeness are assessed tobe limited. Products with superior efficacy or usefulness compared to existing products, with orphan or pediatricindications, or for which Japan is the first country are eligible for additional price premiums, whether priced via
the comparator or the cost based methods
Once set, pharmaceutical reimbursement prices are revised biannually based on an assessment of the variance
between NHI reimbursement prices and actual market (wholesale) prices. While the price difference between
NHI reimbursement prices and actual market prices enable medical institutions and pharmacies to book revenue,
biannual price revisions are intended to limit discounting to within a reasonable range known as the “R-zone”
established by the MHLW, currently set at 2% of reimbursement prices. In practice, the biannual price revisions
52© 2019 Health and Global Policy Institutehave the effect of lowering drug prices, enabling the MHLW to control the natural growth in overall healthcare
spending.
In addition to the standard biennial reassessment of drug prices in Japan, additional adjustments have also been
implement to ensure products are profitable and to promote the development of new drugs while limiting overall
costs by reducing prices for drugs that have seen significant market expansion or that have lost patent protection.

Adjustment

Type

Description

Lack of profitability

Positiveadjustment•

Unprofitable drugs with high medical need are
eligible for an increase in NHI list price by MHLW orgenerics where all generic products are
unprofitable

Market size expansion

Negativeadjustment•

Added price cuts for increased market size or sales
due to indication expansion

Premium to promote thedevelopment of new drugs
and eliminate off-label use

Positiveadjustment•

Premiums for innovative products designed to slow
price reductions and promote new drug
development

Additional Cuts for Long
Listed Drugs

Negativeadjustment••

Additional cuts to long listed products
Used to fund premiums for new drug development

As healthcare costs continue to rise, it is expected that additional revisions to pharmaceutical reimbursement
pricing mechanism may be made going forward. While undetermined, to date, topics such as the introductionof health economics outcome considerations when setting reimbursement prices in addition to potential shift
towards annual price revisions have been discussed.

Pharmaceutical Product Quality and Safety
Similar to other major markets, the development, manufacture and distribution of pharmaceutical products inJapan are also governed by GXP regulations such as GLP, GCP, GMP and GVP standards. However, there are a few
notable differences in Japanese regulations and policies related to product quality and safety.
First, under the Pharmaceutical Affairs Law, to comply with Japan’s Good Quality Practices (GQP) and GVP
requirements, pharmaceutical companies must designate three individuals to take on the following roles uniqueto Japan to oversee and govern product quality and safety related activities:- General marketing compliance officer – Individual with overall responsibility for product quality and safety- Quality assurance manager – Individual responsible to ensure quality activities comply with GQP regulations- Safety manager – Individual responsible for ensure safety activites comply with GVP regulations
Second, upon approval of novel drugs, Japan requires pharmaceutical companies to conduct post marketingsurveillance activities to track and ensure patient safety. Surveillance activities are generally required to be
conducted during the 6 month period after launch and are intended to identify track any adverse events in thereal world setting that may not have been observed during clinical trials. These activities are governed by Japan’s
Good Post-marketing Surveillance Practice (GPSP) regulations.
Third, to further ensure patient safety, new pharmaceutical products are generally restricted to 14 dayprescriptions for one year from the first day of the month pricing is listed. Exceptions to the 14 day prescription
restriction for specific new drugs can be awarded by the Central Medical Council for products that meet either ofthe following two criteria:- New drugs (e.g. compound drugs) with APIs that have the same effect, efficacy, dosing and administration as
approved products with over one year of clinical experience- New drugs where, based on its characteristics or the disease state, only over 14 day formulations exist andthe safety of over 14 day administration has been confirmed
53© 2019 Health and Global Policy Institute6.2

Medical Drugs/Medical Devices｜Generic Drugs

Definition of Generic Drugs
Medical drugs have a period when the pharmaceutical company which first developed it has the exclusive rights
for manufacturing and marketing them (period during which patent is in effect and reevaluation period forverifying efficacy and safety), and the drugs manufactured and marketed during this period are called original
drugs.
Once this period expires, based on the publicized patent information, other pharmaceutical companies canmanufacturer/market drugs which contain the same active ingredients. These drugs thus launched which containthe same active ingredients as the original drug are called generic drugs.
The characteristics of generic drugs are that while they have the same active ingredients and as a general rule thesame efficacy, effect, dosage and administration as the original drug, their prices are lower. Also, while the original
drugs are exclusive to the pharmaceutical company which developed it first, in many cases, generic drugs are
manufactured and marketed by several
Perspective: MHLW’s position on generic drugs
pharmaceuticals. In the Western market, as
In Japan, thanks to the universal national health insurance
these drugs are often prescribed using thesystem, every citizen has equal access to a necessary and highgeneric names of the active ingredients (asquality medical treatment by paying only a certain percentage
opposed to original drugs which are often
of the medical cost from his/her own pocket. On the othercalled by their brand names), they have been
hand, with the advancement of medical technology and fastcalled generic drugs, and this term has become
aging society, Japan’s healthcare cost keeps on rising
popular in Japan as well.
increasingly jeopardizing the sustainability of the national
healthcare system. To maintain this universal healthcare

Efficacy and Safety of Generic Drugs
system, sustain the quality of medical care and to drive
To manufacture and market generic drugs,
efficiency improvement in the healthcare service, Japanese
government has adopted a policy to encourage the usage ofunlike the original drug, there is no need togeneric drugs.
conduct clinical trials to verify efficacy andIn the cabinet decision in June 2015, it has set a target tosafety of the active ingredients, as efficacy andachievethe share of generic drugs of 70% by 2017and 80% by
safety have already been established in the
September 2020, with an ambition to achieve these targets asapproval process of the original drug.
soon as feasible.
However, even if the drug has the same active
ingredients, if it is made by a different
manufacturing process, it may not have the same mode of action. Therefore, in the manufacturing and marketingof generic drugs, they are examined to see if the efficacy and safety are equivalent to those of the original drug.
Evaluation criteria consist of “Test Procedures and Acceptance Criteria”, “Stability Test”, “Bioequivalence Studies”.
If, based on these criteria, the generic drug is proved to be the same as the original drug, its efficacy and safety
are cleared of any issues and the generic drug is eligible to get approval.

Prescription and Dispensing of Generic Drugs
In Japan’s National Health Insurance System, when physicians prescribe medical drugs, it is a common rule to use
the generic name of the active ingredient. However, a physician can choose to put his signature on his prescription
to specifically request the pharmacist to dispense original drug and not to change to generic drugs. Pharmacies,
unless there are specific instructions from the physician, are encouraged to dispense generic drugs upon briefing
to the patient and getting his/her consent. Incentives are set to make sure pharmacies will proactively choose todispense generic drugs.
France is another market which adopts a similar mechanism of prescription and dispensing of generic drugs. In
France, if a pharmacy refuses to dispense generic drugs in substitution to the original drug, the patient has to pay
54© 2019 Health and Global Policy Institute100% out-of-pocket at the pharmacy and apply for reimbursement later. This system is a strong incentive to drive
penetration of generic drugs.
USA is an example of a market which adopts a different system than Japan. In the USA, the insurance policy heldby the patient dictates which medical drugs he can use, giving limited freedom of choice to the physician or thepharmacist. The decision of which drug is to be adopted is made by the HMO, the insurer, in negotiation with thepharmaceutical company.

Drug Price of Generic Drugs
As generic drugs don’t require clinical trials and relieves the pharmaceutical company of large chunks of R&D
expenses compared to an original drug, pharmaceutical companies can remain profitable even if the drugs prices
are set lower than the original drugs. For this reason, in Japan’s National Health Insurance System, it is a common
practice that the reimbursement price of generic drugs is set significantly lower than that of the original drug,
generally at 50% or less.
Furthermore, in Japan’s NHI system, reimbursement prices are determined by taking actual market prices into
consideration. Therefore, if several generic drugs which contain the same active ingredient exist in the market andprice competition occurs in the market, cheaper reimbursement price will be set reflecting those circumstances.

Rules for Determining NHI Listed Price of Generic Drugs
Twice in a year (June and December), generic drugs have opportunities to get screening for approval and inclusionin the NHI reimbursement list.
If generic drugs are to be included in the NHI list for the first time, the basic rule is to set its price at 50% of theoriginal drug, with two exceptions: the price of internal medicine is set at 40% of the price of the original drug if
the number of items proposed for inclusion in the NHI list exceeds 10 items; and price of biosimilar is to be set at
70% of the original drug.
Furthermore, after the initial inclusion in the NHI list, drug prices will be gradually reduced at each of the biannual
drug price revision which target all listed products in the NHI list, according to the changes in the actual market
price. In cases where several generic drugs exist, a policy is implemented for setting one price per each price range,
as described below:
Generic drugs whose price is estimated to be less than 30% of the highest price are included in the list at
single price (weighted average)
Generic drugs whose price is estimated to be 30% or higher but less than 50% of the highest price are includedin the list at single price (weighted average)
Generic drugs whose price is estimated to be 50% or higher of the highest price are included in the list at
single price (weighted average)55© 2019 Health and Global Policy Institute6.3

Medical Drugs/Medical Devices ｜ Non-prescrition Drug

Segmentation of prescription drugs and non-prescription drugs
Apart from prescription drugs which are dispensed by the pharmacist and taken by the patient according to theprescription issued by a physician/dentist, drugs requiring guidance and non-prescription drugs exist which
general public may purchase directly at pharmacies and drugstores and use at one’s own discretion.
As non-prescription drugs can be purchased/taken by the general consumer at his/her own discretion, sellers are
required to provide information to the buyer, and they are divided into Class 1, Class 2 and Class 3 based on risk
level, each category with a defined degree of necessity of providing information.
Class 1 Drugs : Drugs for which pharmacists are required to provide information and only under a pharmacist’s
management and guidance can be sold/handed overClass 2 Drugs :Drugs which can only be sold and handed over at stores where pharmacists/registered sellers
are working full time, and providing information has to be done on best effort basis.
Class 3 Drugs ：Drugs whose risk level is the lowest. Unless the buyer directly requests for it, they can be soldwithout any legal obligation to provide explanation in particular.
Drugs requiring guidance are, distinct from non-prescription drugs, categorized as “quasi-prescription drugs”, andSwitch OTC Drugs, which have just been switched from prescription to non-prescription drug and thus haven’t
been certified risks as non-description drug, as well as Direct OTC Non-prescription Drugs, which have never beenused as prescription drugs, fall into that category.

OTC Drug
Categorization

ExpertBehind-the-Counter
Drug
Pharmacist

Provide written information
face-to-face(Obligation)

Distribution ontheInternet/MailorderNot permitted

Provide written information(Obligation)

Category1
Nonprescription
Drug

Explanation from
Salesperson to Customer

Response to
Customer
Request for
Consultation

Obligatory
Category2

Category3

Pharmacist
orregisteredsales person

Best efforts

Permitted

Not stipulated in law

The term "OTC pharmaceutical" refers to pharmaceuticals without any significant action on the human body in terms of its efficacy and effect, intended foruse with options selected by a consumer based on information provided from a pharmacist and other medical professionals.

56© 2019 Health and Global Policy Institute6.4

Medical Drugs/Medical Devices｜Medical Devices

Medical Device Classification and Approval
In Japan, medical devices are defined as approved medical products with clearly defined structure, method of use,
effect and performance to be used with objective of either “diagnosing, treating or preventing disease” or “impacting
the structure or function of the human body.”94
Medical devices, in Japan, are classified into the following four categories based on their intended use and safety risk.
Approval requirements for medical devices vary by category
In particular, category III and IV medical devices with the largest risks require PMDA approval.

Approval
Requirement

Category

Type of Medical Device

General
Medical
DevicesClass I

Medical devices with extremely low risk in the event ofdefect / failure:• Enteral infusion sets, nebulizer, x ray film, blood gas
analyzer, surgical non-woven products, etc.

 Selfdeclaration

 Third Party
Certification

Class II

Medical devices with relatively low risk in the event ofdefect / failure:• X-ray imaging device, electrocardiograph, ultrasonicdiagnostic device, injection needle, blood collectionneedle, vacuum blood collection tube, infusion set
for infusion pump, Foley catheter, hearing aid,
household massager, etc.

Class III

Medical devices with relatively high risk in the event ofdefect / failure:• Particle beam therapy equipment, artificial dialyzer,
epidural catheter, infusion pump, automatic
peritoneal perfusion device, artificial bone, artificial
heart-lung machine, artificial respirator, etc.

 Minister’s
Approval Third Party
Certification

Class IV

Invasive medical devices with life threatening risk in theevent of defect / failure:• Pacemaker, coronary stent, artificial blood vessel,
PTCA catheter, central venous catheter, etc.

 Minister’s
Approval

Controlled
Medical
DevicesSpecially
Controlled
Medical
Devices

94The Japan Federation of Medical Devices Association "On Medical Equipment" http://www.jfmda.gr.jp/device/about/ (Accessed 2018, Apr. 30)

57© 2019 Health and Global Policy InstituteMedical Device Reimbursement Assessment Categories
Under Japan’s insurance scheme, the manner in which medical devices are reimbursed and priced depends on its
reimbursement assessment category95⚫ Medical devices within the A1, A2, and A3 categories covered within the technical fee for specific proceedures
and cannot be reimbursed separately⚫ Medical devices within the B1, B2 and B3 categories are refered to as Specialty Treatment Materials that are
directly reimbursed separately from technical fees based on reimbursement prices set by technical category⚫ Medical devices within the C1 and C2 categories are, similar to B category devices, directly reimbursed
separate from any technical fees. However, as they do not fit existing technical categories upon approval,
the creation of a new technical category is required. Furthermore, C2 medical devices also require thecreation of a new technical category as well
⚫ B3, C1 and C2 medical devices require approval by the Chuikyo
Assessment Category

Reimbursement Method

A1

Comprehensive

Items covered by the technical fee

A2SpecificallyComprehensive

Items that are covered by existing, specific technical categories

A3

Exiting Technology
w/revision

Items that are covered by existing, specific technical categories (Requirechanges to consideration items)

B1

Existing Technical
Category

Specialty Treatment Material that is directly reimbursed based on existing
technical category separately from technical fees

B2

Existing Technical
Category w/ revision

Specialty Treatment Material that is directly reimbursed based on existing
technical category separately from technical fees (Requires revision ofexisting technical category)

B3

Fixed Period
Enhancement
Premium

Specialty Treatment Material that is evaluated by awarding temporary
premiums based on existing technical category

C1

New Function
Product

Products that need a new function classification and have alreadybeen evaluated for technical fee

C2

New Function /Technology ProductProducts that need a new function classification and have notyet been evaluated for technical fee

F

Not suitable for NHI
reimbursement

Reimbursement Prices for New Medical Devices
Unlike pharmaceutical products which are reimbursed by produc, medical devices are reimbursed based on thetechnical category.
New medical devices are priced either via the ”comparable technical category method” if there is an existing
technical category exists for similar products, or via the ”cost based method” when there is no exsiting technicalcategory. Medical device reimbursement prices are revised concurrently with the periodic reimbursement

95

Ministry of Health, Labour and Welfare "Outline of the 2018 Revision of the Medical Products and Equipment Insurance System"
https://www.jdta.org/pdf/20180404-3.pdf (Accessed 2018, May. 1)

58© 2019 Health and Global Policy Instituterevisions.96 Similar to pharmacutical products, medical device price revisions are decided primarily on the variance
between the reimbursement price and actual market prices based on an acceptable margin including consumption
tax of 4%.
In addition, the MHLW has also implemented medical device reimbursement pricing policies to promote
innovation.
 Challenge Filing: Mechanism to subsequently file for a new technical category post approval based on realworld data Fixed Period Enhacement Premium: Additional price premium awarded for 2 reimbursement periods to
products able to replace an existing technical category Technical Category Exception: Mechanism applied to highly innovative or Sakigake productsin which
prices are maintained at a higher level for 2 reimbursement periods separately from other follow on
products within same technical category
Going forward, similar to pharmaceutical products, to control reimbursement prices, it is expected that healtheconomics outcome considerations may also be considered when deciding medical device pricing.97

96 Ministry of Health, Labour and Welfare "2016 Revision of the Medical Products and Equipment Insurance System" http://www.mhlw.go.jp/file/06-

Seisakujouhou-12400000-Hokenkyoku/0000114377.pdf (Accessed 2018, Apr. 30)
97
Ministry of Health, Labour and Welfare "Outline of the 2018 Revision of the Medical Products and Equipment Insurance System"
https://www.jdta.org/pdf/20180404-3.pdf (Accessed 2018, May. 1)

59© 2019 Health and Global Policy Institute7.1

Financing｜Trends in Medical Expenditures

Medical expenditures in Japan for FY2016 totaled 41.3 trillion yen (according to preliminary reports),
approximately 0.2 trillion yen less than the total from the previous fiscal year. This preliminary figure is also
referred to as approximate medical expenditure because it excludes expenditures stemming from work-related
injuries or those paid entirely out of pocket by individuals. The growth rate of the approximate medical
expenditure compared to the previous fiscal year was -0.4%. Rather than being frequently observed, this negative
annual growth rate was an isolated occurrence, likely due to significant increases in expenses, particularly in 2015,
related to antiviral drugs for treating viruses such as Hepatitis C, followed by a year in FY2016 that saw suchchanges as the revision of medical service fees as well as significant decreases in expenses for antiviral drugs.98
In this section, "medical expenditure" refers to the actual cost incurred at medical facilities for examinations,medications, and treatment for sickness or injury. Note that while "medical expenditure" refers to approximate
medical expenditure, "national medical care expenditure" refers to the estimated costs of treating injuries anddiseases covered by insurance. Specifically, "national medical care expenditure" includes costs for medical anddental treatment, pharmaceutical dispensing, hospital room and board, in-home nursing care, and treatments
such as those from chiropractors/acupuncturists.

98

Ministry of Health, Labour and Welfare "FY2016 Medical Expenditure Trends-MEDIAS-"
http://www.mhlw.go.jp/topics/medias/year/16/dl/iryouhi_data.pdf (Accessed 2018, Jan.25)

60© 2019 Health and Global Policy InstituteFactors Behind Rising National Medical Care Expenditures
As shown in Figure 7-1-1, national medical care expenditure increases every year. These national medical careexpenditure figures represent estimates of the cost of treating injuries and illnesses at medical facilities withineach fiscal year. Factors contributing to rising expenditures include those common among developed economies
such as population aging, advances in medical technology, and increased demand for healthcare. In 2015,
approximately 60% of national medical care expenditure was incurred by people aged 65 and over.99 This groupcomposed approximately 27.3% of the total population as of October 1, 2016. It is predicted that amidst ashrinking population, the rate of population aging will continue to rise, bringing the percent of people aged 65 orover to 33.3% or 1 in 3 by 2036 and resulting in even higher national medical expenditure.100

99 Ministry of Health, Labour and Welfare "Basic Document on Health Insurance" http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-

Hokenkyoku/kiso_h27.pdf (Accessed 2017, Jan.25)
100
Cabinet Office "FY2017 White Paper on the Aging Society" http://www8.cao.go.jp/kourei/whitepaper/w-2017/zenbun/pdf/1s1s_01.pdf (Accessed 2017,
Jan.25)61© 2019 Health and Global Policy InstituteNational Medical Care Expenditure by Funding Source
The topic of national medical care expenditure is crucial for considering the sustainability of Japan's universal
health insurance system. This is especially clear when viewing national medical care expenditure by funding
source—a total of 87% of all expenditures are funded via public sources (government funds and insurance
premiums). The complete breakdown of funding sources is shown in Figure 7-1-2.
Compared to other developed nations, Japan spends relatively little on healthcare in absolute terms; however,total spending on healthcare as a proportion of GDP is higher than the OECD average. By this measure, Japan ranks
sixth, just behind the United States, Switzerland, Germany, Sweden, and France.101 That said, it should be notedthat the OECD calculates healthcare spending as the sum total of not only national medical care expenditures fortreatments reimbursed by health insurance, but also spending on over-the-counter medications (OTCs), long-term
nursing care, preventative measures (vaccinations, checkups, etc.), natural childbirth, and optional hospital bed
upgrades.
In recent years, total healthcare spending as a proportion of GDP has been increasing. Starting in 2006 and heading
into 2016, healthcare spending as a proportion of GDP increased from 7.8% to 10.9%, a number that far surpasses
the 2016 OECD average of 9.0%.102 Japan is one of only a small number of OECD member economies that hasreported rising healthcare spending as a proportion of GDP since 2009. However, the OECD does predict that
healthcare spending in Japan will gradually level off in the future.

Japan faces regional disparities in national medical care expenditure. As shown in Figure 7-1-3, FY2014 medicalcare expenditure in Kochi Prefecture, the prefecture with the highest spending, was approximately 1.5 times
higher than the expenditure of Saitama Prefecture, the prefecture which spent the least. The national governmentis currently aiming to reduce the age-adjusted per-capita national medical care expenditure gap by half in
101 OECD “Health at a Glance2017: OECD Indicators” http://www.oecd.org/japan/Health-at-a-Glance-2017-Key-Findings-JAPAN-in%20Japanese.pdf(Accessed 2017, Jan.25)
102

OECD “Health Statistics 2017” http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT（Accessed 2017, Jan.25)

62© 2019 Health and Global Policy Instituteresponse to this issue. Regional Medical Care Visions, Medical Cost Optimization Plans, and the strengthening of
incentive measures for health-promotion as discussed in Sections 4 and 5 are all parts of the effort being made toresolve this problem.

63© 2019 Health and Global Policy InstituteIn terms of the ranking of national medical care expenditures by type of care, as shown in Figure 7-1-4, in FY2014
inpatient expenditures ranked highest, accounting for 37% of the total, followed by outpatient expenditures at
34%, and pharmacy dispensing expenditures at 18%. As touched upon in Section 4, one factor that has been
identified behind the high inpatient expenditures is the longer than average length of hospitalization in Japan
compared to other countries.

64© 2019 Health and Global Policy Institute7.2

Financing｜The Medical Service Fee System“Medical service fees” refers to the fees that healthcare providers
charge for medical services and pharmaceuticals covered by healthinsurance plans. These fees are set through a medical service fee
point system in which 1 point equals 10 yen. All healthcare providers
throughout Japan are required to comply with the medical service fee
points and calculation requirements for health services, medical
devices, and pharmaceuticals that are set by the MHLW, andproviders are prohibited from charging medical fees in excess of these
set amounts. In general, providers may not provide patients withcombinations of insurance-covered and non-covered treatments(mixed medical treatments); however, mixed medical treatments areallowed for situations covered by the Special or Specified Medical
Care Coverage System. The Special or Specified Medical Care
Coverage System applies to situations involving advanced treatments
and Patient-Proposed Health Services (PPHS) that are underevaluation for insurance coverage as well as elective treatments notintended for coverage.103＜Column＞Has episode-based payment
resulted in lower costs?

Another goal of the Japanese system of
episode-based payment was to drive
down costs, but is that goal being
achieved? Actually, there is a possibility
that health care costs have increased as aresult of DPC. While DPC was successful in
reducing the average length of hospitalstay, an increase in the per-diem rate of
inpatient care created an incentive forhospitals to increase the number of
inpatients. The introduction of DPC also
saw the start of “DPC consulting” services
that, in some cases, help facilities
manipulate coding, or up-code, in order toyield greater returns per patient.

Structure of the Medical Service Fee System (FFS and DPC)
The medical service fee system includes a Fee-For-Service (FFS) system and a Diagnosis Procedure Combination(DPC) payment system.
Since the foundations of the current health insurance system were established in 1961, medical service fees havecome to be based on a Fee-For-Service (FFS) system. The medical service fee system reimburses providers frominsurance funds based on medical service fee points, calculated by each medical facility according to the insuranceapplicable medical services, pharmaceuticals, and medical devices actually provided.
Introduction of the DPC System
The Diagnosis Procedure Combination (DPC) payment system is a medical service fee framework unique toJapan that emerged in the early 2000's amidst growing concerns over healthcare costs, lengths of
hospitalization, and the healthcare demands associated with the rapid aging of the population.
From 1998 to 2004, an episode-based payment system for acute inpatient care was introduced on a trial basis
at 10 major hospitals. During this trial period, the current DPC framework using a per-diem payment system(PDPS) was introduced. Among other things, the trial revealed that, regardless of large variations in length of
hospitalization among patients with the same disease, compared to fee evaluation based on a retrospective,
per-hospitalization method, fee evaluation based on a prospective, per-diem method resulted in smaller gaps
between the total service fee points and the actual resource costs and provided an incentive to lower per-diem
costs.

103

Ministry of Health, Labour and Welfare "Regarding the Uninsured Medical Expense System" http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000Hokenkyoku/20170925.pdf (Accessed 2018, Jan.25)

65© 2019 Health and Global Policy InstituteOverview of the DPC System
The main purpose of the DPC system is to promote the standardization and transparency of healthcare. Thissystem aims to improve the overall quality of healthcare while also addressing disparities among hospitals
through the construction of an objective medical treatment information database that can be used to clarify
medical outcomes and improvements. At the same time, the objective data of the DPC system gives patientsthe benefit of being able to reference standard treatments and pricing information. In addition, the DPC system
is expected to contribute to shortening the average length of hospitalizations. As of April 1, 2016, approximately
55% of Japan's general hospital beds (490,000 beds in 1,667 hospitals) were covered by the DPC system. 104
Similar to the diagnosis-related groups/prospective payment system (DRG/PPS) introduced in the United States,
the DPC system uses codes based primarily on combinations of diagnoses and procedures. There were a totalof 4,244 such DPC codes as of April 2016.105 The Japanese system is unique in that it includes per-diem, bundled/
episode-based codes that are partially integrated with a fee-for-service (FFS) system. Medical fees for inpatient
treatments that correspond to DPC diagnostic groups are calculated using a flat-rate, prospective payment
system, while fees for non-corresponding services are calculated using an FFS system.
Fee Calculation Methods in the DPC System
Basic hospitalizations, screenings (including diagnostic imaging), injections, medications, and procedures
valued at less than 1,000 points are subject to bundled/episode-based evaluations. Fees for these treatments
and services are calculated based on a combination of DPC code-specific per-diem points, lengths of
hospitalization, and medical facility coefficients.
Surgeries, radiation therapy, anesthesia, and treatments valued at 1,000 points or more are not subject tobundled/episode-based evaluations. Fees for these treatments and services are calculated using a Fee-ForService (FFS) system.
In order to eliminate variations in the set coefficients assigned to medical facilities offering similar levels ofcare, the government reconsidered facility type-specific coefficients. Facility coefficients now include the Basic
Coefficient, Function Evaluation Coefficient I, Function Evaluation Coefficient II, and the Provisional Adjustment
Coefficient. In the past, there were just three types of facility-specific coefficients—the Adjustment Coefficientand the Function Evaluation Coefficients (I and II), but after the FY2012 revision to the medical fee calculation
system introduced the Basic Coefficient, the Adjustment Coefficient began to be gradually replaced by the Basic
Coefficient and Function Evaluation Coefficient II. In the FY2018 revision, the Adjustment Coefficient will beeliminated.106

104

Ministry of Health, Labour and Welfare “Outline of FY2016 Revision of Medical Service Fees (DPC System-Related Section)"
http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-Hokenkyoku/0000115023.pdf (Accessed 2017, Oct.27)
105 Ministry of Health, Labour and Welfare “Outline of FY2016 Revision of Medical Service Fees (DPC System-Related Section)"
http://www.mhlw.go.jp/file/06-Seisakujouhou-12400000-Hokenkyoku/0000115023.pdf (Accessed 2017, Oct.27)
106
Ministry of Health, Labour and Welfare "Future Consideration of DPC System-Related Coefficients by Type of Medical Facility (Draft)"
http://www.mhlw.go.jp/file/05-Shingikai-12404000-Hokenkyoku-Iryouka/0000151103.pdf (2018, Feb.2)

66© 2019 Health and Global Policy InstituteBasic Coefficient: Used for basic facility services that cannot be evaluated using Function Evaluation Coefficients.
Function Evaluation Coefficient I: Used when considering the entirety of the medical facility as a service provider,including its personnel organization, facilities, and structure (structural factors).
Function Evaluation Coefficient II: Used when considering incentives (for roles/ functions that medical facilities
should take on) to improve medical delivery system efficiency through the use of DPC/PDPS.
Fee calculation methods also vary according to the stage of hospitalization of which there are three. The flat, perdiem fee during Stage I, the earliest stage of hospitalization, is set higher than for Stages II and III. Stage II includes
days spent in the hospital past Stage I through the day representing the national average length of stay according
to DPC data. Although flat fees within this stage vary according to each diagnostic category, after taking into
account the average per-diem medical resources used, fees in this stage are effectively lower than fees in Stage I.
In Stage III, the final stage specified within the DPC system, per-diem rates are set even lower than in Stage II.107
In exceptional cases, when hospitalizations extend beyond the end of Stage III, all additional medical service fees
are then calculated using the fee-for-service (FFS) system.
There is much debate within Japan on whether the DPC system is producing results in line with its original purpose.
The DPC was created through a unique combination of the United States' PPS and FFS systems. There have been
many analyses published concluding that the use of this system cannot be linked to cost reductions as well as
many publications arguing that the PPS system needs to be applied to an even greater range of services.

107

Ministry of Health, Labour and Welfare "Overview and Basic Approach of the DPC System (DPC/PDPS※)) http://www.mhlw.go.jp/file/05-Shingikai12404000-Hokenkyoku-Iryouka/0000186975.pdf (Accessed 2018, Feb.2)

67© 2019 Health and Global Policy InstituteThe Revision Process for Medical Service Fees
(Road to revision approval via the Central Social Insurance Medical Council and Social Security Council)
Japan's medical service fee system is currently revised once every two years. When under revision, discussions
are held in a variety of domains. As shown in Figure 7-2-1, over the course of the revision process, the Social
Security Council, the Cabinet, the Minister of Health, Labour and Welfare, and the Central Social Insurance
Medical Council (Chu-i-kyo) hold discussions and set goals. For instance, the Chu-i-kyo not only makes proposals
over the course of this process, it also holds discussions and responds to inquiries from the Minister of Health,Labour and Welfare regarding medical service fees, regulations for medical facilities, and health professionals
authorized to accept insurance. The Chu-i-kyo is composed of both members representing insurers, the insured,and employers (on the payer side), as well as members representing doctors, dentists, and pharmacists (on the
medical side), and others representing the public interest.

68© 2019 Health and Global Policy Institute7.3

Financing｜Medical Facility Management

Medical facility revenue is composed of the total remainder after subtracting patient copayments and claims paidby insurance examination and payment facilities. This revenue does not go only to physician salaries. It is also used
to cover hospital and clinic overhead, as well as the cost of purchasing pharmaceuticals, the cost of purchasing
medical supplies, and the cost of facility maintenance.

Data on Japanese Medical Facilities
MHLW conducts a regular Survey on the Current State of Health Economics that examines the state of healthcare
management at hospitals, medical clinics, dental clinics, and insurance-covered pharmacies. This survey isconducted every two years, and the results inform future medical service fee revisions.108
Figure 7-3-1 shows profits and losses in FY2015 and FY2016 by medical facility type. The profit margin in FY2016
for hospitals overall was -4.2%, although this figure jumps to +0.1% when excluding national public hospitals. Thisis thanks to the positive effect of the FY2014 medical service fee revision on most hospital profit margins (+0.4%→+0.6%). Many hospital types are losing money overall, with public hospital profit margins being particularly low.

108

Ministry of Health, Labour and Welfare "Survey on the Current State of Health Economics (Survey of medical facilities etc.)"
http://www.mhlw.go.jp/bunya/iryouhoken/database/zenpan/iryoukikan01.html (Accessed 2017, Dec.14)69© 2019 Health and Global Policy InstituteAlthough most public hospitals are in debt, as these hospitals bear responsibility for pro bono care as well as mostcare in remote areas, a portion of their debts are subsidized by tax revenues. Reasons for the high amounts ofdebt among public hospitals include cost-related problems as well as shrinking patient numbers. Especially at
smaller public hospitals, although average service prices are increasing, profits are decreasing due to falling patientnumbers.109
In addition, salary rates, pharmaceutical costs, and depreciation expenses are higher at public hospitals comparedto hospitals in general. In response to this situation, actions are being taken based on the "New Public Hospital
Improvement Guidelines" including initiatives for the improvement of healthcare management, adjustments to
hospital bed functions in consideration of regional healthcare needs, and downsizing.
Meanwhile, as in previous years, medical clinics remain profitable. That said, profit margins are shrinking. At thetime of the last revision in FY2014, the clinic profit margin was 15.5%, but in FY2016, it was 9.1%.
It's important to keep in mind that the facilities sampled for the Survey on the Current State of Health Economics
vary between surveys, so it is not possible to directly compare recent survey results with past results. Furthermore,since the Survey is set to only a sampling of medical facilities, there is always the chance that results do notaccurately reflect the true distribution of profit margins across Japan.

109 Ministry of Finance "Supplementary Explanation Document (FY2018 Revision of Medical Service Fees, 21st Survey on the Current State of Health

Economics)" http://www.mof.go.jp/about_mof/councils/fiscal_system_council/sub-of_fiscal_system/proceedings/material/zaiseia291108/01.pdf(Accessed 2017, Dec.14)70© 2019 Health and Global Policy InstituteFigure 7-3-2 shows medical expenditures by specialty. Expenditures vary among specialties, with otolaryngology
and otolaryngologic surgery expenditure trends differing most greatly from trends related to other specialties.
Pediatrics, pediatric surgery, and obstetrics/gynecology have consistently shown negative growth rates. Internal
medicine ranks highest in terms of total expenditures due to recent measures such as the promotion of primarycare, and because this specialty treats the largest number of patients. In comparison, expenditures were morethan four times lower for orthopedic surgery, the specialty with the second-highest expenditures.

71© 2019 Health and Global Policy InstituteLooking at average remuneration (salaries and bonuses) for full-time employees working at medical facilities, as
shown in Figure 7-3-3, totals are particularly high for hospital directors and physicians at both hospitals andmedical clinics, especially compared to other full-time employees. Other than full-time pharmacists and executives,
there are not large differences within professions depending on the facility type. This was true of hospitals andmedical clinics in general even when comparing data from one fiscal year to the next.

72© 2019 Health and Global Policy InstituteLooking at the annual trends in terms of estimated numbers of patients per facility type (as shown in Figure 7-34), outpatients exceed inpatients. This is to be expected since the incidence of serious diseases requiring
hospitalization is low compared to that of diseases for which outpatient care is sufficient. Both inpatient andoutpatient numbers increased slightly from 1984 to 1996, but thereafter the number of outpatients leveled off.
Since 2011, the number of hospitalized patients has reached a level nearly equivalent to the level in 1984.

73© 2019 Health and Global Policy Institute8.

Indications for the Future

As we move into the future, we can anticipate changes to continue in the healthcare arena.
As described in the MHLW’s Health Care 2035 report, the following core trends impacting Japan now and into the
future are expected to drive the way for change into the future. These are: 1) demographic shifts, 2) acceleratingurbanization, 3) disease structure, and 4) the increasing impact of technological change. Each of these will havedifferent impacts on the healthcare system in Japan.

Demographic Shifts
Let’s start with demographic shifts. Globally, we are seeing the ageing of mature economies and population
growth in development economies. In Japan, this demographic shift is visible in two specific ways – the ageing anddecrease of the population, and the impact to healthcare will be dramatic. We will see changing medical needs
with expenditure continuing to increase, and the proportionality of diseases will shift as the population ages.

Accelerating Urbanization
At the same time, we will see the acceleration of urbanization. In Japan, this is apparent as only Tokyo andKanagawa prefectures are growing at the time this piece is being written. Furthermore, while populations areamassing in on Tokyo, Kanagawa and Saitama they are declining in the more remote areas of Japan as of October30, 2018. These demographic changes are driving a shift in delivery of care. In remote areas, where there arefewer facilities, the need for technical support and “remote care” technologies are growing.

Disease Structure
In addition, as improved medical care drive changes in the disease structure, increasing the prevalence of diseases
such as dementia and cancer, new approaches to community health are also emerging. This can take the form ofinterconnected patient data through new technologies such as cloud solutions which will allow for less in-hospitaltime and fewer healthcare workers. These changes will allow the elderly to stay at home longer before they are
moved to nursing homes. But important challenges such as personal data privacy need to be overcome to develop
the care delivery models of the future.

Technological Change
Finally, we will continue to see dramatic impacts from technological change. We have seen the rise of social media
and the emergence of cloud technologies. Topics like “big data” and “analytics” have become ubiquitous. These
technological changes are expected to create new opportunities to drive efficiencies in how healthcare is provided.
A series of “new entrants” as diverse as technology companies, car manufacturers, communications companies
and others are beginning to enter the market to take advantage of these opportunities and help drive change inhealthcare. As a result, we are seeing a digital transformation of our healthcare system. With some of thesetechnologies, how we handle our healthcare will be very different in the future. For example, imagine the impact
of connecting apps on our phones with pharmacy information with our historical health information – including
genetics and familial tendencies. If these can be done in a way that addresses privacy and security, a patient could
visit any hospital in Japan and not need to repeat tests or face differing opinions.
Based on these trends, we can imagine dramatic changes coming in healthcare in Japan. They will be impacted byoutside forces and regulated in the market through the government.
74© 2019 Health and Global Policy InstituteConclusion
We hope you have found this document a resource for your education and reference on the Japanese healthcare
system. HGPI endeavors to update this every few years as regulations evolve and trends impact the healthcare
system and cause change.

75© 2019 Health and Global Policy InstituteSupplement: Interview – Envisioning future healthcare policies
Interviews were conducted with leading experts on the Japanese national healthcare system about the various
challenges currently facing the system, the outlook for the future, and the best ways to reform the system. These
interviews were used to enrich the information available on the JHPN website on healthcare policies as part of
updates made to that site.
The main challenges identified in the interview were the change in the epidemiological profile of Japan alongside
the rapid ageing of society, and the limited resources available to deal with those changes. The key to resolving
these challenges is greater cooperation among academia, government, and the private sector.
The world is looking carefully at the policies of Japan, which is witnessing a more extreme rate of ageing anddecrease in its birthrate than any other country, to see how it will develop its response to the incredibly urgent
and complex challenges it faces.
Interview 1 (Kiyoshi Kurokawa – Health and Global Policy Institute; Chairman – National Graduate Institute for
Policy Studies; Professor)
Challenges related to Japanese healthcare policies⚫ At the time the national universal healthcare system was established, it lent itself to evaluation. However,the system did not adapt well to changes in the times.
⚫ There are many challenges faced by the healthcare system of Japan, including universal access, the evaluationof medical service quality, and ways to determine out-of-pocket medical expenses.
The biggest problem is universal access. For example, the number of CT machines available in Japan per
million people is over three times higher than the number in other countries. This is but one example of how
universal access can lead to waste. Despite the adverse effects, no one has come up with an adequate wayof dealing with this issue.
Necessary measures to resolve challenges⚫ As Japanese society ages and chronic conditions become most prominent in the population’s epidemiological
profile, it will become necessary to have more general practitioners that patients can routinely consult with
about the state of their health so as to prevent diseases or the worsening of symptoms.
⚫ Although it is often claimed that there is a shortage of doctors in Japan, as a matter of fact, the number issufficient. The apparent shortage, if there is a shortage, is related to the excessive number of hospitals thatare being built. Given the certainty of the future demographic decline in Japan, as a response to this issue, ageneral practitioner system should be established. That system should assign doctors to each community as
appropriate, and regional hospitals should move toward open systems that allow for them to share CT
imaging equipment and other medical devices.
⚫ In order to make effective use of otherwise limited medical resources, a plan must be devised to establish
open relationships between healthcare institutions. This would allow each type of institution to achieve
functional differentiation. In such a system, advanced medical care would be offered only in university
hospitals. These hospitals would then discontinue the provision of outpatient services.
Aims for the Japanese healthcare system in the future⚫ The role of coordinator for efforts to draw up a mid-to-long term vision for the national healthcare system inJapan could be assumed by public institutions, but discussions about the actual implementation of that visionmust involve multiple stakeholders, including patients. The importance of adopting a mid-to-long term
perspective when planning for the future of healthcare cannot be stressed enough.
⚫ A vision for the future already exists – “Japan Vision: Healthcare 2035.” The important task now is determining
the steps and goals necessary for its realization. As a part of that, it is important to devise a process whereby
individuals involved in the implementation of the vision become core actors with vital responsibilities over
the twenty years of the vision’s implementation.
⚫ Government institutions must continuously communicate with the public and residents when implementing
the vision.
76© 2019 Health and Global Policy Institute⚫

⚫

Henceforth, local governments – municipalities in particular – are set to play a much bigger role. Data on
national health insurance, which is currently in the possession of municipalities, must be converted into avisible and accessible format and put to constructive use.
When thinking about Japan’s healthcare system, it is important to remember that under the integrated
community care system, it is municipal governments that provide certain residence, nursing, preventative
medicine, and lifestyle support services.

Contributions Japan could make to healthcare policymaking in other countries⚫ Even though the Japanese government possesses the ability to put new policies into practice, it lacks themechanisms to discontinue existing systems. This means it does not learn from past mistakes. I would likeother countries to learn from this aspect of Japan’s system.
Interview 2 (Anonymous, Global Technology Company Executive)
Japan’s Health Policy Challenges⚫ The key health policy challenge facing Japan is that the overall structure of the healthcare system is too
expensive. These costs are exacerbated by the aging population, which is growing at a rate for whichgovernment and society are not prepared.
⚫ To address this, it is important for Japan to shift away from the model it has today where people flock to large
hospitals for care. The government is currently trying to encourage people not to do so by moving towards acommunity healthcare based model.
⚫ However, Japan is running out of time. Innovative solutions are needed immediately. One of the biggest issues
facing innovation in Japan is the lack of speed. While the problems of the burgeoning elderly population andcost structure have been understood for a long while, most entities and organizations, including thegovernment, are not prepared to move fast enough - or flexibly enough - to deal with this challenge.
How the Private Sector can contribute to addressing Health Policy Challenges⚫ The manner in which people receive their healthcare or physical items that support their health all mustchange to address the challenges the healthcare system faces. This is a big focus area for the private sector,
which is looking at how to use their specific capabilities to healthcare.
⚫ While no one organization or individual has all of the solutions, companies, including non-traditional players
in healthcare, have many assets and services they can utilize to help make these systemic changes happen.
⚫ Furthermore, non-traditional players, such as IT companies, also bring different perspectives to innovationthat can enable new solutions.
⚫ Within the high-tech industry, the concept of velocity is important and is a term we use broadly.
Philosophically, we approach innovation not by trying to solve for the end state right away, but by taking an
iterative, agile, and experimental approach. While in medicine and healthcare, we need to be prudent, in
spirit, we believe the key is to generate solutions quickly and iterate as we go.
How can stakeholders collaborate to transform health policy⚫ While many already see that change is required to address the problem of the increasing elderly populationand cost structure, it is important to find likeminded stakeholders. It is important that we all share the same
vision for the future and that there is a shared sense of urgency as well.
⚫ Furthermore, particularly as a non-traditional player in healthcare, we must learn to work with traditional
stakeholders. Not only are they unfamiliar with how we operate, but we are also unfamiliar with theirconcerns and way of working.
⚫ As stakeholders, the solutions we build must be developed for the customers, the patients and physicians. We
cannot develop a solution just because it is convenient for us. It is only by taking on this mentality that patientsand physicians will believe that we are working with their interests in mind and that we can drive change.

77© 2019 Health and Global Policy InstituteHow can Japan contribute to global health policy⚫ The manner in which Japan addresses the issue of its aging population is of interest to other countries.
Furthermore, I believe Japan has the potential to be a leader in this space as it addresses this issue.
Interview 3 (Seigo Hara – MICIN Incorporated Company CEO )Challenges related to Japanese healthcare policies⚫ The Japanese healthcare system faces three challenges. One, as income revenue and economic growthstagnate, the amount of resources available for social welfare is becoming limited. The second challenge isthe ageing of the population and low birthrate, and the impact that this is having on the workforce, which inturn affects healthcare system finances. Third is the change in the overall epidemiological profile of Japan.
Necessary measures to resolve challenges⚫ It is important to make efficient and thrifty use of the limited resources available for spending on high quality
medical care. To do so, we must first define “quality care,” and then we need to organize medical data basedon that.
⚫ As social welfare expenditures rise, it is necessary to collect data that can guide efforts to streamline resource
allocation.
Challenges related to data use― Data collection⚫ A challenge in medical data analyses is the actual lack of sufficient data. For instance, although some part ofany medical consultation between a doctor and a patient is recorded as data, that data is not being stored ina form that is possible to analyze. Given these circumstances, data analyses will not return useful results for
either patients or the public. This is a challenge now facing data analyses, the implementation of interventions
based on such analyses, and the active use of data.
― Data use⚫ At the present time, what Japan needs is to establish acceptable methods and concrete policies for the useof data, and to clear up issues around personal privacy and intellectual property rights in order to further
facilitate data use.
⚫ While it is currently possible to analyze data, it is still not possible to feed the results of such analyses backinto the medical field and use it to serve patients on an individual basis. Work is underway to generate healthdata for practitioners. The scope of that work should be broadened to cover all beneficiaries.
⚫ When planning data use, it is very important to consider the merit its use might have from the perspective of
the user, or the potential of the data to become the basis for the development of trustworthy services andproducts for eventual users. One way to make such a judicious use of data is for private companies toincorporate user perspectives into their designs and plans. From the perspective of policymaking,mechanisms should be put in place to provide a boost for private sector-based initiatives, and to create abasis for cooperation within the private sector.
⚫ Entrepreneurs face the difficult task of drawing up outlines for the development of future businesses.
Comparisons with other countries show that Japan has a higher number of CT and MRI machines given its
total population. The massive amount of imaging data generated by such devices, and the amount ofconsistently formatted data Japan has on medical expenditures, may constitute a competitive advantage forJapan in the world.
Telemedicine⚫ The establishment of a system for telemedicine has advanced well over the past one or two years.
Telemedicine might help to further promote the digitization of medical information that is not yet being
recorded digitally. Thanks to telemedicine, data related to communications between doctors and patients
will be created in places closer to patients.

78© 2019 Health and Global Policy Institute⚫

Alongside progress in telemedicine, not-yet-digitized data might eventually be put to constructive use.
Nevertheless, much more effort still needs to be invested into spreading the custom of amassing data at thepatient level. In addition, electronic medical records created by doctors are usually filtered, causing most dataon communications between patients and doctors to be lost. It is thus important to always be aware of thefact that the extent to which available medical data approximates the reality of the information
communicated by patients cannot be fully ascertained.

The form the national healthcare insurance system should assume in the future⚫ I believe the national healthcare insurance system in Japan is a good system. Japan tops the world in terms ofindicators related to average life expectancy and infant mortality. This situation is believed to have been madepossible by the establishment of universal access and safety nets in the healthcare system. Out-of-pocket
medical expenditures are set at a fixed rate. These and other social benefits, which emanate from a system inwhich individuals may receive medical services regardless of their economic status, must be protected in the
future. We also must protect the high-cost medical fees system.
⚫ I think that it would be better if, in the future, the world adequately invested resources into higher value
medical treatments. Payers will probably come to play a bigger role in Japan’s medical system in the future.
The system used in the Netherlands is a good example of a managed competition model. In the Netherlands,
patients select payers, who in turn select providers, enabling the government to control risk.
Expectations of insurers⚫ It may be possible for policy-makers and service providers to work together to find innovative ways ofallocating resources based on analyses of medical data and the claims data owned by insurance providers.
⚫ In Japan, individuals, depending on age and occupation, may throughout their lifetime enroll in different
insurance schemes. Data must be made consistent. It is necessary to investigate how to coordinate benefits
between employee insurance schemes and regional healthcare insurance schemes so as to improve life
expectancy and quality
Contributions Japan could make to healthcare policymaking in other countries⚫ Other countries will follow Japan in the future along the same path of declining birthrates, population ageing,
and increasing strains on social security resources. Japan could serve as a model for such countries as theyalso seek to increase their own life expectancies and life satisfaction indicators.
⚫ The National Clinical Database (NCD) includes a number of unprecedented cases in the world and surgery
outcomes. As such, it is of great value. Since its claims data is to some extent gathered and stored within adatabase, it could be a source of competitive strength for Japan in the future.
Interview 4 (Akio Onishi, Visiting Professor – The University of Tokyo, Graduate School of Public Policy)
Challenges related to Japanese healthcare policies⚫ Ageing, the cost of healthcare, and human resource shortages are the chief challenges for Japan, but that has
been known for some time. Nevertheless, it is important to pave the way for solutions to the problems
underlying these challenges.
⚫ For example, if we look at the problem of the declining birthrate and population ageing, there appears to bea trend toward investing a large amount of resources into ageing-related measures. With regards to thedeclining birthrate, a great deal is being done to resolve the issue of waiting lists at daycares and otherchallenges. It is important that a balance be struck between the amount of resources dedicated to resolving
ageing-related issues and the amount of resources dedicated to the challenges of the declining birthrate.
Necessary measures to resolve challenges⚫ Concerning the provision of medical services, because medical service providers, including paramedics, exerta large amount of control over the quality of the healthcare system, it is important to provide them withincentives to deliver high quality care while monitoring the quality of the services they offer.
79© 2019 Health and Global Policy Institute⚫

Alongside the monitoring and evaluation of the quality of services offered, further in-depth discussions shouldbe held on a system of incentives to improve the quality of these services further. Many countries areattempting to create such a system. Japan should follow suit by organizing spaces where this issue could be
discussed.

How to assess the quality of medical care
⚫ There are quite a few examples around the world of medical reforms being undertaken from the perspectiveof quality of care. This perspective places emphasis on monitoring burdens placed on medical care providers
and patients by hospitalizations and medical services, using indicators such as readmission rates and statistics
on convalescence management for evaluations. With regard to medical equipment, the skills of healthprofessionals are also important to the effectiveness of such devices. The evaluation of such skills should
adopt or incorporate a certain number of the indicators related to quality of care. When evaluating such skills,
it is important to assess the extent to which they satisfy some indicators of Quality of Care. I look forward tofurther discussions about this issue.
⚫ In recent years the concept of Health Technology Assessments (HTA) has been garnering greater attention in
Japan; however, HTA evaluations and quality of care evaluations are not necessarily the same thing. Although
HTA can be useful for measuring the cost-effectiveness of drugs, and a useful guide for the effective
distribution of medical resources, it is important to consider the special characteristics of medical technology,
medical devices, and medical resources respectively when implementing an HTA.
The form the national healthcare insurance system should assume in the future⚫ Japan’s national health insurance system is excellent, and was designed to have a smooth management
structure. What’s more, the medical skills and motivation of doctors and allied health professionals can be
praised highly. With regard to the system of universal healthcare, it is not only important to discuss whether
it should be maintained or abolished, but also how to improve it.
⚫ A major issue for Japan is how to expand the good service framework of one institution to other institutions,
including regional institutions. At-home care and telemedicine are being implemented from the perspectiveof regional cooperation. It is important that Japan consider further solutions to make these services betterand more efficient. In particular, there should be further discussions held on medical care and hospitalmanagement issues.
⚫ Economic incentive frameworks to encourage greater regional collaboration should be considered further. It
is also important to consider the provision of services and evaluation methods for the regions that will takepart in such frameworks.
The form the national nursing-care insurance system should assume in the future⚫ In every region, people in need of nursing care are obtaining authorization under the national nursing-careinsurance system and beginning to receive care services. Decentralization is leading to differences inauthorization standards and in the characteristics of the services provided to patients.
⚫ When users move outside of their area of residence, they often must wait for some time before they are able
to be re-authorized and start availing themselves of available facilities and services. What’s more, out-ofpocket costs may differ for the same service provided in different areas. It is therefore hard to say that it iseasy to use nursing services across different municipalities.
⚫ It is anticipated that in the future, the circumstances surrounding individuals and communities will change.
Such changes could be due to people temporarily moving or changing residences, or because they acquire
accommodations in different areas. Even in cases such as these, a mechanism should be developed to grantusers a somewhat wide degree of freedom so that they can use nursing-care services smoothly.
The challenge of cooperation between Japan’s medical and nursing sectors⚫ Despite the fact that in Japan, one is able to choose freely which medical institution one wants to receive
medical treatment at, there are issues related to nursing care services that differ based on one’s area ofresidence. Patient and patient family awareness about this issue is changing.
80© 2019 Health and Global Policy Institute⚫

As the number of elderly people increases, larger segments of the public are increasingly expecting to become
centenarians, and more and more people will need to start considering how they want to live during late life
stages. These considerations might lead to changes in medical and nursing-care services. It is a good time right
now to take this opportunity for change to gather numerous and broad proposals for transforming medical
and nursing care services, and to hold discussions on this matter.

Expectations of insurers⚫ The process of dividing roles between private and public insurers will undoubtedly continue in the future, andwe are hopefully reaching the moment where serious discussions will commence on how the two groups canactually complement one another.
⚫ Under the current system, while the risk of contracting a disease or suffering an injury varies based on theindividual, risks associated with treatments after the individual becomes a patient do not vary that much fromperson to person. Considering these circumstances, it would be useful to consider adding an option to theexisting public healthcare system that would allow for the payment of premiums to somehow ensure medical
and nursing care service quality.

Contributions Japan could make to healthcare policymaking in other countries⚫ Ageing in Japan is proceeding at a rapid pace, but, at the same time, Japanese elderly people are in better
health compared to elderly people in many other countries. The mechanisms and initiatives developed by
Japan to encourage its citizens to maintain their health for a productive life even in their twilight years, andto guard against emergencies, could become extremely useful as references for other countries that areexperiencing population ageing. By demonstrating how we were able to overcome various challenges, we
could provide a great contribution to the world, as other countries look to us when developing their own
policies on healthcare insurance.

81© 2019 Health and Global Policy InstituteAcknowledge
In 2018, Japan Health Policy Now (JHPN) was updated under the supervision the Health and Global Policy Institute,a Specified Nonprofit Corporation, with pro bono support provided by PwC Consulting LLC, Strategy& incollaboratively drafting and revising the content with HGPI.
We appreciate the support provided by PwC Consulting LLC, Strategy&.

Japanese Health Policy
March 2019
September 201982

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