Reforming the Japanese Health Care System

By: Angela Gamalski


Japanese Prime Minister Shinzo Abe has called for structural change during his tenure, colloquially known as “Abenomics”.[1] Policies have been implemented across a variety of economic sectors, with mixed results.[2] To date, Abenomics has not fully addressed those changes which could alter the current trajectory of Japan’s national health care system, which according to Japanese medical experts, has begun to fail.[3] Serious immediate issues stem from an inelastic geographic distribution of resources and a culture which accepts high utilization of available medical resources. However, economists have noted it will be difficult for Japan to support its projected elderly population at current benefit levels.[4] These policy failures suggest that the Japanese government has violated Article 4 of the National Health Insurance Act, which requires that the government “ensure that the operation of the national health insurance business is done soundly.”[5] This blog post will explain the current Japanese health care law, resulting problems, and several possible solutions available to Japanese lawmakers.



Japan has offered its citizens universal health insurance since 1961 following passage of the National Health Insurance Act (hereafter “NHIA”). [6] The resulting Japanese health care system is noted for the low cost it imposes on the national economy. While health expenditures may consume roughly 6% of Japan's national income, this system is not immune to structural problems. Current Japanese health policies have been criticized for failing to fully address leading burdens of disease, such as low back pain and mental health issues.[7] Further, the system has onerous rules and few incentives to reduce inefficiencies.[8] For example, the Japanese government heavily regulates pharmaceutical prices, but collects little data on drug effectiveness and as a result has minimal quality controls.[9] As a result, Japanese patients must wait for special permission,[10] consider medical tourism, or go without pharmaceutical products approved elsewhere across the globe.



The low costs reported by the Japanese health care system mask a serious concern of resource overutilization and wasteful practices. Japan certainly has earned bragging rights for its healthy population and low health care costs, but it could also boast that it has the a much higher rate of patient visits per person than most other developed nations.[11] At first blush, overutilization and low costs may seem to be incompatible. However, overall costs are low because providers simply do not earn much money.[12] This has resulted in a critical shortage of loss-leading health care services such as emergency care facilities. Complicated cases are likely to be overlooked in the rush to get patients through the door. As a result, the rapidly greying Japanese population may be noted to be less likely to suffer a heart attack than seniors in other areas of the world, but those who do suffer a cardiac event are twice as likely to die than patients elsewhere.[13]

This overutilization may be driven in part by the provisions of the NHIA itself. Article 62 of the NHIA permits insurers to withhold payment of benefits for individuals who have been noncompliant.[14] However, Japanese culture values education and commands respect for learned roles such as physicians, making it highly unlikely that a patient would fail to do anything their doctor told them, or to question their physician’s recommendation.[15] Physician compensation is directly tied to the volume of treatments prescribed. As a result, the system is in an overutilization spiral that may be heading out of control.


Current System Challenges

Politicians have campaigned to increase public access to affordable health care,[16] but the NHIA limits the amount of regulatory action that can be taken. The only major reform tool currently available to government leaders is a biannual implementation of approved fee changes.[17] In theory, by tweaking patient and provider costs for different types of care, the government should be able to incentivize care that is more cost-efficient and returns a higher value for the public expenditure. While a system that can be adjusted only every other year may have some benefits, such as providing time to determine if one change has had an impact, it is unclear that this is an effective means for long-term cost control. For example, the latest fee changes which went into effect on April 1, 2016, included mandatory surcharges for patients who present for treatment at large university hospitals without a community physician referral.[18]

While some cost controls may help stem the demand for health services in Japan, there has not been enough action to date to address the elephant in the room: how the government funds its national health care system. The larger threat to the Japanese health care system is its reliance on worker contributions to finance elder medical expenses. Today, 2.8 workers support each senior citizen, but by 2050 this support ratio is likely to be halved to 1.3 workers per senior citizen.[19]


Possible Legal Reforms

Major reforms proposed for the Japanese system have included a partial managed care system, bifurcation of the insurance market into public and private schemes, and allowing for-profit providers to enter the market to stimulate competition.[20] Other suggested means of reform require making the elderly responsible for more health care costs than they currently now pay, or Financing health insurance benefits by a consumption tax to reduce the disparity between the workers who are funding the system and those who are using resources.[21] Any of these reforms would require legislative action by the Japanese Diet to overhaul the NHIA.

In the interim, regulatory action may be possible. The Minister of Health, Labour and Welfare is empowered by the NHIA to issue guidance to insurance schemes and medical organizations regarding medical treatment benefits.[22] Katsunobu Kato assumed leadership of the Ministry of Health, Labour and Welfare on August 3, 2017.[23] Kato has previously held political positions relating to the Health, Labor and Welfare Ministry within the Japanese Liberal Democratic Party.[24] Kato's campaign website has called for a steady response to population health needs.[25] Kato specifically mentioned an increase in support for dementia care, promotion of health management, and increasing efficiency through data-driven means.[26] Will this economist be able to revitalize a critical aspect of the Japanese economy?



[1] William Pesek, Meet the woman who may be able to save Abenomics, Asia Times (Aug. 3, 2017)

[2] Elaine Lies and Leika Kihara, Japan PM Names Safe Hands in Cabinet Reshuffle but Makes Maverick Top Diplomat, US News & World Report (Aug. 2, 2017)

[3] Health care in Japan: not all smiles, Economist (Sept. 10, 2011)

[4] David Wise, Introduction, Health Care Issues in the United States and Japan, University of Chicago Press, at 7 (David Wise and Naohiro Yashiro, eds.), 2006,


[6] Wikipedia, Health care system in Japan, (last edited June 22, 2017)

[7] Kenji Shibuya, What is the Greatest Threat to Japan's Health?, Huffington Post (May 6, 2013),

[8] See, Economist, supra note 3.

[9] Id.

[10] For example, in 2014, providers in the Kansai area of western Japan were permitted by a special demonstration project to dispense certain drugs that were either unapproved for general use or for an off-label use, if the drug’s use had been approved by the U.S. Food and Drug Administration or certain European Union countries. See, Pharma Japan, Govt Panel Approves Plan for Special Zone in Kansai Area Where Mixed-Healthcare Using Unapproved Drugs Will Be Permitted, Factiva (Sept. 24, 2014),

[11] Masako Ii, Addressing the Problems in the Japanese Health Care System, Tokyo Foundation (Aug. 27, 2009)

[12] See, Economist, supra note 3.

[13] Id.

[14] Article 62, “When a person who was an insured person or an insured person does not obey instructions concerning medical care without justifiable reasons, the insurer can not perform part of benefits such as medical treatment.”


[16] See, Pesek, supra note 1.

[17] Tomoko Otake, How Japan is tweaking the cost of health care, Japan Times (Feb. 17, 2016)

[18] Id.

[19] King del Rosario, Abenomics and the Generic Threat, Globis Insights (Aug. 15, 2013)

[20] See, Wise, supra note 4, at 3.

[21] Id. at 8.

[22] Article 41, National Health Insurance Act,

[23] Katsunobu Kato, Wikipedia, (last edited Aug. 4, 2017)

[24] Id.

[25] Katsunobu Kato (last accessed August 24, 2017)

[26] Id.