COMMENTARY:

Japan’s Low-Cost, High Quality Health Care System

The issue is not whether a health care system is public or private, but whether costs are rigorously controlled or not.

Japan’s health system provides health care to its citizens as a matter of right. It earns some of the highest marks on various measures of quality, and costs far less per capita than the U.S. system–and less, even, than most European systems. Frontline examined how the system works as part of its “Sick Around the World” series.

In October 2007, Frontline interviewed Ikegami, the program chair of the Department of Health Policy and Management at the Keio University School of Medicine, and widely regarded as Japan’s top health economist. As he explains it:

[T]he government is able to control the flow of money....[W]e have multiple payers and multiple providers, but there’s a single-payment system — not a single payer but a single-payment system — so that all payers must abide by the payment system, and all providers must be paid by the system...[T]his is done on a procedure-by-procedure basis and by a drug-by-drug basis, and the way that is done is that a survey is made of the financial situation of the providers.

Each year, the government publishes a directory of what each procedure should cost. Here’s how that plays out when it comes to just one of the drivers of U.S. health care costs: high-priced imaging technology.

Q: Let’s take an example of how these low costs work. In Denver, where I live, if you get an MRI of your neck region it’s $1,200, and the doctor we visited in Japan says he gets $98 for an MRI. So how do you do that?

A: Well, in 2002 the government says that the MRIs, we are paying too much, so in order to be within the total budget, we will cut them by 35 percent.

Q: If I’m a doctor, why don’t I say, “I’m not going to do them; it’s not enough money”?

A: You forgot that we have only one payment system. So if you want to do your MRIs, unless you can get private-pay patients, which is almost impossible in Japan, you go out of business. ...

Q:... The price of that MRI is so much cheaper in Japan. Doesn’t he have to pay the same price, $5,000, for an MRI machine like the man in America?

A: Well, it depends on what kind of image density the radiologist wants. And the MRIs that are available in Japan are much less expensive than those that are typically found in the United States.

Q: So the imaging machine is cheaper? ... To me that’s another advantage of negotiating low prices: Then the supplying industry has to cut its prices, and the MRI makers met this need.

A: Right. And MRIs have now become very big in [the] export industry.

Q: So the health ministry set a low price, the MRI makers make cheaper machines to help the doctors meet that price, and now Japan is exporting these around the world?

A: Right. ... This is a situation where the market does work in health care. ...

Here are some other excerpts, which shows how far we are from most other developed countries when it comes to our thinking on health care. The Japanese are charged co-pays for their services, but there is a ceiling on these out-of-pocket expenses, which is not only extremely low (by our standards), but also adjusted according to income. Keep in mind, as you read this, that some 60 percent of U.S. bankruptcies are related to medical bills, according to a recent study.

Q: [T]hey’ve got a system that makes sure people don’t go broke paying medical bills.

A: Right. I think the main goal of a public health insurance system is to prevent people [from] going broke.

Q: How many people in Japan go bankrupt because of medical bills?

A: None, or at least there should be none, because first of all, they should be covered, and if they’re not covered, then they can get covered by paying back one year’s premiums. And if they can’t pay back the one year’s premium, then they will be on public assistance....

Q: Do you think the Japanese people feel that everyone in this country should all have a basic package of medical coverage?

A: According to opinion polls, I would not only say basic but egalitarian coverage [for] all. Over 70 percent of the Japanese, when they’re asked that question, say they’re not only in favor of basic coverage, they are in favor of egalitarian coverage.