Innovation, Sustainability, Prosperity: Japan’s Healthcare Vision

Japan is looking to its young people to find solutions to its healthcare challenges

In 2015, the Japanese government appointed an advisory panel of young experts to lay out its vision of healthcare in the country for 2035. This vision is a healthcare system that delivers unrivalled health outcomes, provides secure and responsive care for all in society, is sustainable, and contributes to prosperity in the nation and around the world.

Yet, how achievable is this ideal, and how does the government plan to realize its vision? What is clear is that it will require a paradigm shift – a move from quantity to quality of care and from inputs to value, on care rather than cure, on autonomy over regulation, on national integration rather than fragmentation.

Current challenges
Japan has long been recognized as one of the healthiest nations in the world with a top-class healthcare system. It leads the way in key mortality statistics; the average life expectancy at birth continues to increase, reaching nearly 84 years in 2015, the highest among all OECD nations, combined with a very low infant mortality of just 2.1 deaths per 1000 live births. On the surface, Japanese healthcare appears perfectly functional, so why is such a change required?

Challenges have been developing under the surface for some time, especially growing concern over the sustainability of the healthcare system. The Japanese population is ageing; the birth rate has been on a continual decline since the 1970s, reaching just 1.5 births per woman in 2015 (vs a OECD average of 1.7), and this is predicted to decrease to 1.2 by 2020. Meanwhile, a remarkable 27% of the population is 65 years or over, and 8% is 80 years or over. A declining birth rate coupled with an expanding elderly population is expected to put severe stress on the healthcare system. Costs to both the government and employees with national insurance will rise due to the increasing demands on medical care among the proportion of the population not contributing to the economy.

There are other challenges. Firstly, the government has little control over the volume of services provided, and the healthcare system is over-used. Patients are free to consult any healthcare provider they wish regardless of their symptoms, from primary care physicians to specialists. On average, people in Japan have 13 consultations per year, two to three times that of many developed nations. There is also high demand for expensive tests, such as MRI scans, as patients can ask for them at any time.

Additionally, because of the way reimbursement works, hospitals gain financial benefits for admitting patients for long periods of time, leading to a high number of hospital beds per capita and an average hospital stay much longer than most other developed countries. For example, simple hernia operations, which would not require an overnight stay in the West, can result in a five-day stay in Japan. High utilization benefits hospitals and clinics, which need to increase the services provided to make up for reduced profit margins, but leads to a lot of waste and has significant cost implications for the government.

Secondly, to maintain its position as a leader in healthcare, Japan will need to ensure access to newly developed drugs and medical technologies, but these will be increasingly expensive. The Japanese government is facing a major challenge to continue funding its distinguished healthcare system with these increasing pressures and demands.

Fair for all
Since 1961, Japan has employed a system of universal healthcare coverage based on fairness. It is compulsory by law to join a public insurance program through one of three methods:

  1. Employee Health Insurance requires businesses to provide insurance to employees and employees’ family members. This type of insurance is divided into government-managed insurance for small businesses, social health insurance for the larger businesses and mutual aid associations for teachers and other school staff.
  2. National Health Insurance (NHI) covers self-employed and unemployed citizens, with additional help provided for those with disabilities, victims of pollution (mainly asthma sufferers), atomic bomb survivors, and those with intractable diseases.
  3. Elderly Late Care System covers those aged 70 years and older. Payment for this system is jointly covered by other systems as the cost-per person is much higher than the other two methods.

Private healthcare insurance is also available in Japan to cover co-payments or non-covered costs. Private insurance has a fixed payment per surgery or per days in hospital rather than being based on actual expenditure.

Across the three public healthcare systems, 70-90% of treatment fees are reimbursed by the insurer or government, with patients paying a 10-30% co-pay fee per month. This co-pay varies by age group and income to ensure a degree of fairness.

As a general rule, 20% co-payment is required for children under three years, 30% for patients aged 3-69, while 10-20% for those aged 70+. Patients taking regular medication have a maximum monthly ceiling on out-of-pocket costs fixed at ¥80,100 (US$736), although the ceiling is reduced after three months of regular medication use to ¥44,000 (US$405). The patients must cover the short-term out-of-pocket costs as reimbursement takes two to three months. Additional support is available for low-income families and there is a loan system for those who require financial support.

The public healthcare system covers all drugs approved by Japan’s Ministry of Health Labor and Welfare (MHLW), dental care, inpatient and outpatient medical expenses, free screening for certain diseases, and access to hospitals and clinics. Prices are fixed for each prescription drug approved by the MHLW, however clinics and pharmacies need to make a mark up on drugs so charge more than the price set by the NHI. Consequently, the MHLW revises the prices every two years to make the NHI prices closer to the wholesale price, again with the aim of making the costs fair for all.

Employee Health Insurance and NHI currently cover the majority of the Japanese population, but with the portion of society eligible for the Elderly Late Care System projected to rise rapidly over the coming years, healthcare may no longer be affordable for the government in its current form. 

An end to short-termism
Attempts to address the challenges facing the health system have had limited impact so far. The government has introduced a series of measures to encourage more births and so alleviate the strains of an ageing population. The Angel Plan and the New Angel Plan were introduced in the 1990s to financially assist couples raising children, followed by the Plus One Policy in 2009 designed to create a parent-friendly working environment, and the provision of 50,000 new day-care centers. Despite these initiatives, the birth rate has continued to drop.

The government has also tried to ease the strain on the healthcare system by increasing taxes and insurance premiums while cutting benefits but, doing this again would be a politically unpopular, short-term solution at best.

Consequently, the government has been searching for innovative answers to tackle the problems, looking to new ideas, systems and technologies in the hope that the next generation can provide inspiration. The Japan 2035 initiative includes bold plans to move the healthcare system away from the current ‘uncontrolled’ model towards one with more professional self-regulation among HCPs and less waste, with a focus on quality, care and wellbeing rather than the quantity of services.

The Japan 2035 panel recommends implementing a health technology assessment to identify value-based outputs whereby reimbursement rates can be set based on value to the patient. They also propose increasing the quality of health services and care by reducing excessive overuse. Another proposal is to bring a new focus to personal choice and empowerment so citizens make the right choices for themselves, but also play an active role in maintaining their own health. One method of doing this is to increase smoking prevention and cessation initiatives to realize a tobacco-free Tokyo Olympics in 2020 and a tobacco-free society by 2035.

The experts formulating Japan’s 2035 vision have also identified a need for more innovative and efficient use of information and technology to improve healthcare performance, quality, value and safety. They propose a healthcare database to support telemedicine applications such as remote diagnosis and treatment, and telesurgery. The data from check-ups and treatments can eventually be used to develop a policy evaluation process on prevention, diagnosis, treatment, disease management, care services, and long-term care.

Furthermore, the experts recognize that investment in the infrastructure for technological development must be increased, providing platforms for clinical trials and to secure more research funding for various diseases such as cancer and dementia so that Japan becomes the center of innovation worldwide.

A virtuous cycle?
Japan wishes to remain a leading nation in healthcare, so the 2035 vision includes reform for the MHLW into an organization that responds with accuracy and speed to global and domestic health crises and which takes a lead role in global policy making, working to improve the health of those around the world. There is a particular focus on international support for emerging and re-emerging infectious diseases, while the country wants to position itself as the authority on healthy longevity by addressing population ageing and a low birth-rate. The aim is for Japan to create a ‘virtuous cycle’ where it improves its own healthcare system while contributing to economic growth by supporting global initiates.

Over the next twenty years other developed nations that face similar challenges in sustainability and healthcare, and the pharmaceutical industry, will be paying close attention to how the Japan 2035 vision plays out. How the Japanese government addresses the multiple challenges and whether it can truly manage to implement the innovative and paradigm-shifting recommendations laid out by its panel of experts look set to have implications on the future of healthcare delivery and financing worldwide.

Marc Yates is Director of Emerging Markets at Research Partnership.

Commercial Excellence Japan 2018

May 16, 2018 - May 17, 2018, Tokyo

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