Published February 22, 2009 @ 08:35PM PST
For this weekend’s policy corner, I wanted to shake things up a bit in looking at a country who has successfully achieved universal health care. No English-speaking countries. No country that has single-payer. We hear a lot about how Americans’ health care appetite for the latest technology and drugs makes us hard to compare to other nations, so let’s look at a country that has the highest number of CT scans per capita and more MRIs per capita than we do, not to mention a higher percentage of their health care dollars spent on drugs. Yet for all of this, they’ve created a universal health care system that provides health outcomes that are the envy of the world – the highest life expectancy for about a third of what the U.S. spends.
The lucky country is Japan, which the World Health Organization ranks second, behind only France. Where Japanese companies competes with American companies, their universal health care has given them a distinct competitive advantage – nowhere as pronounced as in the auto industry. So it makes sense to look at what they’re doing right and what they’re doing wrong.
Moreover, many of the ideas that form the Obama/Baucus/Kennedy/Edwards/Clinton emerging consensus are remarkably similar to features of the Japanese health care system. An entirely private delivery system of hospitals and clinics, and a mixture of private and public insurance. An individual mandate requiring everyone to have coverage. An employer mandate requiring employers provide insurance, which is how 62.8% of the population gets their coverage – a comparable number to the U.S. Fixing premiums as a percentage of income (a recommendation of The Commonwealth Fund, and the equivalent of income-based subsidies found in the Obama plan). A minimum level of comprehensive benefits that is robust and focused on primary care, prevention and outpatient services. An egalitarian approach to physician compensation. Significantly more stringent regulation of the private insurance industry, enough to completely change their business practices. And, finally, significant government intervention to control costs.
The similarities make it not only worthwhile to look at Japanese health care – it makes it imperative. After the jump are my five best things and five worst things about universal health care in the land of the rising sun.
The Good:
1.) Health outcomes outstanding
Japan has the highest life expectancy in the world – 76 years for men and 82 years for women – despite having one of the highest smoking rates in the Western World (26.3% of the population in Japan compared to 16.9% for the U.S. according to the WHO). Think about that for a second. On the other end, they have one of the lowest, if not the lowest, infant mortality rates in the world.
Whenever I mention this at house parties and discussion groups, people immediately begin guessing at what cultural difference might prompt them to be such a healthy nation. The tobacco use clearly doesn’t help that argument, but there are certainly some diet and lifestyle factors. For one, the obesity rate is 1/10 what it is in the U.S., and even 1/3 of runner-up France. (Yes, I’m sorry to break it to you, but Americans are three times more likely to be obese than the French, the inventors of the croissant, hollandaise sauce and crème brulee. I must speak hard truths here.)
But the biggest cultural difference is that everyone in Japan has access to health care, particularly primary care – and they use it. A lot.
2.) Amazing equity – “single tier”
In designing and maintaining their health care system, Japan has always focused on equality – and it shows. They’ve created what is in many ways the ultimate “single tier” system, with each individual guaranteed robust and comprehensive coverage. Premiums are fixed by law to be about 8% of an employee’s salary, and must be split equally between the employer and employee. If you make the equivalent of $30,000 or $250,000, the rules are the same. The self-employed and people on pensions follow similar rules, but with the government picking up the other half in the place of an employer. Once people get above the age of 70, they’re enter the public Health Services System for the Elderly, where their premiums are paid by taxes that have been collected on all other premiums.
Co-pays are similarly affordable and predictable. For outpatient services, you pay 30% of the cost no matter what plan you’re in. Inpatient services are either 20% or 30%, and primary care, doctor visits, etc. are 10%. Based on this, what do you think people tend to use the most of? That’s right – primary and preventative care, which we know allows us to catch health problems earlier, when they’re easier to prevent and cheaper to treat.
It should surprise no one, then, that Japanese citizens go to the doctor anywhere from twice to three times more frequently than Americans. Going to the doctor makes you healthier – who knew! That’s something else to ponder while realizing that despite their frequency, Japanese per capita health care spending is 1/3 of the U.S.
3.) Use of technology and pharmaceuticals
I wanted to talk about Japan because their use of technology and prescription drugs – two factors that make our health care so unreasonably expensive – matches ours. In 2004, the U.S. had 26.6 MRI machines for every thousand people, but Japan had 40.1. As mentioned, they also have more per capita CT scans than any other country. Their love of toys exceeds ours.
One big cultural difference is that Japanese doctors are often their own pharmacists, dispensing prescriptions directly. But despite the different delivery mechanism, pharmaceutical use is similar to the U.S. – indeed, it’s slightly more frequent. 19% of health care spending in Japan is on pharmaceuticals, compared to 12.4% for the U.S. And yet, Japan in 2006 spent $425 per person on drugs, while the U.S. spent $792.
Here’s the first real secret of how all this is possible. The Japanese Ministry of Health sets rates for everything, not just the government-run plan for the elderly. It has no say in what treatment you get – that’s between you and your doctor. But everyone is on the same page in terms of what it costs.
The country runs on fee-for-service, but prices are uniformly set by the Ministry each year, down to the smallest detail. A story on NPR quoted health economist Professor Ikegami Naoki: “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.”
One of the real problems in the U.S. is there are huge discrepancies in what treatments cost, even in Medicare. Beta blockers in Denver cost less than beta blockers in Los Angeles. Determining health care value has been based on what the market will bear, which leads to a system that makes some people very rich, but the average person mystified at what the real value of the service is. None of this is in play in Japan. The hospitals are entirely private but not-for-profit, so there’d be no value in testing what the market would bear anyways. The Ministry of Health's uniform fee schedule keeps health care affordable for everyone.
4.) Complete choice for consumers
So if you’re not comparing prices among providers (which, by the way, we don’t do in the U.S. either – patients usually make their decisions based on what’s covered by their insurance, almost never by how much they charge), how do you determine where you go for care?
The short answer is, in a completely open market where you have your choice of any primary care doctor in the country, can go to a specialist without a referral, and can go to any hospital in the country and know that there will be no variance in price, you choose based on the point of comparison left to you: quality.
Imagine that – a free market based on meritocracy (and possibly other factors like geographic proximity, personal recommendations, etc.) Why, that almost sounds like Medicare!
5.) Changes the game for the private insurance industry
If Japan proves anything, it’s that the private insurance industry is not inherently naughty by nature. Rather, it’s our laissez-faire treatment of their business practices that has allowed both amoral and arguably immoral practices to rise in the name of the almighty dollar.
One might even say Japan has a robust private insurance industry, with over 2,000 private insurers who offer a variety of plans. But no one would ever mistake this for the American system. As already mentioned, community rating is the law of the land. Your premium is about 8% of your salary regardless of your health history, your family genetics, your pre-existing conditions, or how much money you have. It is illegal to refuse to sell an insurance policy based on pre-existing conditions, and also illegal to deny a claim so long as the normal procedure is followed. The rates for service are set by the government with no variance. A minimum set of benefits is also required, including ambulatory care, long-term care, dental and prescription drugs.
So, in short, nearly everything that frustrates us about the American insurance industry is illegal.
Here’s another tremendous advantage to the government-set fees: administrative costs. A huge amount of waste and inefficiency is generated by the fact that each insurer in the U.S. has their own payment system, their own requirements for claim, and their own compensation methodologies. But in Japan, everyone pays the same rates, regardless of which company. As such, administrative costs are shockingly low.
And yet private insurance allows employers and, to some extent, individuals to customize their plans to suit their needs. You can get different plans to offer different co-pays, or other variants in elective procedures not covered by the minimum set of benefits.
The Bad:
1.) Hospital and physician compensation
There has to be a loser in the government having such a heavy regulating hands in terms of setting fees. In this case, it’s doctors and hospitals. Japan actually has more hospital beds per capita than nearly every other nation, but the percentage that are vacant at any time are very high, even with the average hospital stay for inpatient services significantly higher than it is in the U.S. They have an equivalent number of doctors, meaning there is a shortage compared to their population. But its effects largely haven’t been felt yet because the very low rates of compensation compel doctors to take as many cases as possible. According to an article in Health Affairs from 1987, the average workload per day for outpatient clinicians at that time was 49 patients, with 17% of doctors seeing more than a hundred.
Suffice to say, there’s no way you can see one hundred patients in a day and not have your quality drop precipitously. As I mentioned, quality is the main factor left to judge providers, which means teaching hospitals – perceived to be the best in terms of quality – are flooded, leading to lines and delays for care.
Government intervention to set uniform rates have been great for the federal budget, great for patients, great for businesses, and great for the elderly. But it continues to cause problems for providers. When you consider that hospitals are required to be not-for-profit to begin with, it’s no surprise that Japan shares another trait with the U.S. – hospital going bankrupt during tough economic times.
2.) Overuse of the most expensive services
Here’s something else that Japan shares with the U.S. – an incentive to prescribe the most expensive services. This, as much as affordability, explains why Japanese health care resembles the U.S. in terms of technology and drugs. Where rates are uniform and low, doctors have an incentive to perform services that have the highest fees. The more expensive, still under patent drugs get a wide circulation. The issue here clearly isn’t that it makes Japanese health care more expensive, but that it influences the care that patients receive. Those new drugs and those MRIs aren’t always necessary. And where they’re not necessary, they may do more harm than good.
3.) The need for more prevention and individual responsibility
When health care is affordable and universal, it gets used. That’s good for your health. But it’s not necessarily good for your sense of individual responsibility – a topic conservatives harp on, but which is still key to a healthy lifestyle. As one recent visitor to Japan remarked, “Dialing 119 (911) to summon an ambulance for the most minor of complaints is almost a sport.” Although Japanese obesity is low compared to Americans, it is on the rise, as are unhealthy lifestyle choices, which will lead to more use of a health care system where doctors and nurses are already overworked. It’s a long-term problem, but a troubling trend.
4.) & 5.) You know what? I can’t think of anything.
I’d love to have two more points for symmetry, but I honestly can’t think of anything. It’s a great freaking system and, coming from an undeniable capitalist powerhouse, has barely a sniff of the usual health care boogeymen.
Certainly, Americans aren’t in much of a position to feel superior on either the question of individual responsibility or the wasteful influence of money in medicine. Government’s heavy-handed intervention in the fee-for-service rates is perhaps a cautionary tale, particularly for visions of single-payer. Clearly, the Ministry of Health’s decisions are somewhat influenced by politics. If Congress was in charge of interest rates, you can bet they’d always be at 1% or below at all times, but that would have dire repercussions for our fiscal policy. Tom Daschle’s Federal Health Board – bring together experts primarily from the health care delivery system, insulated from the political process – is one solution. Doubtlessly there are others. But there’s nothing insurmountable broken in Japanese health care.
Ultimately, universal health care is about creating a system that’s affordable, covers everyone’s basic medical needs, and yields a quality outcome. It’s hard to imagine many countries doing it better than Japan.
(Photo credit: Noriko Puffy on Flickr.)
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