Current Issues and Future Challenges facing Japan's Health Care
---How Japan will cope with an aging society----

AtoZ Okamoto, M.D.,M.P.H.
[paper presented at the 1st UK-Japan Health Policy Conference in September 1994]

I. UK and Japan---similarities and differences
II. Rapidly aging population
III.Japanese elderly: poor quality of life
IV. Abundance of hospital beds and understaffing
V. Health care provision and financing
VI. Overutilization of health care services
VII.Efforts to control the growth of hospital beds
VIII.The Ten Year Gold Plan
IX. Action plans at the local levels
X. The case of Osaka-Sayama city
XI. Introduction of long term care insurance
XII.Looking ahead
I.UK and Japan---similarities and differences
The health care systems in the UK and Japan have many striking similarities and differences.
They are similar in that both countries spend a smaller amount of money on health care than other industrial nations. This is envied within the United States and other countries that are suffering from intolerably high health care costs (Fig.1).
However the UK and Japan differ considerably in terms of the source of funding and the burden sharing between personal medical care services and public health services. While the British National Health Service provides both personal medical care and public health services comprehensively, Japan's health care system provides those two services separately.
Public health services are provided by public sector agencies, such as prefectural and local health centers which number 848 or approximately one facility per 150,000 population, and personal medical care services are provided by hospitals and clinics owned and operated predominantly by the private sector. The former are funded exclusively through general revenue and the latter are funded through the universal, compulsory national health insurance system.
Contrary to what most European authorities tend to think, Japan's health insurance system is not entirely similar to the German model whose insurance schemes are exclusively funded by premium contributions with no subsidies from general revenue. Although Japan's insurance is predominantly financed from premium contributions, a considerable amount of government subsidies from general revenue supplements the premium revenue (Fig.2).
Furthermore, in order to equalize the imbalance of the proportion of the elderly to the total enrollment among insurers, an intricate financial redistribution mechanism serves as a quasi-reinsurance for the health care costs for the elderly of 70 years old or over
Simply put, Japan's national health insurance system is not purely an insurance system based on the strict actuarial principle. Rather it can be viewed as a social insurance model based on a hybrid of insurance, taxation, and a complicated financial redistribution and adjustment mechanism.
II.Rapidly aging population
Japan is undergoing a drastic change in terms of demographic trends . While the postwar baby boomers are nearing 50 years old, the birth rate is declining sharply. This demographic change has not only brought Japan's population growth to a virtual halt but it has also increased the proportion of the elderly population.
Japan's current population is 124 million, of which 14% are the elderly of 65 years old or over. However according to the latest prediction, the percent of the elderly will be 17% in the year 2000, and it will reach the peak of 27% in the year 2040 by the medium estimate(Fig.3). The problem is not only that Japan will face an unprecedentedly high percent of the elderly to the total population but that the rate of aging is faster than any other countries (Fig.4). This means Japan can not have long time preparing for a society entirely different from today.
III.Japanese elderly: poor quality of life
Most westerners have a stereotypical image about the status of Japanese elderly. The following are some examples:
1) Japanese families respect the elderly and try to live with them keeping the number of the institutionalized elderly population at considerably low level.
2) Japanese average life span is the longest of the world and consequently most elderly are enjoying good quality of life.
3) A closely interwoven society provides an ideal setting for community services to the needy population.
Unfortunately those are the stereotypical myths concerning Japanese elderly. The reality is quite different.
According to the Ministry of Health and Welfare estimate based on the national health status survey conducted in 1986, there estimated to be in 1995 approximately 850,000 elderly persons, or 4.6% of the population of 65 years old or over, who are bedridden for longer than six months and approximately 1.23 million elderly persons, or 6.7% of the elderly population, who are dementia. Of those elderly who need care services, more than half are institutionalized in hospitals, nursing homes and other long term care facilities.
Also the prevalence of disabled or bed-bound elderly may be higher than in other industrialized countries. According to an international comparison report, the percent of the bed-bound elderly was estimated to be 0.6% of the non-institutionalized population in Japan in a sharp contrast to 0.2% for UK and 0.1% for Denmark (cf. Table 3 of Prof. Niki's article).
These figures illustrate that while Japan's average life span is the longest in the world, the quality of life of the elderly population is not commensurate with its sheer quantity. Recent policy discussions in Japan have focused on how to restructure the health care system to better fit the needs of the rapidly aging society and to improve the quality of life for elderly citizens.
IV.Abundance of hospital beds and understaffing
Japan has an abundance of health care facilities. As shown in (table.1), Japan has a total of 2.22 million bed capacity as of October 1993. The bed capacity per population of 1.8 beds per 100 is absolutely highest in the world.
Because of the abundance of institutional care, long waiting lists are seldom seen in Japan. However the quality of care and amenities within those facilities may be questioned. The minimum space per hospital bed dictated by Health Service Law is only 4.3 square meters. It is barely possible to place a huge patient bed in that space. Moreover, Japan's hospitals are generally understaffed. The number of nurses per inpatient bed is considerably lower than in the UK and other countries (cf. Table 2 of Prof. Niki's article). In order to offset the shortage of nursing staff, many hospitals require patients to employ private nurses aids. The cost for employing those non-licenced personnel is usually not fully reimbursed through the social insurance system thus leading to an informal patient out-of-pocket payment (cf. Table 4 of Prof. Niki's article).
It was not until April 1994, when the government has launched an initiative to do away with this undue financial burden of patients by revising the practicing rules of providers to in include a provision stating "Health care providers shall not cost-shift the nursing service by requiring patients to employ private nurse aids at their expense (Practicing Rules of Health Insurance Providers, Sec 11-2)".
V. Health care provision and financing
In a sharp contrast to the UK system, Japan's medical care facilities are predominantly owned and operated by the private sector. Out of 9,844 hospitals or 1,680,952 hospital beds, 7,080 hospitals (72%) or 917,699 hospital beds(54.6%) are classified as private sector as of October 1993. The medical care service providers are reimbursed by the national health insurance system financed predominantly from premium contributions, although there is a considerable subsidy from the national government.
Reimbursement is done on a fee-for-service basis. Japan does not have a per-capita payment system as in the U.K. Hence there is no registration system of local residents to GPs and there is no official tie between local residents and Gps. Japan's local residents are given full freedom of choosing health care providers. Although this sounds good, actually many persons have difficulties in choosing an appropriate one because of lack of disclosure of information on heath care providers.
VI.Overutilization of health care services
Under the fee-for-service system, the total health care cost is determined by price multiplied by utilization. The price of medical services and pharmaceutical is strictly regulated by the central government and this serves as the main device for total health spending control. In sharp contrast to the strict price control, the utilization of personal medical care services has so far been only loosely regulated. A good example is seen in the growth of renal dialysis patients (Fig.5). In 1970, the number of Japanese patients on renal dialysis was less than in the UK. It has since increased sharply until nearly one out of one thousand Japanese are currently on dialysis.
Another example is evidenced by a comparison of market size of antibacterial drugs of major industrial countries(Fig.6). It is noteworthy that Japan's market size is disproportionately larger than the United States and major European countries. The cost of wanton use of antibacterial was painfully evidenced by insidious epidemics of iatrogenic infection named MRSA (Methicillin Resistant Staphylococcus Aureus), which prompted a nation wide outcry.
The importance of price control over utilization of medical care services in controlling the total national health care costs has been acknowledged by many countries, justifying the recent US effort to introduce price control as part of their health care reform plan. As a consequence of lack of utilization control, Japan's hospital beds have steadily grown until it became the highest hospital beds per population in the world.
VII.Efforts to control the growth of hospital beds
Initial efforts to stem the evergrowing hospital beds were launched in 1985, when the revised Health Service Law authorized the prefectural government to draw a "regional health care plan" by which the prefectural governor can refuse to permit the construction of new hospitals. This blatant attempt to control hospital beds has yielded a somewhat ironical phenomenon: a so-called "rush-in" hospital construction boom from 1984 to 1989.
It was an unfortunate coincidence that Japan's economy has seen an unprecedented economic boom during the latter half of the 80s. Active investment in real estate has spurred the hospital construction. As a result, the hospital beds of somatic hospitals have jumped 18% for a short period of five years from 1,050,113 in 1984 to 1,239,883 in 1989 (Fig.7. The increase of psychiatric beds has remained moderate during this period possibly because Japan's psychiatric beds were already well saturated).
The second blow against hospitals took an insidious shape :controlling the drug price and discouraging pharmaceutical manufacturers and wholesalers from excessive discounting of drugs. Given the enormity of profit margin of dispensing drugs gained by Japanese hospitals, the loss of profit margins from medicines have made the once lucrative hospital industry financially strapped.
Gone are the good old days! Japanese hospitals are currently undergoing a painful restructuring process in which many smaller hospitals are merged or acquired by larger hospitals. Fig.8 shows that the number of small hospitals whose bed capacity is 20-99 has steadily been decreasing despite the rush-in construction boom, while the number of larger hospitals has been on the rise.
VIII. The Ten Year Gold Plan
Given a limited time left for Japan to prepare for the gigantic care need of the elderly, the market mechanism alone will not be sufficient to induce the development of community services such as visiting nurse services, nursing homes, home helping services. In December 1989, the national government instituted a strategic plan for the elderly health and welfare for the year 2000 dubbed as Ten Year Gold Plan and set various national goals to be achieved by 1999 [Table 2].
To achieve the above goals, the cumulative budget of 11 trillion 550 billion yen (or approximately 85 billion pounds) will be spent for a proposed period of 10 years, of which five trillion yen (or approximately 32 billion pounds) will be a direct investment from government.
IX. Action plans at the local levels
Laissez-faire health care policy will inevitably result in a serious geographic inequality of distribution of resources. For example, there is almost three times variety in terms of somatic hospital beds per population (Kochi prefecture has 2,043 beds per 100,000 population while Chiba prefecture has only 696)6. In order to prevent such maldistribution, the national goals set forth by the Gold Plan should be achieved in a well-coordinated manner reflecting the needs of the local levels.
In June 1990, both the Elderly Health Act and the Elderly Welfare Act were revised and all municipal governments were required to develop an action plan to achieve the national goals at the local level.
In the process of developing such plans, each municipal government has conducted a survey to estimate the care needs of the of elderly and to set local goals in keeping with the Ten Year Gold Plan. Estimating the exact number the elderly patients is not easy. For example, the number of senile dementia such as Alzheimer disease patients is difficult to estimate. For the sake of convenience the Ministry of Health & Welfare has published a guideline including an age-specific prevalence of senile dementia based on an extramural survey (Fig.9). The guideline also includes an expected service level[Table 3].
X.The case of Osaka-Sayama city
By the end of March 1994, most of 3,200 municipal governments have completed the action plans.
The author has been involved in development of the action plan of Osaka-Sayama city (a small sized residential city with population 54,323 of which 8% is 65 years old or over, located 20 kilometers southeast of metropolitan Osaka city) as a consultant. The experience gained through participation in the planning shows how the action plans were developed by each municipal government.
In May 1990, the baseline survey was conducted on 1,121 residents randomly sampled from the residents of 55 years old or over. The questionare was distributed by citizen volunteers for which 85.8% of the sample responded. The baseline survey focused on the perceived health status and opinion about the future plan for the elderly health and welfare services and served as a preliminary survey for the following population survey to estimate the care need for the elderly.
In September 1992, the population survey was conducted on the population identified as requiring care services by the baseline survey. 112 elderly residents identified by the baseline survey were visited by citizen volunteers to assess the health status and ADL, the findings of which were used as data to develop the action plan.
The proposed goals for Osaka-Sayama city to achieve by 1999 were then developed incorporating those community surveys which resulted in [Table 4].
Obviously there are huge discrepancies between the goals to be achieved and the status quo and the time allotted to achieve the goals are only five years! The key element to determine the success of the plan is definitely how to finance it. Without adequate financing, the action plan will end up in "blueprint".
XI. Introduction of long term care insurance
As stated earlier, 11 trillion yen will be invested to achieve the Ten Year Golden Plan. How will this huge investment be financed?
Currently skilled nursing homes are financed from health insurance. Care houses are financed predominantly from residents private payment. Visiting home nursing and rehabilitation services have so far been financed from general revenue but are switching to health insurance because the visiting nursing services were included in the health insurance benefit in 1988. All other services including home helping services are financed from general revenue.
However financing from general revenue has some inherent limitations. It will be confined by tax revenue and lack flexibility to cater to the need of the eligible recipients.
The advisory board for the future of social security issued a report advocating an establishment of long term care insurance to finance the care service for the elderly. Obviously the move was much influenced by Germany's introduction of long term care insurance which will take effect in April 1995.
The proposal for the long term care insurance stirred a considerable debate. Although majority of the opinion leaders welcomed it, some academics are doubtful even about the very rationale of the proposal. Some of them argue that the welfare services should be financed from general revenue, others question the cost-effectiveness of collecting insurance premium from enrollees.
Regardless of the debate, the government seems determined to introduce it in 1997. Then the services related with the elderly's long term care such as visiting nursing services, skilled nursing facilities, and some of the geriatric hospitals will be separated from present health insurance system and will be financed from the new insurance.
With the creation of yet another insurance system, Japan will have three different compulsory insurance systems: health insurance for acute medical and dental services, pension insurance for old age and disability and the newly proposed long term care insurance.
Although the addition of the third insurance system will mean that the nation will have to bear heavier premium contribution in the near future, majority of the nation seem to favor the idea of creating a new system According to the opinion poll conducted by Mainichi news paper in cooperation with American Family Life Insurance Inc. revealed that as much as 86% of the nation feel that long term care insurance is necessary.
Apart from financing, the details of the new long term care insurance have not been finalized yet. Especially the focus of debate centers around whether it will include cash payment to the family members who care for the flailed elderly because such cash payment may not only discourage the development of social services but may invite fraud and abuse.
Whatever the outcome, the creation of the long term care insurance will surely facilitate the development of the Ten Year Golden Plan and provide financial basis for strengthening community care services.
XII.Looking ahead
How to cope with a rise in the need for the elderly care services is a formidable issue facing all the industrialized countries. Enactment of Community Care Act by U.K. in 1990 and introduction of long term care insurance by Germany are the examples of ongoing effort in various countries.
Especially Japan, given its rapid rate of aging, can not have time to waste. Unfortunately, Japan's health care system has not been prepared enough to respond to the needs ahead.@@Particularly Japan's home care services have heavily been relying on voluntary labor of family members with little social services available. Japan is going to respond by developing regional planning and introducing German model new insurance system.
This clearly shows that in terms of financing Japan chose to adopt the ways different from those of U.K, which reflects the difference in health care financing of both countries.
However there found to be one crucial resemblance with respect to the provision of community care services: emphasis on "care management" in which various kinds of organizations including local governments, voluntary organizations, private practitioners are coordinated to provide the best possible set of care services to the needy population.
This indicates that despite the difference of financing there will be ample room for both countries to share the experiences in a mutually beneficial manner for the purpose of evaluating the care need and implementing the community care services. Whether Japan will be able to develop effective and successful care management system and achieve the goals set by the Gold Plan will inevitably determine the fate of the Japan's growing elderly population in the next century.
[table 1]bed capacity of Japan
(as of October 1993)
skilled nursing facilities------87,612
intermediate care facilities----194,091

[table 2] 10 year Gold Plan (September 1994)
1, home care services
1)home helpers-----------------------200,000
2)short stay beds of nursing homes----60,000 beds
3)day service centers-----------------20,000 facilities
4)home care support centers-----------10,000 facilities
5)visiting nurse stations--------------5,000 facilities
2, long term care facilities
1)nursing homes----------------------300,000 beds
2)skilled nursing homes--------------280,000 beds
3)care houses------------------------100,000 capacity
4)Welfare centers in rural areas---------400 facilities
[Table 3]The service level expected to be achieved by 1999
(set by the guideline of Ministry of Health & Welfare)

1)home help service----------- 3-6 times per week/elderly patient
2)day services---------------- 2-3 times per week/elderly patient
3)short stay at nursing homes--- 6 days per year/elderly patient
4)visiting home rehab services------ 2 times per week/CVA patient
5)visiting home nurse services 1-2 times per week/elderly patient
6)nursing home beds------------------- 1%+ of the elderly over 65
7)skilled nursing home beds----------- same as above
8)care house------------------------- 0.5% of the elderly over 65
(status as of February 1994)
1)home help service
---20,411 times/year, 32 helpers(4 full time and 2 part time helpers)
2)day services
------------14,360 times/year, 3 centers (1,191 times/year, 1 center)
3)short stay at nursing homes--------1,410 days, 14 beds (1,229 days)
4)home care support centers------------------------- 2 centers (none)
5)visiting home rehab services
---------------------------1,561 times/year, 2 PTs(1,083 times/ year)
6)visiting home nurse services------6,459 times/year, 10 nurses(none)
7)nursing home beds------102 beds, 2 facilities (50 beds, 1 facility)
8)skilled nursing home beds-----------------78 beds, 1 facility(none)
9)care house-----------------------39 capacity, shared facility(none)
GO to CareManager.Net