Table Of ContentThe Art of Balance in Health Policy
Japan has a healthy population compared to the rest of the world, yet the
Japanese pay relatively little for medical care. This book analyzes how the
health-care system works and how it came into being. Campbell and Ikegami,
taking a comparative perspective, describe the politics of health care, the
variety of providers, the universal health insurance system, and the fee sched-
ule cost constraints at both the macro and micro levels. They pay special
attention to issues of quality and to the difficult problems of assuring adequate
high-tech medicine and long-term care. Although the authors discuss the
drawbacks to Japan's stringent cost-containment policy, they also keep in
mind the possible implications for reform in the United States. Egalitarian
values and a concern for "balance" among constituents, the authors argue,
are essential for cost containment and for access to health care.
The Art of Balance
in Health Policy
Maintaining Japan's Low-Cost,
Egalitarian System
JOHN CREIGHTON CAMPBELL
University of Michigan
NAOKI IKEGAMI
Keio University School of Medicine
CAMBRIDGE
UNIVERSITY PRESS
CAMBRIDGE UNIVERSITY PRESS
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Cambridge University Press
The Edinburgh Building, Cambridge CB2 8RU, UK
Published in the United States of America by Cambridge University Press, New York
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© John Creighton Campbell and Naoki Ikegami 1998
This publication is in copyright. Subject to statutory exception
and to the provisions of relevant collective licensing agreements,
no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 1998
This digitally printed version 2008
A catalogue record for this publication is available from the British Library
Library of Congress Cataloguing in Publication data
Campbell, John Creighton.
The art of balance in health policy : maintaining Japan's low-cost,
egalitarian system / John Creighton Campbell, Naoki Ikegami.
p. cm.
Includes bibliographical references (p. ).
ISBN 0-521-57122-7
1. Medical care - Japan - Finance. 2. Medical care - Japan - Cost
control. I. Ikegami, Naoki, 1949- . II. Title.
RA410.55.J3C35 1998
362.1*0952-dc21 97-23853
CIP
ISBN 978-0-521-57122-7 hardback
ISBN 978-0-521-06505-4 paperback
Contents
List of Tables and Figures page vi
Preface vii
1 Low Health-Care Spending in Japan 1
2 Actors, Arenas, and Agendas in Health Policy Making 21
3 Health-Care Providers 53
4 The Egalitarian Health Insurance System 87
5 The Macropolicy of Cost Containment 116
6 The Micropolicy of Cost Containment 145
7 The Quality Problem 175
8 Lessons? 199
Index 219
Tables and Figures
TABLES
1.1 Health Expenditure in Japan, 1990 page 5
3.1 Provider Characteristics, Japan and United States 71
3.2 Provider Characteristics by Ownership, 1993 73
FIGURES
1.1 Total Health Expenditure in PPP U.S. Dollars and Ratio to
GDP, 1994 7
1.2 Ratio of Total Health Expenditure to GDP, 1960-95 9
1.3 Flow of Money in Japanese Health Care 15
3.1 Age Distribution of Physicians according to Hospital Type
and Office: (a) 1972 and (b) 1992 66
4.1 Cross-Subsidization in Health Insurance, 1994 91
4.2 Percent of Population Covered by Health Insurance,
1927-90 105
VI
Preface
WHY should Americans care about the Japanese health-care system? An
easy question. Japan has an exceptionally healthy population, number
one in the world in terms of life expectancy and infant mortality, and excel-
lent by other less precise criteria as well. Although medical care is not the
main determining factor in good health, certainly it is not irrelevant that
everyone in Japan has access to medical care of decent quality at little direct
cost to the consumer. Moreover, Japan achieves these good results with an
exceptionally small burden on the economy: spending on medical care is only
slightly more than half that of the United States, and indeed is lower than in
most advanced nations.
The Japanese were not always so successful in holding down spending.
Back in the 1970s, health-care costs were exploding in Japan as in America,
going up at a much faster rate than inflation or economic growth. Japanese
officials responded in the early 1980s with some small but significant ad-
justments to their system. These succeeded in constraining spending - since
that time health care has continued at a level of about 7 percent of Gross
Domestic Product (GDP) - without cutting back on access or significantly
altering the way medical care is delivered.
American officials had tried a variety of cost-cutting devices without much
effect. The cost of medical care continued to escalate in the 1980s, exceeding
14 percent of GDP in 1994, even though an increasing number of Americans
lacked health insurance. In the 1990s, President Clinton tried to meet both
the access and cost problems with a revolutionary reform of the entire health-
care system, based on a set of academic theories that combined "managed
care" with market competition. This attempt failed but was followed by a
new attack on costs by big employers allied with big insurance/provider com-
plexes, based on similar theories.
This attack on costs had some immediate success, though whether it will
hold down the growth rate of health-care spending in the long run remains
vii
Preface
to be seen. What is obvious is the impact on the medical-care delivery system.
"Managed care" works by limiting choice at the point of delivery by patients
and physicians, and in the eyes of many, it is seriously threatening both
quality and access in the American health-care system.
This perception of threat, the turmoil in health-care institutions, and the
increasing number of practical problems that are developing as the logic of
"managed care" unfolds may combine to make the next few years promising
for serious health-care reform. We hope that such reforms will give equal
weight to the problems of quality, access, and cost. Moreover, we hope that
this time Americans will think less about academic theories and more about
real-life lessons - including lessons from Japan.
This book is an account of Japanese health policy and the medical-care
system from an American point of view. Our approach is rather unconven-
tional for the health policy field. We have kept statistics and detailed descrip-
tions of programs to a minimum, and we do not spend too much time on the
specialized hypotheses raised by academic health economists.1 Instead, we
emphasize the political economy of health care in a broad sense, with par-
ticular attention to how the central institutions that account for Japan's low
cost structure and other important characteristics have developed over time.
We also look for underlying principles in health policy, and find that a prac-
tical emphasis on "balance" - and on egalitarian values more generally -
helps account for Japanese success.
Throughout the book, most of our comparisons are with the United States
since our main intended audience is readers who are interested in the Amer-
ican health-care system. However, we hope that our analysis will also con-
tribute to discussions about health-care reform elsewhere, about Japan's
public policy and its decision-making process, and about the development of
the welfare state in modern society.
Specifically, in the first chapter we demonstrate that medical costs in Japan
are indeed low and controlled, and we briefly run through some of the social
and cultural factors that help explain that result before providing an overview
of how the system works. Chapter 2 describes the actors, arenas, and agendas
of health-care politics today. Chapter 3 shows why Japanese physicians and
1 Some such accounts are included in our companion edited volume, Containing Health-Care
Costs in Japan (Ann Arbor: University of Michigan Press, 1996), and in Aki Yoshikawa,
Jayanta Bhattacharya, and William Vogt, eds., Health Economics of Japan: Patients, Doctors
and Hospitals Under a Universal Health Care System (Tokyo: University of Tokyo Press,
1996).
viii
Preface
hospitals are the way they are, including why they do not cause rapid cost
expansions, and outlines prototypes of the six main types of providers. Chap-
ter 4 describes the fragmented yet egalitarian health insurance system in re-
lation to conflict or potential conflict among social groups.
We then turn specifically to the main mechanism for cost control, the
universal fee schedule. Chapter 5 takes a macro perspective to see how re-
peated political negotiations over fees at the national level have been an ef-
fective way to regulate total medical spending. Chapter 6 looks at how
providers' behavior is structured by the fee schedule and other micro-level
regulations. Chapter 7 assesses several dimensions of quality, the area in
which Japanese health care is most often criticized. Finally, Chapter 8 sum-
marizes our arguments and tries to draw some lessons for both Japan and
the United States.
The initial writing responsibility for these chapters is as follows: Campbell,
1, 2, 4, 5; Ikegami, 3, 6, 7; the concluding Chapter 8 was drafted jointly. All
chapters went through substantial rewriting, stimulated by meetings of two
or three hours up to a couple of weeks at various spots in Japan and North
America. Campbell of course took final responsibility for the English text,
while Ikegami did so for the Japanese version, which has already been pub-
lished by Chuo Koron Shinsho under the title Nikon no Iryo: Tosei to Bar-
ansu Kankaku (literally Japan's Health Care: Regulating and Balancing).
Incidentally, many Japanese readers have remarked to us that it is the first
time they had ever seen anything positive about the Japanese health-care
system (and the book has sold some 40,000 copies).
Although we retain some small differences of opinion, nearly everything
in the book is truly a joint product. Indeed, it has been quite an experience
to have a Japanese physician and an American political scientist collaborating
on a book.
We have followed two sets of conventions that should be noted. First,
names - people's names are given in the Japanese order, family name first.
Unfortunately, no such simple rule can determine what to call organizations
and programs in English. They are often given different English titles even
in official documents, and many of these titles - whether or not they are
direct translations of the Japanese terms - are quite misleading. We generally
pick the title that seems most accurate to us among those in common use,
although in one case we adopted a usage we have not seen elsewhere. Kok-
umin Kenko Hoken, the health insurance program for non-employees, is usu-
ally called ''National Health Insurance," but we find that confusing and call
ix
Preface
it "Citizens' Health Insurance" or CHI, which is actually a more faithful
gloss on the Japanese than the usual term.
Second, money - amounts given in Japanese yen are not intuitively mean-
ingful to most readers, so it is helpful to give an equivalent in dollars, but
at what exchange rate? Any choice is arbitrary in some respect. We take a
simple and radical approach of converting all money figures (except when
otherwise noted) at the rate of ¥180 to $1. That figure is close to the level
of the "Purchasing Power Parity" (PPP) rate in the early 1990s, and by
using the same conversion rate throughout, the amounts are comparable over
time. The alternative would be to use either contemporary actual exchange
rates (which varied between ¥360 to ¥80 to the dollar from the 1970s to the
'90s) or the estimated PPP rate year by year, which varied from ¥183 to ¥292
per dollar in the period 1970-93.2 Both methods are awkward, particularly
for comparisons over time. In any case, these dollar equivalents should be
seen only as an approximate indication of the size of some money amount.
Any serious analysis of trends or comparisons requires careful attention to
the difficult problems of adjusting for price changes and equivalents in for-
eign currency.
ACKNOWLEDGMENTS
Finally, we should thank many institutions and individuals. Campbell's work
on this project originated with a Fulbright fellowship in 1989-90, and he is
grateful to the U.S-Japan Joint Educational Commission and to the Faculty
of Law at Keio University (and host Sone Yasunori) for making an initial
year of study possible. The two authors first met at that time. We observed
that the prospect of substantial reform in the American health-care system
seemed to be growing, and we noted that few in the United States knew
much about what we saw as the very relevant Japanese experience in this
area. That led us to apply to the Center for Global Partnership of the Japan
The calculation of PPP is based on a common market-basket of goods and is generally held
to be more appropriate than official exchange rates for goods that are not internationally
traded (i.e., services such as health care). Calculations from the OECD, conveniently col-
lected along with many health-care statistics for the industrialized nations in George J. Schie-
ber, Jean-Pierre Poullier, and Leslie M. Greenwald, "U.S. Health Expenditure Performance:
An International Comparison and Data Update," Health Care Financing Review 13:4 (Sept.,
1992), pp. 1-87. More recent data is periodically published only in electronic form as OECD
Health Data.
