National | YEN FOR LIVING

Cracks forming in Japan's premium-based universal health care system

by Philip Brasor and Masako Tsubuku

Contributing Writers

One of the issues U.S. voters say they care the most about right now is health care. America is almost alone in the developed world in not providing its citizens with universal medical care.

Japan, on the other hand, has universal health, though it differs from many other countries’ in that it is paid for mainly through premiums to the central government rather than derived from tax revenues. In essence, it is a separate tax based on one’s income.

As society ages, medical costs are ballooning, increasing the burden on workers paying the premiums. But without a drastic overhaul of the national health care system or measures to reduce overall medical costs, the burden on the working population is expected to rise in the coming decades.

At present, there are two main parts to the health care system.

Employees in larger companies and industries tend to pay through the shakai hoken (social insurance) system, which means they share premium payments with their employers. Almost everyone else pays through the kokumin kenkō hoken (national health insurance) system, even if they are unemployed.

Not surprisingly, as Japan’s population has aged, the health care costs of the government have gone up, which means premiums have gone up as well, though according to a series of reports in the Nihon Keizai Shimbun newspaper, better known as the Nikkei, some workers may not realize it.

In an April 19 article about what it called “hidden taxes,” Nikkei reported that between fiscal 2013 and fiscal 2017, premiums for shakai hoken members increased by an average of ¥58,690, while annual salaries increased by ¥160,000 during the same period. This means the boost in premiums reduced the effect of these wage hikes by nearly 40 percent. And as the baby boom generation ages, more money will be needed to prop up the health care system. But since the number of productive workers contributing to the system is dwindling, their burden will become greater.

As it stands, some people cannot afford their health insurance.

In a Nov. 1 article, the Japan Communist Party organ, Akahata, reported that 2.89 million households that subscribe to the kokumin kenkō plan are delinquent on their premiums.

Akahata said that in 2017, 63 deaths were attributed to people not seeking medical care earlier because they either lacked insurance or had their insurance cards revoked due to financial reasons.

This problem may only get worse since more and more Japan residents have to join the kokumin system because of their nonregular employment situation, which usually doesn’t come with benefits.

Such members pay on average 30 to 70 percent more than people who belong to shakai hoken, depending on the insurance management organization.

In Tokyo’s 23 wards, a household with four people and an income of ¥4 million would pay as little as ¥198,000 a year in premiums under the shakai hoken system, while the same demographic using the kokumin kenkō system would pay ¥426,000 a year.

Over the past 25 years, the average income of a household paying into kokumin kenkō hoken has decreased from ¥2.76 million to ¥1.38 million, highlighting the fact that more lower-income people have joined it.

The kokumin system, however, is chronically in the red. In fiscal 2017 it was running a ¥45 billion deficit, but that deficit decreases every year as retired people leave the system when they turn 75 to join the kōki kōreisha system, a health insurance plan for the “late stage elderly” that took effect in 2008.

All health insurance premiums include contributions to the kōki kōreisha system that have been going up steadily since 2012. The total cost that the shakai hoken system shoulders for elderly health care is estimated at ¥3.4 trillion for fiscal 2019, which is equivalent to 40 percent of all revenues collected from company employees.

The government thus faces a reckoning in fiscal 2022, when the youngest baby boomers will turn 75, overloading the system considerably.

The obvious solution is a restructuring of the burden-benefit ratio, but does that mean making younger workers contribute more, or should elderly beneficiaries pay more for their own care?

Presently, many beneficiaries of the kōki kōreisha system pay only 10 percent out of pocket for medical services, compared with 30 percent for members of other national insurance plans. One idea would be to make a greater portion of wealthier older people pay more out of pocket.

Contributions are managed by the state-run Japan Health Insurance Association and corporate- and industry-run health insurance unions. The purpose of the unions is to pool as many members as possible to reduce the burden on each one, but as the number of members goes down through worker attrition, premiums go up proportionately.

At present, the average premium rate paid by the unions is 9.2 percent, while the average premium rate paid through the Japan Health Insurance Association, which is mainly made up of employees at small and midsize companies, is around 10 percent. But as costs for old-age medical care increase, more unions are dissolving because they are running in the red.

Other entities in trouble are the municipal and prefectural governments, which are being asked to contribute more to the national health insurance system. Since prefectural governments have more money than municipal ones, the central government in fiscal 2018 changed the system so the more lucrative prefectures would be running the system instead of smaller governments. As a result, the amount of local tax revenues used to prop up health care has doubled, from ¥170 billion to ¥340 billion.

Japan’s national health care system is based on a means-assessed premium on each member, but the system now requires a greater amount of financial input from local governments, which means those governments have less money to spend on local services. The system is by no means self-supporting.

Of course, another solution is to bring down health costs in general, and in that regard Japan has room for improvement.

As of 2016, Japan had 13.1 hospital beds per 1,000 people, the largest ratio among all OECD countries. The OECD average is 5.4.

According to a March 3 article in the Nikkei, Japan had an excess of 211,000 beds nationwide in fiscal 2018, or 14 percent more excess beds than in fiscal 2013. This is important, because 40 percent of medical costs in Japan go to hospitalization. If a medical institution has beds, its impulse is to fill them. Demand for beds dropped 3 percent last year, but the reduction rate for beds was only 1 percent.

The Nikkei says a number of prefectures are trying to reduce the number of beds in hospitals and clinics, but they can only control the number of new ones. They can’t force a medical institution to reduce the beds it already has. And there is a strong correlation between the number of beds and medical costs. Kochi Prefecture had the highest ratio of excess beds — the number in hospitals divided by the number actually necessary — and the second-highest health care outlays per capita. Also, hospital stays in Kochi are the longest in Japan at 21 days on average.

The government’s plan is to repurpose a substantial portion of beds to rehabilitative care, but hospitals are resisting because beds assigned to acute care, which requires more manpower, can charge ¥40,000 to ¥50,000 a day, or 20 percent more than beds for recovery and rehabilitation. It’s a matter of revenue.

Nara Prefecture in 2017 started monitoring hospitals, making them report real data on surgeries and emergency care. If the government deems those services to be below certain standards for surgeries and emergency care, it can demand the hospital shift more beds over to rehabilitative care.

What’s more, the aging trend will eventually stop. After 2040 the elderly portion of the population will decrease, so demand for rehabilitative care will also decrease. Hospitals do not want to make changes now that will have to be changed back in the coming years.

Yen for Living covers issues related to making, spending and saving money in Japan.