Japan: #26 in the 2022 World Index of Healthcare Innovation
Japan’s high debt loads, rising spending, and aging population make its healthcare system unsustainable.
By Gregg Girvan and Avik Roy
Introduction
While Japan is one of the wealthiest countries in the world, its health care system ranks only 26th in the 2022 World Index of Healthcare Innovation. This is a modest improvement from ranking 30th in 2021 and 31st in 2020.
This poor performance is driven by Japan’s fiscal instability; Japan’s unsustainable debt-to-GDP ratio (over 254% as of 2020) is the highest among ranked countries. This problem, combined with Japan’s aging population and low economic growth, means that Japan will struggle to finance its healthcare system in the years ahead.
Japan’s strength is the Quality of its health system (6th), with especially high performance on disease prevention. Health insurance coverage covers all Japanese citizens and is affordable. Though Japan still underperforms in Science and Technology measures relative to its reputation as a high-tech center, the country has the underlying institutions and infrastructure necessary to make further advances.
Background
Japan first established a health insurance system for blue-collar workers in 1922, modeled after the German system established by Otto von Bismarck in 1883. After World War II, the occupying American army recommended the establishment of universal coverage, which Japan achieved in 1961.
Today, Japan has over 3,200 health insurers, both public and private (usually employer- or occupation-based). Larger businesses tend to have private insurance, while smaller firms and freelancers usually go with the government plan. Since 1983, Japanese seniors receive health coverage financed through a national pool. For the non-elderly, the central government establishes the benefit package and reimbursement rates, and reviews it every two years. Private insurance premiums range between 3% and 10% of monthly wages and cost-sharing can vary. For those in the government plan, premiums are 8.2% of wages, split equally between workers and employers.
The Japanese government sets the price for all drugs reimbursed by health insurers. For non-covered drugs, manufacturers are free to set any price. Japan has a robust domestic pharmaceutical industry, led by Takeda, Daiichi Sankyo, and many others.
Quality
With the exception of Hong Kong, Japan leads the world with the longest life expectancy at 85 years, so it is no surprise that Japan excels in the Index’s Quality dimension, at 6th overall. In particular, Japan stands out on disease prevention (2nd), ranking second in cancer survival rates and fourth in preventing hospital admissions. Despite an initial troubled rollout of COVID vaccinations, Japan responded well to the pandemic (6th) with improving vaccination rates, low fatality rates, and a relatively light touch on lockdowns. In addition, Japan features easy and open access to specialist physicians. Still, Japan’s shortage of primary care physicians contributes to overuse of hospitals, reflected in an average hospital length of stay of over 16 days (more than double the OECD average).
Choice
Japan ranks 19th overall for Choice. Japanese residents have access to universal health coverage, though coverage is less affordable compared to other countries in the Index. Japan has an especially high rate of catastrophic health spending, as measured by the percentage of residents who spend 25 percent or more of household income on healthcare (29th). Insurance typically is provided through a single option from an employer, contributing to Japan’s low ranking (23rd) in freedom to choose healthcare services. As a major pharmaceutical market, Japan ranks 8th in access to new treatments, with a system that blends high access to new therapies with a robust market for affordable generic medications.
Science & Technology
At 14th, the Japanese health system ranks near the middle of the Index on Science and Technology. First and foremost, Japan is a leader in terms of pharmaceutical R&D spending (9th) as well as Nobel laureates (3rd), providing a base of intellectual capital from which medical and scientific advancements flow. Additionally, Japan’s strong information and communications ecosystem enables it to score well for development of personalized health technology. However, Japan has failed to fully capitalize these advantages to achieve broader scientific gains, ranking 10th on health care patents (per capita) and 23rd in the quality of its research, as measured by how often papers are cited. And despite being one of the most digitally connected places on earth, Japan ranks near the bottom in electronic health records adoption (30th).
Fiscal Sustainability
On Fiscal Sustainability, Japan ranks worse than any other country in the Index other than the United States. Japan’s overall debt as of 2020 stood at a staggering 254% of GDP. Public healthcare spending remains high relative to many countries in the Index, constituting 9.1% of GDP in 2020. Japan’s last-place ranking on national solvency and high public healthcare spending (28th) threaten the country’s ability to care for a rapidly aging population and contributes to Japan’s anemic economic performance. That said, Japan has slowed the growth in public healthcare spending in recent years (14th).
