Introduction

While Japan is one of the wealthiest countries in the world, its health care system ranks next to last in the World Index of Healthcare Innovation, with a score of 37.52. The poor performance is driven by Japan’s fiscal instability; Japan’s debt-to-GDP ratio of nearly 240% (as of 2019) is the highest among ranked countries. This problem, combined with Japan’s aging population and low economic growth, means that Japan will struggle to sustainably finance its health care system in the years ahead.

Japan performs best on Quality, with reasonably effective management of preventable disease. Health insurance coverage is universal and affordable to all citizens. 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 was achieved in 1961.

Today, Japan has over 3,500 health insurers: some public, some private (usually employer- or occupation-based). Larger businesses tend to have private insurance, while smaller businesses and freelancers usually go with the government plan. Since 1983, health care costs for those over 70 has been financed through a national pool. For the non-elderly, the benefit package and reimbursement rates are established by the central government and reviewed every two years. Private insurance premiums range between 3–10% of monthly wages and cost-sharing can vary; for the government plan, premiums are 8.2% of wages, split between workers and employers.

The Japanese government sets the price for all drugs reimbursed by health insurers; non-covered drugs have free pricing. 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 84.8 years, so it is no surprise that Japan excels in the Index’s Quality dimension at #8 overall. In particular, Japan stands out on measures of preventable disease(#5), ranking first in 5-year cancer survival rates and fourth in preventing hospital admissions. Despite a troubled rollout of COVID vaccinations, Japan has otherwise responded well to the pandemic (#7) by keeping fatality rates low while exerting a relatively light touch on lockdowns. In addition, Japan features very short wait times for services, thanks to 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 #17 overall for Choice. Japanese residents have access to affordable, universal health insurance coverage, ranking #6 in that element. However, insurance is typically provided only through a single option from an employer, contributing to Japan’s #22 ranking in freedom to choose health care services. As a major pharmaceutical market, Japan ranks fifth 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 #10, the Japanese health system rank on Science and Technology measures dramatically improved relative to other countries in the Index. The improvement was driven in part by accounting for Japan’s strong information and communications ecosystem, making it a strong market for development of personalized health technology. Japan is also is a leader in terms of pharmaceutical R&D spending (#5) as well as Nobel laureates (#3), providing a base of intellectual capital from which medical and scientific advancements are possible. However, Japan has failed to fully capitalize these advantages to achieve broader scientific gains, ranking #10 on health care patents (per capita) and #22 on the average number of citations to scientific documents published. And despite being one of the most digitally connected places on earth, Japan ranks near the bottom in electronic health records adoption (#30).

Fiscal Sustainability

On Fiscal Sustainability, Japan ranks far worse than any other country in the Index. Japan has the highest debt-to-GDP and current public health care spending, and the second highest growth in public health care spending over the last 10 years. Japan’s overall debt as of 2019 stood at a staggering 238% of GDP. Public health care spending constituted almost 9.5% of GDP in 2019 up from 7.4% in 2010. In addition to escalating health costs, these numbers reflect Japan’s anemic economic performance, coupled with high spending on stimulus projects that have not yielded expected returns.