Japan: #31 in the 2020 World Index of Healthcare Innovation

Introduction

While Japan is one of the wealthiest countries in the world, its health care system ranks last in the World Index of Healthcare Innovation, with a score of 31.51. The poor performance is driven by Japan’s fiscal instability; Japan’s debt-to-GDP ratio of 197% 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, with reasonably affordable options available to all citizens, and a large number of insurance plans. However, despite Japan’s reputation as a high-tech center, the country scored poorly on our Science & Technology measures, including adoption of medical advances and health digitization.

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

Japan leads the world with the longest life expectancy at 84.6 years, so it is no surprise that Japan excels in the Index’s Quality dimension at #7 overall. In particular, Japan stands out on measures of preventable disease(#3), ranking first in 5-year cancer survival rates, fourth in preventing hospital admissions and eighth in pandemic preparedness and response. 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 #16 overall for Choice. Japanese residents have access to affordable, universal health insurance coverage, ranking #8 in that element. However, insurance is typically provided only through a single option from an employer, contributing to Japan’s #23 ranking in freedom to choose health care services. Finally, as a major pharmaceutical market, Japan ranks a respectable #7 for access to new treatments.

Science & Technology

At #28, the Japanese health system significantly underperforms on Science and Technology measures, especially relative to the country’s population size and modern economy. Japan 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 fails to convert these advantages into 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

Japan ranks last for Fiscal Sustainability on every element in the Index, with the highest debt-to-GDP, public health spending, and growth in health spending. Japan’s debt as of 2018 stood at nearly 200% of GDP, with public health spending constituting over 9.1% of GDP, up from 7.3% just 10 years prior. These numbers reflect Japan’s anemic economic performance, coupled with high spending on stimulus projects that have not yielded expected returns.