In Japan, All-Payer Rate Setting Under Tight Government Control Has Proved To Be An Effective Approach To Containing Costs: [1]

Headnote

ABSTRACT In Japan's health insurance system, the prices paid by multiple payers for nearly all health care goods and services are codified into a single fee schedule and are individually revised within the global rate set by the government. This single payment system has allowed total health care spending to be controlled despite a fee-for-service system with its incentives for increased volume of services; Japan's growing elderly population; and the regular introduction of new technologies and therapies. This article describes aspects of Japan's approach, as well as how that nation has expanded payment for inpatient hospital care based on case-mix. The result of the payment system is that Japan's rate of health spending growth has been well below that of other industrial nations. The percentage of gross domestic product spent on health increased from 7.7 percent in 2000 to 8.5 percent in 2008, compared to an increase from 13.7 percent to 16.4 percent in the United States. Japan's approach confirms that enlightened government regulation can maintain access to care, avoid rationing, make use of the latest technology, and allow for multiple insurance plans and an aging population-all while restraining the growth of health care spending.

International comparisons highlight two important differences between the United States and many other industrialized countries when it comes to health care spending. First, the level of spending is much higher in the United States, primarily because prices are higher.1 Second, other developed countries are able to have multiple health insurers without the large payment variations across insurers that exist in the United States.2

This article examines how Japan is able to control health care spending. In Japan, the percentage of gross domestic product (GDP) spent on health increased from 7.7 percent in 2000 to 8.5 percent in 2008. In the United States, the percentage increased from 13.7 percent to 16.4 percent in the same time period. Japan's level of cost containment is especially impressive given the slow growth in the country's overall GDP during this period and the percentage of its population over age sixty-five, which increased from 17.4 percent to 22.1 percent.3

The article also describes how the practice of paying for inpatient care based on case-mix has expanded in Japan. The US experience in this area could...