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Japan cut medical spending in 2002 for the first time in its history, adding fuel to proposals for more radical reforms.
ABSTRACT: As Japan's economy declined, more intensive control of prices and even volume through the fee schedule, plus increases in various copayment rates, led to an actual reduction of medical spending in 2002 for the first time in history. To augment established mechanisms of cost containment, case-mix-based inclusive fees for inpatient care were introduced in university hospitals in 2003 and are planned for subacute and long-term care. However, substantial reform, including the introduction of market-based medicine, is not likely to occur in other areas. Progress in making the delivery system more accountable to patients has been meaningful but slow.
NATIONAL HEALTH SPENDING IN JAPAN decreased in fiscal year 2002 for the first time in history. The cut was achieved not by radical restructuring but by relying on traditional measures. In the 2002 regular biennial review, prices of medical services and drugs were cut by an average of 2.7 percent, which led to a change in overall health spending of -0.7 percent.1 Also, several reform proposals were aimed at efficiency in the payment structure, health insurance system, and medical care delivery, prompted by economic stagnation. Another concern was the criticism that Japan's health care system is insufficiently accountable. Before describing current and proposed reforms, this paper describes the context in which the recent reduction was achieved. More detailed descriptions of the Japanese health care system have been published elsewhere.2
Trends In Medical Spending And Prices
Exhibit 1 shows the annual percentage increases in Japan's gross domestic product (GDP), national medical expenditures (NME), and average medical prices as established by the national fee schedule. NME is the amount calculated by the government for all medical services funded by the public health insurance system and general revenues; it includes patient copayments.3 Since health and fiscal policies are focused on nominal NME rather than the per capita or deflated amount, our analysis uses these figures.
The first point to note is the relationship of NME to GDP (Exhibit 1).4 If averaged out for the whole period 1980-2002, NME increased at an annual rate of 5 percent, compared with 4 percent for GDP. However, the pattern is quite...