Containing Health Care Costs in Japan

Section VI: Politics and Health Care

CHAPTER 24 Section VI Politics and Health Care The Egalitarian Health Insurance System John Creighton Campbell SUMMARY Although the Japanese health insurance system is fragmented, coverage is quite egalitarian in terms of burdens as well as benefits. This outcome is accomplished through an intricate set of cross-subsidization mechanisms, developed over the years as ways to resolve conflicts among social groups. Those who are disadvantaged by paying much more than they get back are consoled by receiving marginally higher benefits, so equity concerns do not lead to divisive politics. Background Health care in Japan is financed by numerous insurance organizations that are fonnally independent. Government regulations are so pervasive, however, that these organizations really have very little scope for autonomous decisions on important issues. I That means it is possible to provide health care according to some overall notion of "fairness." The fundamental problem here is that it is difficult to be "fair" about providing medical services because the people who need the most care are often the people who are least able to pay for it. The elderly are the obvious case: in Japan as in the United States, older people consume many times more medical care than the average, but their incomes tend to be fixed and to be too low to afford high insurance premiums. At the other extreme, current employees of large organizations , public or private, are likely to be more healthy and wealthy than the average. This fact makes for deep conflicts of interest among social groups or, in a different sense, between two concepts of"fairness." One is fairness as equity: cost should be related to benefits, so that the premiums charged should be lower for the individual or group that is less likely to become ill. People who exercise and do not smoke should not have to subsidize those who lead riskier lives. The other concept is fairness as equality: everyone should be treated the same and, in particular, should have equal entitlement to health care. The system that maximizes fairness in the first sense is straight free-market medicine without insurance, or its close relative, the individual or small-group policy with "experience-rated" premiums. Such a system could be run with mini255 Section VI Politics and Health Care CHAPTER 24 The Egalitarian Health Insurance System John Creighton Campbell SUMMARY Although the Japanese health insurance system is fragmented, coverage is quite egalitarian in terms of burdens as well as benefits. This outcome is accomplished through an intricate set of cross-subsidization mechanisms, developed over the years as ways to resolve conflicts among social groups. Those who are disadvantaged by paying much more than they get back are consoled by receiving marginally higher benefits, so equity concerns do not lead to divisive politics. Background Health care in Japan is financed by numerous insurance organizations that are fonnally independent. Government regulations are so pervasive, however, that these organizations really have very little scope for autonomous decisions on important issues. I That means it is possible to provide health care according to some overall notion of "fairness." The fundamental problem here is that it is difficult to be "fair" about providing medical services because the people who need the most care are often the people who are least able to pay for it. The elderly are the obvious case: in Japan as in the United States, older people consume many times more medical care than the average, but their incomes tend to be fixed and to be too low to afford high insurance premiums. At the other extreme, current employees of large organizations , public or private, are likely to be more healthy and wealthy than the average. This fact makes for deep conflicts of interest among social groups or, in a different sense, between two concepts of"fairness." One is fairness as equity: cost should be related to benefits, so that the premiums charged should be lower for the individual or group that is less likely to become ill. People who exercise and do not smoke should not have to subsidize those who lead riskier lives. The other concept is fairness as equality: everyone should be treated the same and, in particular, should have equal entitlement to health care. The system that maximizes fairness in the first sense is straight free-market medicine without insurance, or its close relative, the individual or small-group policy with "experience-rated" premiums. Such a system could be run with mini255 ...