The challenge of funding Japan's future health care needs

By Heang Chhor, Diana Farrell, Nicolaus Henke, Sonosuke Kadonaga, Ludwig Kanzler, Martha Laboissiere, Sara Parker, David Urbach, Yukako Yokoyama, Nana Oguro, Hiro Otake, Naoto Yabe, Takuro Endo, Ryo Kawabata, Miki Sogi, Masato Ushio, et al.
The challenge of funding Japan's future health care needs

Health care spending in Japan could double as a proportion of GDP within 30 years. To close the funding gap, policy makers need to consider reforms to avoid more wasteful spending and encouraging more private payments without undermining universal coverage.

At first glance, Japan's health care system, like its people, seems to be in remarkably good shape. The country's National Health Insurance plan provides generous universal coverage. The Japanese suffer relatively low rates of disease and have among the highest life expectancy in the world. Moreover, spending on health care is lower than in most Organisation of Economic Co-operation and Development (OECD) countries, thanks to strictly controlled reimbursement levels.

But Japan, like many other economically advanced countries, faces mounting health care expenses that will be difficult to support using current methods. MGI research suggests health care spending in Japan could double as a proportion of GDP within 30 years, with advances in medical technology, growing wealth, and demographic changes driving the increase. The financing gap is so large that policies on which Japan has relied in the past, such as increasing co-payments, will not be sufficient to close it.

Three other options offer promise: restructuring the reimbursement system to reduce wasteful spending, introducing a financing system that allows patients to pay more for elective procedures, and raising overall contribution rates to bridge the remaining shortfall. Government efforts to consolidate the vast number of dispersed medical centers may also help to reduce costs. While none of these options will single-handedly solve Japan's health care financing challenge, in concert they should help close the gap.

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