Now let us move on to review the achievement and challenges of the Japanese Universal Health Coverage. This slide shows the main features of Japan's social health insurance system. First, individuals have no choice of plans, and dependents, except those older than 75 years, are covered by the plan of the head of the household. And employers have to enroll their employees, or all those not covered by employers, including people who have retired have to enroll either in Citizen's Health or in the Late Elderly Health Insurance of their local government. And there are about 3,500 plans, roughly half employee-based, half community-based. And in employee-based plans, contributions are deducted as a set of percentage or wages which the employer contributing at least half. In community-based plans, each municipality has its own method of certain contributions which are roughly based half on income and half on a flat amount per enrollee. Services covered including drugs and dentistry and payment to providers are the same in all 3500 plans. Despite the generally high co-payment rate, the proportion paid by patient is only 14% of national medical expenditure because of a reduced rate for elderly people and the provision of catastrophic coverage. And this is the path toward Universal Health Coverage in a historical context. The development of Japan's social health insurance can be divided into four periods. In the first period, from 1922 to 1945, coverage came from the military to improve health of the military draft. An employee based social health insurance was expanded to most employees in 1974 and to office workers and dependents in 1979. This figure shows, the government's effort to expand the cover succeeded. And by the peak of the first period in 1943, 70% of the population was insured. In the second period, after World War II, the major political parties competed over establishment of a welfare state, with health insurance for all as a major goal. And insurance coverage quickly recovered from the chaos of wartime and postwar conditions, and expanded further. In 1958, a new citizen health insurance law made enrollment mandatory for people not covered by employee-based plans. And the law mandated the adoption of a fee schedule for employee based plans, and that enabled those enrolled to access almost any provider. By 1961, almost everyone became insured. However, the copayment rate differs substantially. For employees, only a nominal amount have to be paid at the first physician visit, but their dependents and those enrolled in Citizens Health Insurance had to pay 50% of the fee schedule price for all services and drugs. In the third period, from 1961 to 1982, the 50% copayment rate was gradually lowered to 30% for heads of household with Citizens’ health insurance in 1963, and the dependent in 1968, and for the dependents of employee based plans in 1973. Meanwhile, some municipalities started to cover the copayment for elderly people from general revenues. This process expanded, until the national government was pressured to legislate free healthcare for the elderly people in 1973. So another major revision in the same year was the introduction of catastrophic coverage in all plans. In the final period, from 1982 to the present, the co-payment rate was increased for individuals who had previously had low rates. As a result, the copayment rate, eventually became the same for most enrollees. So the copayment is now 30% across the board for all, except for people aged 70 years and older, with incomes below those average workers, who pay 10%. And for children younger than six years, who pay 20%. So how have the rates of use of outpatient and inpatient services changed over time with the expansion of coverage and adjustment in copayment rate? And this figure shows, the use of the inpatient services increased in all age groups from 1950 till the mid 1960's. The rate of increase in people older than 75 years is more striking. The increase was attributable to the provision of free medical care in 1973 which opened the door to the so-called social admissions. Which is to admit a patient because their families were unable or unwilling to care for them. And that process turned many small hospitals into de facto nursing homes. The subsequent decrease was not due to increases in copayment rate because the catastrophic coverage has kept out-of-pocket payment low. It was probably due to the building on new long-term care facilities for elderly people, and possibly other factors. Now let's look at this figure on subsidies and cross-subsidization. Subsidies from general revenues and transfers between the plans to equalize the health care cost of elderly people have allowed the same services to be covered by all social health insurance plans despite substantial differences in income and age structure. To augment premiums from employers and individuals, the national government provides subsidies from general revenues to the plans in the second to fourth tiers here, amounting to a quarter of total health expenditures. As we discussed earlier, the definition of Universal health coverage embodies three related objectives. First, equity in access to health services. Second, quality of health services is good enough to improve the health of those receiving services. And finally, financial risk protection. Now let's look at the extent of equity of Universal Health Coverage in Japan right now. First, horizontal equity. The concentration index has been used to analyze whether individuals with the same need get equal access to healthcare. Although the data difficult to compare, it seems that access to physicians control for patient needs seems to be about the same as in the US. And also, in terms of fairness and financial contribution, if you look at the data using Kakwani index, the extent of fairness was pretty much the same as in South Korea and somewhat more equitable than that in Germany. In terms of catastrophic payment, defined as out-of-pocket payment exceeding 25% of total expenditure was around 1.7% in 2004 which was then similar to that in Taiwan, higher than that in Malaysia, but lower than that of South Korea and China. Finally proportion of catastrophic payment. The percentage of household in which out of pocket healthcare expenditure exceeded 25% of total expenditure was at 1.7% in 2004, which was then similar to that in Taiwan, higher than that in Malaysia, but lower than that in South Korea and China. Now, let's discuss about the challenges to the sustainability of Universal Health Coverage. What are the major threats to the sustainability of our system? First obviously- aging. Aging has led to transfer payments that now amount to nearly half of total expenditure in health insurance plans for people employed by large companies. These transfers are not only due to health insurance for the late elderly but also, to compensate for differences in the proportion of individual aged 65 to 74 years in other plans. These transfers will increase as population ages. Second, the impact of changes in working patterns and the structure of the economy. When Universal Health Coverage was achieved in 1961, 29% of all workers were engaged in the primary industry, such as farming, fishing, and forestry. In 1965, the proportion of working in primary industry was 42%. 25% was self-employed. These percentage have substantially decreased to 3% and 70% respectively in 2008, during this time the proportion of pensioners and other not working has increased from 7% to 40%. So that kind of change will have a huge impact. The third the increasing number of individuals who are unwilling or unable to enroll in citizens health insurance although they are really required to do so. Municipal governments have no way of knowing who should apply, so the numbers cannot be calculated directly. So we analyze data using the, a little bit old, but 2007 individual household records, show that 1.3% of the sample population were not paying social health insurance payments, even though their incomes were high enough to be taxable. If this proportion could be extrapolated, about 1.6 million people would not have insurance. Which might bring into question Japan's status as a country with universal health coverage. In addition to these non-payers, The benefit of those enrollees who have not paid payments for more than 18 months in the citizens health insurance are severely restricted. All three difficulties have been exacerbated by the fragmentation of social health insurance plans by employment and residential status. And the increasing disparity in income levels and aging structure among the plans. This disparity could be compensated or by increasing subsidies from general revenues which will require tax to be increased. Second option is to increase premium. In particular, there has been a debate on the insurance scheme for the late elderly. Another possible solution would be to reduce the benefit covered by social health insurance to a basic package. With the rest to be paid out of pocket or to be covered by supplementary private health insurance. So basically financing option to sustain the system include increase tax, increase the premiums, or reduce benefit package with the introduction of private insurance. One approach to tackling the fragmentation of 3,500 social health insurance plans by employment and residential status is to consolidate insurance plans. Consolidation would equalize payment contribution rates across plans includes total funding by raising the contribution rate of plans currently set at a low level. And finally improve administrative efficiency by expanding these pools. Three options exist for consolidation. The first is to allow everyone to choose the plans that they prefer. But this approach would not work in the Japanese context, because most social health insurance plans, do not operate as independent entities. The second, is the national unification of all social health insurance plans, as has been done in South Korea. However such unification would be contrary to present effort to decentralize the national government functions. The third option is to unify social health insurance plans regionally and uniting insurance coverage from employment status which is more feasible in Japan. The risk pool has been assessed by analyzing the variance in per head annual inpatient medical expenditures if plans were to be consolidated within prefecture. As this figure shows, when the number enrolled exceeds 1.5 million in the Consolidated Citizens Health Insurance Plans and 4.5 million in these plans and employer based plans, further consolidation would bring only a small incremental benefit when compared with national consolidation. Nine prefectures would exceed this level, and their combined population would compose slightly more than half of the total population. The population of the remaining prefectures will still be less than the economically efficient level, but further consolidation would necessitate mergers of the prefectures themselves. Since this analysis, the plan to consolidate at prefecture level has been decided by the government. To summarize on the universal health coverage in Japan, first Japan successfully expanded coverage, contained cost and improved the equity. Second, progress to universal health coverage can begin while still low income. The third health expense can be controlled while expanding coverage and improving equity. And finally, incremental adjustments can appear rational but create future pressures.
