Want a Better Health Care System? Check Out Japan [View all]

The country's public-private hybrid gets good results at lower cost.

By Noah Smith

https://www.bloomberg.com/view/articles/2017-09-19/want-a-better-health-care-system-check-out-japan?utm_content=economics&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-economics

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So how is Japan doing it? What’s the secret of their success?

Japan has a hybrid system. The government pays 70 percent of the cost of all health procedures, unless you’re a low-income elderly resident, in which case it pays as much as 90 percent. The remaining 30 percent is covered by private health insurance -- either employer-sponsored or privately purchased. Spending on private health insurance to cover the 30 percent co-pay is partially tax-deductible. Benefits are the same for everyone, and -- unlike many U.S. health plans -- include dental and mental-health care. For catastrophic care, poor people, and people with disabilities or certain chronic conditions, the government pays more.

This is not that different from what Medicare already does. It has deductibles (unlike Japan) and fixed co-pays, for which many patients purchase supplemental “Medigap” insurance. Simply extending this policy to cover all Americans would leave the U.S. with a system not too different from what Japan has. The private insurance industry would continue to exist, and would supplement rather than compete with the government.

A single-payer system with substantial co-pays has several advantages. Most importantly, the government’s dominant position would allow it to push down the country’s anomalously high prices. In Japan, fees for health services are capped by a government committee, but this isn’t necessary -- simply having the Medicare system use its bargaining power to negotiate cheaper services could solve a lot of the country’s cost problem. The government can also use its bargaining power judiciously, allowing high prices for innovative treatments in order to encourage their development.


The high co-pays of a Japan-style system provide the government with a fiscal escape route. If high taxes prove to be too much of a burden on the economy, the co-pays could be increased, preserving the government’s negotiating power while reducing the amount of taxation required. Also, high co-pays would ensure a role for private insurance, preserving the knowledge and expertise of some fraction of the millions who currently work in that industry.

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