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POLICY: International comparisons, or “How does Japan do it?” revisited

Prompted by a couple of posts from my favorite medical bloggers Robert Centor at Medrants and Sydney Smith at Medpundit, I’ve gone back to my old files (and I mean old). When I was a grad student I spent a lot of time looking at the Japanese health care system, and by now THCB readers know that I’ve spent enough time looking at Canada’s and the UK‘s to be dangerous….

MedRants had this to say in a longer article about private medicine in the UK earlier this week:

The BMJ has run two articles to support the NHS. I would argue that these articles are far from objective. I often rant about the deficiencies in our system. We could certainly use our resources more efficiently. But our system trumps the NHS regularly. Regardless of payor status, if you are truly sick, our system responds. We could do a better job supporting primary care – but even here we trump the NHS

Meanwhile Sydney had rather more vicious things to say about Japan and John Kerry (which are connected in her mind by more than by their first initial):

Single Payer Systems: Japanese doctors are in dire straits:

Doctors in Japan have warned that there could be an exodus from the medical profession unless the of health and welfare ministry increases the fixed fees that doctors receive for treating patients. The ministry–in Tokyo–sets the sums that doctors and hospitals are reimbursed for consultations, treatment, and operations by the country’s social security system. But the Japanese Medical Association says that hundreds of hospitals and general practice clinics are now facing financial ruin because they are being forced to rely on very low, government fixed prices for their income. The situation has become critical, they say, because the cost of treating patients is soaring while the fees have continued to languish at a low level for decades.

The Kerry plan, alive and not-so-well in Japan.


Much as I respect these two bloggers for their writing, not least while they both keep up full time medical practices, sometimes they need to be called on what they say. Particularly when it’s not true.

Robert’s claim that the US trumps the UK may be true in lots of categories but ignores two vital facts.

First, in many ways the UK absolutely trumps the US on primary care. Every UK citizen has a dedicated primary care doctor who is broadly responsible for their overall care. While there are many problems with that system and it does restrict access to expensive specialists and technology, it alleviates the problems both of Americans who do not have access to primary care–especially the uninsured– and that of those patients on dangerous polypharmacy regimens who end up on those dangerous drug combinations by doctor shopping. Virtually all British GPs have computer systems that track their patients’ care. They can tell you pretty instantly which patients are on what drugs, they get reminders out for screenings and tests for things like diabetic eye exams, and since this year, they are actually getting paid for performing to accepted standards. For a variety of reasons this just doesn’t exist in more than a tiny minority of cases in the US. I find it hard to believe that we’re “trumping the UK” in primary care.

Secondly, even if we were trumping the UK, we’re doing it at three times the cost. So at a relative pay for performance level, we’re not doing well at all. But then again our doctors get paid much better.

And apparently physician pay is of great interest to Medpundit Sydney Smith, so much so that she’s upset about its apparent collapse in Japan. Syd should save her tears and perhaps brush up on her language skills and put in for a transfer from Ohio to Osaka.

Japanese private doctors are the highest paid in the world. They are the only ones that make more than Americans. Most of the salary data that’s available conflates this by usually reflecting the salaries of hospital based physicians, who tend to work for the government. The majority of Japanese doctors are independent and run their own clinics. How this works is a little complicated. They also tend to own small hospitals attached to their clinics, and in the Japanese fee-schedule, which is the equivalent of a Medicare-fee-schedule for all, there is no distinction between physician and hospital fees, because hospitals were traditionally extensions of physicians’ practices, as were pharmacies. Hence physicians also dispense (and of course prescribe) drugs. The end result of this was that average earnings for private Japanese physicians in the early 1990s were much higher than those of American physicians. Unfortunately I’m dragging this out of my memory bank (as I don’t have the OECD or Japanese publications available), but my recollection was that it averaged around $300,000 a year back then.

Now there are plenty of other little wrinkles in this, such as the fact that although for-profit hospital chains are banned, there were in fact several chains of clinics owned by wealth physician families (shades of HCA). The Japanese Medical Association, which is the organization complaining about the latest government price reductions, was for years the most powerful force in Japanese medicine, and a relatively much more powerful player in national politics there than the AMA is here. For example some of the early meetings during which the dominant Liberal Democratic party was formed were hosted by the long-time JMA president Taro Takemi. The JMA of course represents mostly these private doctors.

Meanwhile the Ministry of Health and Welfare like other government bureaucracies in Japan sets policy to a much, much greater extent than elected politicians. Over time MHW in Japan put in place several structures that governed the system. They limited the number of physicians in practice. They instituted a single unified fee-schedule that covered every insurer (and tends to reward high-volume but low intensity medicine such as Rx and diagnostics over surgery). That’s right, there is no single payer in Japan, it’s predominantly an employer-based system, but there is a single unified fee-schedule controlled by the Ministry. And of course the JMA and the Ministry are going to fight over that–Duh! But you’d do well not to listen to the rhetoric of just one side in that negotiation. There are some other wrinkles, such as in 1960 the municipal system for the indigent and elderly was expanded so that there are no longer uninsured in Japan, and then in the 1970s a transfer tax was introduced so that the employer groups had to subsidize the public system based on the age of their members.

This was all completed by a slow evolution over time, but the result was that most Japanese kept both the employer based insurance scheme that they were familiar with, and the physicians and providers kept the same format they knew well. So universal multi-payer insurance with free choice of doctor can exist, and can also exist at a reasonable cost. Not much of that is in the Kerry plan, but none of it is in the Bush “plan”.

If you have Health Affairs access, it’s worth reading the article by long term observers of the Japanese scene, Ikegami and Campbell, which details how costs were constrained in the system during the long recession of the 1990s, and even reduced by careful adjustments to the fee schedule and the introduction of user fees. The discussions about these changes were well under way when I was working with health ministry officials in 1991. That they weren’t introduced until 1997 shows the patience of the bureaucrats–a luxury of the Japanese political system. But there is also a sense of noblesse oblige, which the Japanese actually had beaten into them by the New Deal Democrats who ran the initial post-war occupation. One quote from Ikegami and Campbell is well worth pulling out:

Any system of universal health care coverage requires cross-subsidies from the healthier and wealthier segments of the population. Political resistance is inevitable and will intensify in a sour economy. Japan seems to be improvising piecemeal structural reforms to deal with these pressures. However, if the past is any indication of the future, these reforms are likely to be in the direction of more equality, which will be in line with reforms in Europe and stand in marked contrast to those in the United States.

Maybe that sounds like the Kerry plan, but nothing much else about the Japanese health care system does. Adopting something like the Japanese system, unlike the Canadian and British systems, wouldn’t require too much realignment of the existing US system, but it would require a redistribution from the rich and healthy to the poor and sick. That currently appears to be beyond us as a nation.

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