Section 2. Radical Reform of the Medical Insurance System

Aiming at the implementation of reform starting in fiscal 2000, the Ministry of Health and Welfare is currently examining the following issues to conduct comprehensive and radical reviews of the entire medical insurance system. These issues are mutually related and they are reviewed together.

(1) Review of the scheme of medical fee schedule

The current medical fee schedule was introduced in 1958 when many patients were in their acute stage of disease. However, as current patients tend to have chronic diseases, the schedule is no longer suitable. It is also pointed out that the principle of fee-for-service adopted in the current system is creating problems such as excessive medical treatments. In addition, while most physicians were directly providing medical care in their own clinics when the current fee schedule was introduced, hospitals now have heavier weight as medical care provider. The current fee schedule is no longer evaluating the overall functions of medical institutions sufficiently. Considering these issues, it is pointed out that the evaluation should be based on the characteristics of diseases and on the function of individual medical institutions with consideration of changes in disease patterns.

To respond to these issues, starting in November 1997 the System Planning Committee of the Council on Medical Insurance Welfare began investigating the basic framework on reform of the medical fee schedule including the introduction of evaluation system to meet the function of medical institutions and fixed amount system for individual disease type. On January 13, 1999, the "Working Group for Reviewing the Medical Fee Schedule", a subgroup within the System Planning Committee, submitted a report to the System Planning Committee. Then, the System Planning Committee discussed on the issue based on the report, and formulated a report, "Opinions on the Medical Fee Schedule", on April 16,1999. In next steps, the Central Social Insurance Medical Council will discuss on the details of the medical fee schedule with consideration of this report.

(2) Reviewing the drug pricing system

Regarding the current drug pricing system, the following concerns have been raised in relation to the drug price difference (the gap between the actual price at the time of purchase by the medical institution and the drug price used for the calculation of reimbursement to the medical institution from the insurer): 1 strong incentives for using expensive drugs or excessive use of drugs, 2 strong incentives for research and development that focus on new drugs which do not have much new efficacy but can be developed easily and will generate large profit through the difference in drug price, and 3 patients tend to accept a large volume of drugs because of insufficient information and the lack of cost consciousness on drugs.

Considering these issues, the System Planning Committee started discussions on the review of the drug pricing system in January 1998, and the "Task Team for Revising the Drug Pricing System" was organized within the System Planning Committee, and a report was submitted to the System Planning Committee on October 23 of the same year. Then, based on the report, consultations and hearings with relevant organizations were conducted, and then on January 7, 1999, a report "Opinions on Drug Allowance" was compiled. The report recommends to abolish the current drug pricing system and to introduce a system to set the standard value of the benefit provided by the medical insurers for each drug group based on the actual market price (a fixed drug pricing system with standard allowance). The report also includes the opinions against this system.

The Joint Meeting with the Study Group for Basic Medical Issues and the Social Issue Group in the Liberal Democratic Party has also investigated various options for the drug pricing system including the fixed drug pricing system with standard allowance, and in April 1999 it decided to proceed reform based on the third idea, that is different from the fixed drug pricing system with standard allowance, etc. with the direction of reform to aim at the elimination of profit-making price differences and to stabilize the operation through proper assessment of technical fees so that medical institutions can stop relying on the profit generated by the price gaps.

The Ministry of Health and Welfare will examine the details of revision to the system in discussion with ruling party.

Table 3-2-1. Overview of "Opinions on Drug Allowance"

Table 3-2-2. Future Projection of National Health Expenditures (Projection in 1997)

(3) Reviewing the medical care system for the elderly

Per capita medical expenditure for the elderly (age 70+) is five times greater than that of non-elderly people (age under 70), and with the progress of aging society the medical expenditure for the elderly is increasing rapidly. The medical expenditure for the elderly is already taking 1/3 of national health expenditure, and it is projected that its portion will reach 1/2 of national health expenditure around year 2025. If this condition continues with the current health care system, the burden on younger generations for the medical expenditure for the elderly will further expand. In order to realize fair sharing of the medical expenditure for the elderly by all citizens, it is necessary to improve the efficiency of the medical expenditure for the elderly and to balance the burden on non-elderly people and elderly people.

Regarding the current health service system for the elderly, following problems have been pointed out: 1 increasing burden of contribution for health services for the elderly borne by individual medical insurers is pressuring the management of their medical insurance, 2 current calculation method for the contribution for health services for the elderly is a problem in a view of fair burden among insurers, 3 while municipalities are providing the benefits for the medical expenditure for the elderly, the cost is borne by individual insurers in a form of contribution for health services for the elderly and this mechanism creates ambiguity in financial and management responsibilities, and 4 while importance of health care starting in young age is increasing, the current system is not responding to this concept sufficiently.

Considering these concerns, the System Planning Committee investigated the issues on the medical care system for the elderly starting in May 1998, and compiled a report, "Opinions on Health and Medical Care System for the Elderly" on November 9, 1998. The report recommends to take preventive measures focusing on healthy living when the elderly can live in good health without being bedridden, and to realize health care and medical care that is suitable to the elderly. It also presents two concepts for new medical care system for the elderly. One is a system in which all medical care for the elderly is completely separated from other medical care, and the other is a system in which medical expenditure for the elderly is borne separately by employees' insurance and the National Health Insurance.

2. A Temporary Special Measure on Co-Payment on Drugs for the Elderly

With the amendment to the Health Insurance Law, etc., in 1997, co-payment on drugs for outpatients was introduced. However, at the end of December 1998, during the discussion on 1999 budget formulation process by the Government and ruling party, the severe condition of current economy was considered comprehensively, and the implementation of a temporary measure was decided as an emergency measure before radical reform of the medical insurance system with the content that the Government shall bear the co-payment of drugs for the elderly in fiscal 1999 (To be implemented in July 1999).

Regarding the financial impact on medical insurers as a result of this measure, the Government will certainly take necessary measures to prevent the increase of premium payment.

Table 3-2-3. Overview of "Opinions on Health and Medical Care System for the Elderly"

1. Background to the requirement of new health and medical care system for the elderly While social and economic environment surrounding elderly people is changing, it is urgent to establish a new health and medical care system for the elderly with consideration of following issues on the current health care system for the elderly. Per capita medical expenditure for the elderly is much higher than that of non-elderly people. Increasing burden of contribution for health services for the elderly is pressuring the operation of medical insurers. The current method for calculating contribution for health services with the elderly subscriber rate for age 70+ is imperfect. Financial and management responsibilities are ambiguous because the entity providing the benefit and the entity bearing the burden are different. Importance of starting health management in young age is increasing. 2. To realize health and medical care suitable to aging society (1) What is the medical care suitable to the elderly? Desirable medical care for the maintenance of the dignity as human being in the view of the elderly Universal and holistic medical care with understanding of the characteristics of the elderly. Focus on the idea of respecting the will of individuals to allow them conclude their lives to suit their own characters. Medical care to support self-sufficiency, and to maintain and improve the quality of life. Correction of waste and insufficiency of medical cost is mandatory in order to ensure the quality of medical care for the elderly. (2) For healthy long life Healthy life should be the focus, rather than simply extending life span. Improve preventive measures, early detection, treatment and rehabilitation for lifestyle-related diseases. Based on the principle that individuals are responsible for the judgement of their own health management and promotion, the administration will offer support. 3. For impartial and stable cost sharing of medical care for the elderly To realize desirable medical services, it is essential to make the cost sharing system agreeable to citizens. To achieve the goal, a new cost sharing system should be created with the following viewpoints based on the assumption of optimizing and improving the efficiency of medical expenditure for the elderly. Efficient delivery of medical services that are suitable to the elderly Fair sharing of the cost Simple and transparent system that citizens can understand easily 4. Design of the new health and medical care system for the elderly (1) Realizing health and medical care focusing on quality of life Formulate and execute the "Health Japan 21 Plan" with focus on primary prevention of lifestyle-related diseases. Deployment of health check for aging population and health care/preventive efforts with focus on meals, physical exercise, etc. Focus on primary care, and support the function of family physician/dentist. Improve in-home medical care and community care in collaboration with long-term care services, etc. Correct the excessive administration of drugs, long-term hospitalization, excessive treatment for prolonging patient life. (2) Basic framework for the new system (1)Approach with an independent medical care system for all elderly people that is completely separated from other medical care services <Main points> Type of medical care, frequency of illness, etc. are different from those for younger generation. Easy to understand the concentrated use of public fund. <Oppositions> It is against the main purpose of social insurance, which is to widely accept the people with different frequency of becoming ill, and it might cause a conflict between generations. Unfairness in premium borne by elderly people as their income scheme between employees' insurance group and National Health Insurance group is different. Difficult to reach agreement among concerned people regarding who should be the insurer. (2) Approach in which the medical expenditure for the elderly is borne by each insurance group, employees' health insurance group or National Health Insurance. <Main points> Difference in income scheme and the actual conditions of supplementing income between groups. Value the sense of collaboration and unification between elderly and younger people within the group. For employees' insurance group, a nationally unified social insurance system is required for the elderly. Need to correct the imbalance of cost sharing of medical care for the elderly due to age group structure and gaps in income level between systems. [Correct the imbalance of cost sharing between groups through the use of public fund] <Main points> Because the difference between groups is due to the gaps in supplementary income, public fund is used to correct the imbalance of cost sharing. [Actively correct the imbalance of cost sharing between groups by focusing on age and income] <Main points> Actively correct the imbalance of cost sharing by examining the difference between groups in age and income. Subjected age range is age 65+, age 70+ (same as now), age 75+, or the same as the pensionable age for the Old-Age Pension. Co-payment for patients should be the fixed rate of 10%. The eligible age range is 75+, and both insurance premium and co-payment should be about 10%. The Government should make efforts to develop a detailed system plan design with sufficient consideration of quantitative issues and practical issues. The System Planning Committee shall carry on the discussion based on this design.