A2.3 Issues of Medical Insurance

Although Japan’s expenditure on medical care is not high by international standards, there are further problems that need to be resolved. One major issue is the increasing medical expenses that come with an aging population. We examine the economic impact of increasing medical expenses using simulation studies later in the advanced study of this chapter. In addition, there is both a shortage and a severe misallocation of physicians. The misallocation applies to where doctors practice (their workplaces) and to their diagnostic and treatment specialties.

Hospital-employed physicians seem to be in short supply. In particular, there is a severe shortage of obstetricians and pediatricians. The number of births declined significantly from the 1973 echo peak of the late 1940s baby boom through the 1980s, and then settled at a low level. Thus, a decline in specialists working with babies and children is appropriate; however, the fall in numbers has been even greater than required.

However, a remedy is not simple. For example, Japan cannot easily accept foreign physicians because of the language barrier. Moreover, just increasing the number of physicians or the quota of medical school students would not solve the problem because of workplace misallocation, which relates to the division of physicians between hospitals and clinics.

In Japan, a hospital is defined as a medical facility that has an inpatient facility with 20 or more beds. A clinic has no inpatient facilities, or an inpatient facility with fewer than 20 beds. Most clinics are managed by self-employed physicians.

Under the fee structure set by central government, clinics receive more than hospitals for the same medical treatment. This reflects political pressure from the Japanese Medical Association, where self-employed physicians have a majority and are one of the most influential interest groups in Japan. In addition, the Ministry of Health, Labor, and Welfare (MHLW) looks to clinics as reliable providers of community-based health care, and in effect is intentionally subsidizing them for this purpose.

Clinics do not have enough first-aid facilities or sophisticated equipment to accept many patients. Moreover, because patients believe the quality of care is better, most patients prefer to go to hospitals. Further, seriously ill patients can be accepted only by hospitals. Thus, physicians in hospitals become very busy. Hospital-employed physicians have less control over their hours and working conditions than self-employed physicians, and earn less.

Because the fee structure favors clinics, the hourly income of hospital-based doctors is usually lower than that of self-employed (clinic-based) physicians. As a result, the number of clinics has been increasing and the number of hospitals decreasing since the 1990s. Currently, about one-third of all physicians and nurses work in clinics rather than in hospitals.

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