Before Obamacare: Japan’s national healthcare system saves some for private insurers

March 27th, 2010 by Philip Brasor & Masako Tsubuku

It ain't perfect, but it may be all you need

It ain't perfect, but it may be all you need

People who live in Japan and are following the health care reform issue in the U.S. may be drawing some parallels. Part of the problem that some people have with President Barack Obama’s history-making legislation is that it falls way short of what is usually referred to as universal coverage. In other countries that do have universal health care, like the U.K., France and Canada, the government pays for medical care. Under Obama’s new plan, the majority of Americans will still have to buy their medical insurance from private companies.

Japan’s system (kokumin kenko hoken) is somewhere in the middle. It’s national in that the government has a health insurance program that pays for almost everything, but it isn’t universal. In Japan you still have to “buy” your insurance, it’s just that you have to buy it from the government. The difference is important, because in countries that have universal coverage everyone is covered regardless of their circumstances. In Japan, you are covered as long as you pay the government. Once you stop for whatever reason, you lose your insurance. That means you could pay your premiums (which are based on income, basically making it a separate tax) to the government on time for forty years and never even use it, and then, suddenly, because you lost your job or otherwise can’t pay, you lose your insurance overnight.

But the real proof that Japan’s public insurance program isn’t universal is that private medical insurance is widely available, and quite popular. The AFLAC duck is more famous here that it is in its native USA. In fact, companies like AFLAC and Alico make as much as 75 percent of their profits in Japan, the third biggest insurance market in the world, and while much of those sales are in life insurance, a good deal is in supplementary medical insurance.

Do you need this supplementary insurance? Is kokumin hoken not enough? Business writers have discussed this question for years, and in the final analysis it appears that national insurance is enough, but supplementary insurance isn’t really designed to take care of medical expenses. It’s designed to take care of anxiety. Insurance companies prey on people’s fear of getting very sick all of a sudden, since most people believe that it will happen to them someday. Supplementary insurance is meant to take care of expenses other than those directly related to treatment: transportation costs, loss of income, upgrade to a better hospital room, etc.

For instance, so-called cancer insurance, which AFLAC pioneered and now most insurance companies offer, gives you about ¥1,000,000 when you are diagnosed, about ¥10,000 a day during hospitalization or ¥5,000 a day during out-patient treatment, and another ¥100,000 when you leave the hospital. Some plans pay between ¥100,000 and ¥300,000 if you undergo surgery.

Considering that national insurance pays for treatment, surgery, medication and hospitalization for cancer, the cost-benefits of supplementary health insurance aren’t really clear. It depends on when you started paying premiums. If you take a typical scenario and look at someone who started paying in his early 30s and was diagnosed with cancer when he was 60, he pays much more in premiums than what he receives in benefits, so in that case he would have been better off just saving his money in a bank.

Also, because people with kokumin hoken pay on average about 30 percent of their medical costs out of pocket, many people are persuaded to take supplementary insurance in order to cover this 30 percent. But in the kind of crises that supplementary insurance is designed for, the patient will eventually get most of that 30 percent back through tax deductions and other means. The health ministry estimates that in the long run the average cancer patient only pays about ¥90,000 out of pocket for his treatment, which on average costs the government close to ¥5 million.

Still, the potential to make money is huge, and right now competition among private insurers is intense. (The possible resurgence of Japan Post in the insurance racket is reportedly irking a lot of companies)  The magazine Shukan Kinyobi often reports that the U.S. government had pressured Japan to change public health insurance regulations to benefit its insurance industry. If any part of a patient’s treatment involves procedures or medication not covered by national insurance, the entire treatment cannot be covered by national insurance, and the U.S. wants to isolate types of treatment so that American insurance companies can sell more private supplementary insurance to cover those treatments not covered by public insurance. This would help not only American insurance companies, but also American pharmaceutical companies, since only drugs for treatment allowed under national insurance need to be approved by the government. Of course, such regulations would also benefit Japanese insurance and drug companies. With Japan’s rapidly aging society, there are plenty of sick people to go around.

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7 Responses

  1. Thank you very much for clearing this up. I’ve been worrying for a while about whether to buy private insurance, and now I’ve decided not to bother. The ads targeting middle-aged women are especially persuasive (“Women are strong, but not immortal. Think about what would happen to your children if you came down with …” followed by a loooong list of diseases and cancers that afflict women, even though many of them are not common in Japan.)

  2. While Kokumin Kenko Hoken is not Universal, I would like to know why it is not mandatory? By this, I mean, why doesn’t the government require all businesses to enroll their employees in this system since it is similar to an additional tax, rather than making a rule that has no teeth? It seems as though this is part of Japan’s fiscal problem when it comes to managing its health care system. The only thing keeping me from signing up for this insurance -rather than the sketchy Ones- is the back pay for the time when I was not enrolled and entirely unfamiliar with the health care industry, because I assumed that my company was being honest with me by enrolling us in what I now know amounts to travelers insurance.

  3. National insurance in Japan is mandatory, and if you were a full-time employee for a company registered in Japan, by law they should have enrolled you in Shakai Hoken. I myself worked for a company when I first came to Japan who did not enroll me in Shakai Hoken (many companies who hire foreign workers don’t bother, for obvious reasons, and the government seems to look the other way), so I enrolled myself in Kokumin Hoken, which is paid completely by the person enrolled. With Shakai Hoken the employer pays part. You can enroll now in Kokumin Hoken and the government will not make you pay retroactively for the simple reason that you are only covered when you start paying. However, when you enroll for Kokumin Hoken they may ask you to sign up for the national pension system, which is a bit more complicated. Depending on how long you’ve lived here and whether or not your home country has a reciprocity agreement on national pensions with the Japanese government, you may not have to pay retroactively. Obviously, it’s all a lot fuzzier than it should be.

  4. With more than 110,000 persones here illegally, and thousands more permitted to overstay their visa, the vast majority of these persons are here without healthcare coverage. Many persons here legally and self employed do not enroll and are also not covered. When seriously ill, they cannot pay their hospital bills. Enrollment needs to be mandatory, and for non Japanese citizens, the visa should be revoked if they choose not to enroll in the mandatory health insurance system, and they need to be deported for failure to obey the law. As for those here illegally, what can I say? Either make them legal and enroll them or deport them. The burden on hospitals is excessive when these huge debts are not paid.

  5. Hey John you look wise and rich man.Think a little for non English native speakers living in Japan. What job are going to do, or can they find one???
    Make a simple calculation:
    income taxes + resident taxes + Eating + Transport + Lights + Water + Gas + Mobile phone + (Maybe members to be supported) + NHK Tax = Jump in front of the train better?????

    It’s impossible to survive…
    Come on man start walking on the ground.

  6. Actually, Philip, National health insurance is not mandatory in Japan. Even when you go to get your visa renewed, the immigration department “suggest” that you enrol in health insurance. It’s not enforced.
    I know many English teachers who don’t even have health insurance. Possibly the 2 reasons for that are 1) ignorance is bliss (until they get really sick/need to see a doctor). 2) The insurance tax/premium is double of what they would pay for health insurance in their home country.

    Most English schools hire teachers under a certain number of hours (30 I think), so the teachers are considered part-time and the employer doesn’t need to fork out for their health insurance (shakai hoken).

    The 2-year back pay with the (kokumin kenko hoken) is ridiculous. Also, calculating your tax/bill on your previous year’s income is stupid and unfair. In my case, I was working and getting a reasonable pay for a couple of years and then I lost my job without warning. My insurance bill then arrives and it’s even more than my previous year’s bills. A smarter way would be to work it out as you earn it (PAYE), like most taxes. Then you can pay it while you still have the money and the ability to pay it. Yeah sure, my bill for next year will be a lot less, but what about now that I don’t have a job?

    Look, I think health care is really important, and probably should be mandatory. People get sick sometime or other. However, I think they need to make it fair and reasonable for everyone. I don’t understand why they have 2 types of health insurance in Japan. It just makes it more confusing.

  7. Legally, national health insurance and national pensions are mandatory for everyone who lives in Japan, but like many legally mandatory things in Japan there are no punitive measures for non-compliance, and in practice it’s pretty much up to the bureaucrat handling the case to decide. Non-Japanese, especially those who are obviously not going to be here for the long haul, have always been given a pass. That’s why the idea of making visa approvals dependent on enrollment can’t work–the government has never been consistent before. And as I said in the post, if they did the private insurance industry, especially America’s, would be up in arms.


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