Healthcare

GLOBAL INVESTOR 2.12 — 37
Photo: Benjamin Parks
individually by the health ministry based on policy priorities, negotiations
and surveys. For example, in the 2002 revision, the global rate
was reduced by 2%, but the price of taking an MRI (magnetic resonance
image) of the head was reduced by 30% because the number
of MRI examinations had increased “inappropriately.” On the other hand,
in the 2008 revision, prices in emergency care and obstetrics were
increased because the government had to respond to media reports
of deficiencies in these areas. Drug prices are generally revised more
objectively, based primarily on the result of a market price survey. The
selling price is typically lower than the price set by the government
because of competition among distributors. Once the actual market
prices have been determined, the revised price is set so that it is only
2% higher than its volume-weighted average market price. These
revisions have resulted in a downward spiral of drug prices.
Revisions of the global rate are reflected in the annual growth
rate of health expenditures. However, expenditures also increase by
non-price factors: advances in technology and demographic factors,
which together have led to annual increase rates of 2% to 3%. An
example of the former is the transfer in “appropriate” imaging equipment
from a simple X-ray to a CAT (computer-assisted tomography)
scan to an MRI, and now to a PET (positron emission tomography)
scan. Until the 1980s, demographic factors used to consist mainly of
increases in population, but since then, the most influential factor
has been the aging of society. The percentage of the population aged
65 and over has been increasing at the rate of 1% every two years;
the current proportion is 23%, making Japan the oldest country in
the world. Incidentally, nominal increases in GDP are more important
than real (GDP-deflated) increases because the price of health services
tends to be determined relatively independently of the consumer
price index.
When the economy was growing at the rate of 5%, as it did in the
1980s, the ratio of health expenditures to GDP remained constant
because small increases in the global rate and increases due to nonprice
factors could be absorbed. But since the 1990s, the economy
has stagnated, and as a result, the share of health expenditures has
increased. Meanwhile, the national debt, already twice GDP, continues
to increase. How to finance healthcare will become a greater issue
in Japan despite the fact that its health expenditures have been relatively
well contained. In order to meet this challenge, the government
must negotiate with provider organizations so that the services delivered
and the income levels of healthcare professionals can be made
Naoki Ikegami is Professor and Chair of
the Health Policy and Management
Department at Keio University School
of Medicine. He has served as a consultant
to the World Health Organization and
the World Bank. He is currently President
of the Japan Health Economics Association
and is past President of the Japan Society
for Healthcare Administration. He is
also a Senior Fellow at the University of
Pennsylvania’s Wharton School.