Japan's health insurance system, which provides universal coverage through a mix of social health insurance, has been able to contain health care spending, as a share of gross domestic product, to about half the level seen in the United States. According to Commonwealth Fund–supported research, Japan has been able to maintain access to care and avoid rationing while also taking advantage of the latest medical technology by applying a standardized fee schedule for nearly all health care goods and services and combining hospital and physician fees.
International comparisons highlight two important differences between the U.S. and many other industrialized countries when it comes to health care spending. First, the level of spending is much higher in the U.S., primarily because prices are higher. Second, other developed countries are able to have multiple health insurers without the large payment variations across insurers that exist in the U.S. Japan, which achieved universal coverage in 1961 after expanding its social insurance system, has been successful at standardizing and containing costs—even in a sluggish economy and with a significant over-65 population. The percentage of GDP that Japan spent on health rose from 7.7 percent in 2000 to 8.5 percent in 2008, compared with an increase from 13.7 percent to 16.4 percent in the U.S. during that same period.
Japan's single payment system contains spending while retaining the advantages of multiple health insurance plans. Combining hospital and physician fees—not typically done in the U.S.—also helps achieve these objectives. Applying a single rate to U.S. providers, a growing number of whom are employed by hospitals, would simplify billing, provide incentives for physicians to practice more efficiently, and possibly encourage more physicians to locate in medically underserved areas. “If the United States wishes to contain health care spending,” the authors note, “it should rethink the basic assumption that providers should be compensated for their costs,” the authors write. Rather, as is done in Japan, payments should reflect the relative income of different groups of providers and what the country can afford.