National Health Insurance suffers a fivefold regional gap in premiums

In my column dated February 24, 2010, I explained that the inter-insurer adjustment of financial sources in the Japanese health insurance system had reached its limit, by showing regional difference indices of medical expenses and prefectural difference in premium rates charged by the Japan Health Insurance Association. In the present issue, I would like to analyze problems faced by the National Health Insurance, which is designed mainly for individual proprietors and farmers, and demonstrate the urgent need for a fundamental reform of the Japanese health insurance system.

Source: Compiled by the author based on Realities of the National Health Insurance FY 2008, issued by the All-Japan Federation of National Health Insurance Organizations.

There are two kinds of insurance programs under the National Health Insurance: one operated by municipal governments and another by insurance societies dedicated to specific professions, such as doctors, dentists, and pharmacists. The second type, or the profession-specific National Health Insurance program, enjoys rather solid financial standing partly because of the higher income levels of the insured. However, this is not the case with the first type of programs, operated by municipal governments. As Figure 1 shows, the average per-person payment reserves in these programs are only 0.09 times the average per-person annual premium (\84,367), which is roughly equivalent to one month's worth of premiums. This forces many municipal governments to transfer funds from the general account every time the National Health Insurance runs out of its reserve funds.

Due to the consolidation of municipalities, the number of National Health Insurance programs operated by municipal governments plunged from 3,249 in 1998 to 1,804 in 2007. These consist of 806 programs (with 51,507 people insured on average) operated by cities, which are municipalities with a large population, and 998 programs (with 5,377 insured on average) operated by towns and villages, which have a smaller population. There are even towns and villages that have to run programs covering merely less than 1,000 people. The pres ence of micro-insurers that are too small for an insurance system to be economically viable has created an average 1.80-fold gap in premiums between municipalities in the same prefecture. For example, in Chiba, premiums in Mobara City are 1.48 times those in the adjacent Otaki Town. The gap is even wider at the national level; the insured in Ogata Village pay \121,439 in premiums, which is more than five times the amount paid by the insured in Aguni Village (\23,633). On the other hand, medical fees paid to medical institutions are determined by the same scheme in any part of the country. To build a national consensus on healthcare reform, it is essential for the government to patiently explain the structural deficiencies in the current health insurance system to the public.