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Hideki Nitta

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Can We Protect Universal Health Insurance?

Hideki Nitta
Professor of Social Security Law, Social Security Policy Theory, Faculty of Law, Chuo University

Introduction of my research

I specialize in the field of law known as social security law: that is, the application of legal theories to clarify rights and responsibilities within the legislative system related to social security. As significant reforms are frequent for social security systems compared with other legal fields, I aim to do my research while paying attention not only to legal interpretation theory but also to legislative policy theory.

However, it is not easy to be an expert in all the diverse fields that constitute social security law, which includes medical insurance law, pension insurance law, long-term care insurance law, labor insurance law, social welfare law, and public assistance law. Within social security law, I have a particular interest in medical insurance law, particularly the national health insurance system.

National health insurance supporting universal health insurance

National health insurance is regional medical insurance with local municipalities acting as the insurer. Since universal health insurance, whereby all Japanese are in principle obliged to participate in some kind of public health insurance system, was achieved in 1961, the Japanese medical insurance system has long been operated under the dual structure of regional (municipal) national health insurance, and occupational (employee) insurance, the latter including both health insurance for business people and their families and mutual aid associations for civil servants and their families.

Subscribers to municipal national health insurance (the insured) include farmers, the self-employed, employees of individual micro-enterprises, and the unemployed, and legally speaking it has been stipulated that the insured are considered to be all citizens having an address within the municipality, apart from those who subscribe to employee insurance, public assistance or any other such system. In other words those who receive municipal health insurance are decided by a process of elimination. In this way, as municipal health insurance absorbs all those who cannot partake in other medical insurance systems, its institutional significance as the foundation of universal health insurance is emphasized.

However, on the other hand, as subscribers are decided by a process of elimination, and as the insurer is the municipality itself, national health insurance is marred by the following institutional and structural problems: (1) subscribers are older, (2) many subscribers are unemployed, (3) many are on a low income, (4) the rate of premium payment is low, (5) there are discrepancies in medical and insurance premium costs between municipalities and, (6) there are a considerable number of small-scale insurers. That is, many of the challenges presently facing municipal national health insurance are not ones that have newly arisen in recent years, but they have rather been in existence since the early days of universal health insurance, and have, to this day, been being actualized and aggravated by changes in the economic and social situation.

Reforming medical insurance system for national health insurance

In the absence of economic improvement, in the midst of worsening regional and national financial conditions, and given that the only steady progress being made was the progressively aging population, it is not an overstatement to say that the history of medical insurance system reform since 1980s is the history of repeated legal reforms that struggled to maintain universal health insurance by preventing the collapse of the structurally weak municipal national health insurance. Representative examples are the establishment of the health-care system for the elderly (1982), the retiree medical-care system (1984), and the long-term care insurance system (1997). The health-care system for the elderly and the retiree medical-care system were pioneering examples of financial adjustment among medical insurers. Also, regarding the long-term care insurance system (the adjacent system to elderly medical-care), the special collection (deduction) of long-term care insurance premiums by pension insurers, the contribution system by medical insurers, and the establishment of the fiscal stabilization fund can be regarded as forerunning models for the latter-stage elderly healthcare system.

Then, entering the 21st century, in 2006 with the goal of holding fast to universal health insurance and making the medical insurance system sustainable for the future, a large-scale reform of the medical insurance system was conducted around the three pillars of (1) the comprehensive promotion of medical expenses optimization, (2) the establishment of a new medical-care system for the elderly and, (3) the reorganization and integration of medical insurers. Regarding (3), it was decided to center the operation of insurance on the prefectural level. Specifically, with regard to municipal national health insurance, the expansion of inter-municipal financial adjustment on a prefectural level continued, a trend that was also strengthened in the 2010 and 2012 National Health Insurance Law reforms.

Furthermore, the attempt of the current National Social Security System Reform Congress to work out a course of decentralized enlargement of national health insurance, whereby on the one hand part of the insurer function is passed from the municipality to the prefecture (strengthening its role), while on the other the business of insurance premium collection and health service is left to municipalities, can be said to follow in the footsteps of the theory of joint operation of national health insurance by prefectures and municipalities that was discussed at the Ministry of Health and Welfare’s Elderly Health-Care Reform Conference held under the Democratic administration.

The future for national health insurers

As far as can be seen from current debates on the amendment trends of National Health Insurance Law and the reform of the medical insurance system, it is easy to get the impression that the operation of national health insurance on a prefectural level is obvious and self-evident, but is that all there is to it? In other words, is the operation of national health insurance by municipalities, which lasted for more than half a century, really entirely out-of-date? It seems that as we are to switch the very basis of universal health insurance, there is once more a need to validate this switch by going back to the principles. Below, I would like to consider the operating body and scale of regional medical insurance.

Views on medical insurance operating bodies can roughly be divided into the followings: (1) operation should be left to corporations (insurance unions etc.) that aim to exclusively engage in insurance management (the unionist principle) and, (2) the view that the public bodies of government, prefecture and municipality (general administrative bodies) should also serve as insurers (the public management principle). The advantages of the unionist principle are that (1) in insurance unions, functions such as execution and voting are structurally centered on representatives of the insured, so the complete autonomy of the insurer is achieved and, (2) unions are dedicated solely to insurance operation, so they have greater expertise, and can operate flexibly and efficiently. The advantages of the public management principle are that (1) the public nature of the insurance business is strengthened, (2) integrated operation in unison with related administrations and businesses is facilitated, (3) subsidies from general revenue (tax revenue) can easily be availed of and, (4) pre-existing administrative organizations can be made use of.

The pros and cons of the current expansion in scale of regional medical insurers from a municipal level to a prefectural level have been under focus. The benefits are said to include the following: (1) risk diversification is made easier and insurance finances stabilize, (2) the correspondence between costs and benefits to medical-services will become clearer and, (3) many of the functions of the insurer (external negotiating power, internal business processing power) are strengthened. As for the disadvantages, (1) because of reduced inter-insurer competition, the efficiency of insurance operation drops, (2) there is a possibility that the functions of imposing and collecting insurance premiums will be weakened, (3) the effectiveness of the health service may be reduced, (4) insurer autonomy (especially internal democracy/autonomy) and sense of solidarity weaken and, (5) cooperation and coordination between regional medical-care insurance on the one hand and municipal health-care/medical-care/social-welfare administration (apart from national health insurance) on the other may be endangered.

There is of course no absolute correct answer to the question of what kind of body, of what scale, would be appropriate as a provider of regional medical insurance, but assuming the essence of social insurance that differs from social assistance (a system that uses tax as revenue) is the autonomy of the insurer and the solidarity of the subscribers, then in theory it is appropriate for national health insurance (or alternative regional medical insurance) to, while as much as possible operating as an insurance business rather than simple administrative measures, pursue the advantages particular to social insurance. This includes the enablement of democratic decision made by premium payers, bringing about renewed solidarity through this participation in the decision making process with the expectation that the structure of the system will change the consciousness of subscribers and the optimization of payment management through competition between multiple decentralized insurers. If this is the case, for insurers, it is better for there to be insurance unions rather than government bodies, for those unions to be multiple rather than one, and also for the scale of insurers to be of a scale that can maximize these merits. Furthermore, in this case, it could be thought that the scale of the insurers would not become very large, so there needs to be careful consideration as to how to all at once expand the scale of insurers to the prefectural level.

Conclusion-the solution of cooperative national health insurance operation-

So, will the theory of cooperative national health insurance operation, which is influential at the National Congress, be the deciding factor in solving the system’s problems? In the case of cooperative operation, it is difficult to divide the assignment of responsibilities between the prefecture and the municipality. If the functions of the prefecture are over-strengthened, the municipality will become subcontractors. And if, being aware of this fact, we grant wider discretion to municipalities, control as a single insurance group will no longer be feasible, and so the significance and purpose of enlargement will be brought into question. Another problem is the relative merits of expanding joint ventures while maintaining municipal insurers, an approach that is possible in the current system. Particularly, it won’t be easy to settle the issue of by whom and how the gaps will be filled when deficits arise on the balance sheets.

If we follow this line of thought, we understand that there are merits and demerits to each conceivable choice to stabilize the operation of national health insurance (which is the foundation of universal health insurance), so we are not led to choose any unequivocally optimal regional insurance provider. However, to choose a better insurer, it is important that they are not only theoretically fair and efficient, but that they build a system that is practical, so that subscribers can trust in it. It may seem roundabout, but it is desirable that, without being swept away by a passing mood, all parties involved with medical insurance engage in careful discussion.

Hideki Nitta
Professor of Social Security Law, Social Security Policy Theory, Faculty of Law, Chuo University
Born in Tokyo in 1958. After graduating from the University of Tokyo Faculty of Law in 1981, joined the Ministry of Health and Welfare. After being Assistant Professor at Nagoya University, a director at the Ministry of Health, Labor and Welfare, a Cabinet Counselor, and Professor at Taisho University, etc., entered his present position in 2013. Researches the desirable form of the social security system based on the investigation of legal principles mainly centered on the historical analysis of legal bodies in the medical insurance system, and its constitutional values (right to life, respect of the individual, etc.). Authored Perspectives on Social Security Reform (Shinzansha Publisher Co., Ltd., 2000), Insurers for National Health Insurance (Shinzansha Publisher Co., Ltd., 2009), and Topic: Social Security Law, 7th edition, authored and edited (Fumashobo, 2013), etc.