The Fraser Institute

The Fraser Institute

April 15, 2013 06:32 ET

The Fraser Institute: Japan's Universal Health Care System a Model for Canada in Reducing Costs and Wait Times

CALGARY, ALBERTA--(Marketwired - April 15, 2013) - Canada can learn much from Japan's approach to universal health care, which offers patients rapid access to high-quality treatment at a dramatically lower cost, according to a new report from the Fraser Institute, an independent, non-partisan Canadian think-tank.

"In 2009, Canada's health expenditures were 87 per cent higher than Japan's and 26 per cent higher than the average developed nation with universal health care. Yet Canadians still face some of the longest waits for treatment in the developed world," said Nadeem Esmail, Fraser Institute director of health policy studies and author of Health Care Lessons from Japan.

"Japan's experience shows it is possible to provide quality health care to all citizens regardless of their ability to pay, and at a reasonable cost to taxpayers."

Health Care Lessons from Japan is part of a Fraser Institute series examining the way health services are funded and delivered in other developed countries with universal-access health care.

The report outlines how Japan's health policy framework differs from that of Canada:

  • Cost-sharing for all forms of medical services
  • Largely private provision of acute-care hospital and surgical services
  • Activity-based funding for hospital care
  • Privately funded parallel health care
  • Statutory independent insurers providing universal services on a premium-funded basis (commonly known as a social insurance system).

"Emulating Japan's approach to health care would require substantial reform of the Canadian system including, most significantly, a shift from a tax-funded government insurance scheme to a system of independent insurers offering premium-based coverage," Esmail said.

"The Japanese system of multiple health insurers is regulated by the federal government to ensure the entire population has access to health care with taxpayer-funded support for those who cannot afford coverage."

The report argues that all Canadians would benefit from health policy reforms based on Japan's proven framework for providing high-quality, universal health care at a reasonable cost:

1. Implement activity-based funding models for hospitals and surgical services.

Activity-based funding creates incentives for hospitals to treat more patients and to provide the types of services that patients need most. While global budgets (the dominant form of hospital funding in Canada) disconnect funding from service provision, studies have shown that activity-based funding can lead to a greater volume of services being delivered, reduced wait times for patients, improved quality of care, more rapid diffusion of medical technologies and best practices, and greater overall efficiency.

2. Allow private provision of hospital and surgical services.

Some 70 per cent of Japanese hospitals are privately owned, comprising 55 per cent of total beds; however, 74 per cent of acute-care beds are found in private hospitals compared to 26 per cent in the public sector.

"The key advantage of introducing more private provision under activity-based funding in health care is that it fosters greater competition, putting pressure on all providers, both public and private, to operate more efficiently," Esmail said.

3. Introduce cost-sharing regimes for universal health care with reasonable annual limits and automatic exemptions for low-income populations.

A lack of cost-sharing (i.e. when patients are required to pay for a portion of their insured medical services) has resulted in excessive demand and wasted resources in Canada's health care system. Cost-sharing encourages patients to make more informed decisions about when and where it is best to access the health care system, thus increasing the cost efficiency of health care (ultimately reducing total spending) and improving access to treatment for those in need. Cost-sharing policies have been shown not to have an adverse effect on health outcomes as long as low-income populations are exempt.

4. Develop a social insurance construct for universal coverage with premium funding, along with taxpayer support for those who cannot afford insurance.

The Japanese social insurance system (which relies to a large extent on private ownership and competition) provides rapid access to high-quality care at a lower cost than Canada's approach. International research shows that social insurance models frequently outperform government-run health insurance systems on measures of timeliness, quality of care, and access to advanced medical technologies.

"One of the central differences between a social insurance construct and a government insurance system is the de-politicization of decision-making," Esmail said.

"The independence of providers from government puts a greater focus on the needs of consumers as opposed to administrators."

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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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