Why Japanese Healthcare is More Efficient Than Canadian and US Healthcare

A recently published report by the Conference Board of Canada, a not-for-profit economics and policy research organization, indicates that Canadians are spending more on their healthcare and getting less than most advanced nations. Canada spend more annually per capita on healthcare – $4100/person, or 10% of GDP – than all but three advanced nations, but ranked 10th according to the Conference Board’s quality of medicine metrics. By comparison, Japan spent only $2,729 per capita annually while ranking first in life expectancy and infant mortality rates. The United States healthcare system, on the other hand, performed abysmally. While the US spends astronomically more per capita on healthcare than any other nation – $7,500 annually – the Conference Board rated the quality of American healthcare to be among the worst in the 17-country study.

Why are the Japanese paying so much less to receive so much more? Surely, there are a number of factors involved. But before getting to some of them, it must be stated that the Conference Board of Canada’s study was not an experimental study in which the respective healthcare systems were isolated from their broader societies. Key factors in evaluating quality of care in this study were stats on life expectancy and infant mortality rates, variables that are influenced by many factors other than a nation’s healthcare system. However, this truth does not explain away the vast differences in how much is being paid for care in Canada, the US and Japan. Three reasons for the difference in healthcare expenditures among nations, I will argue, are: 1. Some governments are better at regulating and/or negotiating the costs of medical services and products with service providers (e.g., doctors, nurses, rehabilitation therapists) and producers (e.g., pharmaceutical and biotech manufacturers); 2. healthcare professionals’ associations/unions putting private and professional interests of constituents over citizens and the healthcare system; and 3. differences in social/family dynamics between Japan, on the one hand, and the US and Canada, on the other.

I. Japan Regulates on Medical Serve Pricing; American Presidents Often Don’t Even Negotiate For Good Prices

One reason for Japanese healthcare’s relative cost-effectiveness is government regulations of pricing for medical services. Consider the cost of an MRI scan: $1,500 USD in America, $98 USD in Japan. Whereas American Republican President George W. Bush and moderate Republican President Barack “Bush-Lite” Obama have each readily forfeited the ability of US government administrations to even begin negotiating with pharmaceuticals companies over prices, Japanese healthcare is delivering 15 MRIs for less than the cost of one in America.

Canadian pricing is somewhere between that in Japan and America; hence, some Americans try to save money by buying their pharmaceuticals from Canada. While better controlled than in America, where the pharmaceutical, biotech, insurance and medical establishments have made errand boys out of American Presidents, the Canadian system, too, could learn a thing or two from the Japanese on the subject of healthcare cost containment. As a nearly-graduated occupational therapist in Ontario, I am regularly appalled by the ridiculous costs for assistive devices for people with disabilities. As an example, consider a simple long-armed reacher, useful for people who have difficulty or are unable to bend down at the waist (e.g., people who have recently had hip surgery). These devices can be purchased for under $5, sometimes just two bucks, at standard commercial establishments (e.g., buck or two type discount shops). However, take a trip to a medical/health specialty store such as Shopper’s  and prices immediately jump to $20-$40! Some in healthcare have colloquially called this price inflation “medical tax”.

Now, at least when it comes to reachers the savvy consumer at least has the chance of figuring out how not to be price-gouged. But what about more medically-specific and technologically-involved aids, such as wheelchairs and alternative and augmentative communication devices, each of which can easily run in cost into the thousands and tens-of-thousands of dollars? When a person needs a wheelchair or a high-tech communication aid (e.g., computerized text-to-to-electronic-speech machine), government programs such as the Ontario government’s Assistive Devices Program (ADP) largely subsidize the cost; ADP covers 75% of eligible devices. Citizens of low-income often get the remaining 25% paid by other government programs, such as the Ontario Disability Support Program (ODSP).

Without sufficient price regulation, government aid programs in conjunction with well-intended universal healthcare policies and patent laws drive up prices

This government subsidization in combination with patent laws and, I strongly suspect, deal-making between medical tech manufacturers and suppliers serves to drive up prices. When the government absorbs 75-100% of the cost of a product, the economic impact on the purchaser is reduced by a proportional amount – each additional dollar of cost translates into only zero to 25 cents borne by the consumer. This reduces the consumer’s incentive to shop around or simply not buy the product, which would  press manufacturers and suppliers to lower their prices.

Even when the consumer shops around, though, they often won’t find many desirable competing products at much less cost. There are a few reasons for this. Firstly, ADP funding is only available at ADP-authorized suppliers. ADP-authorized suppliers are expected to keep current with medical technology, which often means carrying a disproportionate amount of technologies whose original patents have not expired and thus, for which no cheaper knock-off/generic models yet exist. Furthermore, dealers frequently have exclusivity deals with manufacturers (in exchange for slightly lower wholesale prices) wherein they are obliged to limit the amount of competing manufacturers’ products they sell. The result of these factors is a stifling of competition, resulting in inflated prices.

Pharmaceutical and biotech manufacturers can engage in similar competition-squelching by virtue of government policy on evidence-based medicine, which says that every Canadian must receive a certain high standard of treatment, which means treatment with cutting edge medicines and biotechnologies. By continually improving their products, pharmaceutical and biotech companies can continue to sell products still protected under patent (and thus at high prices), and as long as the product is viewed as the current medical best practice, the healthcare provider often must use it.

I support government aid for healthcare services and products, and I want manufacturers to be able to receive a healthy financial reward for their ingenuity and helpful products, but more rigorous and market regulations are needed to contain costs.

II. Healthcare Professional Unions

The term “union” is often used for more blue-collar and lower to middle socioeconomic status occupational groups. White collar, professional and middle-to-high socioeconomic status occupational groups, by contrast, are typically represented by “associations” and “societies” (e.g., Canadian Medical Association, American Psychology Association, Canadian Association of Occupational Therapists, Ontario Society of Occupational Therapists, Major League Baseball Players Association). They’re all unions. They represent the interests of their members; that’s a good thing. However, “association” doesn’t come with the cultural baggage that “union” is saddled with, thanks to a storied history of being dragged through the mud by business owners, executives and their unions.

So, what do doctors, nurses, physical therapists, psychologists, and occupational therapists (like me), want? Well, just like anyone else, we’re human. Like any other human, we want more power. This does not mean that we want to reign over others. But, like anyone else, we would rather have more money, more free time, more job security and more career mobility, all else equal – especially given all the hard work and debt we incurred to get to where we are. How do we get this? Well, we work to increase our social value. How do we do this? Well, one way is by tinkering with supply and demand. If we reduce the number of professionals of our type that are available in a community, those who are there can command higher pay, better working conditions, and can be increasingly confident that we can work wherever we want. Now, of course, we’re not sociopaths. Obviously, (most) healthcare professionals care about providing good care and having a healthy, protected society. We know that what we do carries great social/moral weight, and I trust that the grand majority of healthcare professionals take the social/moral role of what we do very seriously. I for one would definitely be willing to negotiate pay freezes on my own income for the greater good, so long as I believed that the burden were being fairly distributed. I’m sure that a great many other healthcare professionals would be of like mind on this. But, clearly, there’s a tension in our interests, as we strive to find a balance point between self-interest and pro-social interests. Furthermore, negotiating for higher pay or whatever for constituents is quite the feather in the cap of any union leader, so there are systemic factors, too.

It would be beyond naive to think that the private interests of healthcare professionals, as advocated for by their/our professional associations, are not playing a role in the putting up of roadblocks to the certification of foreign-trained medical professionals and the much-needed expansion of enrollment caps at Canadian medical schools, as Canadians deal with an increasingly over-extended medical system replete with shortages.

III. The Japanese Family Is More Integrated Than Canadian and American Families

Although it has become more and more Western over the years, Japanese Collectivist heritage has by no means fully given way to Western Individualism. One reflection of this is that, on the whole, Japanese families are not as geographically and socially dispersed as families in Canada and the US. As such, when a person in Japan becomes ill, they are more likely to have relatives that are willing and able to take care of them – for free. This can reduce the length of expensive hospital stays, which can easily cost into the thousands of dollars per day in Canada and the US, and also decrease the likelihood of negative health incidents, hospital admissions and re-admissions among the ill and frail. In a stroke of great social and economic policy, a few of Canada’s federal political parties have included the provision of financial assistance to Canadians taking time off from work to stay home with seriously ill, injured and palliative relatives. If enacted, this program will save healthcare dollars, free up hospital beds, and reduce home costs, while enabling Canadians whom are sick or hurt rest, recover and/or spend their last days in the comfort of their own home with the people they love.

9 thoughts on “Why Japanese Healthcare is More Efficient Than Canadian and US Healthcare

  1. My first comment of your new blog! Yay for getting this back up and running, I’ve missed it!

    My question:

    Does the geography of Canada and Japan play any part in the cost of effective health care?

    You mentioned professionals in your industry specifically their ‘wants': Would the massive scale of Canada’s geography make any difference in the care and cost provided?

    Does the average Japanese person make more than the average Canadian?

    What do you think?

  2. Hey Xander!

    Really good point on the geography, thing. I didn’t think of that. I can’t imagine how the geographic differences wouldn’t favour Japan and work against Canada. Japan will have less need for long distance emergency patient pick-ups, their citizens are closer to healthcare facilities (on average) and so they can seek care early on in symptoms detection before problems become BIG problems, and hospital stays can be shorter – if a recovering patient lives far away from the nearest hospital, they will be kept in hospital longer to make sure that they are not going to need quick, emergency treatment after they get home.

    As for average income, I highly doubt the average Japanese person makes more than the average Canadian, but I don’t know.

  3. Pingback: Why healthcare is more efficient in Japan than the US and Canada « The Frame Problem

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  5. Thanks very much for your article. It’s interesting to see a comparison to other countries. However it’s a bit like comparing apples to oranges since there are so many other factors that need to be considered. And healthcare is not just about access to acute care services. It should also include socio-economic and environmental quality of life indicators.

    For example, what is the model of access to healthcare service in Japan. Is it a nationalised service like Canada where it is written into the federal Health Act to guarantee that all Canadians will receive access to healthcare? Do Japanese citizens pay to see a GP (unlike Canadians)? How are Japanese surgical and medical waitlists managed? How the Japanese population health outcomes compare (e.g. mortality, morbidity, rates of readmission)? And what about efficiency of resource use? The Japanese may have reduced the price of an MRI, but at what socioenvironmental cost? The demand for cheap electricity in Japan has positioned them to be dependent on nuclear energy. How does the Japanese quality of life indicators compare? Do they rely heavily on migrant workers for cheap labour? How much manufactoring do they outsource to other Asian countries? Do the Japanese have a positive outlook on life? Do the Japanese trust their government? Is there transparency of governmental process? Do the Japanese have freedom of information?

    It’s easy to have a poke at the Canadian healthcare system through a simple comparative model, but from the perspective of someone who has worked as a clinician, administrator and consultant for 20 years, it is one of the best in the world – from all angles.

  6. As a healthcare professional (cardiovascular surgeon) with experience in both Canada and Japan, I like to share some insights about the Japanese system. Doctors in Japan work long hours for relatively low pay (around $125,000 a year at mid-career). One doctor I know who’s in his 30s says he works more than 100 hours a week. On the positive side, patients can nearly always see a doctor within a day. However, quality of care is susceptible and bedside manners are poor. The Japanese are only a quarter as likely as Americans or French to suffer a heart attack, but twice as likely to die if they do. Some doctors see as many as 100 patients a day. Because their salaries are low, they tend to overprescribe tests and drugs. (Clinics often own their own pharmacies.) On the positive side, this saves the government a lot of money. My annual billings as a surgeon in Canada is around $550,000. My equivalent in Japan gets $200,000.

    Emergency care is often poor. In smaller cities it is common for ambulances to go from one hospital to another to find one that can cram in a patient. The system is slow to adopt cutting-edge (and therefore costly) treatments. New drugs are approved faster in Indonesia or Turkey than in Japan. The bottom line: cheap drugs and cheap doctors mean cheap health care.

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