MHLW Is More Aggressive

Generally the MHLW has been rather cautious in implementing radical and painful reforms; however, with the LDP’s landslide victory in the general election, the MHLW has been aggressive with a positive reform plan. Based on MHLW’s basic reform plan, the government and its supporting parties will put together the official reform plan this year and present the bill to the next regular session of the Diet in early 2006. The general pressure to reduce medical costs comes from the growing elderly population that will in turn surely push up the medial expenditures in the next decade.  Even today, the public burden for medical costs has been almost saturated from the viewpoint of the national economy.

The biggest issue, cost containment program, will be proposed with the combination of a short term strategy exploring the instant effect, and the middle/long term strategy of which the effect would be realized in a five-to-10-year time frame. In terms of medical remunerations, the fixed payment system for in-patient care, the Diagnostic Procedure Combination (DPC) will be further promoted. Today, only 144 medical institutions out of 9,500 hospitals have adopted the DPC system, but the MHLW projects that it will increase on a much more of a nationwide basis in the future.

The DPC, which is similar to the US DRG, is available only for the acute in-patient care per diem except for surgery; however, the MHLW projects to make the DPC applicable even for the chronic diseases. The medical remuneration consists of a medical service fee related to the medical technique and the cost reimbursement for drugs and medical materials. The medical service fee is set forth by procedure, diagnosis and related services with the designated evaluation points (one point = 10 Yen) as a remuneration.

While the drugs and medical materials are paid for by the authorized reimbursement price, the drug gets the price per brand, but the medical material gets the price per function. MHLW intends to separate the medical service fee into the doctor fee and the hospital fee. It has not been decided yet what the new classification will be until the next repricing; however, the reduction of the service fee seems unavoidable.

With the political power of Koizumi, the total reduction is projected to be between 2 and 5% at the next repricing of the medical remuneration in April 2006.  The drugs and medical materials have been reduced every time; however, the medical service fee was only reduced once in 2002 with a 1.3% reduction. (See Exhibit 1).

If the medical service fee were reduced this coming April, it will be the second reduction of the medical service fee in the history of repricing. However, the Japan Medical Association (JMA), one of the biggest supporters of the LDP and a strong lobbying group, strongly opposes the reduction in the medical service fee, as the cutback will reduce the income for the medical institutions.

At the last repricing in 2004, Koizumi tried to cut the medical service fee; but due to a political compromise between LDP and JMA, it was sustained. His political power then was not so strong as much as it is today with the victory in the general election. He regards the medical reform as one of his key policies, “Reform Regardless the Vested Interests”, and he should have a strong will to cut the medical service fee no matter how the JMA or a part of LDP opposes it this time. This is exactly the same as what happened at the postal reform.



Yoshio Mitsumori is the president and CEO for Tokyo-based ADMIS, a consultant specializing in the medical device industry. He has more than 25 years of experience in the medical industry, including positions with the Itochu Corp., U.S. Surgical, National Medical Enterprises and Century Medical. A member of RAPS, he has spoken at many industry events and worked extensively in international trade of medical products and technologies. He can be reached at [email protected]