Regulating the Healthcare System

  • Pierre-Yves Donzé


In 1879, following demands from a group of private doctors, Tokyo authorities decided to limit the treatment of nonpoor outpatients in municipal hospitals. To doctors, the low-cost care available at these institutions represented unfair competition. Relations between private doctors and public hospitals continued to be difficult during the two last decades of the nineteenth century until the 1906 adoption of the Medical Practitioners Act (ishi-), which consecrated private doctors as the foundation of the health system and brought Japan into what Takeshi Kawakami called the “golden age of private medicine.”

1 Introduction

In 1879, following demands from a group of private doctors, Tokyo authorities decided to limit the treatment of nonpoor outpatients in municipal hospitals. To doctors, the low-cost care available at these institutions represented unfair competition. 1 Relations between private doctors and public hospitals continued to be difficult during the two last decades of the nineteenth century until the 1906 adoption of the Medical Practitioners Act (ishi-), which consecrated private doctors as the foundation of the health system and brought Japan into what Takeshi Kawakami called the “golden age of private medicine.” 2 When new medical technology such as X-ray devices, laboratories, and sterilized operation rooms became equipment necessary for medical practice, private doctors thus accessed the infrastructure by opening clinics and small private hospitals. 3

As Chapter  4 discussed, this new technology had a deep influence on hospital management. Moreover, the impact extended beyond hospitals as single organizations. Indeed, the competition that existed between the various healthcare organizations in a single space—usually a city or a district—made it necessary to acquire the latest medical technology in order to remain competitive and attract patients. This was a major engine of technological development and innovation in the Japanese medical market. However, competition also made it necessary to lower or at least limit the increase of hospital and medical prices in order to continue attracting patients. Consequently, the endless modernization of medico-technical equipment, given the competition surrounding the healthcare system, led to a contradiction proper to the system itself—a situation that Karl Marx called the tendency of the rate of profit to fall. In this context, how was it possible to ensure the maintenance of the health system and its ability to continue growing?

This question is not exclusive to Japan; the patterns are evident elsewhere in industrialized countries during the same period and in a very similar form, although the conditions in Japan were particularly intense due to the atomized structure of the hospital system. In Western Europe and the United States, the regulatory intervention of the state, most common during the interwar years, transcended this contradiction proper to free market-based hospital medicine. The intervention took various forms, ranging from the nationalization of hospitals and the planning of national needs to systems based on the introduction of minimum prices (hospitalization, use of medico-technical equipment, and fees for doctors, for example) that ensured institutional functionality. In the case of France, for example, Jean-Paul Domin demonstrated that competitiveness on the healthcare market led medical doctors to organize within a national association (1884) that pressured the authorities into declaring that care for the poor would not be free of charge any longer but rather under local government control (1898). After 1918, the hospital system experienced significant growth thanks to health insurance, which made it possible for a large proportion of the population to access hospital care and afford the costs. It was only under the Vichy regime (1940–1944), however, that the state became an authoritarian regulator of the entire hospital system, a policy that the government pursued after 1945 through the institution of social security and the adoption of fixed prices negotiated with doctors and hospitals. 4 Discussing the case of France, scholar Olivier Faure also showed the existence of a very important private sector for hospitals. It experienced fast growth starting in the 1930s, essentially based on the hospitalization of middle-class members of a mutual insurance company that had contracts with private clinics and doctors. 5 Until World War II (WWII), the French hospital market thus featured regulation without strong state intervention. The situation was similar to the cases in most Western countries, like Germany or Switzerland. 6 In the United States, however, there was a growing opposition between public and charitable hospitals serving poor people on the one hand and for-profit hospitals for wealthy people on the other. There was state regulation, but it was under a two-system framework. 7 It was quite similar in the United Kingdom, where the philanthropy crisis delayed the modernization of the hospital infrastructure during the 1920s and 1930s and gave way to the nationalization of the health system in 1948. 8

As for Japan, a mid-1960s study by Marxist historian Takeshi Kawakami highlighted how medicine had shifted from a purely capitalist system during the years 1870–1914 to a gradual “socialization of healthcare” (iryō no shakaika) during the interwar years. 9 While the Japanese hospital system was based on the development of small private institutions belonging to and under the management of doctors, Kawakami emphasized that the introduction of health centers with cost prices (jippi shinryōjo) for the middle class (first opened in Tokyo in 1911; a total of 153 centers were opened throughout the country by 1929), 10 the adoption of the Health Insurance Act (kenkō hoken ), and the introduction of the National Health Insurance Act (kokumin kenkō hoken-) enabled working classes to benefit from new medical technology while private doctors focused on wealthy and profitable patients. Consequently, Kawakami exposed a dual system quite close to the conditions in the United States during the same period. However, his examination does not detail the process of regulation enough to clarify the situation of medical doctors and private hospitals.

This chapter focuses on the regulation of hospitals and medical care in Japan until WWII, aiming to answer the following questions: How were hospital managers and private doctors able to organize the hospital market in order to sustain continuous development? What was the role of the state in this process? The chapter comprises three sections. The first tackles the introduction of official prices for medical treatment; the second analyzes the role and impact of health insurance; and the third discusses the regulatory intervention of the state.

2 The Organization of the Supply of Healthcare

Although private institutions—especially small hospitals and independent doctors—accounted for an overwhelming share of the healthcare system, that does not mean that the system was based on purely free-market mechanisms. As the association of private doctors in Tokyo employed interventionist measures against the municipal authorities, an approach that I mentioned at the beginning of the chapter, the organization of the supply of healthcare resulted from relations and negotiations between various interest groups. This section analyzes the historical development of the regulation of medical and hospital prices up until WWII.

To begin, a short statistical overview of the medical profession between 1900 and 1940 would be beneficial. Official censuses carried out by the Bureau of Hygiene (Ministry of Health since 1938) provide helpful data. In Japan, doctors represented the main lobbying organization that succeeded in discussing the regulation of the healthcare market with sanitary authorities. Unlike Western Europe and the United States, Japanese hospitals did not have an organized association, and the political weight of health insurance was weak. During the four first decades of the twentieth century, however, the medical profession in Japan underwent a deep transformation.

First, Fig. 1 shows the total number of medical practitioners in Japan over time, as well as the average number of people per doctor, which helps illustrate changes in competitiveness in the healthcare market. The figures reveal four distinct phases. First, the years 1901–1918 were a period of constant increase in the number of practitioners, which went from 32,977 to a peak of 46,109; the market thus saw strong densification (1349 people per doctor in 1901 and 1186 in 1918). The hospital field also saw growth in the number of small private hospitals over the same period (see Chapter  4). Second, the post-World War I (WWI) era (1918–1921) corresponds to a short phase of decline in the number of doctors (42,464 in 1921) and a strong decrease in the average size of the market (1334 people per doctor). This lull in the competition was brief, however: The two subsequent decades witnessed a growing number of doctors in two different phases. In the third period, from 1921 to 1930, the number of doctors increased (49,680 practitioners in 1930), but the density stagnated (1323 people per doctor on average). Still, as Shuhei Ikai noted, this growth did not occur in a uniform fashion across Japan—new doctors tended to concentrate in cities and find employment in hospitals. On the one hand, the number of towns and villages without doctors grew from 1960 in 1923 to 3231 in 1930. On the other hand, while the number of independent doctors remained stable between 1913 and 1927 (at around 32,000), the number of doctors with hospital appointments doubled during the same period (from 5295 in 1913 to 10,656 in 1927). 11 The healthcare market in cities became highly competitive and concentrated more and more around hospitals. Fourth and finally, the years 1931–1940 represented a phase of significant growth in both the number of doctors (65,332 in 1940) and market density (1101 people per doctor in 1940). The trends observable in the previous period grew stronger, with towns and villages without doctors growing even more numerous (3655 in 1939), independent doctor numbers increasing (34,806 in 1936), and more doctors flocking to hospitals(19,191 in 1936). 12 Two other key points to note are that medical specialties like radiology emerged in this context and that X-ray equipment entered a high-diffusion phase.
Fig. 1

Number of medical doctors and density of the medical market, 1901–1940

(Source Eiseikyoku nenpō, Tokyo: Eiseikyoku, 1901–1936 and Eisei nenpō, Tokyo: Koseisho, 1937–1940)

A brief discussion of the evolution of medical-doctor training, which had a strong influence on the nature of competitiveness of the healthcare market, is also necessary. Figure 2 shows numbers of doctors by their “pathways” of training in Japan up to WWII. 13 The first pathway corresponds to doctors who were in practice before the implementation of the law on medicine in 1875. These doctors held neither modern certifications nor diplomas but still retained the authorization to continue practicing. Although this pathway represented the largest group of doctors through 1907, it later experienced a steep drop from 63% of all practitioners in 1900 to 29.8% in 1910, 12.1% in 1920 and then less than 5% after 1927. Second, there were doctors who lacked any specific academic training but passed a state examination that originated in 1875. The doctors who followed this pathway generally had basic practical training or academic backgrounds in various medical schools, albeit not always at state-recognized institutions. This category of doctors experienced significant growth until WWI and was the largest group between 1909 and 1917. The suppression of this certification system in 1916 led to the gradual decline of the second pathway; in 1940, it represented only 12.2% of all medical doctors. Third, the graduates of state-recognized medical colleges, either private or public, formed a growing category after the adoption of the Medical Practitioners Act (1906), which extended the number of state-recognized institutions. 14 This third pathway exhibited steady growth in real numbers and a very strong increase in relative numbers through 1925 (accounting for 28.6% of practitioners in 1910 and 49.4% in 1925). Until the mid-1920s, they were the primary drivers of Japan’s increasing medical density. During the second part of the 1920s, however, they entered a phase of stagnation in relative numbers (49.1% of practitioners on average from 1925 to 1940) as the fourth doctor pathway emerged. The new group comprised graduates of the faculties of medicine at imperial universities (mostly Tokyo, but also Kyoto, Tohoku, Kyushu, Hokkaido, Osaka, and Nagoya) and the elite of the Japanese medical world. The size of the fourth pathway stayed small until the early 1920s, with doctors in the segment finding most of their positions at large, public institutions such as hospitals, universities, the military, and the central administration. They did not compete directly against other practitioners. However, the situation changed during the 1920s as the “medical elite” portion of the medical population began to grow from just 10.5% of practitioners in 1920 to 23.1% in 1930 and 39% in 1940. They also regularly ventured out on their own as independent doctors and owners of small hospitals, contributing to the escalating competitiveness of the healthcare market. 15
Fig. 2

Medical doctors in Japan by training, 1900–1940

(Source Eiseikyoku nenpō, Tokyo: Eiseikyoku, 1900–1936 and Eisei nenpō, Tokyo: Koseisho, 1937–1940)

Consequently, this quantitative overview of the evolution of the medical profession in Japan corroborates the notion that the healthcare market became increasingly competitive during the interwar years. In addition, the hospital system underwent major densification the 1920s and 1930s—a development that resulted in intensifying competition between independent doctors and hospitals that offered outpatient care at the time. 16 The presence of strong competition in a free-market context would normally have led to pressure on medical prices and, by extension, doctor earnings. Efforts to organize the doctor community, which began at the end of the nineteenth century, aimed specifically at preventing that logical outcome from happening.

Although the 1875 law on medicine forbade the sale of drugs by medical doctors, the practice was still widespread at the beginning of the twentieth century. It went back to the Edo period (1603–1868), during which all the services offered by doctors were included in a broad designation called the “cost of drugs” (kusuri-dai). 17 The new law introduced a separation between the cost of drugs and price of consultation. Medicine thus became a real service—a form of intellectual work—that warranted remuneration as such. 18 The progressive professional autonomization of pharmacists, which the developing drug industry buoyed, gave way to an important and long-lasting conflict with doctors. The discord was so strong that, in 1925, the state adopted a new law on pharmacists (yakuzaishi-) and stopped accepting the sales of drugs by doctors, which the government had tolerated up to that point due to a lack of pharmacists. 19 In terms of the organization of the healthcare market, the policy forced doctors to redefine the nature of their fees more precisely and relinquish the idea of kusuri-dai.

However, the 1875 law did not abandon doctors to purely free-market competition. The principle of official prices for medical treatments was one part of the legislation; each prefecture had official price lists, which doctors and local authorities agreed upon. 20 Four years later, the Bureau of Hygiene of the Home Ministry presented lists from Prussia to serve as examples. 21 Thereafter, prefectural authorities published lists of minimum and maximum prices for medical treatments. The local associations of doctors, which took shape between 1875 and 1882, were very active in this process, publishing their own lists and negotiating the specifics with authorities. Medical prices were thus under regulatory control at the end of the nineteenth century, and the fierce competition of the medical market had no negative impact on revenues.

Hospitals, meanwhile, collected hospitalization fees from the outset, with prices generally varying according to several classes of patients. These fees covered hospital costs but did not include drugs or doctor fees. For example, the rules of Osaka Prefecture Hospital in 1878 mentioned the possibility of offering Western meals to patients in the first and second classes with an additional daily fee of 1.5 yen, or more than twice the basic fee for the first class (0.6 yen). The following year, the same hospital specified that first- and second-class patients were to have individual rooms, while third-class patients were to stay in group rooms. 22 In Tokyo, private hospitals had begun implementing a broad variety of fees in the mid-1880s as the market segmented early and institutions set out on their quests for wealthy patients. 23 Since the implementation of a hospital system in Japan, then, these institutions competed over affluent patients. Moreover, there was no unified system of hospital fees—and the lack of any hospital association until WWII made its introduction unlikely.

The regulation of the healthcare market continued at the beginning of the twentieth century, with the control over fees growing more rigid and prefectures unifying their respective structures. On the basis of the 1906 law on medical practice, the Home Ministry adopted regulations governing the associations of doctors (ishikai kisoku), which established associations in each city and prefecture. These bodies set fees, minimum and sometimes fixed, for various medical treatments in agreement with local authorities. 24 Between 1907 and 1917, regional associations of doctors proliferated: New groups formed in Kyoto (1907), Shizuoka (1908), Nagano (1908), Kumamoto (1908), Aichi (1909), Yamaguchi (1909), Hiroshima (1911), Hokkaido (1914), and Tokyo (1917). 25 In 1919, the government required medical doctors to belong to regional associations. 26 Ikai argued that the graduates of imperial universities, particularly the University of Tokyo, exerted more and more control over these associations in the early 1920s. Their massive engagement in private medicine made it necessary for them to control the financial aspects of their business. Therefore, these associations unified fees within prefectures and later adapted the prices in accordance with price evolution. The competition between doctors was not over prices; doctors could not reduce fees.

However, during the interwar years, liberal medicine was blamed by a large number of politicians, bureaucrats, and intellectuals hoping to give the entire population access to the benefits of advances in medical science—especially new technologies like radiology. The “socialization of medicine” (iryō no shakaika), as many called it, progressed in the context of a recurring economic crisis during which attempts to reduce medical treatment fees were common. 27

The opening of cost-price health centers (jippi shinryōjo), beginning in 1911, was a catalyst of intense debates over the cost of medicine. The fees at these cost-price centers amounted to just one-third of the prices recommended by the Japan Medical Association (ishikai). 28 Doctors tried to prevent the development of these facilities through a ban on the opening of healthcare institutions by nondoctors—a lobbying effort that ended successfully but still too late. Although the state decided in 1933 to subject the opening of hospitals and clinics by nondoctors to an official licensing procedure, 29 the number of cost-price health centers in Japan had already increased to 153 in 1929.

Despite the difficulties of the interwar years, the healthcare-market regulations that went into practice in the early 1920s created ideal conditions for doctors. The doctor population benefited from a system that guaranteed minimum fees for their work. The situation was quite different for hospitals, however, which were in a context of tight competition and relied mostly on patient contributions for their funding (see Chapter  4). Due to pressure from local associations of doctors, some hospitals joined doctor associations and gained the ability to fix hospitalization fees through negotiations with their respective associations and local authorities. This was the case for Hikone Hospital, which made itself an association member in 1920 30 ; however, becoming an association member was neither compulsory nor a generalized process. Fixed fees were negotiated with health insurance associations since the introduction of the 1922 Health Insurance Act, and the growing population of healthcare policyholders enabled hospitals to apply fixed fees to a larger number of patients. Yet, it was only in 1943—amid the wartime mobilization effort—that the Ministry of Health introduced fixed hospital fees for all patients. After the war, one of the first actions of the Japan Hospital Association (founded in 1951) was to demand that the Ministry implement an official and unified increase of hospital fees. 31

3 The Role of Health Insurance

In most Western countries, health insurance systems—whether private or public—have played a major role in the regulation of the healthcare market. Insurance providers have negotiated fixed fees for their patients with doctor and hospital associations, helping stabilize the pressure on prices and putting an end to price-based competition. That stabilization process relied centrally on premium payments from policyholders. In some cases, national governments have even subsidized insurance providers to reduce premium costs and thus facilitate the extension of policy coverage across wider segments of the population. In Japan, the Health Insurance Act (1922) and National Health Insurance Act (1938) constituted the basis of the system until WWII. 32

3.1 The Health Insurance Act (1922)

The Health Insurance Act (kenkō hoken hō, 1922) was inspired by the German example and aligned with a social policy designed to maintain order in society. 33 The objective, in the context of the social and trade-union movements that characterized the post-WWI environment, was to guarantee access to healthcare for the poorest workers. The Act specifically applied to employees who worked for manufacturing and mining enterprises with more than ten workers and earned less than 1200 yen per year. 34 The salary provision, imported from the German model, was essential: The purport of the law was thus to support working classes, not the entire population. If one considers that the limit of 1200 yen represented more than twice the annual income of a male worker in the cotton industry at the time (estimated at 450–500 yen), however, the scope of the legislation was rather broad. 35  Policymakers then extended the provision to employees in enterprises of more than five employees in 1934 and revised the Act in 1939 to include members of workers’ families. The law led to a dual-institutional system. Enterprises employing more than 300 workers could open their own health insurance associations (kenkō hoken kumiai), while the government created public insurance for others. These various organizations negotiated contracts with doctors and hospitals; workers had no say in the agreements. Finally, in 1926, the state decided to subsidize these insurance programs. 36

From the perspective of healthcare-market regulation, the law had two major effects. First, health insurance providers signed contracts with doctor and hospital associations—and thus defined fixed fees for various medical treatments. The Home Ministry published several editions of lists that prefectures had negotiated with medical and hospital associations. 37 Second, the financial contributions that insurance providers made toward healthcare costs (for hospitalization, drugs, operations, and the use of technological equipment, for example) had an upper limit until 1942. Providers did not reimburse all medical services, only covering a portion of the full range. This measure limited the possibility of the healthcare infrastructure developing endlessly on the backs of health insurance providers alone.

Consequently, the health insurance of industrial enterprises helped the healthcare market, albeit to a limited degree. The sector represented direct opposition to doctor associations that demanded higher fees for their services and tried to control fees among those who accepted contracts with insurance providers. These contracts were an opportunity for doctors to introduce the concept of “points” for each type of medical treatment and the idea of basing payments on point counts, which the prefectures defined with the regional associations of doctors. In 1943, when the state intervened authoritatively in health affairs, the Ministry of Health started to determine point values after first consulting doctors who had signed contracts with insurance providers, prefectural authorities, and regional medical associations. 38 This system of point-based fees enabled better control and the standardization of prices.

The 1933 official census by the Home Ministry provides some details about the state of health insurance associations belonging to private enterprises (kumiai). 39 There were 340 associations, mostly in the textile (132), machine (61), mining (48), and chemical (34) industries—the largest sectors of the manufacturing industry at the time. The geographical breakdown shows that the associations existed primarily in industrial cities: The prefectures of Osaka (52), Tokyo (50), and Aichi (34, where Nagoya is located) accounted for more than one-third of the sum. In total, these associations insured 569,856 workers, only slightly more than 10% of the entire workforce in the manufacturing and mining industries. 40 Consequently, many enterprises used the public insurance system to cover their employees. One must also note that most of these associations were small; on average, they had only 1676 members, and half (170) had less than 1000 members. Only six had more than 10,000 members: Tokyo City Electric Department (12,970), textile companies Toyo Spinning (34,637), Kanebo (31,731), Dai-Nihon Spinning (21,753) and Gunze (17,705), as well as the Mitsui Miike Mine (10,116). Thus, only a minority share of workers received coverage through insurance belonging to and under the direct control of their employers. Health insurance was not a tool for enterprises to implement a paternalistic strategy, unlike the cases of many companies in Western countries. 41

3.2 The National Health Insurance Act (1938)

Social protection was bolstered in 1938 with the adoption of the National Health Insurance Act (kokumin kenkō hoken-), whose objective was to enlarge the share of the population benefiting from a policy through the integration of workers from agriculture and fish farming—two sectors that lay outside the scope of the 1922 law. As the country continued to militarize, a central aim of this new law was to improve health conditions across the entire population, particularly in the countryside. The foundation of a healthcare system based on free-market principles and the private action of independent doctors had led to a concentration of hospitals and doctors in cities. The idea of giving the rural population financial support for paying medical fees served to facilitate the business of doctors in the countryside.

This insurance structure operated on a decentralized system, with the creation of mutual insurance associations in villages and towns, or organized by professional unions. The associations had considerable autonomy regarding management (premiums, contracts with doctors and hospitals, and so forth). 42 In 1942 and 1943, about 95% of municipalities throughout Japan had such an association. 43 Membership was voluntary, however.

Lastly, following the creation of a Ministry of Health in 1938, health insurance coverage expanded to integrate workers from professions that had not yet been a part of the framework. In 1939, new laws gave birth to mutual insurance for the employees of maritime transportation (sen’in hoken-) and services (shokuin kenkō hoken-).

Figure 3 shows the number of people covered by the 1922 Health Insurance Act and the corresponding share of the total population. The figures, from Statistics Bureau data, do not include people covered by the new insurance systems created in 1938 and 1939. The graph clearly reveals the impact of the 1934 amendment to the law, which expanded coverage from industrial companies with at least ten workers to those with at least five workers. While the number of insured people averaged 1.8 million people from 1926 to 1933, it then entered a phase of growth, reaching 3.8 million in 1937 and 5.7 million in 1940. In 1944, some 10 million people were insured. 44
Fig. 3

Population covered by the 1922 Health Insurance Act, millions of people and share of total population (%), 1926–1940

(Source Nihon chōki tōkei sōran, Tokyo: Nihon Tōkei Kyōkai, 1987, tables 20-12-a/b)

The state played an important, but not essential, role in this development. First, a majority of insured people were members of public mutual insurance; their proportion fluctuated between 58 and 68% during the years 1926–1940, averaging 63.3%. Next, the state gave subsidies to all forms of insurance in a total sum that went from 3.2 million yen in 1930 to 6.1 million in 1940. These subsidies, however, represented a relatively small amount in comparison to the total premiums paid by the insured (33.2 million yen in 1930 and 121.3 million in 1940) and a constantly decreasing share thereof (from 9.6 to 5%). 45 The insured population formed the main basis for the financial growth of health insurance providers.

Despite this development, though, the proportion of the total population receiving coverage under the 1922 insurance system was low. The percentage was just 2.9%, on average, from 1926 to 1934 and reached only 7.9% in 1940. The health insurance system thus targeted specific categories (workers and employees) that lacked the financial means for accessing the healthcare infrastructure. Even if one were to add in the people covered by the 1938 and 1939 insurance provisions, the overall proportion remained relatively stagnant until 1940. That year, the total number of those covered by any kind of health insurance amounted to 9.8 million people—a mere 13.6% of the total population. 46

These percentages are far lower than the corresponding figures in Western Europe during the interwar years. In France, for example, 20 million people—46% of the national population—had public or private health insurance in 1934. 47 Switzerland had a similar rate: In 1940, 48.8% of the population had health insurance coverage. 48 As for Germany, the estimated coverage rate in 1930 was 50%. 49 Even the United States, which tended to be “backward” on the issue in comparison with Western Europe, had a rate slightly larger than Japan: In 1945, the mutual and private associations Blue Cross and Blue Shield, which represented of the leading source of health insurance during the interwar years, had a total of 21 million members, or about 15% of the whole population. 50 In Japan, therefore, the health insurance system did not aim to give the middle class access to hospital treatment and then support the growth of the hospital and healthcare systems. Rather, it was basically a measure of social policy whose objective was to maintain social order. The chief aim was to create a safety net for the poorest workers.

The perspective of healthcare-market regulation brings a slightly different dimension into the topic, as insurance providers played an important role in introducing the idea of fixed fees for medical treatments and contributing to the unification of prices despite the opposition of independent doctors. In 1943, following the adoption of the National Medical Care Act (kokumin iryō-) within the context of a nationalist, militarist policy, the Ministry of Health’s system of fixed fees took effect in the health system after doctors and hospitals had offered their input. 51 The proportion of the population with health insurance coverage, meanwhile, dramatically increased to 76% in 1943. 52

4 The Regulatory Intervention of the State

The associations of doctors and, to a lesser extent, health insurance providers had a major regulatory function in the healthcare market through the adoption of fixed fees. However, that action was possible only through state interventionism. The Japanese authorities adopted a legal order that enabled the institutionalization of the market, though the direct intervention of the state was extremely limited in the field of healthcare and medicine until WWII. Health policy had two main objectives: training doctors and fighting epidemics. Still, the organization of the healthcare market was not considered a major state responsibility, as the process rested on market principles.

Public health was one of the numerous fields of society and economy that underwent intense modernization under the new authorities after the Meiji Restoration (1868). Prussia served as a model for the effort. In 1870, the Japanese government asked Prussia to send two doctors to Tokyo to teach their skills in the state-owned medical school, which became the Faculty of Medicine at the University of Tokyo in 1877. 53 Doctor training was part of the public health policy itself, however. Training initiatives were originally the jurisdiction of the Ministry of Education. The Bureau of Medical Affairs (imu-kyoku), which opened in 1872 within the Ministry of Education, became part of the Home Ministry in 1875 and assumed a new name: the Bureau of Hygiene (eisei-kyoku). 54 In 1938, the organization became the Ministry of Health, which had a military objective to strengthen the nation.

The state’s intervention in the health sector aimed first at improving the sanitary conditions of the country and protecting the weakest against illness and accidents. An objective of social policy thus led the state to take measures that had an impact on the organization of the healthcare market. One of the first actions in the field centered on factory work. The demanding working conditions and bad hygiene at textile factories at the end of the nineteenth century spurred a tuberculosis crisis, especially among young girls, who constituted cheap labor in the industry. 55 During the 1890s and 1900s, doctors raised the issue, leading to one of the first state interventions with an impact on health insurance. The Factory Act (kōjō-), adopted in 1916, introduced the provision stipulating that employers were to be responsible for work-related injuries and illnesses and, consequently, the corresponding healthcare costs. 56 However, policymakers did not organize any specific accident insurance program after the passage of the law.

At the same time, the struggle against tuberculosis had essentially relied until then on the action of individuals and private associations. The largest was the Japanese Society for the Prevention of Tuberculosis (nihon kekkaku yobō kyōkai), founded in 1913. 57 In that context, the state enacted a law to prevent the spread of the epidemic (kekkaku yobō-, 1919). National lawmakers decided both to finance the construction and setup of sanatoria and to assume liability for the care of poor tuberculosis patients. 58 Sick individuals thus received state support outside the medical market. This was an exception, however, and their number was very limited; state intervention resulted principally from social and sanitary concerns. In 1930, there were 54 sanatoria for tuberculosis, a mere 1.5% of all healthcare institutions in Japan that year. 59 The interwar years saw increases working classes secure easier access to hospitalization and modern medical technology, although that development arose mostly from private action instead of state interventionism.

The first public intervention that affected the regulation of the healthcare market with any real heft came in 1933. The action resulted not so much from the Bureau of Hygiene bureaucracy’s intentions to organize the market but rather from lobbying by independent doctors who wanted to limit competition. The new rules on health centers that the Home Ministry adopted that year introduced a legal distinction between a “hospital” (byōin, or a healthcare institution with ten beds or more) and a “clinic” or “healthcare center” (shinryōjo, an institution with fewer than ten beds) and gave the state control over the opening of institutions by nondoctors. Finally, the government adopted various measures aiming to guarantee the quality of healthcare and improve sanitary conditions (limiting the number of sick patients per room and isolating contagious individuals, for example), but these stipulations had no effect on the organization of the market. 60 This first state intervention was, on the whole, limited and indirect. The objective was to support the activities of doctors and improve the functioning of a market mechanism-oriented system.

Therefore, the state implemented an interventionist policy aiming at regulating the healthcare market after the creation of the Ministry of Health in 1938. This intervention occurred within the context of the militarization of Japanese society and economy, with the state aiming to control public health in order to strengthen the nation—and to ensure strong, healthy soldiers. 61 The National Medical Care Act (kokumin iryō-), which took effect in 1942, was the major avenue for advancing this new policy. 62 From the perspective of the regulation of the healthcare market, the government’s initiative had two main consequences. First, it laid the groundwork for a nationwide network of public, government-financed hospitals, relying on two 500-bed central hospitals in Tokyo and Osaka, a 250-bed hospital in each prefecture, and 588 small (50-bed) hospitals throughout the country. The project saw only partial implementation, however, due to the war and the fervent opposition from independent doctors. The new authorities ended up halting the effort in 1947. 63 Second, the state introduced a generalized system of fixed fees for all medical treatments, including hospitalization. Each treatment was evaluated and given a number of points; the monetary value of each point was determined by the Ministry of Health, which adapted the value to price fluctuation. This system remained in force until 1948. 64 The idea to regulate the healthcare market through a system of treatment-specific credits formed the basis of today’s healthcare system in Japan.

5 Conclusions

Although the healthcare market in Japan relied largely on private organizations until WWII, it did not function only according to the laws of the free market—it also operated under regulations resulting from the state’s legal intervention. The approach to regulation had two objectives: to guarantee minimum prices for medical treatments for doctors and to provide the poorest workers with access to healthcare.

At first, from the end of the nineteenth century to WWI, prefectures had standardized fees for medical treatments. The key issue for doctors was to stand firm against the pressure to cut prices, and associations of doctors engaged actively in this process. Next, during the interwar years, health insurance took on a greater influence. As the emergence of new technology like X-ray equipment not only transformed medicine and hospitals but also spurred rising healthcare costs, the working classes had virtually no access to this advancing infrastructure. The state thus adopted a new legal framework to facilitate care for a broader range of people. Health insurance, despite covering only about 10% of population in 1940, had a regulatory impact on the healthcare market by negotiating fixed fees with doctors and some public hospitals.

The healthcare market was still largely based on competition, however, except for the domain of medical treatments prices. Few hospitals benefited from fixed hospitalization fees—a major source of revenue. In 1934, there were only 52 public hospitals that had contracts with health insurance providers guaranteeing fixed fees for insured patients. 65 While that number represented nearly half of all public hospitals (46.2%), it only amounted to a tiny share of all hospitals (1.8%).

Finally, my discussion emphasized the fact that the state played only a modest role in the regulation of the healthcare market until WWII. The government put its stock in the principle of a private market. The state’s intervention was little more than a reaction against lobbying by the associations of doctors and a product of the need to take at least some measures for the working classes. There was no momentum behind the idea of organizing the entire healthcare market until the end of the 1930s. The creation of the Ministry of Health in 1938 thus represents a major turning point, one that coincides with the shift to a total-war economy. 66 The National Medical Care Act (1942) gave sweeping organizational powers to the government, which attempted a regulatory intervention in the health system—notably through the definition of fixed fees for all treatments. During the 1950s, the health system experienced a phase of reconstruction and reorganization, characterized by the government’s focus on the growth of large public hospitals and the adoption of universal health insurance (1961) in light of the wartime experience and the British example. The continuity with the 1938 regime rested on the adoption of fixed fees for medical treatments and hospitalization, with the state and the various actors in the health system negotiating the values. This guaranteed the financial stability of the healthcare system and enabled the pursuit of its development. Until the late 1930s, the lack of rigid regulation made hospital revenues unstable due to the highly competitive nature of the market. This explains why hospitals felt it so necessary to acquire the most current medical technology in hopes of attracting patients—and why manufacturers of medical devices had to deliver equipment that fell within the limited budgets of small hospitals.


  1. 1.

    Isei hyakunen shi, pp. 103–104.

  2. 2.

    Kawakami, Gendai nihon iryoshi, pp. 231–238.

  3. 3.

    Ikai, Byoin no seiki no riron.

  4. 4.

    Domin, Une histoire économique de l’hôpital.

  5. 5.

    Faure, Les cliniques privées.

  6. 6.

    Labisch and Spree, Krankenhaus-Report 19. Jahrhundert and Donzé, L’ombre de César.

  7. 7.

    Stevens, In Sickness and in Wealth.

  8. 8.

    Mohan, Planning, Markets and Hospitals.

  9. 9.

    Kawakami, Gendai nihon iryoshi.

  10. 10.

    Ibidem, p. 341.

  11. 11.

    Ikai, Byoin no seiki no riron, pp. 142 and 146.

  12. 12.


  13. 13.

    Sakai, Rekishi de miru nihon no ishi no tsukurikata.

  14. 14.

    Momose, Showa senzenki no nihon, p. 218.

  15. 15.

    Byoin no seiki no riron, Chapter 2.

  16. 16.

    Kawakami, Gendai nihon iryoshi, p. 11.

  17. 17.

    Isei hyakunen shi, Aoyagi, Shinryo hoshu no rekishi.

  18. 18.

    Kawakami, Gendai nihon iryoshi, p. 31.

  19. 19.

    Ibidem, pp. 211–213.

  20. 20.

    Aoyagi, Shinryo hoshu no rekishi, pp. 202–203.

  21. 21.

    Naimu-sho Eiseikyoku zasshi, vol. 13, 1878.

  22. 22.

    Aoyagi, Shinryo hoshu no rekishi, pp. 232–233.

  23. 23.

    Fukunaga, Nihon byouin shi, pp. 168–169.

  24. 24.

    Aoyagi, Shinryo hoshu no rekishi, p. 286.

  25. 25.

    Ibidem, p. 292.

  26. 26.

    Ibidem, p. 414.

  27. 27.

    Kawakami, Gendai nihon iryoshi, pp. 327–335.

  28. 28.

    Ibidem, p. 338.

  29. 29.

    Ibidem, pp. 341–342.

  30. 30.

    Hikone shiritsu byoin hyakunenshi, p. 74.

  31. 31.

    Nihon byoin kai 30 nen shi, p. 1.

  32. 32.

    Shimazaki, Nihon iryo, p. 114 and Sumiko, Hasegawa, Carrin and Kawabata, “Scaling Up Community Health Insurance”.

  33. 33.

    Yoshihara and Wada, Nihon iryo hoken seidoshi, pp. 29–63.

  34. 34.

    Ibidem, p. 44.

  35. 35.

    Wada and Hara, Kingendai nihon keizaishi yoran, p. 99.

  36. 36.

    Yoshihara and Wada, Nihon iryo hoken seidoshi, p. 51.

  37. 37.

    For example, Rodosha saigai fujo sekinin hoken jigyo nenpo.

  38. 38.

    Yoshihara and Wada, Nihon iryo hoken seidoshi, p. 55.

  39. 39.

    Kenko hoken kumiai yoran, 1933.

  40. 40.

    In 1930, the workforce of these two sectors amounted at 5.0 million people. Historical Statistics of Japan, file 19-9-a, (accessed 5 December 2016).

  41. 41.

    Tone, The Business of Benevolence.

  42. 42.

    Shimazaki, Nihon iryo, pp. 65–80.

  43. 43.

    Ibidem, p. 44.

  44. 44.

    Historical Statistics of Japan, tables 20-12-a/b.

  45. 45.


  46. 46.

    Takaki, “Kokumin kenko hoken to chiiki fukushi”, p. 252.

  47. 47.

    Domin, Une histoire économique de l’hôpital, vol. 1, p. 189.

  48. 48.

    Statistisches Jahrbuch der Schweiz, p. 257.

  49. 49.

    Carrin and Chris, “Social Health Insurance”, p. 50.

  50. 50.

    Starr, The Social Transformation of American Medicine, p. 308.

  51. 51.

    Kawakami, Gendai nihon iryoshi, p. 57.

  52. 52.

    Takaki, “Kokumin kenko hoken to chiiki fukushi”.

  53. 53.

    Kawakami, Gendai nihon iryoshi, pp. 91–96.

  54. 54.

    Ibidem, p. 114.

  55. 55.

    Aoki, Kekkaku no shakaishi, pp. 75–77.

  56. 56.

    Yoshihara and Wada, Nihon iryo hoken seidoshi, p. 12.

  57. 57.

    Isei hyakunen shi, p. 233.

  58. 58.

    Yoshihara and Wada, Nihon iryo hoken seidoshi, p. 21.

  59. 59.

    Historical Statistics of Japan, table 24-28, Hospitals by kind, 1910–2004.

  60. 60.

    Sugaya, Nihon no byoin, pp. 112–116.

  61. 61.

    Kasza, “War and Welfare Policy in Japan”.

  62. 62.

    Isei hyakunen shi, pp. 293–295.

  63. 63.

    Sugaya, Nihon no byoin, 127–131 and Sugiyama, Senryoki no iryo kaikaku, 191–192.

  64. 64.

    Kawakami, Gendai nihon iryoshi, p. 57 and 456.

  65. 65.

    Rodosha saigai fujo sekinin hoken jigyo nenpo.

  66. 66.

    Hara, “Wartime Controls”.


Copyright information

© The Author(s) 2018

Authors and Affiliations

  1. 1.Osaka UniversityToyonakaJapan

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