Delegation of Government-Managed Health Insurance

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: Health Policy Developments 10

Abstract

By the Health Care Reform Act 2006, operation of the Government-managed health insurance will be delegated from the Government to a quasi-public body, the National Health Insurance Corporation from October 2008.

Recent developments

Operation of the Government-managed health insurance (GMHI), which is a part of the Employee's health insurance system and provides health insurance for employees and employers of small-sized companies, will be delegated to a newly organized quasi-public body, the National Health Insurance Corporation (NHIC) with a decentralized mechanism of management.

Changes in the operation of the Government-managed health insurance (GMHI) will therefore not only introduce decentralized mechanisms, as in the original plan of the Cabinet in 2003, but the operation of GMHI will also be delegated to the newly organized National Health Insurance Corporation (NHIC). This change of policy took place apparently due to inefficient and irresponsible operation, revealed in 2004, of the Social Security Agency, which promoted arguments for organizational reform.

The organizational reform has broadly the following six objectives:

• increasing responsibility and accountability of employees, employers, and the public;
• developing autonomously innovative management of health insurance;
• achieving efficient management;
• achieving financial stability;
• achieving good governance; and
• achieving fair management.

The Government will delegate general management of health insurance - except for the collection of premiums and approval of eligibility - to the NHIC as a whole. The NHIC will in turn develop its organization with a decentralized structure. The newly created NHIC will have national and local (prefectural) boards representing employees, employers and experts. It will act as a payer for health care services partly with decentralized mechanisms of management. Branches, formed in each prefecture, have discretion to set premiums for their beneficiaries and to plan and implement activities for promoting healthy behaviour among them.

This decentralization is a change compared to the current situation in which the Social Security Agency has branches in every prefecture, but these branches have virtually no discretion.

Degree of Innovation	traditional		innovative
Degree of Controversy	consensual		highly controversial
Structural or Systemic Impact	marginal		fundamental
Public Visibility	very low		very high
Transferability	strongly system-dependent		system-neutral
current    previous

Innovation - delegation of financing mechanism and decentralization of management of health insurance are new though national hospitals had been delegated similarly.

Controversy - controversy exists on how to adjust risks between insurers.

Systemic Impact - this policy will introduce structural changes in management of public health insurance.

Visibility - since irresponsible management of the Social Security Agency was intensively criticized by the media and in the Diet, the reorganization was highly visible. However, decentralization of management itself was not so visible.

Transferability - delegation and decentralization of management and risk-adjustment can be introduced in other countries.

Purpose and process analysis

Current Process Stages

	Idea	Pilot	Policy Paper	Legislation	Implementation	Evaluation	Change
Implemented in this survey?

Initiators of idea/main actors

• Government

• Media

Stakeholder positions

The original Cabinet plan for reforming health care included the introduction of a decentralized mechanism to Government-managed health insurance (GMHI). According to this plan, GMH would be managed by the Social Security Agency (SSA). In the spring of 2004, criticism on inefficient and irresponsible operation of the Social Security Agency arose among the public as well as the Diet (Japanese Parliament), facilitated by the media, which lead to the creation of the Task Force on Reform of the Social Security Agency, organized by the chief cabinet secretary in August, 2004.

The task force published its report, "On the Reform of the Security Agency", in May 2005, which proposed that a nationwide quasi-public body should be founded to take over operation of the GMHI and that the existing Social Security Agency should be abolished.  In response to the report, the Cabinet formally declared in its Basic Policies for Economic and Fiscal Management and Structural Reform the following:

"…the current Social Insurance Corporation will not be maintained. As for Government-managed health insurance, its operation will be separated from the central government with the aim of establishing a public corporation run on a national basis." (The Cabinet 2005).

Employers, employees and the public generally supported the organizational reform for technically efficient and responsbile management. Nippon Keidanren, representing large companies, had argued for giving more descretion to insures for efficient management. Smaller companies are rather interested in changes in premium rates. The Japanese Trade Union Confederation (Rengo) advocated for decentralized management of the GMHI.

Actors and positions

Government
Cabinet office	very supportive		strongly opposed
Ministry of Health, Labour, and Welfare	very supportive		strongly opposed
Media
Newspapers	very supportive		strongly opposed
Journalists	very supportive		strongly opposed
current    previous

Influences in policy making and legislation

In its consultation paper on health care reform published in October 2005, the MHLW projected that the operation of Government-managed health insurance should be taken over by a new public corporation in about October 2008. Later, the Committee on Health Care Reform, consisting of the ruling parties and the Government, again confirmed this delegation. Finally the Health Care Act 2006 which includes articles on the delegation of operation of the Government-managed health insurance has passed the Diet: delegation of Government-managed health insurance shall come into force in October 2008.

The contents of the act as for the operation of GMHI can be summarized as follows:

1. A public corporation, the National Health Insurance Corporation (NHIC), will be founded on October 1, 2008, and will operate the GMHI;
2. The assets of the SSA will be transferred to the NHIC;
3. The central executive officer shall be named by the Minister of Health, Labor and Welfare, appoint the members of the board of trustees, and chair the board;
4. Branches will be established in each prefecture;
5. A national committee and branch committees, consisting of representatives of employees, employers and experts, will be organized to discuss management and operation of the GMHI;
6. The NHIC shall adjust financial imbalances between branches due to health expenditures, income, and demographic structures;
7. The NHIC shall decide on a premium rate for each branch, to maintain balance between revenue and budget in each prefectural branch, taking health demographic structures and incomes of each branch within limits determined by law, details of which shall be given by ordinances;
8. The CEO of the NHIC must ask for opinions of branches before changing premiums;
9. Premiums determined by the NHIC shall be approved by the Minister;
10. The Government shall collect premiums and transfer them to the NHIC after deducting an amount for collecting premiums;
11. The NHIC shall make annual reports and financial statements on cooperative accounting principles, which shall be audited by certified public accountants appointed by the Minister;
12. The NHIC shall make and publish a five-year financial forecast every two years; and
13. The Minister shall evaluate performances of the NHIC every year.

Legislative outcome

Enactment

Actors and influence

Government
Cabinet office	very strong		none
Ministry of Health, Labour, and Welfare	very strong		none
Media
Newspapers	very strong		none
Journalists	very strong		none
current    previous

Positions and Influences at a glance

Adoption and implementation

To prepare for the enactment of the articles on operational delegation of the GMHI, the MHLW organized the Founding Committee of the National Health Insurance Corporation in November 2006. The committee has been discussing missions, organizational and managerial principles, human resources, development of an information system and framework for businesses.

Also, prefectural offices of the existing Social Security Agencies have organized meetings with employees, employers and experts on the reform.

Monitoring and evaluation

 

 

Expected outcome

The planned organizational reform will delegate operation of the Government-managed health insurance to the National Health Insurance Corporation (NHIC) along with a more decentralized structure. The delegation would increase managerial efficiency by more flexible management and prompter introduction of information technologies. A problem may arise due to the separation of bodies for collecting premiums (Government) and paying for services (NHIC) unless good communication between them will be achieved.

Whether the newly established risk adjustment by income and age will work depends on residual differences after adjustment, which may reflect differences in other factors of health needs. If residual differences are too large and some branches have difficulties in balancing revenues and budgets, other mechanisms may be considered. Nevertheless this organizational change for decentralization will attract the attention of local people on public health insurances.

Impact of this policy

Quality of Health Care Services	marginal		fundamental
Level of Equity	system less equitable		system more equitable
Cost Efficiency	very low		very high
current    previous

Quality - this reform is unlikely to have direct impacts on quality of health services.

Equity - there might be a positive impact on equity when a formula for risk-adjustment will be developed.

Efficiency - efficiency in management of public health insurance as well as resource allocation have been expected to increase by organizational development and health promoting activities.

References

Sources of Information

Task Force on the Reform of the Social Security Agency: On the Reform of the Security Agency. 2005.

Task force on Establishment of a New Organization for Social Security. Toward Establishment of a New Organization for Social Security. 2007.

MHLW. Report on organization of the National Health Insurance Corporation, reported Committee for Health Insurance, Social Security Council on 12 April, 2004. 2007.

The Cabinet. Basic Policies for Economic and Fiscal Operation and Structural Reform 2005. 2005.
www.keizai-shimon.go.jp/english/publication/pdf/050705basic_policies.pdf

Author/s and/or contributors to this survey

Matsuda, Ryozo

Ryozo Matsuda is professor in community health and health policy at College of Social Sciences, Ritsumeikan Univerisity. This report was written when he was a visiting fellow at LSE Health, London School of Economics and Political Science.

Suggested citation for this online article

Matsuda, Ryozo: "Delegation of Government-Managed Health Insurance". Health Policy Monitor, October 2007. Available at http://www.hpm.org/survey/jp/a10/3