Acknowledgements
During writing this dissertation, I beneÖted from a number of people. First of
all, I would like to thank my main advisor, Douglas Almond, for his guidance at
every stage of the my research. Without his continuous encouragement through
my entire dissertation, I could not complete the dissertation. Wojciech Kopczuk
and Tal Gross gave me invaluable advices and supports during job market.
I am also grateful to helpful comments and suggestions from Prashant Bharadwaj, Kasey Buckles, Janet Currie, Joseph Doyle, Mark Duggan, Amy Finkelstein,
Kiyohide Fushimi, Michael Grossman, Hideki Hashimoto, Masako Ii, Amanda
Kowalski, Ilyana Kuziemko, Frank Lichtenberg, Jason Lindo, Bentley MacLeod,
Shinya Matsuda, Robin McKnight, Matt Neidell, Cristian Pop-Eleches, Heather
Royer, Bernard SalaniÈ, Miguel Urquiola, Eric Verhoogen, Till von Wachter, Reed
Walker, and the seminar participants at Bank of Japan, Columbia University,
McGill University, National University of Singapore, Osaka University, Simon
Frazer University, University of Michigan, Uppsala University, and NBER Japan
project meeting.
Special thanks go to Hideo Yasunaga and Hiromasa Horiguchi for their invaluable help in obtaining the data and for helpful discussions.
Yet others suggest that it is not relevant or desirable to envisage any illness, obesity included, as a social
construct (Berger, Luckman, 1975, pp.65-108). This is because it tends to relegate, preventive medicine to be
an external factor within health and denies the role in which an individual plays, in being responsible for
their own health concerns (Germov, 2005, pp.15-17) (Jusssim, 1991, pp.54-73). Which according to the early
17th century Philosopher, Descartes, this was neither desirable nor relevant, if medicine / health and society
was to progress within the 17th century. Infact with Descartes, individualist philosophical claims off; I think
there for I am; discourse, becoming embodied, within an enlightenment period of history. The individual In conclusion as I mentioned at the outset of this essay, that from a social constructivist, philosophical
perspective, the illness of obesity is a socially constructed health concept and that within a western
liberalistic, philosophical tradition and context, obesity tends to be envisioned as a symptom of a modern
lifestyle process. I have endeavoured to elaborate, how obesity has become a chronic health problem, within
a modern western society and endeavoured to explain, why a modern liberalistic, philosophical tradition,
finds it hard to diagnose, what causes the health condition- obesity. Indeed I would tend to agree with the
Social Scientist Lupton, when he suggests that: “Within a western liberalistic, philosophical paradigm,
health is seen as risk concept, (obesity in this case), and it thus can become a covenant, hegemonic tool for
big business and politicians, so as to maintain a power structure within society. This is achieved because, big
business and politicians are in the unique position, as to be able to identity and define, what a health risk is
(symptoms), (obesity in this case) and if there is to be any solutions (diagnoses), to such health risks.
Consequently because politicians and big business are able to determine what a health risk is, they are then
able, to also, legitimize and control a specific ideology and social practice within society, when it is
necessary.” p.432 (Lupton, 1993, p. 432
became cental to decision making, this is because self responsibility and the idea of the body, as a biological
machine took root, while an individuals mind became a separate entity (Turner, 2003, pp.15-16).
Consequently the Cartesian / rational idea, of the body, as machine suited the adventures of an enlightened,
empirical science process (Parker, 1995, pp. 24-29) (Duhamel, 1933, pp. 162-166). Indeed envisioning any CHAPTER 1
The E§ect of Patient Cost-sharing on Utilization, Health
and Risk Protection: Evidence from Japan
1.1. Introduction
Governments increasingly face an acute Öscal challenge of rising medical expenditures especially due to aging population and expansion of coverage. Spending
growth for Medicare, the public health insurance program for the elderly in the
United States, has continued unchecked in spite of a variety of government attempts to control costs.1 As more than one third of current health spending is on
the elderly, future cost control e§orts can be expected to focus on seniors.2
One main strategy for the government to contain cost is cost-sharing, requiring
patients to pay a share of the cost of care. However, cost-sharing has clear tradeo§s.
While cost-sharing may reduce direct costs by decreasing moral hazard of health
1Examples of supply-side attempts by the government to control cost are the introduction of
prospective payment for hospitals and reductions in provider reimbursement rates (Cutler, 1998).
2The elderly are the most intensive consumers of health care. Patient over age 65 consume 36
percent of health care in the US despite representing only 13 percent of the population (Centers
for Medicaid and Medicare Services 2005). Furthermore, Medicare costs are expected to comprise
over a quarter of the primary federal budget by 2035, or between Öve and six percent of GDP
(CBO, 2011). Likewise, in Japan, the elderly consume Öve times as many health services as
non-elderly (Okamura et al, 2005). Also Japan has the most rapidly aging population in the
world (Anderson and Hussey, 2000)
). Employment-based health insurance covers the employees of Örms that satisfy certain requirements and employeesídependents.9 NHI is a residential-based
system that provides coverage to everyone else, including the employees of small
Örms, self-employed workers, the unemployed, and the retired.
For this study, there are two important features of Japanese medical system
that arguably permits isolation of the patient demand for health care services
from responsive behavior by insurers and medical providers: universal coverage
and the uniform national fee schedule. First, under universal coverage, patients
in Japan have unrestricted choices of medical providers unlike in the U.S where
managed-care often restricts the set of the providers at which beneÖciaries can
receive treatment. For example, it is common for individuals to visit hospitals for
outpatient care rather than clinics (similar to physiciansío¢ ce visits in the U.S.)
in Japan. Patients have direct access to specialist care without going through
a gatekeeper or referral system. There is also no limit on the number of visits
a patient can have. Patients may go either hospitals or clinics for outpatient
visits and go to hospitals for admissions, unlike in the U.S., where those who lack
insurance use hospitals as primary care.
9Employment-based health insurance is further divided into two forms; employees of large Örms
and government employees are covered by union-based health insurance, whereas employees
of small Örms are covered by government-administered health insurance. Enrollment in the
government-administered health insurance program is legally required for all employers with Öve
or more employees unless the employer has its own union-based health insurance program
Second and perhaps more importantly, all medical providers are reimbursed
by the national fee schedule, which is uniformly applied to all patients regardless
of patientsí insurance type and age. Since patientsí insurance type and age do
not a§ect reimbursements, physicians have few incentives to ináuence patientsí
demand.10 For example, from physiciansí perspective, there are few reasons to
delay surgeries until age 70 because reimbursements do not di§er by age of patients.
The uniform fee schedule also implies that there is little room for cost-shifting, a
well-known behavior of medical providers in the U.S. where they charge private
insurers higher prices to compensate for losses from beneÖciaries of public health
insurance (Cutler, 1998).11
As a result, while people in Japan enjoy the relatively easy access to health
care services, Japan has the highest per-capita number of physician visits among
all OECD countries; physician consultations (number per capita per year) is 13.2
in Japan, which is more than three times larger than 3.9 in the U.S. (OECD, 2011).
While some blame universal coverage for high frequency of unnecessary physician
visits, others claim that these medical services contribute to the longevity of the
Japanese (Hashimoto et al., 2011).
10The national schedule is usually revised biennially by the Ministry of Health, Labor and Welfare
through negotiation with the Central Social Insurance Medical Council, which includes representatives of the public, payers, and providers. See Ikegami (1991) and Ikegami and Campbell
(1995) on details.
11Japan introduced prospective payment for hospitals since 2003 for only acute diseases, but the
reimbursement does not di§er by the insurance type or age of the patients. See Shigeoka and
Fushimi (2011).
During writing this dissertation, I beneÖted from a number of people. First of
all, I would like to thank my main advisor, Douglas Almond, for his guidance at
every stage of the my research. Without his continuous encouragement through
my entire dissertation, I could not complete the dissertation. Wojciech Kopczuk
and Tal Gross gave me invaluable advices and supports during job market.
I am also grateful to helpful comments and suggestions from Prashant Bharadwaj, Kasey Buckles, Janet Currie, Joseph Doyle, Mark Duggan, Amy Finkelstein,
Kiyohide Fushimi, Michael Grossman, Hideki Hashimoto, Masako Ii, Amanda
Kowalski, Ilyana Kuziemko, Frank Lichtenberg, Jason Lindo, Bentley MacLeod,
Shinya Matsuda, Robin McKnight, Matt Neidell, Cristian Pop-Eleches, Heather
Royer, Bernard SalaniÈ, Miguel Urquiola, Eric Verhoogen, Till von Wachter, Reed
Walker, and the seminar participants at Bank of Japan, Columbia University,
McGill University, National University of Singapore, Osaka University, Simon
Frazer University, University of Michigan, Uppsala University, and NBER Japan
project meeting.
Special thanks go to Hideo Yasunaga and Hiromasa Horiguchi for their invaluable help in obtaining the data and for helpful discussions.
Yet others suggest that it is not relevant or desirable to envisage any illness, obesity included, as a social
construct (Berger, Luckman, 1975, pp.65-108). This is because it tends to relegate, preventive medicine to be
an external factor within health and denies the role in which an individual plays, in being responsible for
their own health concerns (Germov, 2005, pp.15-17) (Jusssim, 1991, pp.54-73). Which according to the early
17th century Philosopher, Descartes, this was neither desirable nor relevant, if medicine / health and society
was to progress within the 17th century. Infact with Descartes, individualist philosophical claims off; I think
there for I am; discourse, becoming embodied, within an enlightenment period of history. The individual In conclusion as I mentioned at the outset of this essay, that from a social constructivist, philosophical
perspective, the illness of obesity is a socially constructed health concept and that within a western
liberalistic, philosophical tradition and context, obesity tends to be envisioned as a symptom of a modern
lifestyle process. I have endeavoured to elaborate, how obesity has become a chronic health problem, within
a modern western society and endeavoured to explain, why a modern liberalistic, philosophical tradition,
finds it hard to diagnose, what causes the health condition- obesity. Indeed I would tend to agree with the
Social Scientist Lupton, when he suggests that: “Within a western liberalistic, philosophical paradigm,
health is seen as risk concept, (obesity in this case), and it thus can become a covenant, hegemonic tool for
big business and politicians, so as to maintain a power structure within society. This is achieved because, big
business and politicians are in the unique position, as to be able to identity and define, what a health risk is
(symptoms), (obesity in this case) and if there is to be any solutions (diagnoses), to such health risks.
Consequently because politicians and big business are able to determine what a health risk is, they are then
able, to also, legitimize and control a specific ideology and social practice within society, when it is
necessary.” p.432 (Lupton, 1993, p. 432
became cental to decision making, this is because self responsibility and the idea of the body, as a biological
machine took root, while an individuals mind became a separate entity (Turner, 2003, pp.15-16).
Consequently the Cartesian / rational idea, of the body, as machine suited the adventures of an enlightened,
empirical science process (Parker, 1995, pp. 24-29) (Duhamel, 1933, pp. 162-166). Indeed envisioning any CHAPTER 1
The E§ect of Patient Cost-sharing on Utilization, Health
and Risk Protection: Evidence from Japan
1.1. Introduction
Governments increasingly face an acute Öscal challenge of rising medical expenditures especially due to aging population and expansion of coverage. Spending
growth for Medicare, the public health insurance program for the elderly in the
United States, has continued unchecked in spite of a variety of government attempts to control costs.1 As more than one third of current health spending is on
the elderly, future cost control e§orts can be expected to focus on seniors.2
One main strategy for the government to contain cost is cost-sharing, requiring
patients to pay a share of the cost of care. However, cost-sharing has clear tradeo§s.
While cost-sharing may reduce direct costs by decreasing moral hazard of health
1Examples of supply-side attempts by the government to control cost are the introduction of
prospective payment for hospitals and reductions in provider reimbursement rates (Cutler, 1998).
2The elderly are the most intensive consumers of health care. Patient over age 65 consume 36
percent of health care in the US despite representing only 13 percent of the population (Centers
for Medicaid and Medicare Services 2005). Furthermore, Medicare costs are expected to comprise
over a quarter of the primary federal budget by 2035, or between Öve and six percent of GDP
(CBO, 2011). Likewise, in Japan, the elderly consume Öve times as many health services as
non-elderly (Okamura et al, 2005). Also Japan has the most rapidly aging population in the
world (Anderson and Hussey, 2000)
). Employment-based health insurance covers the employees of Örms that satisfy certain requirements and employeesídependents.9 NHI is a residential-based
system that provides coverage to everyone else, including the employees of small
Örms, self-employed workers, the unemployed, and the retired.
For this study, there are two important features of Japanese medical system
that arguably permits isolation of the patient demand for health care services
from responsive behavior by insurers and medical providers: universal coverage
and the uniform national fee schedule. First, under universal coverage, patients
in Japan have unrestricted choices of medical providers unlike in the U.S where
managed-care often restricts the set of the providers at which beneÖciaries can
receive treatment. For example, it is common for individuals to visit hospitals for
outpatient care rather than clinics (similar to physiciansío¢ ce visits in the U.S.)
in Japan. Patients have direct access to specialist care without going through
a gatekeeper or referral system. There is also no limit on the number of visits
a patient can have. Patients may go either hospitals or clinics for outpatient
visits and go to hospitals for admissions, unlike in the U.S., where those who lack
insurance use hospitals as primary care.
9Employment-based health insurance is further divided into two forms; employees of large Örms
and government employees are covered by union-based health insurance, whereas employees
of small Örms are covered by government-administered health insurance. Enrollment in the
government-administered health insurance program is legally required for all employers with Öve
or more employees unless the employer has its own union-based health insurance program
Second and perhaps more importantly, all medical providers are reimbursed
by the national fee schedule, which is uniformly applied to all patients regardless
of patientsí insurance type and age. Since patientsí insurance type and age do
not a§ect reimbursements, physicians have few incentives to ináuence patientsí
demand.10 For example, from physiciansí perspective, there are few reasons to
delay surgeries until age 70 because reimbursements do not di§er by age of patients.
The uniform fee schedule also implies that there is little room for cost-shifting, a
well-known behavior of medical providers in the U.S. where they charge private
insurers higher prices to compensate for losses from beneÖciaries of public health
insurance (Cutler, 1998).11
As a result, while people in Japan enjoy the relatively easy access to health
care services, Japan has the highest per-capita number of physician visits among
all OECD countries; physician consultations (number per capita per year) is 13.2
in Japan, which is more than three times larger than 3.9 in the U.S. (OECD, 2011).
While some blame universal coverage for high frequency of unnecessary physician
visits, others claim that these medical services contribute to the longevity of the
Japanese (Hashimoto et al., 2011).
10The national schedule is usually revised biennially by the Ministry of Health, Labor and Welfare
through negotiation with the Central Social Insurance Medical Council, which includes representatives of the public, payers, and providers. See Ikegami (1991) and Ikegami and Campbell
(1995) on details.
11Japan introduced prospective payment for hospitals since 2003 for only acute diseases, but the
reimbursement does not di§er by the insurance type or age of the patients. See Shigeoka and
Fushimi (2011).