[Special Feature: Cancer and Society] Yoko Ibuka: A Health Economics Perspective on the High-Cost Medical Expense Benefit System

The "High-Cost Medical Expense Benefit System" is a crucial mechanism that economically supports cancer treatment in Japan. Between 2024 and 2025, a proposal to reform this system was presented and deliberated; however, the implementation of the original draft was ultimately frozen. This article examines the validity and limitations of the impact estimates essential for policy formation in light of scientific findings.

Since the establishment of the Universal Health Insurance System in 1961, all residents in Japan have been guaranteed the right to receive medical care through public health insurance. However, with the exception of preschool children and some elderly individuals, the out-of-pocket copayment is generally 30%, which leaves a significant burden on household finances for advanced medical care. The "High-Cost Medical Expense Benefit System" is the mechanism that alleviates this. If out-of-pocket expenses in a single month exceed a "copayment limit" based on income, public insurance covers the excess, serving as a safety net to prevent massive expenditures.

As of June 2025, the copayment limits applied to the working-age generation are divided into five tiers based on annual income. The highest income tier (annual income over approx. 11.6 million yen) has a monthly limit of 252,600 yen. Below that, the limits decrease to 167,400 yen for the 7.7–11.6 million yen tier, 80,100 yen for the 3.7–7.7 million yen tier, 57,600 yen for the under 3.7 million yen tier, and 35,400 yen for households exempt from municipal resident tax, ensuring burden adjustments according to income levels.

Furthermore, considering the continuous burden associated with long-term medical care, a "frequent occurrence" rule is applied: if the limit is reached three or more times within the most recent 12 months, the limit is lowered from the fourth time onwards. This reduces the out-of-pocket burden to 140,100 yen per month even for the highest income tier, and to 24,600 yen for tax-exempt households. In recent years, cancer drugs that are extremely expensive yet highly effective have appeared one after another, and treatment periods are also tending to lengthen. The High-Cost Medical Expense Benefit System is an indispensable institutional foundation for ensuring access to such advanced medical care regardless of income and for protecting patients and their household finances.

In November 2024, the Medical Insurance Division of the Social Security Council (an advisory body to the Minister of Health, Labour and Welfare) began a full-scale review regarding the increase of copayment limits for the High-Cost Medical Expense Benefit System. The division stated the purpose of the reform as "maintaining the function as a safety net while reducing the burden on insured persons of all generations" *1. The pillars of this reform are: (1) a phased increase in copayment limits, and (2) a further subdivision of income tiers (expanding the current 5 tiers to 13).

Regarding the former, from the perspective of mitigating sudden impacts on household finances, a gradual increase over three years starting from fiscal year 2025 was proposed. Particularly for the newly established highest income tier (annual income of approx. 16.5 million yen or more), the current monthly limit of 252,600 yen was scheduled to increase significantly by approximately 200,000 yen—to 290,400 yen in the first year, 367,200 yen in the second year, and 444,330 yen in the third year. On the other hand, by making the income tiers more granular, the intention was to ensure out-of-pocket payments correspond to the ability to pay while taking care not to place an excessive burden on low-income groups.

However, during the Diet deliberations in early 2025, a series of strong opposing opinions were voiced by patient groups and related academic societies based on concerns about the disruption of treatment continuity. In response to these voices, the government announced a policy in August of the same year to freeze the planned increase in copayment limits.

In the discussions surrounding this freeze, issues inherent in the policy-making process itself, such as the lack of stakeholder participation during the deliberation process, have been pointed out. In this article, I would like to shift the perspective and focus on the challenges regarding the estimation of the impact of institutional reforms, which is vital when considering policies.

The proposed increase in copayment limits lists the reduction of the burden on insured persons—namely, the suppression of insurance premiums—as its primary objective. Given the current situation where total medical expenditures are increasing annually due to advances in medical technology, this reform is positioned as an attempt to reduce benefit amounts—in other words, to suppress total medical expenditures. In fact, the aforementioned materials from the Ministry of Health, Labour and Welfare provide estimates for the reduction in the financial burden on medical insurance due to the reform of the High-Cost Medical Expense system, as well as the resulting reduction in premiums per insured person. On the other hand, increasing copayment limits is a measure that imposes the "pain" of a burden on the targets. It is important as a starting point for discussing institutional reform to appropriately evaluate whether the objectives of the insurance system can be achieved in a manner commensurate with that pain.

An increase in copayment limits can potentially lead to improvements in medical insurance finances for two reasons. First is the reduction in insurance expenditures caused by shifting the cost burden of receiving care to the individual patient. Taking the highest income tier, which has the largest change in copayment, as an example, the current monthly limit of 252,600 yen would be raised to 290,400 yen in the first year of the reform, and the difference of 37,800 yen would shift from insurance expenditure to the patient's burden. This is a reduction in expenditure that occurs because the primary payer of medical costs changes from the insurer to the patient, and the estimate can be obtained through simple arithmetic. Second is the pathway where the increase in out-of-pocket costs suppresses healthcare-seeking behavior, resulting in a decrease in medical expenditures themselves. Because this second pathway depends on the degree to which human behavior changes in response to changes in copayments, its estimation involves uncertainty. In the Ministry of Health, Labour and Welfare's estimates, this effect of reducing medical expenditures through increased copayments is called the "Nagase Effect," and it is stated that it is included in the current estimates *2.

Research has been conducted in the field of health economics regarding this second pathway *3. Whether the level of copayment influences medical utilization is the core of medical insurance system design, and empirical research has been accumulated for half a century. To state the conclusion: if copayments rise, medical utilization decreases—this relationship has been observed across countries and systems.

A symbolic preceding study is the RAND Health Insurance Experiment (RAND Experiment) conducted by the RAND Corporation in the United States in the 1970s. In this experiment, copayment rates were randomly assigned in four stages from 0% (completely free) to a maximum of 95%, and changes in medical utilization, including outpatient and inpatient care, were tracked. As a result, as the copayment rate increased, not only the number of outpatient visits but also the probability of hospitalization and total medical expenditures decreased. In particular, the result that a 10% increase in the copayment rate leads to an approximately 2% decrease in medical utilization (in technical terms, the price elasticity of demand for medical care is -0.2) is still frequently cited today as a benchmark value.

Effects of a similar scale have been observed in Japan. A representative example is a quasi-experimental study utilizing the reduction in the copayment rate upon reaching age 70 (at the time, from 30% to 10%) *4. Here, too, when converted to price elasticity, it was at the same level as the RAND Experiment. Although the medical delivery systems and medical cost payment mechanisms differ greatly between the U.S. and Japan, the conclusion that "a 10% increase in copayment leads to a decrease in medical utilization of around 2%" is almost identical.

Although the estimation formula for the Nagase Effect used by the Ministry of Health, Labour and Welfare in the current estimates is not explicitly stated in the aforementioned materials, in estimates previously conducted by the authors using other publicly available materials, it was confirmed that the price elasticity shown in these preceding studies and the Nagase Effect are roughly of the same magnitude *5. However, is it appropriate to apply this elasticity (i.e., the Nagase Effect) as is to the estimation of the effect of raising the copayment limits for high-cost medical expenses? Assuming it can be applied, if the limit is raised by approximately 15% from 252,600 yen to 290,400 yen in the first year, the calculation using estimates from existing research would project a decrease in medical utilization of roughly 3%. However, there is a significant difference in nature between a change in a fixed-rate copayment for low-cost treatments that occur daily and an increase in the monthly limit for high-cost treatment costs, even if both are an "increase in out-of-pocket costs." High-cost treatment arises from necessity and has limited alternatives, so the response to copayments may be small. In this case, the estimation of the improvement effect on insurance finances using estimates from existing research would be an overestimation. In fact, there is a lack of empirical research both domestically and internationally on how much changes in the burden limits for high-cost medical care affect medical utilization, and the quantitative understanding of this part is still in progress.

A further point to note is that the reduction in medical utilization in this evaluation of financial impact is likely based on the implicit assumption that "there is no impact on health." However, the indicator that should be monitored most closely when changing the burden limits for high-cost medical care is precisely that impact on health. While the RAND Experiment targeting the general population and preceding studies in Japan report that the average health improvement from lowering copayment rates is small, the application of high-cost medical expense benefits targets the treatment of serious diseases. In the RAND Experiment, health improvements from reduced copayments were confirmed specifically for groups in poor health, and this point cannot be overlooked. If the limits for high-cost medical care are raised and healthcare-seeking behavior is actually suppressed, there is a significant possibility that the loss of treatment opportunities will lead to serious health damage. Parallel to the estimation of financial effects, a careful evaluation of the impact on health outcomes is a prerequisite for system design.

What specifically can be done to link such scientific knowledge with policy decisions? First, when conducting financial simulations like those in the current materials, it is desirable to disclose the estimation formulas (models) used for the evaluation. This leads to sharing the assumptions of the estimates and understanding their limitations. Furthermore, it would increase the verifiability for outsiders and lead to constructive future discussions. Second, in the longer term, it is necessary to further prepare the ground for building scientific evidence. For example, the current proposal to revise the limits sets the limit amounts according to income brackets based on the principle of "burden according to ability." For this discussion, it is an urgent task to match databases of income levels and medical utilization to verify changes in utilization trends by income bracket.

Japan's medical expenditures are covered by a social insurance system, funded by premiums contributed by insured persons and public funds. The essential function of insurance is to level the risk of expenditures that, while low in probability, become massive once they occur, and to mitigate sudden income fluctuations for households. Typical examples would be automobile insurance to prepare for car accidents or fire insurance to prepare for house fires. Therefore, preparing for high-cost medical expenses is one of the most important functions of health insurance, and from this perspective, the setting of copayment limits that define the ceiling for actual out-of-pocket costs can be said to be an issue that should be handled with the utmost care when discussing the medical insurance system.

Currently, regarding the increase in the High-Cost Medical Expense limits that has been frozen, a decision on the direction is scheduled to be made around autumn 2025. To deepen this discussion, an "Expert Committee on the State of the High-Cost Medical Expense Benefit System" is expected to be established under the Medical Insurance Division to conduct intensive deliberations. As a specialist in health economics, I intend to closely monitor future discussions to ensure that the voices of stakeholders are sufficiently incorporated and that scientific knowledge is appropriately reflected in policy.