WHY should Americans care about the Japanese health-care system? An easy question. Japan has an exceptionally healthy population, number one in the world in terms of life expectancy and infant mortality, and excellent by other less precise criteria as well. Although medical care is not the main determining factor in good health, certainly it is not irrelevant that everyone in Japan has access to medical care of decent quality at little direct cost to the consumer. Moreover, Japan achieves these good results with an exceptionally small burden on the economy: spending on medical care is only slightly more than half that of the United States, and indeed is lower than in most advanced nations.

The Japanese were not always so successful in holding down spending. Back in the 1970s, health-care costs were exploding in Japan as in America, going up at a much faster rate than inflation or economic growth. Japanese officials responded in the early 1980s with some small but significant adjustments to their system. These succeeded in constraining spending – since that time health care has continued at a level of about 7 percent of Gross Domestic Product (GDP) – without cutting back on access or significantly altering the way medical care is delivered.

American officials had tried a variety of cost-cutting devices without much effect. The cost of medical care continued to escalate in the 1980s, exceeding 14 percent of GDP in 1994, even though an increasing number of Americans lacked health insurance.