In Japan, all-payer rate setting under tight government control has proved to be an effective approach to containing costs.

In Japan's health insurance system, the prices paid by multiple payers for nearly all health care goods and services are codified into a single fee schedule and are individually revised within the global rate set by the government. This single payment system has allowed total health care spending to be controlled despite a fee-for-service system with its incentives for increased volume of services; Japan's growing elderly population; and the regular introduction of new technologies and therapies. This article describes aspects of Japan's approach, as well as how that nation has expanded payment for inpatient hospital care based on case-mix. The result of the payment system is that Japan's rate of health spending growth has been well below that of other industrial nations. The percentage of gross domestic product spent on health increased from 7.7 percent in 2000 to 8.5 percent in 2008, compared to an increase from 13.7 percent to 16.4 percent in the United States. Japan's approach confirms that enlightened government regulation can maintain access to care, avoid rationing, make use of the latest technology, and allow for multiple insurance plans and an aging population--all while restraining the growth of health care spending.