Effects of universal health insurance on health care utilization, and supply-side responses: Evidence from Japan

We investigate the effects of a massive expansion in health insurance coverage on health care utilization and supply-side responses, by focusing on universal health insurance introduced in Japan in 1961. There are two major findings. First, health care utilization (measured in terms of admissions, inpatient days, and outpatient visits to hospitals) increased significantly. Second, we also find a supply response but the size of the supply response differs across service types: while the number of beds increases, effects on the number of medical institutions, physicians, and nurses are either negligible or inconclusive. Our results suggest that countries planning a large expansion in health insurance coverage would need to generate sufficient financial resources to cover the surge in health care expenditures, both in the short and long run. Our results also indicate that any slowdown in the supply-side response may constrain the ability of the health care system to meet increased demand.

► We examine the introduction of universal health insurance in Japan in 1961.
► Expanded insurance coverage increased healthcare utilization drastically.
► Increases in the supply of health care services were smaller than the demand.
► The size of the supply response differs across types of services.
► No evidence of reduced mortality rates, at least in the short term.