Japan shows the advantages and limitations of pursuing universal health coverage by establishment of employee-based and community-based social health insurance. On the positive side, almost everyone came to be insured in 1961; the enforcement of the same fee schedule for all plans and almost all providers has maintained equity and contained costs; and the co-payment rate has become the same for all, except for elderly people and children. This equity has been achieved by provision of subsidies from general revenues to plans that enrol people with low incomes, and enforcement of cross-subsidisation among the plans to finance the costs of health care for elderly people. On the negative side, the fragmentation of enrolment into 3500 plans has led to a more than a three-times difference in the proportion of income paid as premiums, and the emerging issue of the uninsured population. We advocate consolidation of all plans within prefectures to maintain universal and equitable coverage in view of the ageing society and changes in employment patterns. Countries planning to achieve universal coverage by social health insurance based on employment and residential status should be aware of the limitations of such plans.

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