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Considering the 'Tax Loss' Problem of Consumption Tax in Medical Institutions from the Perspective of Local Finance - Part 1 (Total of 3 Parts)

ヤット@地方財政の中の人

Why do medical institutions bear consumption tax even though medical services are tax-exempt?

On May 9, 2026, a symposium titled 'Thinking About the Problem of Consumption Tax in Healthcare' was held in Tokyo, co-hosted by the International University of Health and Welfare and The Yomiuri Shimbun.

I read reports that former Minister of Health, Labour and Welfare Yasuhisa Shiozaki stated, 'We must review it into a form suitable for the new era,' and that speakers voiced concerns such as 'there is a gap between actual burdens and compensation status' and 'it may lead to hesitation in necessary investments, resulting in a decline in the quality of medical care.'

Now that discussions surrounding consumption tax cuts and reduced tax rates are gathering national interest, I feel that the consumption tax problem for medical institutions is worth re-examining in that context.

As someone involved in local finance, this issue has an aspect that is by no means someone else's problem, from the perspective of 'how to protect regional healthcare.'
This time, I would like to think about this while carefully organizing the structure of this problem.

Starting this time, over the course of three installments, I would like to think about this while carefully organizing the structure of this problem.

In the first place, why do medical institutions 'lose' money on consumption tax?

Patients who receive insured medical treatment do not pay consumption tax. This is because medical fees are positioned as 'tax-exempt transactions' under the Consumption Tax Act.

However, when medical institutions purchase drugs or medical materials, introduce medical equipment, or rebuild hospital wards, they naturally pay consumption tax.
For ordinary businesses, this 'consumption tax paid at the time of purchase' can be recovered through a mechanism called 'purchase tax credit.'
However, since the majority of a medical institution's income comes from tax-exempt insured medical treatment, this deduction can hardly be used.

As a result, medical institutions are placed in a situation where they have no choice but to record the consumption tax paid at the time of purchase as their own loss.
This is the essence of the problem known as 'non-deductible consumption tax,' commonly referred to as 'tax loss.'

The history of consumption tax rates being raised from 3% to 5%, 8%, and then 10% cannot be separated from this problem. As the tax rate has risen, the amount ultimately borne by medical institutions has also ballooned.

The reality of 'compensating through medical fees'

The Ministry of Health, Labour and Welfare takes the position that it 'compensates for this problem by adding the consumption tax portion to medical fees (points for insured medical treatment).'
Since the introduction of the consumption tax in 1989, medical fees have been revised every time the tax rate has been raised, and the portion corresponding to the consumption tax has been incorporated.

At the time of the 10% increase in October 2019, a consumption tax-related revision of +0.41% was implemented for medical care as a whole.

However, this mechanism has a structural problem.
Because compensation is incorporated into points based on the 'average consumption tax burden of medical institutions,' it is a uniform addition.

The actual percentage of the consumption tax burden is completely different between large-scale acute care hospitals that use a lot of expensive medical equipment and hospitals with convalescent wards that do not have as much medical equipment.

According to data reported by the Ministry of Health, Labour and Welfare to the Central Social Insurance Medical Council (Chuikyo) regarding the compensation status for fiscal year 2024, the overall compensation rate is 100.3%, which makes it look like it is 'generally being compensated.'

However, looking at the breakdown, for large-scale hospitals with 400 beds or more, the median remains at 67.4%. If limited to public hospitals, it is 83.2%.
On the other hand, hospitals centered on convalescent beds are in a state of significant 'over-compensation' at 156%.

In other words, even if the accounts seem to balance at the macro (overall) level, there is considerable variation at the micro (individual medical institution) level.

Furthermore, the compensation rate for fiscal year 2024 has fallen by 2.8 points from the previous year's 103.1%.
With rising prices continuing, the biennial medical fee revision cannot keep up, and estimates from Chuikyo committee members suggest that 'at this rate, the compensation rate will fall to around 91% by the end of fiscal year 2027.'

The fundamental premise that it is currently 'generally being compensated' may collapse if things continue as they are.

Next time, I would like to organize the structural reasons for the differences in the sense of crisis regarding this issue within the medical community, as well as the specific problems unique to municipal hospitals.

Reference

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