Japan was the first non-Western country to introduce social insurance and the first to achieve universal coverage. It has been very successful in helping to bring about high health levels among its citizens at reasonable cost. Consequently, it provides a unique model for the newly industrialized countries of how to adapt modern technologies in structuring their own health care systems. Japan's financing system is organized by the government. Coverage is mandated for all citizens and is supplied by a number of insurance plans, whose variety reflects the differences in their development. The country relies mainly on the private provision of health care, delivered from physician-owned clinics and hospitals. The most prestigious facilities, however, are the public hospitals. Services are fragmented between clinics and hospitals, which compete for a share of the patients in their area. Patients can choose where to seek medical services. Providers are paid by a nationally uniform method and rate, which are decided by one central agency. Increases in payment rates are tied to the ceiling set by the government's general expenditure limitations. A uniform fee schedule has helped to control costs and to ensure equitable access. Challenges remaining for Japan's health care system are caring for an increasingly elderly population and ensuring quality of care.