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How do they establish prices? Is it a negotiation of some sort? What's the process look like?
Great question. I'm not sure. I believe the government sets the prices - that would be in line with how they generally do things. For some things, I think the patient pays a set "co-pay" and for other things they pay a percent. I generally paid about $5 (500 yen or so) for getting dental cavities filled, but I had a CAT scan (iirc - it may have been some other big machine they stick you in) and don't remember how much I paid, but it was not an amount that we had to worry about.
BTW, I still get new glasses when I visit Japan. About $100 to $300+ depending on the frames you choose, and the eye exam is included for free. This is without insurance (I got 2 new pairs last year, for about $400 total), and I've not lived or worked in Japan in over a decade.) Thinner lenses than in the USA, but perhaps not as safe. The store is called "Megane Ichiba", and I believe it is a chain.
Point is though, that the glasses market in Japan is not as monopolized (or at least not as greedy) as the market in the USA.