The revision of the fee schedule greatly affects the direction of medical expenditures. Despite its importance, however, the mechanism for revising the fee schedule has yet to be studied in detail. This paper examines the problems that have arisen in revising the fee schedule (price of medical services) according to what philosophy was used and how the method of revision has affected medical expenditures in Japan. First, after changes in the method for revising the fee schedule are examined, it is concluded that up to the present revision have been based on the increasing rate of total medical expenditures rather than on the cost of each medical treatment and the physician's technical fee, and that their objective has been to realize the sum of the Medical Facility Operation Costs, that is, upward revision in the fee schedule. Introduction of the sliding cost method in the 1970s also aimed to compensate the medical facility for operational cost increases. During a period of high economic growth, it produced steep increases in medical expenditures, reflecting the advantages for medical care providers, and, in the process of its change, the revision rate was left to political settlement between the Ministry of Health and Welfare (MHW) and the providers. In the mid-1980s moderation of the relative position of the provider side was a major factor in getting medical expenditures under control. The main issue remaining is that no direct compensations are made for the differences in physicians' techniques and regional costs, capital investment costs, and the cost accounting method, which were hidden behind the revisions settled only in consideration of medical facility total costs.