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Health care systems in transition: Israel

1 janvier 2003 Organisation mondiale de la santé

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1HiT summary: Israel, 2004 HiT summary Fig. 1. Total health care expenditure as % of GDP, comparing Israel, selected countries and EU average, 2002 Source: WHO Regional Office for Europe health for all database, June 2004. Note: EU-15: EU countries before 1 May 2004. Health Care Systems in Transition European Observatory on Health Systems and Policies WHO Regional Office for Europe Scherfigsvej 8 DK-2100 Copenhagen Denmark Telephone: +45 39 17 17 17 Fax: +45 39 17 18 70 E-mail: observatory@who.dk www.observatory.dk European Observatory on Health Systems and Policies Denmark Israel Netherlands United Kingdom EU-15 average Israel Introduction Government and recent political history The State of Israel was established in 1948. An elected president heads a parliamentary and multi-party system. A history of armed conflicts with neighbouring Arab countries and large- scale immigration have posed continuing heavy burdens on Israel’s economy. Income inequality is among the highest of developed countries. Administratively, the continuing process of decentralization has led local governments to operate as independent authorities although dependent on central government for much of their financing. Population In 2000 Israel had an estimated population of 6.4 million inhabitants of whom 78% were Jews, 22% were mostly Muslim Arabs. Population density is among the highest of the developed countries, with over 60% of the population concentrated along the Mediterranean Sea and only 10% in rural areas. Israel’s population is marked by a combination of a relatively high fertility rate (2.95 per woman) and growth in the number of older people, with 29% of the population younger than 15 and 10% over the age of 64. Israel has two official languages: Hebrew and Arabic. Average life expectancy In 1999 life expectancy at birth was 76.6 for males and 80.4 for females. Over the past two decades life expectancy has increased by 4.8 years for males and 5.0 years for females. Leading causes of death The main causes of death are cardiovascular disease, cancer, cerebrovascular diseases, diabetes and accidents. Breast cancer is the leading cancer among women, while among men it is prostate cancer (Jewish men) and lung cancer (Arab men). 7 8 9 10 2HiT summary: Israel, 2004 Recent history of the health system Over the past century, health care services in Israel have been developed by voluntary health plans (originally called sick funds), non-profit institutions, the government and the British mandatory regime that existed prior to the establishment of the State of Israel in 1948. In 1911 the first health plan was established by workers’ associations to provide care for workers and their families and to employ immigrant doctors. All four of Israel’s health plans were established formally between 1920 and the early 1940s. The Hadassah Medical Organization has also been key in providing health care services and began establishing hospitals in urban centres in 1918. Until the introduction of National Health Insurance (NHI) in 1995, the health plans insured their members and provided them with most health services. By the late 1980s approximately 95% of the population was enrolled in one of four competing health plans that provided their members with most curative health services either directly or by contract with other agencies. In 1988 the state set up the Netanyahu Commission to examine the problems of the nation’s health system. This commission made several recommendations highlighting inadequacies in the public health system, disorganization and low levels of employee satisfaction. These recommendations led to legislation introducing the NHI in 1995 and reorganization of the Ministry of Health (MoH). Health expenditure and GDP Israel spent 8.8% of GDP on health care in 2002, slightly higher than the EU-15 average. Public spending constituted 68% of total expenditure in that same year. Overview The Israeli health system underwent significant scrutiny and reform following the Netanyahu Commission in 1988. While highlighting the deficiencies in the system, the commission made important recommendations that the MoH adopted. As a result of this process, NHI was introduced in 1995. In addition, recent efforts have attempted to change government hospitals into freestanding hospital trusts, so far without success. Despite these improvements to the organization and delivery of health services, the health system has some important challenges such as persistent health inequalities, an ageing population and political unrest. Organizational structure and management As a parliamentary democracy, Israel’s Knesset (parliament) determines laws and budgets and thus exercises ultimate authority over the health system. However, many key players are involved in health within the government (including the ministries of health and finance) and outside (including health plans, hospitals and health care unions). The MoH has overall responsibility for the health of the population and the effective functioning of the health system. It is involved in several areas of planning such as public health, regulatory and stewardship functions and owns around half of the nation’s acute hospital beds, two thirds of the psychiatric and one tenth of the chronic disease beds. The Ministry of Finance prepares the budget and monitors its implementation. Furthermore, it seeks to limit public spending on health care and the number of employed physicians. The National Insurance Institute collects the health tax (see below) and the Israeli Defence Force 3HiT summary: Israel, 2004 provides basic and emergency care for military personnel. Outside of the government, the four health plans are voluntary, non-profit organizations that provide their members with access to a benefits package specified in NHI law. The government provides the health plans with an annual capitation fee per member. In addition to the health plans, half of the hospitals are non-governmental. Health care unions, emergency service organizations and other voluntary organizations are important non- governmental players involved in health. The NHI law of 1995 addressed organizational problems such as the over-politicized health system (some health plans have political affiliations) and the lack of a comprehensive legal framework for health plans’ activities. However, there is a significant problem with the MoH’s dual role as regulator and provider as proposed by the Netenyahu Commission, which can lead to inefficiencies and conflicts of interests. Current efforts aim to reduce government provision of health services in the hopes of increasing efficiency. Planning, regulation and management Israel has neither a comprehensive national health plan nor an active system for setting and updating national targets. Independent, temporary commissions such as the Netenyahu Commission appear to have a stronger impact on planning and policy development than efforts within the MoH. Regulation of health services outside of the public sector had been limited to budgetary controls, subsidies and political persuasion until the introduction of NHI and the Patients’ Rights Act in the mid 1990s. These two reforms created new areas for MoH regulation such as mandatory fluoridization of community water supplies, long- term care, patients’ rights and smoking in public places. These additions built on the previous areas such as food, water and drug safety, licensing of health professionals, major capital expenditures and hospital per diem rates. However, some areas still require increased regulation including food fortification and quality, health care personnel and the quality of acute care. Decentralization of the health system Although the Netanyahu Commiss ion recommended the regionalization of health services in Israel, the ultimate source of authority remains at national level. The national level develops policies and strategies for the regions to implement, with some leeway to respond to local conditions. In the past decade there have been some notable changes in this area. First, there has been some deconcentration of central authority to lower administrative levels of central government. For example, government hospitals were given more autonomy. Secondly, while there has been no devolution or delegation to regional or local levels, authority actually has been transferred from health plans to central government. Finally, despite various attempts at privatization there has been little success in implementation to date. Health care financing and expenditure Health care financing and coverage The Israeli health system lies somewhere between a social health insurance system and a tax-financed system. It is financed predominantly from public sources through a mix of payroll and general tax revenue. In recent years the share of private financing has increased. General tax revenues, consisting of income tax, value-added tax and customs levies, make up less than 50% of total financing. The payroll tax earmarked for health accounts for 25% of total health care financing and is collected by 4HiT summary: Israel, 2004 Fig. 2. Hospital beds in acute hospitals per 1000 population, Israel, selected countries and EU-15 average, 1990–2001 Source: WHO Regional Office for Europe health for all database, June 2004. Note: EU-15: EU countries before 1 May 2004. the National Insurance Institute (NII). There are exemptions for various groups such as pensioners and recipients of income maintenance allowances. Public NHI financing is allocated among the four competing health plans. The introduction of the NHI law instituted universal coverage and specifies the content of the benefits package. Prior to this reform approximately 5% of the population was uninsured, health plans had incentives to cream skim younger and/or healthier people and benefits packages were unclear. Many problems still remain, however, such as worsening financial deficits in the health system. Health care benefits and rationing The NHI law outlines the benefits package that all Israeli residents are entitled to receive from their chosen health plan. This package includes all hospital care, community-based health care and pharmaceuticals. Services not included in the NHI benefits package include long-term care, psychiatric care, preventive health care, public health services and dental care. Long-term care financing is shared between households and several agencies such as the NII, government ministries and the health plans. Patients pay out-of-pocket for private surgery and laboratory tests, alternative medicine, private nurses and ambulances, psychological and psychiatric visits, opticians’ services and dental care. The government does cover some of the costs of dental care for indigent or elderly people and schoolchildren. In 1997 Israel established a formal priority- setting process for revising the benefits package based on solid information and a structured decision-making procedure. Although there have been some criticisms of this procedure, such as the limited use of cost-benefit analysis and limited incorporation of the public’s priorities and values, it represents an important step in decision-making in health. 0 1 2 3 4 5 6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Denmark Israel Netherlands United Kingdom EU-15 average 5HiT summary: Israel, 2004 Fig. 3. Physicians per 1000 population, Israel, selected countries and EU-15 average, 1990–2001 Source: WHO Regional Office for Europe health for all database. Note: EU-15: EU countries before 1 May 2004. Complementary sources of finance Complementary sources of finance constitute approximately 13% of the health plans’ revenue; supplementary health insurance makes up around 5% of their revenue. Household expenditure on health has increased in recent years and represented 8.3% of total household consumption in 1999. Out-of-pocket payments Cost sharing has been a longstanding part of Israel’s health system. Prior to the introduction of NHI, most cost sharing was for government- funded services, while health plans mainly charged co-payments for pharmaceuticals. The NHI law required the health plans to freeze the level of co-payments. The Knesset overrode this legislation in 1998 and authorized all health plans to levy charges on specialist services and community-based diagnostic centres and to increase co-payment rates for pharmaceuticals. These changes were intended to alleviate some of the health plans’ financial deficits. Co-payments are structured so as to minimize the financial burden on individuals. For instance, welfare recipients are exempt and there is a quarterly ceiling on total co-payments at the household level, which is 50% lower for the elderly. However, currently there are no exemptions or discounts for low-income patients thereby creating potential financial barriers to access for these groups. Out-of-pocket payments also are made to private physicians in community and hospital settings. While private services are illegal in government hospitals and one of the health plans’ hospitals, informal payments for these services persist. Voluntary health insurance (VHI) Voluntary health insurance exists in Israel in two forms: supplementary VHI offered by the health plans and supplementary VHI offered 2 2.2 2.4 2.6 2.8 3 3.2 3.4 3.6 3.8 4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Denmark Israel Netherlands United Kingdom EU average 6HiT summary: Israel, 2004 by commercial insurers (commercial VHI). In recent years, the proportion of Israelis with supplementary VHI has risen markedly from 37% in 1997 to 65% in 2001. Supplementary VHI covers part of the costs of private physicians, treatment in private hospitals, complementary medicine, etc. Approximately 25% of Israelis have commercial VHI, which tends to offer more coverage than the supplementary VHI, and 20% have both forms. Those with commercial VHI tend to have higher incomes and better health as commercial insurers are free to reject applications on the basis of health status and pre-existing conditions. In the 1990s there was much debate about who should be allowed to offer VHI: the health plans, commercial insurers, or both. It was believed that allowing health plans to offer VHI would generate revenue and enable reasonably priced VHI to be offered to a wider range of people. However, concerns centred around the health plans’ potential marketing advantage over private insurers due to their existing relationship with members; that those with VHI might have faster or more courteous service, thereby undermining the NHI’s equity objective; and that the health plans might use public NHI funds to cross-subsidize VHI. While both health plans and private insurers currently are permitted to offer VHI, health plans are restricted from providing long-term care insurance and they must have separate accounts for VHI to prevent cross-subsidization. Health care expenditure Health expenditure in Israel stabilised in the 1990s, after a sharp increase in the previous decade. While total health expenditure increased from 6.6% GDP in 1985 to 8.8% in 2002, public expenditure remained constant at 68% of total health expenditure (with a peak of 73% in 1997–1998). In 1998, services with the highest proportion of total health spending were hospitals and research (41%), public clinics and preventive care (39%), followed by dental care (9%), medicines and medical equipment purchased by households (6%), private physicians (4%) and, lastly, government administration (1%). Health delivery system Primary care Primary care is highly accessible in Israel and has improved substantially in recent decades. In three of the four health plans, the cost of primary care visits to health plan physicians is fully covered by NHI and waiting times are minimal. Improvements in primary care have resulted from growing competition among health plans, the founding and expansion of family practice residency programmes, computerization of health clinics, upgrading of clinic management skills, increasing patient choice and upgrading and modernizing facilities. Primary care physicians are employed with a health plan as either salaried or independent physicians (IPs). Private primary care physicians accounted for less than 1% of total primary care visits in 1996–1997. A recent comparative study of IP care and that provided in a clinic setting indicates that although IP care is more expensive, it provides longer patient visits, more health promotion and is associated with greater patient and physician satisfaction. However, there are problems with IPs, such as limited resources available for multiple tasks and quality control, less continuity of care and professional isolation. Historically the largest health plan (Clalit) made extensive use of nurses in its primary care clinics but their role declined in the 1990s. Recently, there has been growing recognition of nurses’ importance in primary care, particularly in rural settings, and Israel’s nursing leadership would like to see an expanded role for nurses in both urban and rural areas. In all the health plans visits to hospital- based specialists require prior authorization, thus primary care physicians act as gatekeepers. 7HiT summary: Israel, 2004 However, members of small health plans have access to community-based specialists without prior authorization. A recent study recommended increasing gatekeeping coordination through patient and provider education to encourage voluntary use of primary care physicians as the sole referring agents, greater decentralization of authority and greater budgetary autonomy for clinics and primary care physicians. There is a growing belief in Israel that primary care physicians should do more, but the conditions needed to expand their services do not exist. There could be greater attention to the psychosocial components of care, active health promotion, addressing the unique needs of immigrants and vulnerable populations and accounting for resource constraints. However, barriers to these changes include inadequate training, heavy caseloads, lack of incentives and insufficient infrastructure. Recent policy developments, such as the establishment of a National Council for Health in the Community and the provision of economics and management training for physicians, have attempted to address these shortcomings Public health services The MoH operates a public health service that coordinates regional and district offices. The recently formed Ministry of the Environment took on some environmental health responsibilities such as noise and air pollution, radiation, and waste collection and disposal. However, the MoH retains responsibility for water quality, recycling and pesticide use. The MoH plans and coordinates efforts to prevent, monitor and control communicable diseases, with support from health plans and physicians. Family health centres, which are mostly owned and operated by the government, are involved in intensive outreach efforts in immunization and child health. Vaccination coverage is high in Israel, with about 90% to 92% coverage of infants and a 93% level of measles immunization in 2000. There was effective cooperation on communicable disease control between Israel’s MoH and its Palestinian Authority counterpart until the intifada in 2000. In 1994 the Israeli Center for Disease Control was established to collect and analyse health- related data to increase the evidence base for policy decisions. Family health centres are the primary source of screening in childhood and the new women’s health centres established by the health plans offer screening for women. A recent nationwide effort to increase mammography rates for women over 50 was carried out jointly by the MoH and the health plans. There remains a need to develop an organizational culture of outreach efforts, greater publicity for health promotion and enhanced methods to engage health reporters in order to improve screening efforts in Israel. The Department of Health Education within the MoH organizes health promotion. Currently, there is no national policy or any clear definition of what should be included in promotion and prevention programmes. While health plans have played an increasing role in health education and promotion, there continue to be problems engaging physicians to be active in this area. The past decade has seen a substantial increase in health promotion activities but these need more evaluation together with increased resources and new programmes. Key issues in public health centre around the low levels of spending (0.8% of national health expenditure), developing methods for prioritizing and funding public health interventions and changing ownership and modernization of family health centres. Secondary and tertiary care There is a rising proportion of specialists among all licensed physicians in Israel, reaching 42% in 2000. Most specialist ambulatory care is given in community settings, with a declining proportion taking place in hospitals. Many hospital-based specialists have begun part-time work in the community in order to supplement their incomes, which may enhance hospital- 8HiT summary: Israel, 2004 community communication. In all but the largest (Clalit) health plan, the majority of specialists work independently in their own facilities. Specialists are concentrated in urban areas and waiting times appear to be reasonable. Rates of specialist visits are substantially lower among Israeli Arabs than Israeli Jews, but the reverse is true for primary care physicians and hospital visits. In 2000 Israel had 48 general acute hospitals and 21 psychiatric hospitals. The general hospitals are spread throughout the country with an overall general care bed-population ratio of 2.2, which is low compared to OECD countries. Average length of stay has declined dramatically while admission rates have increased in recent decades. About half of all acute hospital beds are in government-owned and operated hospitals. Clalit (33%), private profit-making hospitals (5%) and voluntary non-profit hospitals own the remainder. Hospital physicians are employed by the hospitals, except for independent physicians in private hospitals. Recent plans for hospital reform centre on reducing government ownership of hospital beds to improve efficiency and responsiveness. In the 1990s an attempt to change government hospitals into separate legal, nongovernmental trusts failed due to objections from health care unions. Other important issues regarding hospital care include monitoring and improving quality of care and debates about investing in expensive end-of-life care. Social care Long-term care financing is the shared responsibility of households and various agencies. The National Insurance Institute provides community services for those with chronic disabilities and mentally frail elderly people. The Ministry of Social Affairs funds homes for the aged and community care for semi-independent and frail elderly people. The MoH is responsible for nursing homes and institutional care for people with severe disabilities. The health plans provide medically skilled nursing for elderly people in institutions. About 4.1% of elderly people in Israel live in institutions. Half of these are referred through the government that participates in financing their care, half are self-referred and pay for their own care. The health plans provide professional home care for elderly and disabled people and are considering increasing the amount of services provided, for instance home hospitalization as an alternative to costly hospital stays. The 1986 Community Long-Term Care Insurance Law defined the government’s legal obligation to provide a minimum level of long- term care to elderly people with disabilities based on eligibility criteria. These community services are financed from a proportion of employee wages and general taxation. While the burden of care had rested primarily with the family, now the government assumes some responsibility. Other services in the community include home-making services, meals-on-wheels, day-care and respite centres. These services are provided and subsidized by the Ministry of Labour and Social Affairs on the basis of a means-tested discretionary programme. Additional services have been provided in order to assist elderly people to ‘age in place’, such as sheltered housing and supportive communities, planned and developed through collaboration between several ministries including Finance, Housing, Immigrant Absorption, Labour and Social Affairs. Human resources and training Physicians In addition to schools outside Israel, particularly in eastern Europe, four Israeli medical schools train a large number of physicians. Immigration from Germany, the Russian Federation and most recently from the commonwelth of independent states of the former USSR, has yielded a significant number of trained physicians. Approximately half of the large number of immigrant physicians have 9HiT summary: Israel, 2004 found work as doctors in Israel, consequently the physician-population ratio has risen substantially to around 3.8 physicians per 1000 population (compared to the EU-15 average of 3.5). While some analysts argue that the number of physicians should be reduced by limiting the number of medical students, the Israeli Medical Association maintains the need to build a fifth medical school in Israel to anticipate shortages resulting from lower immigration levels. Additional challenges in this area centre on shortages in some medical specialities and urban-rural discrepancies in physician density. Nurses Israel has no shortage of nurses, with around 6 nurses per 1000 population in 2001. Mass immigration has impacted significantly on nursing, as immigrants comprise more than half of the country’s nurses. Israel is in the midst of a major nursing reform including such policies as shifting from licensed practical nurses to registered nurses in some settings, changing registered nursing education, encouraging masters and doctoral level education for nurses and expanding the role of nurses in health plans and hospitals. Management training Health care management training has significantly expanded and improved over the past decade. Degree programmes are offered at several major universities and many mid-career employees of health plans and hospitals are encouraged and subsidized to participate in them. Pharmaceuticals and health care technology assessment Pharmaceutical expenditure in Israel constitutes approximately 15% to 20% of total health expenditure, 15% of total health plan expenditure and 20% of total household spending on health. Israel’s pharmaceutical industry deals primarily with the manufacturing and distribution of generic drugs; the majority of patented drugs are imported or produced in Israel under licence from foreign companies. Almost two-thirds of total drug sales are imports. Most pharmaceuticals are dispensed in three types of pharmacies in community settings: health plan clinics, independent pharmacies and large chains. In hospitals the main pharmaceutical services provided are production and inventory management. The government approves pharmaceuticals for sale, sets the National Health Insurance formulary of drugs that health plans must provide to their members, sets maximum prices, licenses pharmacists and regulates the pharmaceutical market. Individuals face co-payments for all prescriptions and cover the full cost of over-the- counter drugs, medications not included in the NHI formulary and those prescribed privately. In efforts to contain costs, some health plans monitor physician prescribing but there is no formal penalty for over-prescribers. Most pharmacists are salaried employees. In 2000, there were 0.61 pharmacists per 1000 population, of whom 50% were women and 20% immigrants who had arrived since 1988. The pharmaceutical industry has undergone several important changes in recent years. For instance, pharmaceutical chains have grown and there have been increased efforts to speed up the licensing process for new drugs, to increase the use of generics and make more drugs available over-the-counter. In addition, in order to increase competition and reduce drug prices, parallel imports are now permitted despite serious opposition from large multinational drug companies, their agents and subsidiaries in Israel and the Association for Research-Based Pharmaceutical Companies, on the grounds that parallel trade violates patients’ rights and international trade agreements. Dental care Dental care expenditure amounted to 9% of total health expenditure in 1997. Almost all spending on dental care consists of out-of-pocket payments, since dental care is not included in the NHI benefits package (except for cases of trauma or cancer). However, almost 10% of the 10HiT summary: Israel, 2004 population have full dental coverage through commercial VHI and a further 60% have partial coverage through supplementary VHI from their health plans. For those who are not covered, cost considerations appear to lead many low-income people to forego medically necessary treatment. Improvements to dental care services are being considered, such as expanding the School Dental Service and including dental coverage in the NHI benefits package to ensure appropriate care for vulnerable populations. While independent private dentists had provided almost all dental care, in 1997 they accounted for two thirds of dental units, with health plans and commercial chains accounting for 9% and 15% of dental units respectively. In 2000 the dentist-population ratio was 1.34 per 1000 population, which is among the highest in the world. The MoH provides and funds some local oral treatment and preventive services for children and people in need, subsidizes dental costs for indigent people and is responsible for licensing dentists and promoting fluoridization of the water supply. Mental health care In 2000 Israel had around 5600 psychiatric beds, of which 5% were in general hospitals and the remainder in psychiatric hospitals. The government owns 10 of the 18 psychiatric hospitals, which accounted for two thirds of beds, 67% of patient days and 82% of admissions in 2000. The MoH finances care in government hospitals, private hospitals and psychiatric departments in general hospitals, while the health plans finance care in their two psychiatric hospitals. In the community there are many private, independent mental health practitioners and about 90 public mental health clinics, 55 of which are provided and funded by the MoH. The Mental Patients’ Treatment Act of 1991 permits compulsory psychiatric examinations or treatment. The MoH established a Unit for Addictions Treatment in 1990 to improve treatment in this area. While addiction has been targeted as a priority area for expansion, there is a shortage of services for people suffering from both mental illness and substance abuse. The past decade has seen declines in the supply of psychiatric beds, utilization of psychiatric hospitals and long-term care admissions along with an expansion of community-based mental health services. Additional changes have resulted from the Community-Based Rehabilitation of the Mentally Disabled Act of 2000 and an increase in government funding of rehabilitation, which has further strengthened community-based mental health care. While rehabilitation services have improved and expanded, still they are available to only 10% of the population. Rehabilitation Rehabilitation is included in the NHI benefits package, so health plans provide these services with a standard co-payment. Services include general and geriatric rehabilitation for neurological or orthopaedic impairment provided in hospitals and health plans’ community facilities offering physical, occupational and speech therapy. In 2000 there were about 5700 rehabilitation professionals in Israel, which represents a significant shortage, particularly in geriatric rehabilitation services. In addition to the shortage of human resources, poor physical conditions and other factors lead to lengthy waiting times in community rehabilitation centres. Older chronic patients are the main victims of this situation. Financial resource allocation Third-party budget setting and resource allocation Each year the government sets the NHI budget based on the previous year with adjustments for 11HiT summary: Israel, 2004 inflation and demographic and technological changes. There are disputes over this method of budget setting, for example, health care providers and insurers argue for a formula-based budgeting system rather than annual determination by government. Additional disputes arise over the extent to which demographic changes should be factored into the budget and how the mandated adjustment for price changes should be carried out. The main actors in the health system believe that the system is under-funded and increasingly strained. Although the per capita allocation to the health system increased from 1995 to 1999, during this time both the purchasing power of health plans and the share of NHI expenditure as a proportion of total health care spending declined. Public NHI financing is allocated to the four health plans on the basis of a capitation formula and takes account of two factors: the number of members and the age mix. This method of funding has made vulnerable groups such as the elderly more attractive to health plans, but since health status is not taken into account in the funding, the healthy and wealthy still are more financially attractive. Also, the poor and the elderly are less likely to purchase supplementary VHI, an important source of revenue for the health plans. It is also debated whether geography should be a determinant in the distribution of resources to health plans in order to improve access to care for people living in small settlements and the peripheral regions. While the government has put in place a regional organization of public health services, in terms of curative care, health plans are free to organize themselves geographically and allocate the resources at their disposal across geographical regions. The health plans determine geographical resource allocation according to the number of people in the region, their age mix, health status, the previous year’s budget and utilization rates and competitive pressure from other health plans. The health plans are free to determine their mix of inputs such as human and capital resources subject to budgetary restrictions and prices that are set by the government, collective bargaining agreements or market forces. As a result of this freedom, the health plans differ markedly in how they allocate resources across different services. Capital investments in hospitals are funded largely by the MoH, through its capital budget, in addition to philanthropy from abroad. However, in the community setting operating revenue and/or bank loans fund a great deal of capital spending, which is perceived as a major problem. The MoH also operates a Certificate of Need programme through which health plans apply for approval before purchasing expensive, high technology equipment. Payment of hospitals Currently, the reimbursement of public hospitals (which constitute 96% of acute beds) takes place in the form of fees-for-service, per diem fees and case payments, and is subject to a revenue cap. Outpatient services account for a quarter of hospital revenue and are reimbursed on the basis of a fee-for-service charge list established by the government, with a slightly different system of reimbursement for Clalit hospitals. This fee schedule is believed to be out-of-date with technological changes and overpriced. Thus, a key policy issue that remains unresolved is whether, and how, to modify the charge list. Most inpatient admissions are reimbursed on a government-set per diem basis that is uniform across hospitals and departments. The rate is determined on the basis of current operating costs in the government hospital sector. Throughout the 1990s, case payments (diagnostic-related groups) were introduced for 30 types of admission that accounted for about 20% of hospital inpatient revenue. These case payments were established in order to shorten waiting times primarily for the more expensive procedures. Their introduction has been found to eliminate most queues but 12HiT summary: Israel, 2004 they have also reduced length of stays, increased admissions and repeat admissions and have had no recognizable impact on mortality rates. A hospital revenue cap was established in 1995 in order to reduce the growth in hospital utilization by removing incentives and reducing the health plans’ expenditure for services above the cap. This reform appears to have achieved its objectives but there has been much criticism. For example, hospitals argue that the cap needs to grow more rapidly in order to account for increasing costs and that it works against hospitals in areas of rapid population growth that are prone to exceed the cap. In 2002 a hybrid approach was taken in order to ensure that major external factors are taken into account when setting the cap. The impact of this change in the health system has yet to be evaluated. Payment of physicians Around 40% of the population receive primary care from Clalit clinics with free choice of physician. The clinic-based physician receives a basic monthly salary, primarily experience- based, and a monthly capitation payment for each member on their list above a prescribed basic number. Approximately 5% to 10% of members receive care from an independent physician who is paid a capitation rate set unilaterally by Clalit. In the other health plans, most primary care physicians work independently and are paid on a capitation basis based on either actual patient visits or enrolment lists (as in Clalit). Community-based specialists are either independent or salaried. Independent specialists, the most common type, mostly work in their own offices and are paid on an ‘active’ capitation basis in addition to receiving fee-for-service payments. The salary scale is determined through a collective bargaining agreement between the Israel Medical Association and the government. Almost all salaried specialists work in Clalit-owned and operated clinics. Their salary is a function of their extent of full-time work, professional rank and years of experience. There are additional payments for seeing more ‘first-time’ patients than the specified norm, teaching residents and for carrying out administrative duties. Hospital-based physicians are paid a salary primarily based on their clinical/administrative responsibility and years of experience. Some physicians supplement their income through private work on a fee-for-service basis, after- hours work in health trusts, working a second shift in Clalit hospitals to deal with lengthy queues and taking illegal under-the-table payments at rates set by themselves. Some believe that the frequent physicians’ strikes in Israel have damaged public trust in physicians and their representatives. In the most recent strike (2000) physicians called for substantial pay increases, among other things. This strike led to two developments: the Israel Medical Association agreed not to strike for 10 years and the government agreed to a formal commission to examine the functioning of the health system. Two emerging issues in physicians’ remuner- ation include whether payment schemes should account for quality of care and whether physicians should be at financial risk for the health care expenditure they generate. Health care reforms Four major reform efforts in Israel are noteworthy: the NHI law, mental health care reform, hospital trusts initiative and the Patients’ Rights Act. In addition, the Netanyahu Commission constitutes an important event in the modern history of health care reform. This commission highlighted the following problems with Israel’s health system: • inadequate public services • constraints on the MoH • vague financing and budgeting procedures • sub-optimal organization and lack of managerial tools • low levels of employee satisfaction and motivation. 13HiT summary: Israel, 2004 Following this critique the commission made the following recommendations: • legislation for NHI • reorganization of the MoH to separate the regulation and delivery functions • regionalization, decentralization and enhanced competition • centralized financing system and capitation payments • introduction of private practice in public hospitals • financial incentives to increase employee motivation • information systems and research. The introduction of NHI sought to address many of the above-mentioned problems and more generally, growing widespread dissatisfaction with the health system. The NHI legislation established universal coverage, reduced cream- skimming by the health plans, created more progressive financing and encouraged (and funded) continual evaluation and monitoring of this monumental social policy. One year after the implementation of NHI the health plans faced financial strain that led to the introduction of co-payments for pharmaceuticals and physician visits in 1997. While NHI was expected to enhance equity, some recent developments are believed to have had an adverse effect. NHI extended coverage and accessibility of health services but socioeconomic differences in health expenditure and utilization persisted in 1999, particularly between Arabs and Jews. Mental health care is in the midst of reform. This has sought to address problems including the segregation (and stigmatization) of mental health care, lack of legal entitlement to mental health care and the MoH’s dual role as both regulator and provider of services. NHI legislation created a legal entitlement to mental health care and also called for responsibility for mental health care to be transferred to the health plans within three years. That the latter did not take place is due in part to lack of trust between the health plans and the government, failure to engage health plans in the planning process and the MoH’s unwillingness to increased funding levels for mental health. This failure led to a more recent reform effort in 2001which addressed the previous attempt’s limitations. It is likely that these renewed efforts will lead to positive developments in the near future. The problem of the government’s dual role as regulator and deliverer of health services led to the hospital trusts initiative. There are two major proposals to transfer government responsibility for hospitals, but they have yet to be implemented. The Patients’ Rights Act of 1996 represents an important shift from a paternalistic model of care to a more patient-centred model that emphasizes patient autonomy. This law defined patients’ rights, set up formal avenues for complaints, established ethical committees and inspection and quality assurance committees. Finally, an independent commission to assess the overall functioning of the health system was established in 2000 in order to resolve a major physicians’ strike. The Israel Medical Association called for wage increases. The final recommendations (in 2002) endorsed the principle that patients in public hospitals should have choice of physician, supported a slight and gradual increase in physicians’ salaries, called for uniform licensure exams for all physicians, changes in hospital organization, for health plans to identify a personal primary care physician for each plan member and for outpatient services to be provided in the community setting. Recent attention has focused on the public- private mix and the status of physicians in the health system. 14HiT summary: Israel, 2004 Conclusions Israel’s health system is interesting as it represents a synthesis of government and market forces, is made up of organizations that combine funding and delivery functions, employs risk-adjusted capitation financing to limit cream-skimming by insurers, has an explicit method of setting priorities and defining the benefits package, and maintains a strong focus on equity. The health system is predominantly publicly funded through progressive taxation, provides broad population coverage and good geographical access to primary health care. However, equity remains an issue due to the relatively high proportion of private finance. In recent years private health services have expanded and, while health care is highly equitable within the public system, several important components of health care – for example, dental and institutional long- term nursing care – remain outside the public system. Recent reforms, stimulated by the 1988 Netanyahu Commission critique of the health Table 1. Inpatient utilization and performance in acute hospitals in the WHO European Region, 2002 or latest available year Country Hospital beds Admissions Average Occupancy per 1000 per 100 length of stay rate (%) population population in days Denmark 3.4a 17.8a 3.8a 83.5a Israel 2.2 17.6 4.1 94.0 Netherlands 3.1e 8.8a 7.4a 58.4a United Kingdom 2.4d 21.4f 5.0f 80.8d EU-15 average 4.1a 18.1c 7.1c 77.9d Source: WHO Regional Office for Europe health for all database. Notes: a 2001, b 2000, c 1999, d 1998, e 1997 f 1996. system, sought to improve efficiency. Some of these efforts, such as introducing NHI and improving patients’ rights were implemented quite effectively, but there have been no attempts to reduce government responsibility for health service delivery. Efforts to reform mental health care are underway and it is likely that there is a strong basis for future improvements in this area. Current issues on the policy agenda include continuing financial strains and the need to improve the methods of measuring and rewarding quality of care. Challenges facing Israel’s health system include adapting to the special health needs of a large number of immigrants, making effective use of the large number of physicians, ensuring adequate and responsive care to Arab populations and managing the strain on emergency and rehabilitative services due to a high number of casualties of terrorism and conflict. 15HiT summary: Israel, 2004 HiT summary Israel Health Care Systems in Transition European Observatory on Health Systems and Policies The Health Care System in Transition profile on Israel was written by Bruce Rosen (Director, Health Policy Research Program, JDC-Brookdale Institute), with the assistance of Rachel Goldwag (Senior Research Assistant, JDC-Brookdale Institute). The editors of the Israel HiT were Sarah Thomson and Elias Mossialos. The research director was Elias Mossialos. The following persons provided critical input, as noted in the introductions to dif- ferent sections: Yehuda Baruch, Sharaon Bason, Shuli Brammli-Greenberg, Neta Bentur, Jenny Brodsky, Mark Clarfield, Michael Davies, Leon Epstein, Gary Gins- berg, Manfred Green, Revital Gross, Anneke Ifrah, Avi Israeli, Johnny Lemberger, Adina Marks, Tal Morgenstin, Daniella Nahan, Nurit Nirel, Ari Paltiel, Boaz Porter, Shoshana Reba, Philip Sax, Carmel Shalev, Segev Shani, Shifra Shvarts, Naomi Struch, Israel Sykes, Ted Tulchinsky, Miri Zibzenher, Shlomo Zusman. Special thanks to Rachelle Kaye (Maccabi Health Services) and Malka Borrow (Israel Medical Association) for their helpful comments on the entire manuscript. The European Observatory on Health Care Systems is grateful to Gabi Bin Nun (Deputy Director General for Health Economics, Ministry of Health) and David Chinitz (Senior lecturer, Braun School of Public Health, Hebrew University) for reviewing the HiT. The Health Care Systems in Transition (HiT) profiles are country-based reports that provide an analytical description of each health care system and of reform initiatives in progress or under development. The HiTs are a key element that underpins the work of the European Observatory on Health Systems and Policies. The Observatory is a unique undertaking that brings together the WHO Regional Office for Europe, the governments of Belgium, Finland, Greece, Norway, Spain and Sweden, the European Investment Bank, the Open Society Institute, the World Bank, the London School of Economics and Political Science, and the London School of Hygiene & Tropical Medicine. This partnership supports and promotes evidence-based health policy-making through comprehensive and rigorous analysis of health care systems in Europe.

Israel

Health Care Systems in Transition

Written by Bruce Rosen

With the assistance of Rachel Goldwag

Edited by Sarah Thomson and Elias Mossialos

Health Care Systems in Transition

2003

The European Observatory on Health Care Systems is a partnership between the World Health Organization Regional Office for Europe, the Government of Greece, the Government of Norway, the Government of Spain, the European Investment Bank, the Open Society Institute, the World Bank, the London School of Economics and Political Science, and the London School of Hygiene & Tropical Medicine.

Israel

European Observatory on Health Care Systems

Keywords: DELIVERY OF HEALTH CARE EVALUATION STUDIES FINANCING, HEALTH HEALTH CARE REFORM HEALTH SYSTEM PLANS – organization and administration ISRAEL

This document may be freely reviewed or abstracted, but not for commercial purposes. For rights of reproduction, in part or in whole, application should be made to the Secretariat of the European Observatory on Health Care Systems, WHO Regional Office for Europe, Scherfigsvej 8, DK-2100 Copenhagen Ø, Denmark. The European Observatory on Health Care Systems welcomes such applications.

The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoever on the part of the European Observatory on Health Care Systems or its participating organizations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. The names of countries or areas used in this document are those which were obtained at the time the original language edition of the document was prepared.

The views expressed in this document are those of the contributors and do not necessarily represent the decisions or the stated policy of the European Observatory on Health Care Systems or its participating organizations.

European Observatory on Health Care Systems: WHO Regional Office for Europe Government of Greece Government of Norway Government of Spain European Investment Bank Open Society Institute World Bank London School of Economics and Political Science London School of Hygiene & Tropical Medicine

ISSN 1020-9077 Vol. 5 No. 1

Suggested citation: Rosen, B. in Thomson, S. and Mossialos, E. (ed.) Health care systems in transition: Israel. Copenhagen, European Observatory on Health Care Systems, 5(1) (2003).

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Foreword ............................................................................................. v

Acknowledgements .......................................................................... vii

Introduction and historical background ......................................... 1 Introductory overview .................................................................... 1 Historical background .................................................................... 7

Organizational structure and management .................................. 11 Organizational structure of the health care system ...................... 11 Planning, regulation and management ......................................... 17 Decentralization ........................................................................... 19

Health care financing and expenditure ......................................... 21 Main system of financing and coverage ...................................... 21 Health care benefits and rationing ............................................... 25 Complementary sources of financing .......................................... 28 Health care expenditure ............................................................... 34

Health care delivery system ............................................................ 41 Primary health care ...................................................................... 41 Public health services ................................................................... 50 Secondary and tertiary care .......................................................... 58 Social care .................................................................................... 65 Human resources and training ..................................................... 71 Pharmaceuticals and health care technology assessment ............. 78 Dental care ................................................................................... 81 Mental health care ........................................................................ 83 Rehabilitation ............................................................................... 86

Financial resource allocation .......................................................... 89 Third-party budget setting and resource allocation ..................... 89 Payment of hospitals .................................................................... 96 Payment of physicians ............................................................... 100

Health care reforms ....................................................................... 109 Conclusions ..................................................................................... 137

Glossary, abbreviations and websites .......................................... 143

References ....................................................................................... 145

Further reading .............................................................................. 153

Contents

Israel

European Observatory on Health Care Systems

Israel

Health Care Systems in Transition

Foreword

The Health Care Systems in Transition (HiT) profiles are country-based reports that provide an analytical description of a health care system and of reform initiatives in progress or under development. The HiTs

are a key element of the work of the European Observatory on Health Care Systems.

HiTs seek to provide relevant comparative information to support policy- makers and analysts in the development of health care systems in Europe. The HiT profiles are building blocks that can be used:

• to learn in detail about different approaches to the organization, financing and delivery of health services;

• to describe the process, content and implementation of health care reform programmes;

• to highlight challenges and areas that require more in-depth analysis; and

• to provide a tool for the dissemination of information on health care systems and the exchange of experiences of reform strategies between policy-makers and analysts in different countries.

The HiT profiles are produced by country experts in collaboration with the Observatory’s research directors and staff. In order to facilitate comparisons between countries, the profiles are based on a template, which is revised periodically. The template provides the detailed guidelines and specific questions, definitions and examples needed to compile a HiT. This guidance is intended to be flexible to allow authors to take account of their national context.

Compiling the HiT profiles poses a number of methodological problems. In many countries, there is relatively little information available on the health care system and the impact of reforms. Due to the lack of a uniform data source,

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quantitative data on health services are based on a number of different sources, including the WHO Regional Office for Europe health for all database, Or- ganisation for Economic Cooperation and Development (OECD) Health Data and data from the World Bank. Data collection methods and definitions sometimes vary, but typically are consistent within each separate series.

The HiT profiles provide a source of descriptive information on health care systems. They can be used to inform policy-makers about experiences in other countries that may be relevant to their own national situation. They can also be used to inform comparative analysis of health care systems. This series is an ongoing initiative: material is updated at regular intervals. Comments and suggestions for the further development and improvement of the HiT profiles are most welcome and can be sent to observatory@who.dk. HiTs, HiT summaries and a glossary of terms used in the HiTs are available on the Observatory’s website at www.observatory.dk.

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Acknowledgements

The Health Care System in Transition profile on Israel was written by Bruce Rosen (Director, Health Policy Research Program, JDC-Brookdale Institute), with the assistance of Rachel Goldwag (Senior Research

Assistant, JDC-Brookdale Institute). The editors of the Israel HiT were Sarah Thomson and Elias Mossialos. The research director was Elias Mossialos.

The following persons provided critical input, as noted in the introductions to different sections: Yehuda Baruch, Sharaon Bason, Shuli Brammli-Greenberg, Neta Bentur, Jenny Brodsky, Mark Clarfield, Michael Davies, Leon Epstein, Gary Ginsberg, Manfred Green, Revital Gross, Anneke Ifrah, Avi Israeli, Johnny Lemberger, Adina Marks, Tal Morgenstin, Daniella Nahan, Nurit Nirel, Ari Paltiel, Boaz Porter, Shoshana Reba, Philip Sax, Carmel Shalev, Segev Shani, Shifra Shvarts, Naomi Struch, Israel Sykes, Ted Tulchinsky, Miri Zibzenher, Shlomo Zusman.

Special thanks to Rachelle Kaye (Maccabi Health Services) and Malka Borrow (Israel Medical Association) for their helpful comments on the entire manuscript.

The European Observatory on Health Care Systems is grateful to Gabi Bin Nun (Deputy Director General for Health Economics, Ministry of Health) and David Chinitz (Senior lecturer, Braun School of Public Health, Hebrew University) for reviewing the HiT.

The current series of Health Care Systems in Transition profiles has been prepared by the research directors and staff of the European Observatory on Health Care Systems. The European Observatory on Health Care Systems is a partnership between the WHO Regional Office for Europe, the Governments

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of Greece, Norway and Spain, the European Investment Bank, the Open Society Institute, the World Bank, the London School of Economics and Political Science, and the London School of Hygiene & Tropical Medicine.

The Observatory team working on the HiT profiles is led by Josep Figueras, Head of the Secretariat, and research directors Martin McKee, Elias Mossialos and Richard Saltman. Technical coordination is led by Susanne Grosse-Tebbe.

Jeffrey V. Lazarus managed the production and copy-editing, with the support of Shirley and Johannes Frederiksen (lay-out) and Thomas Petruso (copy-editor). Administrative support for preparing the HiT on Israel was undertaken by Dorit Ganot-Levinger, Uta Lorenz and Anna Maresso.

Special thanks are extended to the WHO Regional Office for Europe health for all database, from which data on health services were extracted; to the OECD for the data on health services in western Europe; and to the World Bank for the data on health expenditure in central and eastern European countries. Thanks are also due to national statistical offices that have provided data.

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Health Care Systems in Transition

Introduction and historical background

Introductory overview1

Country profile

Geography

The State of Israel was established in 1948. Israel is a small country at the eastern end of the Mediterranean. It lies in the Middle East, at the junction of three continents (Africa, Asia and Europe) and is bordered

by Lebanon on the north, Syria and Jordan on the east, Egypt on the southwest and the Mediterranean Sea on the west. At the end of 2000 Israel had an estimated population of 6 369 000, of whom 78% were Jews and 22% non- Jews, the majority of these Muslim Arabs2 (CBS 2002b). Population density is among the highest in the western world, with 288 people per square kilometre. Israel’s three largest cities are Tel Aviv (1 153 800 inhabitants), Jerusalem (758 300) and Haifa (534 000). Israel has two official languages: Hebrew and Arabic. English and Russian are the most commonly used foreign languages.

Israel’s terrain consists of the Negev desert in the south, low coastal plains, central mountains and the Jordan Rift Valley. Natural resources include copper, phosphates and crude oil. Limited freshwater resources and arable land are the country’s largest environmental concerns.

1 This section draws heavily on Dolev 1996 and on Central Bureau of Statistics 2002b. Anneke Ifrah, Manfred Green, Ari Paltiel, Ted Tulchinsky and Michael Davies made important suggestions and corrections. 2 Muslims account for 14.6% of the population. Other minority groups include Christians (3.2%) and Druze (1.7%).

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European Observatory on Health Care Systems

As noted in the Statistical Abstract of Israel (CBS 2002b), “Israel’s […] southern and eastern areas are characterized by an arid climate, while the rest of the country has a Mediterranean climate. This results in high variability in quantities of precipitation from year to year and between different areas. In addition, there is a clear division into two seasons: a hot summer with hardly any rain and a cool, rainy winter.”

More than 60% of the population is concentrated in the narrow strip along the Mediterranean Sea and the population density in this area is several times higher than the national average. The Jewish population is largely urban; only 10% live in rural areas, principally in two types of cooperative communities: moshavim and kibbutzim. Most of the Arab population live in non-urban settings, primarily small- to medium-sized towns.

Israel is a relatively young society; 29% of the population are under age 15 and only 10% are over age 64. Israel’s general population is still significantly younger than that of most other western countries. Its relatively high total fertility rate (2.95 per woman) has been accompanied by phenomenal growth in the absolute number of elderly people. Since 1955 the elderly population has increased sevenfold, while the general population has increased approximately 3.5 times. The proportion of elderly people in the population is expected to reach 12% by 2020 and 19% by 2050.

Immigration has played a critical feature in the demographics of Israel. When the State was declared in 1948, its population was 873 000. In its early years the population increased as a result of large waves of Jewish immigration from Eastern Europe and the Arab countries of the Middle East and North Africa in the 1950s. As a result, the population passed the two million mark within a decade of Israel’s founding. In the 1970s another major wave of immigration arrived, this time from the Soviet Union. Immigration rates were lower in the 1980s and surged again in the 1990s. The years 1990–2000 saw the arrival of almost one million new immigrants, including almost 400 000 in 1990/1991 alone. The vast majority of these new immigrants arrived from Former Soviet Union (FSU) countries. From 1990 to 1995 – years of particularly high immigration rates – the Israeli population grew at an annual average rate of 3.5% per year, while from 1996 to 2001 the average annual growth was 2.5%.

Government Israel is a democratic state with a parliamentary, multi-party system. All citizens age 18 and over have the right to vote. The head of state is the president, who has largely ceremonial duties. The state’s legislative branch is the Knesset (parliament), which has 120 members. Elections are held every four years by a

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Health Care Systems in Transition

system of proportional representation. A Prime Minister heads the executive branch. There are many political parties, so all governments have been formed from coalitions. At no time in Knesset history has any one political party held an absolute majority. The cabinet (referred to in Israel as ‘The Government’) is assembled by the prime minister, but it must receive a collective vote of confidence from the Knesset. As a result, the cabinet usually involves political leaders from a number of different parties. The judicial branch, headed by the Supreme Court, has the authority to supervise the legal system throughout the various localities.

Table 1. Population and demographic indicators, 1990 and 2000

1990 2000

Average population (thousands) 4 660.2 6 289.2 Number of newly arrived immigrants (thousands) 199.5 60.2

Averages 1985–1989 1995–1999 Birth rate (per 1000 women) 22.8 21.7 Infant mortality rate (per 1000 live births) 10.9 5.4 Male life expectancy at birth 73.8 76.1 Female life expectancy at birth 78.8 80.0 Male mortality rate (per 1000 residents) 7.0 6.4 Female mortality rate (per 1000 residents) 6.0 6.0

Source: CBS 2002b.

Fig. 1. The population (in thousands), 1948–1998

Source: CBS 2002b.

1 000

2 000

3 000

4 000

5 000

6 000

7 000

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998

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European Observatory on Health Care Systems

Local governments are elected every five years and operate as independent authorities providing local services such as water, sanitation, education and social welfare. There has been a continuing process of transfer of responsibili- ties and decentralization to these local authorities, which nonetheless remain dependent on central government for much of their financing.

Economy Throughout its history, armed conflicts with neighbouring Arab countries and large-scale immigration have posed heavy burdens on the Israeli economy, thus creating the need for loans and extensive foreign support. Despite these challenges, Israel is a developed, industrialized country with a small, technologically advanced agricultural sector (less than 4% of the work force), a growing service sector and a substantial high-tech sector. The 1999 GDP per capita income was US $PPP 18 600, slightly higher than that of Spain, but well below that of more developed countries such as Switzerland (US $PPP 28 700) and the United States (US $PPP 33 800). Israel’s economy grew rapidly in the mid-late1990s, but growth has slowed since 2000 due to the worldwide recession, the global downturn in the high-tech sector and the recent upsurge in the Israeli-Palestinian conflict.

54.4% of the population age 15 and over were part of the civilian labour force in 2001 and the unemployment rate was 9.3% (CBS 2002b). Income inequality in Israel is among the highest of developed countries including the United States, Australia and Europe. In 1997 Israel was ranked fourth in income inequality after the United States, the United Kingdom and Italy (Luxembourg Income Survey data; www.lisproject.org).

Table 2. Macroeconomic indicators, 1996–2000

1996 1997 1998 1999 2000

GDP (NIS million), 1995 prices 282 493 291 714 299 650 307 392 326 517 GDP per capita (NIS), 1995 prices 49 690 50 046 50 187 50 184 51 939 Annual inflation rate (%) 11.3 9.0 5.4 5.2 1.1 Unemployment rate (%) 6.7 7.7 8.6 8.9 8.8

Source: CBS 2002b.

Israel’s national currency is the shekel (often abbreviated as NIS, for New Israeli Shekel). As of 14 January 2003 the official exchange rate was US $1= NIS 4.8 and €1= NIS 5.1.

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Health Care Systems in Transition

Health status

Health indicators3

In 1999 life expectancy at birth was 76.6 for males and 80.4 for females (Fig. 2). Life expectancy for Israeli males is among the highest for countries in the Organisation of Economic Cooperation and Development (OECD) and that for women is in the low-middle range. Over the past two decades life expect- ancy has increased by 4.8 years for males and by 5.0 years for females.

In 2000 the infant mortality rate was 5.4 per thousand live births (Fig. 3); it has declined by 50% over the past decade. The infant mortality rate for the Arab population has shown an even more rapid decline than the Jewish population, but still remains approximately double that of the latter, reflecting the influence of high rates of consanguineous marriages and various socioeconomic factors. The main causes of infant mortality are congenital anomalies in the non-Jewish (Arab) population and prematurity in the Jewish population. The maternal mortality rate was 8 per 100 000 live births in the period 1995–1997.4

The crude mortality rate in 1999 was 6.1 per 1000 population, down from 6.6 per 1000 population in 1985. The leading causes of death were heart disease, malignant neoplasms, cerebrovascular diseases, diabetes and accidents, accounting for two thirds of all deaths from 1995 to 1997. Mortality from stroke and coronary heart disease declined dramatically between 1975 and 1990; thereafter rates remained stable. The decline was largely due to improved treatment (medication and surgical intervention) and greater awareness and prevention. The decline was generally more marked in the Jewish than in the Arab population. Notwithstanding this decline, heart disease remains a major health problem in Israel, particularly among women.

Among women, breast cancer is the leading cancer, accounting for approximately 30% of all cancer morbidity and 20% of cancer mortality. Among men, the leading cancers are prostate cancer (in Jewish men) and lung cancer (in Arab men). The cancer with the highest mortality is lung cancer (for both Jewish and Arab men) (National Cancer Registry, www.health.gov.il).

Data on the incidence of cancer are based on the National Cancer Registry, while other morbidity data are generally self-reported, based on large population surveys.

3 This section is based on a Ministry of Health publication (Ministry of Health 2001a), which also includes extensive data on morbidity, health care system resources and other dimensions of health care in Israel. 4 The maternal mortality rate was lower in the Arab population than in the Jewish population.

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European Observatory on Health Care Systems

In the Arab population, the leading causes of morbidity and mortality are heart disease, stroke and diabetes. Risk factors for cardiovascular disease, such as obesity, diabetes and physical inactivity, are particularly prevalent among Arab women over age 45. Lung cancer, which is the leading cancer among Arab men, carries a 50% higher mortality rate among Arab men than among Jewish men; this has been linked to the higher rates of smoking among Arab men (approximately 50%) compared to Jewish men (approximately 30%).

With regard to lifestyle factors, alcohol consumption is appreciably lower in Israel than in European countries and rates of cigarette smoking are generally slightly lower. Rates of smoking have shown no significant decline in the past decade; in the year 2000 approximately 27% of the population aged 18 and above reported that they were smokers. The prevalence of cigarette smoking is increasing in young women and teenagers (Ministry of Health 2002b).

1970 1975 1980 1985 1990 1995 2000

Israel Sweden United Kingdom EU average

Fig. 2. Life expectancy at birth (in years), 1970–2000

Source: WHO Regional Office for Europe health for all database.

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Health Care Systems in Transition

Historical background

Health care services in Israel have been developed over the past century by voluntary health plans originally called sick funds, non-profit institutions, the government and the British Mandatory regime that existed prior to the establishment of the State of Israel in 1948. Workers’ associations established the first health plan in 1911 to provide care to workers and their families and to employ immigrant doctors. This laid the basis of the health plan system, which is still a major component of the Israeli health care system. All four of Israel’s health plans were formally established in the period between 1920 and the early 1940s; some of them emerged from mergers of health plans established even earlier.

Another important actor in the early years of the Israeli health care system was the Hadassah Medical Organization. Hadassah began its medical activities in Israel in 1913 by establishing the Tipat Halav system (“well-baby” clinics, literally “drop-of-milk” centres), another key feature of Israel’s present health care system. In 1918 Hadassah began establishing hospitals in urban centres such as Jerusalem, Safed and Tiberias.

Fig. 3. Infant mortality rates (per 1000 live births), 1970–2000

1970 1975 1980 1985 1990 1995 2000

Israel Sweden United Kingdom EU average

Source: WHO Regional Office for Europe health for all database.

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European Observatory on Health Care Systems

Government hospitals, which currently provide more than half of all acute beds in the country and most psychiatric facilities, consist primarily of hospitals established by the State of Israel in British Mandate hospitals and in buildings abandoned by British Army camps, left over from the War of Independence in 1947-1948.

The nature and the achievement of the health care system in Israel stem, to a large extent, from its foundation in organized social arrangements as well as a general consensus that society as a whole is responsible for the health of its citizens. This guiding principle has been reflected in the structure of health services in Israel, combining state activities with those of the voluntary health plans (non-profit mutual organizations).

Until the introduction of National Health Insurance (NHI) in 1995, the health plans both insured their members and provided them with most health services. By the late 1980s, approximately 95% of the population were insured in one of the four competing health plans, who provided their members with most curative health services either directly or by contract with other agencies. Public health and individual preventive services were provided by the government, Hadassah and some of the larger municipalities.

At present, four non-profit health plans operate in Israel: Clalit, Maccabi, Meuhedet and Leumit. Established in 1911, Clalit has been the dominant fund both in size and in influence, insuring more than 80% of the population until the beginning of the1980s. It was affiliated with the Histadrut (General Federation of Labour in Israel), which was established in 1920.

In recent decades the transfer, mainly of younger members, from Clalit to the smaller funds, and the tendency of new immigrants to join the smaller funds, have reduced Clalit’s relative position so that it now enrolls approximately 55% of the population. Until recently Clalit was the only fund that operated its own network of hospitals and, under state arrangements, provided inpatient care to members of the other funds as well.

Two of the four health plans had ties with political parties. As part of the Histadrut, Clalit was tied to the Labour Party, while the Leumit health plan was tied to the revisionist parties. These ties greatly politicized the health care system and they remained in place until the 1995 advent of the NHI law.

The state has been responsible for supervising, licensing and overall planning of health services. It has also subsidized some of the voluntary health plans and other bodies, as well as directly providing some services not offered by the health plans, such as control of communicable diseases, mother and child care, psychiatric services and long-term hospitalization.

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As a result of the network of general hospitals developed by the state, the Ministry of Health is in effect the owner of approximately half of the acute care hospital beds in the country. These hospitals, together with hospitals built by Clalit and voluntary and religion-based hospitals, provide services to the members of all the health plans on the basis of reimbursement rules established by the state.

Since the late 1970s the Israeli health care system, like those of other countries, has had to confront population ageing, steadily increasing demand for geriatric services and care of chronically ill people and the need for the latest technology for diagnosis and treatment. The Israeli public have expected and demanded the provision of modern and progressive services to meet their needs, requiring investment in sophisticated equipment as well as research and professional expertise, in order to remain current with leading international standards. The result has been an ongoing rise in health expenditures, and an ever-widening gap between the resources available and the actual expenditures of the health care system.

The 1980s saw substantial labour unrest throughout the Israeli health care system, accompanied by increasing consumer dissatisfaction with lengthening queues for elective surgery, the growth of ‘black-market’ medicine, cream- skimming by some of the health plans and lack of responsiveness of the public system to rising consumer expectations.

In June 1988, against this background, the Cabinet of the State of Israel decided to establish a State Commission of Inquiry into the functioning and efficiency of the health care system, chaired by Supreme Court Justice Shoshana Netanyahu and thus referred to as the Netanyahu Commission. Though numerous public committees had been set up to examine the problems in the nation’s health care system since 1948, the establishment of this high-level commission reflected the public’s sense that the health care system was in a state of crisis and that drastic action was needed.

The recommendations of the Netanyahu Commission constituted a major watershed in the history of Israeli health policy. The commission emphasized the following problems in the Israeli health care system:

• inadequacies in the services provided to the public

• the Ministry of Health’s dual role as service provider and regulator

• vague financing and budgeting procedures

• sub-optimal organization of the system and lack of managerial tools

• low levels of employee satisfaction and motivation.

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European Observatory on Health Care Systems

The majority report of the Commission5 presented the following recommendations (see the section on Health care reforms for a full overview):

• legislation to introduce NHI

• reorganization of the Ministry of Health

• regionalization, decentralization and enhanced competition

• a centralized financing system and capitation payments

• introduction of private medical practice in public hospitals

• financial incentives for increased productivity, along with enforcement of the principle of equal pay for equal work.

Majority report recommendations were adopted by the Minister of Health, who established implementation task forces to deal with the reconstitution of government hospitals as freestanding for-profit entities, the reorganization of the Ministry of Health, preparation of the NHI law and health care system economics, including the design of capitation arrangements.

In the years immediately following the submission of the Commission’s recommendations (1990–1993), reform efforts focused on an attempt to transform the government hospitals into freestanding hospital trusts. This effort, discussed in greater detail in the sections on Health care delivery and Health care reforms, failed due to opposition from health care workers’ unions and the Histadrut, although recently there have been renewed efforts to move the trust initiative forward. The focus then turned to the development of the NHI law, which proved to be more successful; the NHI law was passed in 1994 and came into effect in January 1995. The problems that led to the adoption of NHI and the main components of the NHI law are discussed extensively in the sections on Health care financing and expenditure and Health care reforms.

5 The minority report, written and endorsed by one of the five commission members, called for greater targeting of the reforms on the main areas of health care system dysfunction and for less radical, more evolutionary change.

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Organizational structure and management6

Organizational structure of the health care system

This section begins with an introduction of the overall framework of government in health in Israel and continues with a description of the organization of the Ministry of Health and the health care system.

The Knesset Israel is a parliamentary democracy, thus it is the Knesset that ultimately determines laws and budgets. In the past decade the Knesset has been very active in health-related legislation, passing such laws as the NHI law 1995 and the Patients’ Rights Law 1996. The key Knesset committees relating to health are the Finance Committee, which prepares the annual budget for votes in the plenum and the Labour, Social Affairs and Health Committee, which is formally charged with the leading role on health issues.

It is important to note that over the past decade much use has been made of the annual Budget Arrangements Bill, which accompanies the national budget, to move health and other social policy matters quickly through the Knesset in late December as part of the annual budgeting process. This bill is handled by the Finance Committee, rather than by the Labour, Social Affairs and Health Committee, and its use for substantive issues has come under increasing criticism on the part of Israel’s social lobby.7

6 This section was prepared in consultation with Ted Tulchinsky. 7 The social lobby is a loose network of Knesset members and nongovernmental organizations, which seeks to advance legislation to promote equality and the wellbeing of low-income groups.

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European Observatory on Health Care Systems

The government Executive power is in the hands of the government. Only the Prime Minister is directly elected by popular vote, and the elected Prime Minister8 then tries to assemble a government (cabinet), which must secure and maintain majority support in the Knesset. This is done through the distribution of cabinet portfo- lios among the various coalition parties. Until the 1990s the health portfolio was given to one of the smaller, less powerful parties, with the major parties preferring the more visible and powerful portfolios of Foreign Affairs, Finance, Defence, Education, etc. The period from 1990–1994 was unique, as the Ministry of Health was held by major players: first by one of the rising stars of the Likud Party and then by a rising star of the Labour Party. This was a reflection of the growing salience of health care issues in Israel. Between 1995 and 2001 there were six ministers of health, some from the smaller parties and some second-tier figures from the dominant parties.

The government plays a role in health care at several critical junctures. First, while the Knesset must vote on the annual budget, it is the government that prepares and submits the budget. The Ministry of Finance and its powerful Budget Division play a critical role in drafting the budget. However, the gov- ernment ultimately determines what is proposed in the budget sent to the Knesset and the political balances of power, as well as the policy priorities of the gov- ernment as a whole, invariably affect allocations to health care.

Similarly, the government plays an important role in the legislative process. While the Knesset will entertain private members’ bills, in practice most legis- lation, and almost all major legislation, is submitted by the government. While the relevant ministry prepares any particular bill, the government’s Ministerial Committee on Legislation plays an important role. For example, in the case of the NHI law, this was the place where a crucial compromise was reached whereby the Finance Minister agreed to support the bill on the condition that the Health Minister would agree to various measures that would serve to control NHI expenditures.

The Ministry of Health As in other countries, the Ministry of Health has overall responsibility for the health of the population and the effective functioning of the health care system. The Ministry is headed by the Minister of Health, who is a member of the Government (cabinet) and appoints a physician as Director-General, the Ministry’s senior health care professional.

8 The direct election of Prime Minister is a relatively new phenomenon in Israel and it will no longer apply as of forthcoming elections.

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Key functions of the Ministry of Health include:

• planning and determining health priorities;

• drafting of health care laws to be put before the Knesset and enacting of regulations subsequent to primary legislation;

• advocating for adequate resources for the NHI system and for other components of the health care system;

• promoting the effective use of resources within the health care system, including proposing the ministry’s annual budget for the Ministry of Finance and the government;

• monitoring and promoting population health (see the section on Health care delivery);

• overseeing the operation of the government’s 11 acute care hospitals, 11 psychiatric hospitals and 5 chronic disease hospitals;

• monitoring and regulating the activities of nongovernmental actors in the health care system, including hospitals, health plans,9 various freestanding diagnostic facilities, etc.;

• regulating the health care professions;10

• preparing the health care system for various emergency situations including terror attacks or military attacks with conventional and nonconventional weapons.

In addition to all the usual planning, public health, regulatory and steward- ship functions, Israel’s Ministry of Health also plays a major role in the direct provision of care. It owns and operates almost half of the nation’s acute hospital beds, approximately two thirds of the psychiatric hospital beds and 10% of the chronic disease beds. In addition, it operates the majority of the nation’s mother and child preventive health centres. This multiplicity of Ministry roles has long been recognized11 as one of the problems of the Israeli health care system, and it is an issue that is discussed further in the section on Health care delivery.

The Ministry of Health receives important input from various advisory bodies. These include the National Health Council, a statutory body estab- lished to advise the Minister of Health on implementation of the NHI law, and a series of standing national councils on, for example, community medicine,

9 The Ministry of Health is involved in primary care in part through its regulation of the health plans and in part through a small unit involved in developing policy and strategic initiatives in primary care. However, primary care has not been a major focus of ministry attention. 10 Part of this function is then delegated to the Scientific Council of the IMA, which works closely with the ministry on issues of physician licensing and other key matters. 11 This problem was discussed thoroughly by the Netanyahu Commission, as well as by various prior commissions. Most senior managers in the government and in the health plans concur with this assessment.

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European Observatory on Health Care Systems

oncology, cardiovascular disease and women’s health, appointed to advise the Director-General on both long-term goals and pressing issues requiring an immediate policy response.

Other key government bodies involved in health • The Ministry of Finance: As noted above, this is the agency of the execu-

tive branch that prepares the budget for approval by the cabinet and Knesset and monitors its implementation. Historically, its budget division has also been a catalyst for major structural reforms in Israeli health care. In addition, the Ministry’s wages and collective bargaining division is the lead government actor in negotiations with the health care labour unions. Its finance and capital markets division plays an important role in regulating the commercial insurance sector. Thus, the Ministry of Finance has multiple, powerful points of influence on Israeli health care. As in other countries, the ministry is the key governmental actor seeking to limit public spending on health care, constrain the construction of new health care facilities, limit the number of employed physicians, etc.

• The National Insurance Institute: The National Insurance Institute (NII) collects the health tax that plays a major role in the financing of the NHI system. See the section on Health care financing and expenditure for further details.

• The Israel Defence Force: This operates a medical corps that directly provides basic and emergency care for military personnel and purchases tertiary services from the civilian sector.

Key nongovernmental actors • Health plans: Health plans are voluntary, non-profit organizations, obliged

to ensure that their members have access to a benefits package specified in the NHI law. In return, the health plans receive an annual per-member capitation fee from the government. There are currently four health plans and their mid-2003 market shares are as follows: Clalit – 55%; Maccabi – 24%; Meuhedet – 11%; Leumit – 10%. The health plans are governed by boards of directors, which in some cases are self-perpetuating, and in other cases are indirectly elected by the members of the plan.

• Hospitals: While the government owns approximately half of the acute beds, Clalit owns one third of the acute beds and the remaining beds are owned by various non-profit and for-profit entities.

• Health care unions: Most notable in this regard are the Israel Medical Association (IMA) and the Israel Nurses’ Association (INA). For further

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details see the sections on Health care delivery and Financial resource allocation.

• Magen David Adom (‘Red Star of David’) : Israel’s equivalent of the Red Cross operates ambulances and other emergency services.

• Voluntary organizations: Many of these are organized around specific diseases or health care services.

Citizen influences on health policy In theory citizens can influence Israeli health policy through several major channels. The first is through the political parties’ primary elections and the Knesset elections themselves. However, throughout the history of the State domestic issues in general and health care in particular have not figured prominently in election campaigns. One important exception was the 1992 general election campaign in which the introduction of NHI and, even more so, reduction of questionable practices in the Histadrut, the national labour federation, and its separation from Clalit constituted central campaign issues of both parties.

It should be noted that the political parties had a substantial impact on health policy even during periods when health policy was not a central campaign issue.12 For many years the Labour Party resisted efforts to eliminate the health plan system in favour of a unitary, government-run NHI system. They also successfully fought for government subsidies of the Histadrut-affiliated health plan. Conversely, for decades the revisionist parties, predecessors of the current Likud, used their political power to block any NHI legislation that would preserve the dominance of the Histadrut-affiliated health plan. The religious parties used their pivotal role in the political balance of power both to influence NHI legislation and to influence legislation on sensitive issues such as abortion and autopsies.

In addition to their influence via political parties, citizens also influence the health care system through their involvement in the boards of directors of key organizations, such as Hadassah, the health plans and Magen David Adom, and through participation on various government advisory bodies such as the National Health Council. Of course some of these boards are dominated by professionals and the influence of ‘ordinary citizens’ is therefore not that great.

Citizens as consumers also have influence through the mechanisms of ‘voice’ and ‘exit’. Increasingly, researchers are using surveys and in-depth interviews

12 Since they are voluntary associations of citizens, political parties’ actions can be considered a form of citizen participation.

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European Observatory on Health Care Systems

to help consumers articulate their needs and wants with regard to an ever- widening set of health care services and issues. Moreover, in those areas of health care characterized by competition, such as the health plan sector, shifts and potential shifts in market shares have led providers to be much more responsive to consumer demands and wants than they were in the past.

The health care system since 1990 The major organizational problems identified by the 1990 Netanyahu Commission report were that:

• the health care system was overly politicized due to the political affiliations of some of the health plans; many key health policies were influenced by partisan political considerations;

• there was no comprehensive legal framework for the activities of the health plans;

• the Ministry of Health’s dual role as regulator and provider led to conflicts of interest and inefficiencies.

Israel’s NHI law, which came into force in 1995, addressed the first two of these problems to a significant extent. In the early 1990s unsuccessful efforts were made to address the third problem. The major change expected in the coming years is in the reduction of government provision of health services: there are major efforts underway to transfer responsibility for mental health services from the government to the health plans. Those heading up these efforts appear to have learned from the failures of prior efforts to implement such a change, and the current process is characterized by greater collaboration and sharing of information.

The primary organizational changes since 1990 are summarized in the following paragraphs.

Prior to 1995 individuals paid their health insurance premiums directly to the health plans on a voluntary basis. Since the introduction of NHI in 1995, these payments are collected by the NII on a compulsory basis as a health tax. The NII then distributes the revenue raised to the health plans. See the sections on Health care financing and expenditure and Financial resource allocation for further details.

Employers used to play a substantial role in financing health insurance, although it is worth pointing out that unlike in European social health insurance systems, where employer finance comes with employer involvement in health policy, the role of Israeli employers was always limited to writing a cheque without having any interest in what was done with the money. Since the

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employers’ tax was abolished in 1997 and replaced by an increase in general tax revenue, employers no longer play a significant role in the public system.13

See the section on Health care financing and expenditure for further details.

Government hospitals are more autonomous than in the past, although they continue to be owned and managed by the Ministry of Health.

Several significant new planning and regulatory units staffed by highly trained professionals have been established within the Ministry of Health, including units for health economics, supervision of health plans and regulation of the adoption of new technologies.

Planning, regulation and management

Planning National health care planning in Israel includes the development of long-term plans for the number of acute and long-term care beds that should be built. These are handled by interministerial working groups, and nongovernmental bodies are also involved in the planning processes. Israel does not have a comprehensive national health plan, nor an active system for setting and updating national health targets.

The Ministry of Health has had a consistent policy of keeping a low hospital bed-to-population ratio as a key to planning for many years, thus helping to maintain the balance in resource allocation between hospital and community services.

In 1990 the Ministry of Health sponsored a planning process involving key health care system actors in order to develop a Health for All 2000 document. The document identified various areas for priority action and specified several quantitative health goals. However, the document does not appear to have been a major guide to subsequent policy development. The Ministry of Health does monitor performance on various Health for All measures (Haklai et al 2002), but little was done in the 1990s to compare achievements with targets or to update the targets. More recently, the Ministry has begun an effort to update the targets.

External, highly visible, temporary commissions such as the Netanyahu Commission (see the sections on Historical background and Health care

13 At the same time many large employers have begun to organize voluntary health insurance coverage for their employees. See the section on Health care financing and expenditure.

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European Observatory on Health Care Systems

reforms) appear to have had as strong an impact on planning and policy develop- ment as the Ministry of Health or any permanent planning entities. These commissions are perceived as capable of examining issues more objectively, more professionally and less politically than the Ministry of Health, mainly because of the latter’s multiplicity of roles. Further analysis is needed to determine whether this is indeed the case and whether relying on temporary public commissions as the primary vehicle of policy development is advisable.

Most planning is done on a yearly basis and is closely tied to the annual budget process. Periodic strategic planning efforts take place in some health plans and hospitals, typically initiated when a new chief executive is appointed.

Regulation Outside the public health arena, Israel does not have a well-developed culture of government regulation in the health sector. Instead, government has relied primarily on budgetary controls, offers of subsidies and moral and political suasion to influence nongovernmental providers. Since the introduction of NHI and the Patients’ Rights Act in the mid-1990s, the Ministry of Health has developed new capabilities in the regulatory area.

Areas of long-standing Ministry of Health regulation include:

• food safety

• water safety

• drug safety and efficacy

• licensing of health professionals

• structural safety of health care facilities

• major capital expenditures such as expansion of bed complements, acquisi- tion of expensive technologies, etc.

• hospital per diem rates.

Areas of recent Ministry of Health regulation:

• filtration of community water supplies

• mandatory fluoridation of community water supplies

• long-term care

• smoking in public places

• patients’ rights

• health plan benefits and financing.

Areas still lacking regulation:

• food fortification and quality

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• number of health care personnel

• quality of acute care.

One area of particular note is the lack of planning regarding the number of health care personnel. This is particularly significant in light of Israel’s high physician- and dentist-to-population ratios. The prevailing sentiment has been that human resource planning in Israel would be an exercise in futility, due to the open-door policy for all Jewish immigrants, including high numbers of health care professionals. In recent years there has been a growing sense that Israel should, nonetheless, begin to engage in some form of human resource planning.

Decentralization

Israel has a unitary, as opposed to a federal, system of government. While the government has administrative divisions at the regional level, these do not have independent authority in the same way as US states or German Laender.

Although the Ministry of Health’s Public Health Division operates through regional and district offices, which have some leeway in responding to local conditions, the ultimate source of authority is the national office. The regional and district offices serve primarily to implement the policies and strategies developed at the national level, both in the public health area and in the regulation of long-term and psychiatric care.

The same is true of the health plans; all have regional administrations, but authority rests with their national headquarters. In recent years the health plans have been undergoing a process of decentralizing authority and responsibility to the regions and branches. This is particularly true of Clalit, which is in the process of an ambitious programme of decentralization down to the clinic level.

The recommendation of the Netanyahu Commission for regionalization of health services in Israel has not been adopted. The Ministry and its institutions have one set of regional structures and the health plans each have their own. There is little in the way of coordination between these bodies at the regional level.

The NHI law called for reducing the role of government in service provi- sion in three key areas of activity: personal preventive care, long-term care and mental health care. The law stated that within a three-year transition period, these responsibilities would be transferred to the health plans. As discussed in greater detail in the section on Health care delivery, the original decision to transfer responsibility for personal preventive care was reversed by the Knesset

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in 1998, and while the decision to transfer responsibility in the other two areas remains on the books, it has not yet been taken.

A major effort was undertaken in the early 1990s to transform the govern- ment hospitals into independent, non-profit trusts. This was a top priority of the Minister of Health at the time. However, the effort failed, primarily due to the opposition of the health care unions (see the section on Health care delivery). Instead, the government hospitals have been gradually given far more autonomy than they had in the past.

Most analysts interpret the NHI law as increasing government control of the health care system. Previously, the health plans were largely unregulated, whereas the government now has substantial regulatory powers regarding the benefits to be provided and how much to finance health plan activity. Nevertheless, the health plans remain separate legal entities with wide latitude for strategic and managerial discretion. The change is less radical than that which was envisaged by competing approaches to NHI such as abolition of the health plans and institution of a unitary health insurance system run by the government. Still, there is no denying that health plans have significantly less independence than they had prior to 1995.

The change appears to have enhanced the public’s right to a defined benefits package and has increased equity in the health care system. What is less clear is the magnitude of the costs of the change in terms of reduced innovation, responsiveness and diversity.

In summary, in the past decade the Israeli health care system has under- gone: • some deconcentration of central government authority to lower adminis-

trative levels of central government, particularly in the case of the govern- ment hospitals;

• no significant devolution of authority to regional or local governments;

• no significant delegation of responsibilities to quasi-public organizations (on the contrary, NHI constitutes a process of transfer of authority from the health plans to the government);

• various attempts at privatization, in the sense of transferring responsibilities for service provision from the government to the voluntary sector, none of which has been successfully implemented to date.

Questions remain as to the desirable extent of deconcentration, devolution, delegation and privatization in Israeli health care. Thus there continue to be vigorous debates as to the desirability of the changes that took place in the 1990s. Similarly, there is no clear consensus as to how Israeli health care should change with regard to these issues in the decade ahead.

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Health Care Systems in Transition

Health care financing and expenditure14

Health care in Israel is predominantly financed from public sources via a mixed system of payroll tax and general tax revenue. Supplementary voluntary health insurance (VHI), statutory cost sharing and direct

out-of-pocket payments for private sector services also play a role. In recent years the share of public financing has declined, while the share of private financing has increased.

The section on the main systems of financing and coverage briefly presents data on financing sources for the health care system as a whole and then focuses on the main component of the health care system, which is financed by NHI. The section briefly notes those components of the health care system that are not financed by NHI. The following sections discuss how the NHI benefits package is determined, complementary sources of financing and health care expenditure.

Main systems of financing and coverage

Table 3 presents information on the main sources of financing for the health care system as a whole. General tax revenue comes from a mix of progressive taxes such as income tax and regressive taxes such as value added tax and customs levies. The employer tax, which was known as ‘the parallel tax’ and earmarked for health care, was abolished in 1997. The shortfall was compen- sated for by an increase in the share of general tax revenue, which rose as a result from 26% in 1995 to 46% in 2000. Prior to the introduction of NHI in

14 This section was prepared in consultation with Avi Israeli, Gary Ginsberg, Miri Zibzenher and Shuli Brammli-Greenberg.

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European Observatory on Health Care Systems

1995 individuals paid their health insurance premiums directly to the health plans on a voluntary basis. Health plan premiums were subsequently replaced by the health tax, which is a payroll tax earmarked for health (see below). By 2000 the health tax accounted for 25% of total health care financing.

Table 3. Main sources of financing for health care in Israel (as % of total), 1985–2000

Source of financing 1985 1990 1994 1995 2000 % % % % %

Public 68 65 71 70 71 – general taxation 27 19 27 26 46 – employer tax 27 27 22 22 0 – health tax 0 0 0 22 25 – health plan premiums 14 19 22 0 0 Private 25 28 24 26 29 Other/unknown 7 7 5 4 0 Total 100 100 100 100 100

Source: CBS 2002a.

NHI financing More than half of the health care system’s activities are financed by NHI, which was established by the NHI law in 1995. See the section on Health care reforms for further details on the background to and implementation of this law.

Since the beginning of 1995, all permanent residents of the State of Israel15

have been entitled to a benefits package specified in the NHI law (see below). They are also required to enrol in one of four competing, non-profit health plans offering the NHI benefits package and are allowed to switch between plans once a year (Rosen and Shamai 1998; Gross et al 2001). Residents are free to choose among the health plans, which must accept all applicants. There are two ‘open enrolment’ periods each year. No permanent resident can voluntarily opt out of the NHI system. The health plans are independent, nongovernmental legal entities, but they operate within a legal and regulatory framework defined by the government.

Each year the government determines the level at which the NHI system will be funded. See the section on Financial resource allocation for further

15 The NHI system only covers recognized permanent residents. Israel currently has several hundred thousand foreign workers, primarily from Eastern Europe and Southeast Asia, and they are not covered under NHI. Employers of foreign workers are required to arrange private health insurance for them and the Knesset has ensured that these private packages are similar in scope to the benefits package offered by NHI. Accordingly, those foreign workers who are in Israel legally have adequate health insurance. However, there are also large numbers of illegal foreign workers and, generally speaking, they lack health insurance. Recently, the government took measures to ensure basic health insurance coverage for the children of the illegal foreign workers.

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information about this process. The officially determined NHI funding level is almost entirely financed from public sources. The remainder comes from private sources, through cost sharing (see below).

Public NHI financing comes from two sources: the health tax and general tax revenue. The health tax is an earmarked payroll tax collected by the National Insurance Institute (NII). Individuals pay 3.1% on wages up to half of the average national wage and 4.8% on income beyond that level.16 Income above five times the national wage is not taxed for NHI purposes. There are exemptions and discounts for various groups such as pensioners and recipients of income maintenance allowances. Failure to pay the required health tax will result in government action to enforce payment, but in no way jeopardizes the individual’s right to NHI benefits. Prior to the abolition of the employer tax in 1997, the proportion of public financing for health care that came from earmarked sources was substantially higher.

General tax revenue is used to fill the gap between the officially determined level of NHI funding and revenue from the health tax. The system therefore lies somewhere between a social health insurance system and a tax-financed system.

Some in Israel are uncomfortable with this hybrid system and there are conflicting calls about the direction the system should move towards. On one hand, various economists and public finance professionals argue that the health tax should be absorbed into the income tax system, which they prefer because it is more progressive. In addition, they are dissatisfied with the precedent set by an earmarked tax, as earmarking reduces government freedom, particularly the freedom of the Ministry of Finance.

On the other hand, many actors and analysts within the health care system argue for the reinstatement of the employer tax, which was earmarked for health, but was abolished in 1997. They contend that the health care system needs earmarked sources of financing because it is the only area in which the government has stipulated a benefits package to which all residents are entitled by law. These proponents believe that a greater degree of earmarking will result in a higher level of public financing of health care in the long term.

The debate continues with no signs of immediate change in either direction.

Public NHI financing is allocated among the four competing health plans. See the section on Financial resource allocation for further information about this process.

16 In the initial legislation the ceiling was four times the average wage. This was changed to five times the average wage in 2000. The ceiling was abolished in June 2002. The extra revenue was not earmarked for health, but could be used for any type of public expenditure.

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European Observatory on Health Care Systems

Prior to the introduction of NHI, enrolment in the health plans was voluntary. Approximately 5% of the population were uninsured, with relatively high rates of uninsured among the young, poor and Arab population groups. Health insurance premiums were set and collected by the health plans themselves. Premium levels rose with income, but were less progressive than the current health tax. The health plans also received financing from an employer tax collected by the NII and distributed among health plans on the basis of the number and age of their members.

The pre-NHI voluntary system was characterized by a number of problems:

• 5% of the population were uninsured;

• the health plans had a financial incentive to cream skim younger or healthier people, who would use fewer services, or people with higher incomes, whose contributions were higher;

• the one health plan which did cater to older or poorer people or people in poor health was at a competitive disadvantage and incurred large and grow- ing deficits;

• the system was highly politicized, with two of the four health plans having ties to the major political parties;

• the benefits package was stated in general terms only and the nature of members’ entitlement to it was unclear (Rosen 1999).

The NHI law addressed these problems by instituting universal coverage, tying health plan revenue to members’ expected utilization levels rather than their income levels, guaranteeing free choice of health plan, breaking – or at least weakening – the ties between the health plans and the political parties and specifying the content of the benefits package in law.

Even with this major reform, however, many problems and issues remain (Rosen et al 2000; Gross and Harrison 2001). It was hoped that NHI would bring an end to the accumulation of financial deficits in the health care system, but this has not happened and periodic financial crises have continued (Gross et al 2001). For further discussion of ongoing debates about levels of NHI financing, see the section on Financial resource allocation.

Non-NHI financing Services not included in the NHI benefits package and not generally provided by the health plans include long-term care, psychiatric care, preventive health care, public health services and dental care. Details about the financing of these services can be found in the section on Health care delivery. Non-NHI financing also covers investment in hospital construction and equipment and

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medical research. Services such as inpatient care and physician consultations are provided primarily by the health plans, but are also available from the private sector on a commercial basis.

Long-term care financing is shared among households and a number of agencies including the NII, government ministries and the health plans. Mental health care in government hospitals, private hospitals and in psychiatric departments of general hospitals are financed by the Ministry of Health (see the section on Health care delivery). Nongovernmental outpatient mental health services are financed by fee-for-service payments and health plan financing.

Households pay out-of-pocket for the following services: private surgery and laboratory tests, alternative medicine, private nurses and ambulances, psychological and psychiatric visits and dental care. In addition, households are subject to cost sharing for some services. Approximately 90% of dental care is financed by households, about 10% of which have commercial VHI coverage for dental care. The government also plays a role in financing dental care, primarily for indigent or elderly people and school children.

Health care benefits and rationing

The NHI law stipulates the benefits package which all residents are entitled to receive from their health plans. In setting the initial benefits package in 1995 the Knesset essentially adopted that of Clalit, the largest health plan. The initial benefits package provided by the health plans under NHI included hospital care, community-based health care, pharmaceuticals, etc. All health plans are legally mandated to provide all the benefits included in the NHI benefits package.

Prior to the introduction of NHI, there were slight differences in the benefits covered by the health plans, although they basically covered the same broad categories of care. The NHI therefore brought greater detail, specificity and clarity to the benefits package, but did not bring about any immediate major changes in the types of benefits covered (Gross et al 2001).

The NHI law called for the transferral of responsibility for three key services – inpatient long-term care, mental health care and preventive services – from the government to the health plans at the end of a three-year transition period. Although these three services have long been the direct responsibility of the government, there has been no legal entitlement to them and their availability has been subject to budgetary pressures. Means testing plays an important role in determining eligibility for government financing and the extent

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to which the government covers costs, particularly in the case of inpatient long-term care. The NHI law sought to transfer responsibility for these services to the health plans in order to introduce entitlement to them, to improve quality through greater continuity of care and to reduce costs through integration. However, these services have not yet been transferred to the health plans and they continue to be the responsibility of the government.

Several services remain outside the responsibility of both the government and the health plans. These include: complementary medicine, optician services and dental care (Bin Nun and Katz 2001). No serious debate was given to their inclusion under NHI because there were concerns that NHI might be under funded and legislators were therefore reluctant to add new benefits. In subsequent years this decision has been questioned, particularly with regard to dental care.

In 1997 Israel established a formal priority-setting process for the addition of new services to the benefits package. Each year, as part of the annual budgeting process, the government determines how much money will be available to fund new technologies. At the same time, the Ministry of Health solicits recommendations from the health plans, pharmaceutical companies, the Israel Medical Association (IMA), patient organizations and other groups for new technologies to be given priority for inclusion in the benefits package. After the Ministry of Health carries out a cost-benefit analysis, a public com- mittee, made up of health plan representatives, the Ministries of Health and Finance, the IMA, experts in health economics and health policy and public figures from outside the health care system, recommends which new technologies should be adopted (Chinitz and Israeli 1999; Shani et al 2000). Final decisions as to what will be included are made by the Minister of Health. The public committee’s recommendations are not legally binding, but to date its recommendations have been fully adopted.

In the first few years of the priority-setting process, most additions to the benefits package were pharmaceuticals. Moreover, almost all of the funds went to life-extending, as opposed to life-enhancing, medications. There is a growing sense that, in future, greater emphasis needs to be given to life-enhancing medications and to non-pharmaceutical innovations.

Between 1998 and 2002, not enough money was allocated to fund new technologies and many cost-beneficial items therefore remain outside the benefits package; 1% of the cost of the benefits package was allocated every year to fund new technologies. This amount was drastically reduced, and almost eliminated, in 2003.

This explicit priority-setting process is considered by many health policy analysts, both in Israel and abroad, to be ground breaking on an international

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scale (Chinitz 1999). It certainly constitutes one of the most serious efforts in health care in Israel to base decisions on solid information and a structured decision-making procedure. However, the following criticisms of the process have been noted:

• not enough use is made of cost-benefit analyses, quality-adjusted life years (QALYs), disability-adjusted life years (DALYs) etc, either in the decision- making process or in the background documents prepared by staff;

• not enough has been done to incorporate the priorities, values, views and preferences of the general public;

• the process does not benefit from sufficient input and guidance from the National Health Council, a broadly representative body established by the NHI law to advise the Minister of Health; some have argued that the National Health Council should be setting the broad criteria used to guide the prioritization work of the public committee, while others think that these criteria should be set by the public committee itself;

• some of the data needed to project how many people are candidates for the use of a proposed new technology – a key component of the cost-benefit analyses – is available only to the health plans; the government has not made full use of its right to require the health plans to make that data available to the process, nor does it appear to have the authority to require the health plans to divulge information on the amounts paid for particular drugs; as a result, the health plans tend to share only those data that advance their interests;

• interested parties, particularly the health plans, have too much power on the public committee;

• the Israeli courts have seen fit to mandate the health plans to provide certain benefits not recommended by the public committee.

To some extent these problems may be start-up problems, while others may be more structural and long-lasting (Chinitz et al 1998; Shalev and Chinitz 1998).

From time to time the health plans and others have called for the removal of certain services from the benefits package or for reductions in the number of treatments covered for particular services such as in-vitro fertilization. These proposals have met with strong public opposition and none of them has been adopted. Moreover, none of these proposals has been formally considered by the public committee. In the coming year, the public committee plans to begin to grapple with the challenge of how to go about considering whether items currently in the package should be removed.

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Prior to 2001 all funding for ‘new technologies’ was spent on services provided by the health plans. From 2001 there has been funding earmarked for new technologies for services provided directly by the government in areas such as public health, prevention, geriatric care and psychiatric care. It remains to be seen whether these funds will be allocated using a serious prioritization process, similar to the prioritization process for funding new technologies for the NHI benefits package.

Complementary sources of financing

Table 4 presents data on the current sources of revenue of the health plans as a group. The vast majority of the health plans’ revenue comes from the government as part of its obligations under NHI. The next largest source of revenue source comes from cost sharing, primarily for pharmaceuticals.

Table 4. Health plan financing sources, 2000

Source of financing % NIS (millions)

NHI-mandated revenue from government 87% 18 237 Temporary ‘safety net’ funding 1% 187 Co-payments for physician visits 1% 281 Co-payments and sales of drugs 7% 1 464 Supplementary VHI surpluses 1% 181 Services outside the benefits package 2% 456 Other 1% 222 Total 100% 21 028

Source: Witowsky 2000.

The health plans also offer supplementary VHI (described more fully below) to all members in exchange for a monthly age-related premium. Supplementary VHI constitutes about 5% of health plans’ revenue. However, this is not re- flected in Table 4, which indicates only 1% of revenues emanating from the profits from supplementary VHI due to the fact that supplementary VHI is run as a separate financial entity and only carry-overs to the main account appear in the health plans’ official financial statements.

Table 5 presents data on household expenditure on health in selected years between 1992 and 1999. Household spending on health accounted for 8.3% of total household consumption in 1999, up from 7.1% in 1993 (CBS 2002a). Approximately half of household spending on health was for the health tax, which replaced the voluntary health plan premiums in 1995. The two items of

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Health Care Systems in Transition

expenditure that have grown most rapidly in recent years are medications and supplementary VHI premiums (discussed further below).

Table 5. Average monthly household spending on health (NIS in 1999 prices), 1992–1999

1992/1993 1997 1999

Total household expenditure 8 490 9 427 9 619 Total health expenditure 599 751 794 (as % of total household expenditure) 7.1% 8.0% 8.3% Health tax (formerly premiums) 328 406 410 (as % of total health expenditure) 54.8% 54.1% 51.6% Non-tax health spending 271 345 384 – dental care 125 135 126 – medications 46 59 81 – all other health spending 43 58 77 – supplementary VHI – 19 39 – private physicians 42 53 37 – commercial VHI 15 21 24

Source: CBS 1993, 1997, 1999.

Out-of-pocket payments Cost sharing has long been a requirement of health care in Israel, including for preventive services at family health stations, visits to emergency departments and inpatient long-term care. Prior to the introduction of NHI, most cost sharing was for services financed by the government. The health plans mainly charged co-payments for pharmaceuticals. Only one of the health plans – Maccabi – charged a fee for visits to physicians. The NHI law required the health plans to freeze the pre-NHI level of co-payments.

In 1998 the Knesset authorized all the health plans, in principle, to charge their members for visits to specialists and community-based diagnostic centres. The health plans were also authorized to raise substantially their co-payment rates for pharmaceuticals. The Knesset stipulated that details of the co-payments would need to be approved by the Ministry of Health.

The new co-payments were part of a ‘package deal’ intended to alleviate the health plans’ financial deficits; other components of the package included increased government funding from general tax revenue and cost reductions by the health plans. It is generally recognized that, at the Knesset level, the primary motivation for the new co-payments was revenue enhancement. However, the Ministry of Finance insists that it pushed the legislation partly to reduce the frequency of unnecessary visits to physicians, with a view to containing costs.

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The co-payments are structured as follows:

• visits to physicians, specialized clinics and diagnostic centres: there is a flat-rate charge for the first visit in any quarter; repeat visits within the quarter to the same specialist; welfare recipients are exempt from co- payments; there is also a quarterly ceiling on total co-payments at the household level, which is 50% lower for elderly people; in 2002 the ceiling ranged from NIS 80 to NIS 140, depending on health plan; the ceiling is not a function of family size;

• pharmaceuticals: the three smaller health plans charge a percentage of the purchase price, subject to a minimum co-payment of NIS 12 (in 2002) per item purchased; for most medications, Clalit charges a set fee per therapeutic dose (a standardized amount of medicine, as defined by the health plan).

There is a quarterly ceiling of NIS 200 (in 2002) for co-payments for people with various chronic illnesses. In addition, pharmaceuticals used to treat chronic illnesses such as cancer are exempt from co-payments. At present there are no exemptions or discounts for low-income patients (Brammli-Greenberg et al 2003) or ceilings for households in general.

Health plans’ revenue from co-payments have grown markedly in recent years. For example, health plans’ revenue from co-payments of all sorts, plus revenues from sales of pharmaceuticals outside the NHI benefits package and from OTC sales, per age-adjusted member rose from NIS 136 in 1993 to NIS 256 in 2000 (in 1999 prices) and increased from 6% to 8% of health plans’ total revenue (Witowsky 2000).

There is evidence to suggest that the new co-payments have created financial barriers to access, particularly for people with low incomes (Gross and Brammli- Greenberg 2001). It is not yet known whether these barriers to access have had an adverse effect on health status.

Another important type of out-of-pocket payment is for private physicians’ services provided in community and hospital settings. In the community setting there are no legal restrictions on the provision of private care, apart from the stipulation that those physicians who also work in the public sector receive permission from their employer to practise privately. In practice, permission is almost always granted, although often with a limitation on the number of hours that the physician can practise privately. This situation is not monitored closely by the hospitals or the government, but if cases of serious abuse come to light, they are dealt with administratively.

In the hospital setting, physicians can legally practise privately only in private hospitals and in Jerusalem voluntary hospitals. Private services are currently illegal in government and Clalit hospitals. This is primarily due to equity

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Health Care Systems in Transition

considerations; at least in public facilities, all patients should receive the same level of care, irrespective of their ability to pay. Nevertheless, some physicians do practise privately in government and Clalit hospitals, in return for under- the-table payments. There is widespread disagreement about the extent of this phenomenon and initial attempts to estimate its prevalence have been beset by major methodological limitations. Policymakers are seriously considering legalizing the provision of private services in government and Clalit hospitals, subject to various regulations and restrictions. For further information on this issue and the current debate see www.jdc.org.il/brooksites/sharap_library.

As discussed in the section on Financial resource allocation, most government hospitals have established ‘health trusts’. These are distinct legal entities which engage physicians to work after hours, usually on a per-visit or per-operation basis determined by negotiation between the trusts and individual physicians. However, this activity is not primarily ‘privately financed’ in the sense of being funded by out-of-pocket payments or commercial VHI. Rather, the trusts’ revenue comes primarily from the sale of surgical and outpatient clinic services to the health plans during late afternoon, evening and night hours.

Voluntary health insurance There are two forms of VHI available in Israel: supplementary VHI offered by the health plans and commercial VHI (Brammli-Greenberg and Gross 1999). In essence the situation is characterized by competition between private insurers and public-private hybrids.

Approximately 60% of Israelis have supplementary VHI, which provides partial coverage for services such as visits to private physicians, treatment in private hospitals, complementary medicine, etc. Coverage is always taken out by individuals as opposed to groups. Eighty per cent of Maccabi and Meuhedet members are covered by supplementary VHI, compared to only 50% of Clalit members. Supplementary VHI packages and premium rates must be approved by the Ministry of Health. The Ministry of Health also requires the health plans to offer supplementary VHI to any member that requests it, for a premium determined by age alone (not health status). The health plans are prohibited from excluding pre-existing conditions.

About a quarter of Israelis have commercial VHI and about 20% are covered by both supplementary and commercial VHI. Private insurers are regulated by the Ministry of Finance’s Insurance Commissioner, whose main concern is to ensure that they have adequate financial reserves. Consequently, private insurers are free to reject applications on the basis of health status, exclude pre-existing conditions and rate premiums according to health status. In addition to partial

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European Observatory on Health Care Systems

cover of the same range of services covered by supplementary VHI, commercial VHI usually covers dental care. The cover provided by commercial VHI tends to be broader and deeper than the cover provided by supplementary VHI. Premiums are also higher. Approximately half of those with commercial VHI are covered by group policies, which are purchased by employers or unions but paid for by the individuals covered (Gross and Brammli-Greenberg 2001).

During the late 1990s there was a major policy debate about who should be allowed to offer VHI: the health plans, the private insurers or both (Gross and Brammli-Greenberg 1997; Kaye and Roter 2001; Brammli-Greenberg and Gross 2003).

Arguments in favour of allowing the health plans to offer VHI were that:

• it would give the health plans an additional source of revenue and managerial flexibility;

• it would make reasonably priced VHI coverage available to a wider range of people;

• it would make it possible to offer VHI based, at least in part, on solidarity principles.

Arguments against allowing the health plans to offer VHI were that:

• they would have an unfair marketing advantage over the private insurers due to their existing relationship with the members;

• they would favour those who purchased VHI with regard to the NHI benefits package by providing them with faster or more courteous service, thus undermining the NHI’s equity objectives;

• they might use public NHI funds to cross-subsidize VHI;

• they had relatively little experience of accumulating and maintaining actuarial reserves and might not have the financial discipline required to avoid spending in the present in order to accumulate reserves for the future – a concern particularly relevant to long-term care insurance.

Currently the government’s policy is to allow both the health plans and the private insurers to offer VHI, with the proviso that the health plans do not offer long-term care insurance.17 In addition, the health plans must operate supplementary VHI under separate financial accounts and may not use public NHI funds to cross-subsidize supplementary VHI. In practice, however, the health plans have used profits from supplementary VHI to help offset deficits in the NHI part of their activity.

17 The health plans may market long-term care insurance policies offered by the private insurers, but cannot serve as the insurer for these policies.

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A key outstanding issue is whether to allow supplementary VHI to provide cover for choice of physician in public hospitals, which are not allowed to take money from patients in return for the right to select a physician. For more on this issue see Brammli-Greenberg and Gross 1999 and Rosen 2001.

In recent years the proportion of Israelis with supplementary VHI coverage has increased markedly, from 37% in 1997 to 51% in 1999 to 65% in 2001. This is primarily due to a recent push on the part of Clalit to increase the proportion of its members with supplementary VHI. Relative to the other health plans, Clalit got off to a late start with regard to supplementary VHI because it was not a major provider of supplementary VHI prior to the introduction of NHI. Furthermore, the government-mandated NHI benefits package included everything that was included in Clalit’s basic pre-NHI package, but excluded certain services that were covered by the pre-NHI benefits package of the other health plans. The other health plans were therefore able to say to their members that if they wanted to preserve all their pre-NHI services they would have to purchase supplementary VHI.

The proportion of Israelis with commercial VHI coverage is currently 26%, with 20% of the population having both supplementary and commercial VHI coverage.18 The demographic profile of people with commercial VHI differs somewhat from that of those with supplementary VHI in that they tend to have higher incomes and better health. In the commercial market for VHI non-price limitations such as coverage limits, waiting periods, risk-rated premiums, the exclusion of pre-existing conditions and the rejection of applications for cover serve as a means of selecting healthier people and rejecting or charging higher premiums to less healthy people (Shmueli 1998, 2001).

An interesting issue recently raised by Brammli-Greenberg and Gross (1999) is whether, and under what circumstances, competition from the private insurers will push the supplementary VHI market into disequilibrium. The concern is that the private insurers will take advantage of their right to apply the non- price limitations mentioned above to select risks (cream skim), leaving the health plans, who are subject to regulations concerning open enrolment and community rating, with an ever higher concentration of people with poor health.

Indeed, in recent years there has been a small increase in the proportion of chronically ill people among those with supplementary VHI, alongside a small decrease of the same among those with commercial VHI, probably as a result of the new regulations requiring open enrolment for supplementary VHI. At

18 It is not known why so many people maintain both types of VHI coverage. It may be due to a lack of understanding of the extent of the overlap, a strong aversion to risk, the desire to have coverage for as many contingencies as possible or other factors.

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European Observatory on Health Care Systems

the same time there have been no signs of substantial movement of healthier people from supplementary VHI to commercial VHI, probably due to the marketing and distribution advantages enjoyed by the health plans and the fact that their supplementary VHI premiums only constitute a small add-on to the premiums they charge for NHI benefits. However, as the service and premium gaps between supplementary VHI and low-end commercial VHI are narrowing, the threat of cream skimming and disequilibrium is becoming more serious.

External sources of financing The health care system benefits from two sources of external funding. First, donations from Jews residing in other countries, primarily the United States and Western Europe, often play an important role in funding capital expenditure for new buildings, renovations and the acquisition of major equipment. Second, research grants from foreign governments and pharmaceutical firms play an important role in the financing of clinical and pre-clinic research.

Health care expenditure

As indicated in Table 6, in 2000 Israel spent over NIS 40 billion on health care, amounting to 8.2% of GDP. It is important to note that in the 5 years following the introduction of NHI in 1995, the share of health in GDP was relatively stable in the 1995–2000 period, in contrast to a sharp rise in the preceding decade. The share rose again precipitously in 2001 (CBS 2002a).

Table 6. Trends in total expenditure on health care in Israel, 1985–2002

1985 1990 1995 1997 1998 1999 2000 2001 2002

Value in current prices (billions of NIS) 2 236 8 136 22 417 30 205 33 060 36 511 39 707 42 594 44 850 Share of GDP (%) 6.6 7.3 7.9 8.2 8.2 8.2 8.2 8.7 8.8 Public share of total expenditure on health care (%) 68 65 70 73 73 71 70 69 68

Source: CBS 2002a.

The proportion of Israel’s GDP devoted to health is seen in a wider European context in Fig. 4 and Fig. 5. Israel spends 8.3%, which approximates the EU average. Prior to 1994 Israel spent below the EU average.

The level of health care expenditure in US $ PPP is shown in Fig. 6 and amounts to US $ PPP 1531 per capita in Israel, which is slightly lower than the EU average due to the fact that Israel’s GDP is relatively low.

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Health Care Systems in Transition

% of GDP

Georgia (2000) Belarus

Armenia (1993) Turkmenistan (1996)

Ukraine CIS average

Russian Federation (2000) Republic of Moldova

Uzbekistan Kyrgyzstan

Kazakhstan Tajikistan (1998)

Azerbaijan

Croatia (1994) Slovenia

Federal Republic of Yugoslavia (2000) Czech Republic Slovakia (2000)

Poland (1999) CSEC average (2000)

Lithuania Hungary Estonia

Latvia Bulgaria (1994)

The former Yugoslav Republic of Macedonia (2000) Romania (1999)

Bosnia and Herzegovina (1991) Albania (2000)

Switzerland (2000) Germany (2000)

France (2000) Greece

Malta Iceland (2000)

Israel Belgium (2000)

EU average (2000) Denmark

Portugal (2000) Netherlands (2000)

Italy Austria (2000)

Sweden (1998) Spain (2000)

Norway (2000) United Kingdom (2000)

Ireland (2000) Finland (2000)

Luxembourg (1998) Turkey (1998)

Fig. 4. Total expenditure on health as a % of GDP in the WHO European Region, 2001 or latest available year (in parentheses)

Source: WHO Regional Office for Europe health for all database. Note: CIS: Commonwealth of independent states; CSEC: Central and south-eastern European countries; EU: European Union.

0.8

1.2 1.6

2.3

2.6

2.9

2.9 3.0

3.4

3.5

4.2

4.6 5.1

1.9

3.5

4.5 4.5

4.7

4.8

5.5

5.7 5.7

5.9

6.2

6.5

7.4 7.6

8.2

9.0

4.3 6.0

6.6

6.7

7.3

7.5

7.7

7.9

8.0 8.0

8.1

8.2

8.4

8.7 8.7

8.8

8.9

9.2

9.5

10.6

10.7

0 2 4 6 8 10 12

123456789012345678 123456789012345678

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European Observatory on Health Care Systems

Fig. 5. Trends in total expenditure on health as a % of GDP in Israel and selected European countries , 1990–2001

5.5

6.5

7.5

8.5

9.5

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Denmark Israel Netherlands United Kingdom EU average

Source: WHO Regional Office for Europe health for all database. Note: EU: European Union.

Fig. 7 shows the proportion of total expenditure on health care from government or public sources. With 68% of total expenditure from public sources, Israel is among the lowest of the European region.

1998 is the most recent year for which there are data on expenditure by type and service. In that year fixed capital formation accounted for 4% of national health care expenditure and current expenditure accounted for 96% (CBS 2002a). For current expenditure the breakdown was as follows:

Hospitals and research 41% Public clinics and preventive care 39% Dental care 9% Private physicians 4% Medicines and medical equipment purchased by households 6% Government administration 1%

As indicated in Table 7, a decade previously, the share of public clinics and preventive care was a somewhat smaller 33%, while the shares of hospitals and research and dental care were somewhat larger, at 43% and 13% respectively (CBS 2002a).

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Health Care Systems in Transition

US $PPP

Fig. 6. Health care expenditure in US $PPP per capita in the WHO European Region, 2000 or latest available year (in parentheses)

Source: WHO Regional Office for Europe health for all database. Note: CIS: Commonwealth of independent states; CSEC: Central and south-eastern European countries; EU: European Union.

1389

1556

2420

3222

26 49

112

136

160 192

243

332

214 229

272

338 358

426

536

557

594

690

841

1031

297

1399

1441

1522

1664

1671

1748

1763

1953

2032

2123

2162

2246

2268

2269

2349

2608

2613 2748

0 1000 2000 3000 4000

Switzerland Germany

Luxembourg (1999) Iceland

Denmark France

Belgium Norway

Netherlands Austria

EU Average Italy

Ireland United Kingdom Sweden (1998)

Israel Finland

Spain Malta

Portugal Greece Turkey

Slovenia Czech Republic

Hungary Slovakia Estonia

Poland (1999) CSEC average

Lithuania Croatia (1994)

Latvia Romania (1999)

The former Yugoslav Republic of Macedonia Bulgaria (1994)

Albania

Belarus Russian Federation

CIS average Ukraine Georgia

Kazakhstan Armenia (1993)

Uzbekistan Republic of Moldova

Kyrgyzstan Turkmenistan (1994)

Azerbaijan Tajikistan (1998)

1234567890 1234567890

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Source: WHO Regional Office for Europe health for all database.

Fig. 7. Health care expenditure from public sources as a percentage of total health care expenditure in countries in the WHO European Region, 2001 or latest available year (in parentheses)

Percentage

Luxembourg (1999) Iceland (2000)

Sweden (1998) Norway (2000)

Denmark United Kingdom (2000)

Turkey (2000) France (2000) Ireland (2000)

Italy Finland (2000)

Germany (2000) Belgium (2000) Portugal (2000)

Spain (2000) Austria (2000)

Israel Netherlands (2000)

Malta Switzerland (2000)

Greece

Bosnia and Herzegovina (1991) Bulgaria (1994) Croatia (1996)

Romania (1999) The former Yugoslav Republic of Macedonia (2000)

Czech Republic Slovakia (2000)

Slovenia Albania (2000)

Estonia Poland (1999)

Hungary Lithuania

Latvia

Kyrgyzstan (1992) Kazakhstan (1998)

Belarus (1997) Ukraine (1995)

Republic of Moldova (2000) Georgia (2000)

100

0 20 40 60 80 100 120

12345678901234

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The distribution of current expenditure by operating sector was as follows in 1998:

Government and local authorities 22% Health plans 41% Other non-profit institutions 12% Business sector 25%

Table 7. Health care expenditure by type and service, 1988 and 1998

1988 1998

Hospitals and research 43% 41% Public clinics and preventive care 33% 39% Dental care 13% 9% Private physicians 5% 4% Medicines and medical equipment purchased by households 5% 6% Government administration 1% 1%

Source: CBS 2002a.

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European Observatory on Health Care Systems

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Health Care Systems in Transition

Health care delivery system

Primary care19

Primary care is highly accessible in Israel. In three of the four health plans, the cost of primary care visits to health plan physicians is fully covered by NHI where co-payments are limited to specialist visits. There

are over 5000 primary care providers (PCPs) working with the health plans throughout the country. Only 5% of respondents reported having to wait more than 3 days for an appointment with a PCP and two-thirds of respondents visited the PCP on the same day that they called. Sixty per cent of the respondents waited for less than 15 minutes before seeing the PCP. Eighty- nine per cent reported being satisfied or very satisfied with the professionalism of their PCP and 93% reported being satisfied or very satisfied with the inter- personal skills and behaviour of the PCP (Gross and Brammli-Greenberg 2001).

Primary care in Israel has improved substantially in recent decades. Historically, very few graduates of Israeli medical schools pursued careers in primary care. The immigrant physicians who provided the bulk of primary care were not always able to communicate effectively with the population groups among whom they worked. Few of them had specialty training in family medicine or other primary care specialties and there were serious questions about the quality of the care they provided. The clinics tended to be poorly run, under-staffed, characterized by long waits and disputes among patients about whose turn was next and, in some areas, poor facilities.

Israel has had one of the world’s highest rates of visits to physicians per thousand population20 (Sax 2001; Shuval 1988), partly because patients’ medical

19 This section was prepared in consultation with Revital Gross. 20 These international comparisons included visits to primary care physicians and specialists, with visits to primary care physicians accounting for t

Informations clés

Organisation Organisation mondiale de la santé (OMS)

Type de document Publications

Date d'adoption 1 janvier 2003

Source Organisation mondiale de la santé