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The Israeli Health Care System

by Bruce Rosen, Myers-JDC-Brookdale Institute

What is the role of government?

Government, through the Ministry of Health, is responsible for population health and the overall functioning of the health care system. It also owns and operates a large network of maternal and child health centers, about half of the nation’s acute care bed capacity, and about 80 percent of its psychiatric bed capacity (Rosen, Waitzberg and Merkur, forthcoming).

In 1995, Israel passed a national health insurance (NHI) law, which provides for universal coverage. In addition to financing insurance, government also provides financing for the public health service, and is active in areas such as control of communicable diseases, screening, health promotion and education, and environmental health, as well as providing various other services provided directly by the government. It is also actively involved in financial and quality regulation of key health system actors, including health plans, hospitals, health care professionals, and others.

Who is covered and how is insurance financed?

In 2013, national health expenditures accounted for 7.6 percent of GDP, of which about 60 percent are publicly financed.

Publicly financed health insurance: Israel’s NHI system automatically covers all citizens and permanent residents. It is funded primarily through a combination of a special income-related health tax and general government revenues, which in turn are funded primarily through progressive income-related sources such as income tax.

Employers are required to enroll any foreign workers (whether documented or undocumented) in private insurance programs, whose range of benefits is similar to that of NHI. Private insurance is also available, on an optional basis, for tourists and business travelers.

Nevertheless, there are people living in Israel who do not have health insurance, including undocumented migrants who are not working. Several services are made available to all individuals irrespective of their legal or insured status. These include emergency care, preventive mother and child health services, and treatment of tuberculosis, HIV/AIDS, and other sexually transmitted infections.

Within the NHI framework, residents can choose among four competing, nonprofit health plans. Government distributes the NHI budget among the plans primarily through a capitation formula that takes into account sex, age, and geographic distribution. The health plans are then responsible for ensuring that their members have access to the NHI benefits package, as determined by government.

Private health insurance: Private voluntary health insurance (VHI) includes health plan VHI (HP-VHI), offered by each health plan to its members, and commercial VHI (C-VHI), offered by for-profit insurance companies to individuals or groups. In 2014, 87 percent of Israel’s adult population had HP-VHI, and 53 percent had C-VHI (Brammli-Greenberg and Medina-Artom, 2015). C-VHI packages tend to be more comprehensive and more expensive than the HP-VHI packages. While C-VHI coverage is found among all population groups, coverage rates are highly correlated with income.

Together, these two types of private VHI financed 14 percent of national health expenditures in 2012, a figure that has been increasing steadily. The Ministry of Health regulates HP-VHI programs, while the Commissioner of Insurance, who is part of the Ministry of Finance, regulates C-VHI programs. The focus of C-VHI regulation is actuarial solvency, with secondary attention to consumer protection more generally; in HP-VHI regulation, there is more attention to equity considerations and potential impacts on the health care system (Brammli-Greenberg, Waitzberg and Gross, 2015).

Reasons for purchasing VHI include securing coverage of services not covered by NHI (e.g. dental care, certain life-saving medications, institutional long-term care, and treatments abroad), care in private hospitals, or a premium level of service for services covered by NHI (e.g., choice of surgeon and reduction of waiting times). VHI coverage is also purchased as a result of a general lack of confidence in the NHI system’s capacity to fully fund and deliver all services needed in cases of severe illnesses.

What is covered?

The mandated benefits package includes hospital, primary, and specialty care, prescription drugs, certain preventive services, mental health care, dental care for children, and other services. Dental care for adults, optometry, and home care are generally excluded, although the National Insurance Institute does provide some funding for home care, dependent on need. Limited palliative and hospice services are included in the NHI benefits package as well (Bentur et al., 2012).

Israel has a well-developed system for prioritizing coverage of new technologies within an annual overall budget set by the Cabinet (which includes Parliament members from the ruling parties) (Greenberg et al., 2009). Proposals for additions are solicited and received from pharmaceutical companies, medical specialty societies, and others. The Ministry of Health then assesses costs and benefits of the proposed additions, and a public commission combines the technical input with broader considerations to prepare a set of recommendations. These are usually adopted by the Minister of Health and subsequently by the Cabinet.

Cost-sharing and out-of-pocket spending: In 2012, out-of-pocket spending accounted for 26 percent of national health expenditures. Some of this was for services not included in the NHI benefits package, including dental care for adults, optical care, institutional long-term care (for those not eligible for means-tested assistance), certain medications, and medical equipment. The other major component was copayments for NHI services, such as pharmaceuticals, visits to specialists, and certain diagnostic tests. Dental care and pharmaceuticals are the two largest out-of-pocket components.

There are no copayments for primary care visits or for hospital admissions. There are also no quarterly or annual deductibles with NHI coverage. Within the NHI system, physicians are not allowed to balance-bill.

Safety net: There are a variety of safety-net mechanisms in place. For pharmaceuticals there is a quarterly ceiling for the chronically ill, and discounts for the elderly based on age, income, and health status. Holocaust survivors are exempt from copayments for pharmaceuticals. With regard to specialist visits, there are exemptions for elderly welfare recipients, children receiving disability payments, and people afflicted with certain severe diseases. There is a quarterly ceiling on total copayments for these visits at the household level, which is 50 percent lower for elderly people. In addition, people earning less than 60 percent of average wages pay a reduced health tax of 3 percent of income, instead of 5 percent.

How is the delivery system organized and financed?

Primary care: Nearly all Israeli primary care physicians (referred to as general practitioners (GPs) in this profile, although they also include board-certified family physicians) provide care through only one of the four competing nonprofit health plans, which vary markedly in how they organize care.

In Clalit, the largest health plan, most primary care is provided in clinics owned and operated by the plan, and GPs are salaried employees. The typical clinic has three to six GPs, several nurses, pharmacists, and other professionals. Clalit also contracts with independent physicians; although these doctors tend to work in solo practices with limited on-site support from nonphysicians, they have access to various administrative and nursing services at Clalit district clinics.

The other three health plans also use of a mix of clinics and independent physicians in primary care, with the mix varying across plans. In Maccabi (the second-largest plan) and Meuhedet, almost all of the primary care is provided by independent physicians, while in Leumit the clinic model predominates (though not to the same extent as in Clalit).

Members of all plans can generally choose their GP from among those on the plan’s list and can switch freely. In practice, nearly all patients remain with the same GP for extended periods.

In Clalit, each patient is registered with a GP who has responsibility for coordinating care and acts as gatekeeper, except for access to five common specialties. In Leumit, patients are registered with a clinic rather than a GP, while there is no registration in the other two plans. However, in all plans there is movement under way to associate each member with a physician for purposes of quality assurance and accountability. Clalit is the only plan with referral requirements to secondary care.

Independent physicians in all plans are paid on a capitation basis, with Clalit and Leumit using “passive capitation” (a quarterly, per member payment made irrespective of whether the member visited the GP in the relevant quarter) and Maccabi and Meuhedet using “active capitation” (where the payment is made only for members who visited their GP at least once during the quarter). Independent physicians also receive limited fee-for-service payments for certain procedures.

Plans monitor the care provided by their GPs and work closely with them to improve quality (Rosen et al., 2011). However, quality-related financial incentives are generally not used.

The salaries of Clalit clinic physicians are set via a collective bargaining agreement with the Israel Medical Association. The capitation rates of independent physicians, in all the health plans, are set by the plans in consultation with their physicians’ associations.

It is estimated that of Israel’s 24,000 physicians employed in 2011, approximately 7,000 worked with or for the health plans as GPs.

Outpatient specialty care: Outpatient specialty care is provided predominantly in community settings, either health plan clinics (the dominant mode in Clalit) or physician’s offices (the dominant mode in the other health plans). The former tend to be integrated multispecialty clinics, while the latter tend to be single-specialty. Most specialists are paid on an active capitation basis, plus fee-for-service for certain procedures. Rates are set by the health plans and, within the NHI system, specialists may not balance-bill; patients pay the quarterly copayment only. Patients can choose from a list of specialists provided by their health plans. Specialists who work for the plans may also see private patients.

Administrative mechanisms for direct patient payments to providers: As noted above, the only direct payments to NHI providers are copayments. Patients can usually use their health plan membership cards instead of making cash payments; the provider receives the full fee from the health plans, which then collect the copayments from enrollees.

After-hours care: After-hours care is available via hospital emergency departments (EDs), freestanding walk-in “emergi-centers,” and companies that provide physician home visits. Physicians providing care in EDs and emergi-centers come from a range of disciplines, including primary care, internal medicine, general surgery, orthopedics and, increasingly, emergency medicine. Nurses play a significant role in triage. They are typically salaried, while physicians working for home-visit companies are typically paid per visit.

Primary care physicians are not required to provide after-hours care. They receive reports from the after-hours providers, and increasingly this information is conveyed electronically.

All the health plans operate national telephone advice lines for their members, which are nurse-staffed with physician backup.

Hospitals: Acute-care bed capacity is divided approximately as follows: government, 50 percent; Clalit, 30 percent; other nonprofits, 15 percent; for-profits, 5 percent (Haklai, et al., 2014). However, the for-profits account for a much larger share of admissions and an even large share of surgical operations (Brammli-Greenberg and Artom, 2015).

Hospital outpatient care is reimbursed on a fee-for-service basis, and inpatient care is reimbursed using a mix of per diem and DRG arrangements, with approximately two-thirds of revenue coming from per diem payments (Brammli-Greenberg et al., forthcoming). Maximum rates are set by government, but health plans negotiate discounts. There are also revenue caps set by government, which limit the extent to which each hospital’s total revenues can grow from year to year. Generally speaking, hospital payments include the cost of the physicians working for the hospitals.

In government and nonprofit hospitals, physicians are predominantly salaried employees, with limited arrangements for supplemental fee-for-service in some hospitals. Fee-for-service is the predominant payment mode in private hospitals.

Mental health care: Responsibility for the provision of mental health care was transferred in mid-2015 from the Ministry of Health to the health plans, which provide care through a mix of salaried professionals, contracted independent professionals, and services purchased from organizations (including the Ministry’s mental health clinics). The benefits package is broad and includes psychotherapy, medications, and inpatient and outpatient care. Integration with primary care is currently limited, but this is expected to improve because of the transfer of responsibility to the health plans.

Long-term care and social supports: Financing of institutional long-term care is considered a responsibility of patients and their families, to the extent that they can afford it. An extensive system of needs-based, graduated subsidies is available from the Ministry of Health. These are generally paid directly to providers, although recently a change was made to the law to make it easier for families to receive cash subsides to be used in paying providers.

The health plans are responsible for medical care of the disabled elderly living in the community. In recent years, they have increased access to clinicians (particularly for the homebound) via home-care teams and telemedicine.

The National Insurance Institute finances personal care and housekeeping services for community-dwelling disabled elderly (Asiskovitch, 2013). Additional supports include an extensive network of day-care centers and a growing network of supportive neighborhoods.

For nursing homes, home medical care, and home aids, eligibility is based on inability to carry out activities of daily living. In addition, there are means tests for government assistance for nursing home and home aids, but not for medical home care provided by the health plans, or for any services provided through private insurance.

Private, for-profit providers deliver about two-thirds of nursing home care, virtually no medical home care (which is delivered by the private, nonprofit health plans), and nearly all home aids.

Although the government maintains that hospice care is included in the NHI benefits package that the health plans are supposed to provide, the plans dispute this. Some hospice care is available (particularly home hospice), though much less than is needed.

Approximately half of the adult population has private long-term care insurance. There is no direct financial support for informal or family caregivers.

What are the key entities for health system governance?

Parliament (the Knesset) adopts and amends legislation related to the health system. The Cabinet, comprising a selection of Knesset members from the ruling parties, has executive responsibility for the government as a whole, including the Ministry of Health (MoH). The MoH has overall responsibility for population health and the effective functioning of the health care system. It includes:

  • The Minister, an elected member of the Knesset and typically also a member of the Cabinet. The Minister has full authority and responsibility for the functioning of the MoH.
  • The Director-General, the MoH’s top professional, who is appointed by the Minister to run the operations of the MoH.
  • A large number of departments, including those responsible for quality and safety, assessing cost-effectiveness, fee-setting, public information, and health IT.
  • Various advisory bodies, including the National Health Council, a public advisory; the benefits package committee, which advises on prioritization of new technologies for inclusion in the NHI benefits package; and national councils in such areas as trauma care, mental health, and women’s health.

The Ministry of Health has an ombudsman’s office to help citizens realize their rights under the NHI law. In addition, there are various nongovernmental patient advocacy organizations, many of which focus on particular diseases.

The Budget Division of the Ministry of Finance prepares the budgets of all ministries, including the MoH, for consideration by the Cabinet and then the Knesset. It also plays a major role in promoting and shaping major structural reforms to the health system and partners with the MoH on interministerial committees, such as those that set maximum hospital prices and the capitation formula. The Ministry of Finance Insurance and Capital Markets Division regulates commercial health insurers. The government also has an antitrust unit responsible for promoting competition, but it is not very active in the health area.

The Scientific Council of the Israel Medical Association is responsible for the specialty certification programs and examinations, in coordination with the MoH. The Council for Higher Education is responsible for the authorization, certification, and funding of all university degree programs, including those for training health care professionals.

What are the major strategies to ensure quality of care?

For over a decade, Israel has had a well-developed system for monitoring the quality of primary care. Comparative quality data for individual health plans has been made public since 2014 (Jaffe, 2012). While the published data relate to the health plans as a whole, the plans have internal data by region, clinic, and individual physician. The plans and their clinicians have made intensive use of this data to bring about substantial improvements in quality (Rosen et al., 2011; Balicer et al., 2015).

The MoH publishes comparative data on the quality of hospital care. This system is much newer than the system for primary care quality and is currently limited to a handful of indicators. However, it is expected to develop rapidly over the coming years.

The MoH is in the process of launching a national initiative to reduce waiting times for surgical procedures, and there are several initiatives focused on the care of particular diseases, such as dementia. The health plans are increasingly active in implementing programs for the chronically ill, including disease management.

Hospitals and clinics require a license from the MoH, granted only when basic quality standards are met. Hospitals are also increasingly seeking, and securing, accreditation from Joint Commission International.

There are biannual surveys of the general population regarding the service level provided by the health plans. The MoH recently launched an annual survey of hospitalized patients. Results are published by institution.

There are currently no explicit financial incentives for hospitals and health plans to improve quality. However, due to the competitive environment, public dissemination of quality data may be providing an indirect incentive. Consideration is being given to introducing a limited number of pay-for-performance incentives in the years ahead.

National registries are maintained by the MoH for certain expensive medical devices and for a broad range of diseases and conditions, including: cancer, low birth weight, trauma, and occupational diseases.

To receive a medical license from the MoH, persons who studied in an Israeli medical school must also successfully complete a one-year internship. Those who studied abroad are usually also required to pass an examination. Specialty recognition requires specialty training in an accredited program and passing an exam. The there are no re-licensure exams for physicians.

What is being done to reduce disparities?

The MoH is leading a major national effort to reduce disparities, in cooperation with the health plans and hospitals. Key initiatives include:

  • Reducing financial barriers to care, particularly for low-income persons and other vulnerable populations. Most prominently, mental health care and dental care for children has been added to the NHI benefits package, thereby reducing the substantial financial barriers that existed when these services were provided privately (Rosen, 2012).
  • Enhancing the availability of services and professionals in peripheral regions, by increasing the supply of beds and advanced equipment in the periphery and providing financial incentives for physicians to work in the periphery.
  • Addressing the unique needs of cultural and linguistic minorities, through adoption of cultural responsiveness requirements for all providers, establishment of a national translation call center, and targeted interventions for the Bedouin and other high-risk groups.
  • Intersectoral efforts to address the social determinants of health and promote healthy lifestyles.
  • Creation, analysis, and public dissemination of information about health care disparities, including periodic reporting of variations in health and health care access.

What is being done to promote delivery system integration and care coordination?

The health plans, which are both insurers and providers, are essentially the sole source of primary care and the main source of specialty care. This structural integration of services provides the foundation for provision of relatively seamless care for all the insured, including complex and chronically ill patients. The plans’ health information systems link primary and specialty care providers, and a new national health information exchange is linking the health plans and the hospitals. Increasingly these provide access to electronic medical information at the point of care.

In addition, the health plans have put forth several targeted management programs that aim to provide comprehensive integrated care for complex patients with chronic conditions. These make extensive use of the plans’ sophisticated information systems, videoconferencing, and other innovative techniques (Intel, 2015).

Generally speaking, integration is still limited among the various components of the long-term care system and between long-term care and other components of the health care system. However, this may change in the future if long-term care becomes a responsibility of the health plans (see below).

What is the status of electronic health records?

All health plans have electronic health record (EHR) systems that link all community-based providers—primary care physicians, specialists, laboratories, and pharmacies. All GPs work with an EHR. Hospitals are also computerized but are not fully integrated with health plan EHRs. The MoH leads a major national health information exchange project to create a system for sharing relevant information across all hospitals and health plans.

Each citizen has a unique identification number, which functions as a unique patient ID. Patients have the right to get copies of their medical records from hospitals and health plans, and patients can access some components of their EHR online, but the full records are not generally available. Efforts are under way to set up secure messaging systems linking patients and their GPs.

How are costs contained?

Israel is one of the most successful high-income countries in containing costs, with health expenditures remaining below 8 percent of GDP. Strategies include:

  • Channeling the bulk of funding through a single, tightly controlled, government source
  • Maintaining tight controls on key supply factors, such as hospital beds and expensive medical equipment
  • Requiring the health plans—which function as the building blocks of the health system—to provide care competitively, within budgets that are largely determined prospectively
  • Maintaining a well-developed system of community-based services, which reduces reliance on high-cost hospital care
  • Using electronic health records effectively, particularly in the community
  • Purchasing pharmaceuticals in bulk and relying heavily on generics
  • Setting maximum hospital reimbursement rates (government), negotiating discounts (health plans), and instituting hospital global revenue caps
  • Explicitly prioritizing public funding for new technologies included in the NHI benefits package
  • Aligning organizational and financial incentives between clinicians and the hospitals or health plans for whom they work (see below).

Although clinicians are rarely given explicit financial incentives to contain costs, reliance on salary and capitation (rather than fee-for-service) may reduce incentives to over-treat. Moreover, the health plans have various internal processes to discourage care that provides poor value.

Of recent concern to some experts, however, is the recent growth of private medical care and private financing, which is seen as potentially jeopardizing Israel’s success in containing cost growth.

What major innovations and reforms have been introduced?

Mental health: In July 2015, mental health care was added to the set of services that the health plans must provide within the NHI framework, making access a legally guaranteed right rather than a government-supplied service whose availability is subject to budget constraints. Because of this new mandatory package of mental health services, government funding for health plans has been increased substantially to cover the additional costs. The main objectives of the reform are to improve the linkage between physical and mental care, increase the availability of mental health services, and increase efficiency. An external evaluation will ascertain the extent to which the objectives are achieved and whether various concerns are realized (Rosen et al., 2008).

Comparative data on hospital performance: In 2015, the MoH began publishing comparative data on hospital quality, and there are plans to rapidly expand the indicator set in the years ahead. In 2014, the Ministry published the results of a nationwide survey of hospitalized patients regarding their care experience. It is also assembling a database of waiting times for surgical operations, with the intention of publishing comparative data in 2016. The objectives of all these efforts are to provide hospitals with information to help identify problem areas, enhance consumer choice of hospitals, and provide hospitals with incentives to improve performance.

Reducing surgical waiting times: Long waiting times are perceived as one of the major causes of the recent growth in private financing and care provision. Motivated by a desire to improve public confidence in the publicly financed health care system as well as quality of care, the MoH is planning a major initiative to reduce surgical waiting times. This will involve additional funding to expand hours of operation for surgical theaters as well as a series of organizational changes to improve efficiency.

Improving service levels in hospital EDs: As part of a broader effort to improve patient-centered care and service levels, the MoH is launching a major effort to reduce waiting times between patient arrival and the first contact with a health care professional. Strategies are to include enhanced physician, nurse, and physician assistant staffing, as well as engaging operations management experts to improve workflow.

Long-term care insurance: Israel’s long-term care system is seriously fragmented, with service gaps, duplication of care, inefficient incentives, and inadequate investment in prevention and rehabilitation. The government is working on a plan to add institutional long-term care to the set of NHI benefits for which the health plans are responsible, with the plans also serving as the budget holders for institutional LTC.

Acknowledgements

This profile draws on the forthcoming Healthcare in Transition—Israel, by Bruce Rosen, Ruth Waitzberg, and Sherry Merkur, due to be published in early 2016 by the European Observatory on Health Systems and Policies. The profile also benefited from valuable input from Martin Wenzl of the London School of Economics and Political Science.

References

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