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The Israeli Health Care System

by Bruce Rosen and Ruth Waitzberg, 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 (including the regulation of health care insurers and providers). 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.1

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

Who is covered and how is insurance financed?

In 2015, national health expenditures accounted for 7.5 percent of GDP, a figure that has remained stable during the last two decades. In 2015, 62 percent of health expenditures were publicly financed, a share that is one of the lowest among Organisation for Economic Co-Operation and Development (OECD) countries. (The Israeli figure is down from 63.5% in 2010 and 68% in 1995.)

Publicly financed health insurance: Israel’s NHI system automatically covers all citizens and permanent residents (aside from soldiers, who receive health care directly from the army). It is funded primarily through a special income-related health tax in combination with 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 benefit 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.2 HP-VHI premiums are age-related and cross-subsidized, and health plans cannot reject applicants. C-VHI premiums are risk-related, and coverage is tailored to consumers. C-VHI packages tend to be more comprehensive and more expensive than 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 2014. 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; in HP-VHI regulation, there is more attention to equity considerations and potential impacts on the health care system.3

Israelis purchase VHI to secure coverage of services not included in the NHI package (e.g., dental care, certain lifesaving 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 time). VHI is also supplementary to NHI, as it extends coverage of services in the health basket such as more physiotherapy or psychotherapy sessions. However, it does not cover user charges. 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 illness.

What is covered?

The mandated benefit 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 benefit package as well.4

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).5 Proposals for additions are solicited and received from pharmaceutical companies, medical specialty societies, and others. The Ministry of Health then assesses the 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 Ministry and subsequently by the Cabinet.

Cost-sharing and out-of-pocket spending: In 2014, out-of-pocket spending accounted for 23 percent of national health expenditures. Some of this was for services not part of the NHI benefit 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 (user charges) 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 per household on total copayments for these visits, 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 provide care through only one of the four competing nonprofit health plans, which vary markedly in how they organize care. (In this profile, we refer to primary care physicians as general practitioners, or GPs, although they also include board-certified family physicians.)

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 and 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 non-physicians, they have access to various administrative and nursing services at Clalit district clinics.

The other three health plans also use a mix of clinics and independent primary care practices, 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 who acts as a gatekeeper to secondary care, with the exception of five common specialties. In Leumit, patients are registered with a clinic rather than with a GP, and in the other two plans there is no registration. However, in all plans there is a movement under way to associate each member with a physician for purposes of quality assurance and accountability. Clalit is the only plan that requires referral 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.6 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.

In 2012–2014, Israel had an average of approximately 27,700 employed physicians. As of 2011, approximately 7,000 of them worked with or for the health plans as GPs.

Outpatient specialty care: Outpatient specialty care is provided predominantly in community settings, either in health plan clinics (the dominant mode in Clalit) or in physicians’ offices (the predominant 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, staffed by nurses 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.7 However, the for-profits account for a much larger share of admissions and an even larger share of surgical operations.8

Hospital outpatient care is reimbursed on a fee-for-service basis, and inpatient care is reimbursed using a mix of per-diem and activity-based diagnosis-related group (DRG) arrangements, with approximately two-thirds of revenue coming from per-diem payments.9 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 benefit package is broad and includes psychotherapy, medications, and inpatient and outpatient care. Integration with primary care is currently limited but is expected to improve because of the transfer of responsibility to the health plans.

Long-term care and social supports: The 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 range 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 elderly) via home care teams and telemedicine.

The National Insurance Institute finances personal care and housekeeping services for the community-dwelling seniors with disabilities.10 Additional supports include an extensive network of daycare centers and a growing network of supportive neighborhoods. An emergency call service, physician home visits, and social activities are offered. Additionally, in every community a facilitator coordinates social supports and apartment repairs.

For nursing homes, home medical care, and home aids, eligibility is based on the degree of 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 benefit 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.

diagram of health care system

What are the key entities for health system governance?

Parliament (the Knesset) adopts and amends legislation pertaining 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 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, assessment of cost-effectiveness, fee-setting, public information, and health information technology.
  • 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 benefit 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’s 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 2014.11 While the published data relate to the health plans as a whole, the plans also maintain internal data on regions, clinics, and individual physicians. The plans and their clinicians have made intensive use of these data to bring about substantial improvements in quality.12,13

The MoH publishes comparative data on the quality of hospital care. This data system is much newer than the system for primary care quality and is currently limited to a relatively small number of indicators. However, it is expected to develop rapidly over the coming years. In addition, a new effort is under way to develop and implement quality indicators for continuity of care between hospital and community settings.

The MoH is in the process of launching a national initiative to reduce waiting times for surgical procedures, and there are several other initiatives focused on the care of particular diseases, such as dementia. The ministry also collects and publishes data on individual hospitals’ waiting times for elective procedures. 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 as long as basic quality standards are met. Hospitals are also increasingly seeking, and securing, accreditation from Joint Commission International.

An independent research institute carries out biannual surveys of the general population regarding the service level provided by the health plans and the level of satisfaction with the health system. The MoH recently launched an annual survey of hospitalized patients, publishing results for individual hospitals.

There are currently no explicit financial incentives for hospitals and health plans to improve quality. However, owing 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 successfully complete a one-year internship. Those who studied abroad are usually also required to pass an examination. Specialty recognition requires training in an accredited specialty program and passing an exam. 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.14 Key initiatives include:

  • Reducing financial barriers to care, particularly for those with low incomes and other vulnerable populations. Most prominently, mental health care and dental care for children have been added to the NHI benefit package, thereby reducing the substantial financial barriers that existed when these services were provided privately.15
  • Enhancing the availability of services and professionals in peripheral regions by increasing the supply of beds and advanced equipment in those regions and providing financial incentives for physicians to work there. In addition, in 2010, a new risk adjustment related to place of residence in the peripheral regions was added to the capitation formula.
  • Addressing the unique needs of cultural and linguistic minorities through the 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.
  • Designating particular professionals within the hospitals and the health plans to be the leaders in their institutions for promoting equity and cultural responsiveness, along with government-sponsored training programs for them and for additional professionals.
  • Promoting greater poverty awareness at all levels of the health system.
  • Implementing intersectoral efforts to address the social determinants of health and promote healthy lifestyles.
  • Compiling, analyzing, and publicly disseminating information about health care disparities, including periodic reporting of variations in health and health care access and instituting an annual conference showcasing initiatives to reduce disparities.

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 a foundation for the 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. These systems are increasingly providing 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.16

Generally speaking, there is still only limited integration among the various components of the long-term care system and between long-term care and other components of the health care system. However, integration may be expanded 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 the health plan EHRs. The MoH is leading a major national health information exchange project to create a system for sharing relevant information across all hospitals and health plans.

Each citizen has an identification number that 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 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?

Among high-income countries, Israel is one of the most successful at 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 to reduce 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 global revenue caps for hospitals.
  • Explicitly prioritizing public funding for new technologies included in the NHI benefit package.
  • Aligning organizational and financial incentives between clinicians and the hospitals or health plans for which 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 overtreat. Moreover, the health plans have various internal processes for discouraging care that provides poor value.

Of 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.

Other growing concerns are the rapid increase in expenditures on pharmaceuticals, particularly those related to cancer care,17 and the future cost impact of the expanding field of biologic therapies and personalized medicines.18

What major innovations and reforms have been introduced?

Voluntary health insurance: In 2016, the government introduced several changes to the regulation of VHI, with an eye toward restraining growth in this coverage and providing consumers with greater value for the premiums they pay. Key components include the standardization of commercial insurance coverage for surgical operations and the requirement that VHI payments to surgeons be channeled through the hospitals in which they work.

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. 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.19

Comparative data on hospital performance: In 2015, the MoH began publishing comparative data on hospital quality, and the indicator set is rapidly being expanded. In 2014, the ministry published the results of nationwide surveys of hospitalized patients regarding their care experience, and a similar survey has been carried out in 2016. The ministry has also assembled a database of waiting times for surgical operations, with the intention of publishing updated comparative data in the near future. The objectives of all these efforts are to provide hospitals with information to help identify problem areas, to enhance consumer choice of hospitals, and to 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 raise public confidence in the publicly financed health care system and to improve quality of care, the MoH is planning a major initiative to reduce surgical waiting times. This will involve additional funding to expand the 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 staffing of physicians and nurses, the introduction of physician assistants into the EDs, and the engagement of operations management experts to improve workflow.

Long-term care insurance: Israel’s long-term care (LTC) 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 LTC to the set of NHI benefits for which the health plans are responsible, with the plans also serving as the LTC budget holders.

Full-timer program: In mid-2016, the MoH launched an initiative in which voluntarily selected physicians in public (i.e., government and nonprofit) hospitals will receive significantly enhanced pay in return for (a) working additional hours in a public hospital and (b) agreeing not to work in the private sector. The overall objective of the full-timer initiative is to strengthen Israel’s publicly financed health care system by improving its availability, quality, and safety.

Acknowledgements

This profile draws on “Israel: Health System Review,” by Bruce Rosen, Ruth Waitzberg, and Sherry Merkur, published in Health Systems in Transition, Vol. 17, No. 6 (2015), by the European Observatory on Health Systems and Policies. It also benefited from valuable input from Martin Wenzl of the London School of Economics and Political Science.

References

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3S. Brammli-Greenberg, R. Waitzberg, and R. Gross, “Integrating Private Insurance into the Israeli Health System: An Attempt to Reconcile Conflicting Values,” in S. Thomson, E. Mossialos (eds.), Private Health Insurance and Medical Savings Accounts: History, Politics, Performance (Cambridge University Press, 2016).

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13R. D. Balicer, M. Hoshen, C. Cohen-Stavi et al., “Sustained Reduction in Health Disparities Achieved Through Targeted Quality Improvement: One-Year Follow-Up on a Three-Year Intervention,” Health Services Research, Dec. 2015 50(6):1891–909 (e-pub March 19, 2015).

14T. Horev and H. Avni, “Strengthening the Capacities of a National Health Authority in the Effort to Mitigate Health Inequity—The Israeli Model,” Israel Journal of Health Policy Research, Aug. 15, 2016 5(19).

15B. Rosen, “Inclusion of Dental Care for Children in NHI,” Health Systems and Policies Platform.ha (2016).

16Intel Health & Life Sciences, Improving Health Outcomes and Reducing Costs with Video Conferencing Technology (case study), 2015.

17Y. Lomnicky, D. Kurnik, R. Loebstein et al., “Trends in Annual Drug Expenditure—A 16-Year Perspective of a Public Healthcare Maintenance Organization,” Israel Journal of Health Policy Research, Sept. 15, 2016 5(37).

18D. A. Goldstein, S. M. Stemmer, and N. Gordon, “The Cost and Value of Cancer Drugs—Are New Innovations Outpacing Our Ability to Pay?” Israel Journal of Health Policy Research, Sept. 22, 2016 5(40).

19B. Rosen, N. Nirel, R. Gross et al., “The Israeli Mental Health Insurance Reform,” Journal of Mental Health Policy and Economics, Dec. 2008 11(4):201–08.