Introduction
Economic and Social Aspects
of Israel's Healthcare System
Editors: Gabi Bin Nun, Racheli Magnezi
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‫היבטים כלכליים וחברתיים‬
‫במערכת הבריאות בישראל‬
Economic and Social Aspects
of Israeli's Healthcare System
First Edition: September 2010
ISBN π∑∏≠π∂µ≠µµµ≠µ±±≠∞
‫אין להעתיק¨ לשכפל¨ לפרסם¨ להוציא לאור או לעשות שימוש מסחרי‬
‫כלשהו בקובץ זה או בחלק ממנו¨ ובכלל זה במאמרים ובדעות המפורסמים‬
Æ‫בו¨ לרבות תרגומו¨ ללא הסכמה מראש ובכתב מאת העורכים‬
Language Editing: Lior Almog
Graphic Design: Nava Moscko
Print Production: Zisman Shiber
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  
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Introduction
Introduction:
Economic, Social and Organizational Aspects,
of Israel's Healthcare System
As of the 1970s, the national healthcare costs have risen consistently at a
rate higher than the national product of most western countries. An aging
population, modern treatments using new and expensive technologies, the
behavior of the patient as a consumer expecting to receive the best and latest
treatment at any cost, the expansion of the insurance coverage and the rise in
the standard of living - all gave rise to a growing gap between the clinical
capabilities of the healthcare system and the possibility of guaranteeing the
application of these capabilities to all. The perennial shortage of financing
has forced the State’s involvement in the establishment of priorities and in
the search for initiatives and methods for improving the organization and
management of the healthcare system. We will focus on some of these initiatives
in the Israeli system in the different chapters of this book.
The basis of the free market economic theory is the central concept that
competition in the marketplace is a primary means of achieving efficiency.
Examining the application of this equation in the field of healthcare shows that it
is flawed by a large number of market obstacles, including the existence of
external influences in the creation and consumption of health services, the
multi-faceted nature of the service, the lack of information, the asymmetry
of information between the suppliers and consumers of the medical services
and more. These market failures undermine efficiency and serve as a primary
justification for the State's involvement in the health systems.
Another central reason for the State’s involvement in organizing the economic
activity of the healthcare system is ideological: The prevalent philosophy that
views healthcare as a basic right that should, as far as possible, be guaranteed,
irrespective of the economic resources available to the healthcare consumer.
Examples of the State’s intervention in order to make the functioning of the
healthcare system more efficient, to repair the market’s failings and to better
the degree of solidarity that underlies it, are many and varied, and to a large
extent will be discussed in the various parts of the book. Most of the countries
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‫היבטים כלכליים וחברתיים במערכת הבריאות בישראל‬
in the western world impose various limitations on the availability of services
in order to control and audit the national expenditure on healthcare. Most
western countries are involved in the creation of standards and the
establishment of quality indexes, in order to fix the “quality” failures that result
from information gaps. Many states even regulate the system’s allocation
and accounting mechanisms, mainly in order to prevent the phenomena of
selectiveness with regard to beneficiaries or services. Moreover, almost all
western countries (including the United States at present) attempt to guarantee
universal coverage for a basic selection of healthcare services with extensive
public funding, in order to improve the equalitarian nature of the system. The
collection of articles presented in this book sheds light on various economic,
social and organizational aspects of the healthcare system in Israel, with
reference to all of the factors mentioned above, including efficiency, equality and
quality.
In the book’s chapters, we chose to include articles written by members of
the healthcare system who are experts in organization, economics and
administration, out of a desire that the chapters of the book will, as far as possible,
discuss relevant issues that are part of the healthcare system’s agenda in recent
years.
In the first chapter, which deals with The Economic Aspects of the
Healthcare System, Gabi Bin Nun and Nir Kaidar analyze the central trends
in the development of the national healthcare expenditure over the last
decade and compare these trends to parallel trends in the OECD countries. The
authors stress that while in most of the countries the share of healthcare costs
in the national product continues to rise, Israel is demonstrating stability and
even a slight drop in the percentage of the national product spent on healthcare.
This drop results primarily from the freezing of the system’s resources, specifically
hospital beds and personnel. In addition, the authors analyze the major trends
in the financing of the national healthcare expenditure and determine that
the share of private financing in the Israeli healthcare system is on the rise in a
manner that deviates from the worldwide trend.
Amir Shmueli, David Messika, Irit Zmora and Bernice Oberman deal in their
article with analyzing the cost of medical treatment provided by the sickness
funds (Kupot Holim) over the final twelve months of life. One of the interesting
findings presented in the article is that the average cost during the final twelve
months of life is approximately NIS 50,000, with half of the cost registered in
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Introduction
the first nine months. The authors note that the variables of age and sex that
serve as common variables in the mechanism used by the sickness funds for the
allocation of resources, cannot be used to predict pre-death costs. Therefore
it is recommended that the sickness funds be compensated for the high and
unexpected costs of the last year of life.
Dov Chernichovsky’s article examines the changes necessary to improve the
efficiency of the mechanism for the allocation of resources to the sickness funds
established in the National Health Insurance Law - a mechanism that today is
based solely on the variable of age. Among the article’s recommendations we
can note the author’s proposal to expand the number of variables used in
establishing the weights of the equation and to institute a periodic update
of the entire capitation mechanism and all its components through an
independent outside party.
In their article, Racheli Magnezi and Haim Reuveni propose a management
approach that would enable the improvement of organizational efficiency
through the contracting of an outside service provider that specializes in the
provision of unique services (outsourcing). In their article the authors review
different applications of this management approach in healthcare organizations
in Israel and in the world - in hospitals and in the sickness funds. The authors
present the primary advantages of this approach, such as the curbing of
costs, improving the quality of medical care, increasing the availability of
innovative technology and knowledge, and raising the level of satisfaction for
the caregivers and the patients.
Jonathan Halevy’s article discusses the question of the shortage of doctors
in Israel and the need to establish another medical school. This is in light of the
expected changes in the patterns of consumption of medical services by the
public and with an estimation of the future supply of doctors. Halevy presents
a number of key arguments that support the opening of an additional medical
school, including the need to address the expected shortage of doctors, the
large demand for medical studies in Israel and the rise in the number of Israelis
studying medicine abroad.
The economics chapter closes with an article by Elad Asher and Haim Reuveni
dealing with the phenomenon of defensive medicine in Israel and the rest of
the world, and its economic ramifications. In the article the authors note that
the prevalence of medical malpractice suits, as well as the lack of appropriate
legislation, results in the ill-advised use of healthcare resources. Court
rulings influence the clinical behavior of doctors and the level of the patients’
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‫היבטים כלכליים וחברתיים במערכת הבריאות בישראל‬
expectations, while at the same time increasing the costs of health services. In
the authors’ opinion, the minimization of defensive medicine requires extensive
public debate, at the end of which ground rules can be established for the
healthcare system that will provide a balance between the good of the patients,
the doctors and the public interest.
The second chapter of the book deals with The Organization of the
Healthcare Services, and opens with an article by Gur Ofer, who presents the
virtues of Maimonides’ “middle road” as a preferred model for the organization of
healthcare systems that integrate the public and private sectors. The author
describes the patterns of economic behavior of healthcare organizations that
operate in a nonprofit mode and march along the “golden path” - between
governmental bureaucracy and market organizations, between central planning
and control, and steering and channeling, and between budgetary balance and
the optimal provision of services.
In another article in this chapter Avigdor Kaplan presents the problems
inherent in the multiplicity of functions fulfilled by the Ministry of Health and he
points out that this multiplicity impairs the efficiency of the Ministry’s functioning
and even leads to built-in conflicts of interest. The author proposes a format
for a different organizational structure for the entire healthcare system that is
based on the establishment of two health authorities: a National Health
Authority and a National Authority for the Planning and Regulation of Healthcare
Services.
Naomi Shalom Rubinstein and Yair Shapira describe the complex process
involved in planning and building a new hospital in Israel. The article reviews
the planning and construction processes of the new “Assuta” hospital, with
reference to the ramifications of establishing a hospital in the commercial
medical environment of Israel in the 2000s. The description and analysis of the
planning of the hospital provides a glimpse of a unique business model in the
Israeli healthcare system.
In an article discussing the export of health services, Shlomo Mor Yosef notes
that one of the methods for expanding the sources of financing for the Israeli
healthcare system is by turning to the international market, which values its
high professional level. The author proposes a number of healthcare services
that can be exported, of which the principal ones incorporate medical tourism the provision of medical treatment in Israel to foreigners; the provision of
training and professional guidance in the healthcare field; and consulting on
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Introduction
large scale projects in developing nations.
Revital Gross’ article deals with the structure of the health insurance market,
its developmental trends, and the processes of governmental regulation of
complementary insurance and commercial insurance. The article stresses the
unique combination of private and public insurance in Israel and reviews the
related policy issues. The author presents the effects of the complementary and
private insurances on equality, on the basic basket of services and on mobility
between sickness funds. With regard to commercial insurance, issues such as
double insurance, the fairness of the insurance and under-usage of nursing
level policies are discussed.
The section on organization closes with an article by Asaf Toker and Haim
Reuveni that deals with medical personnel planning in Israel. The article
discusses the difficulty and complexity of long term medical personnel planning,
especially in light of the only partial information available on the subject. The
authors propose a number of steps to improve the information infrastructure,
such as re-registration of doctors and nurses and the establishment of a
national committee for the planning of manpower in the medical services. The
authors further propose an increase in the supply of doctors by expanding the
existing schools or through the establishment of another medical school and
the redefinition of the doctor’s job.
The third chapter of the book deals with Gaps and Inequality in Healthcare.
In their article Gabi Bin Nun, Yitzhak Berlovitz and Mordechai Shani
distinguish between the private and public sectors in two central dimensions of
the healthcare system: the expenses of supplying healthcare services and the
sources of funding for those expenses. In the article they provide an analysis
of the primary trends in the development of a public-private mix for the supply
and financing of healthcare services in Israel over the years. In addition, the
authors discuss the advantages and disadvantages of the organizational model
that integrates private funding within the public system (the option to choose a
doctor who is to be paid privately - private medical service).
Barbara Swirski’s article deals with the inequality in healthcare and presents
some of the social and economic factors that contribute to this inequality.
Among the factors discussed in the article are: inequality in the division of income,
gaps in education and in higher education, the erosion of the social safety net
and the reduction in government expenditure in contrast to the rise in the private
financing of healthcare services. In order to cope with the growing inequality
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‫היבטים כלכליים וחברתיים במערכת הבריאות בישראל‬
in healthcare, the author recommends the establishment of a monitoring
mechanism that will document the level of inequality that can be prevented
in the field of healthcare. The article further recommends improving the daily
living conditions and increasing the public financing of the healthcare system.
In their article Tuvia Horev and Nir Kaidar review the degree of
progressiveness inherent in the mechanisms of public financing of the Israeli
healthcare system, in order to examine how the current methods of financing
support the principles of equity and mutual aid that underlie the National Health
Insurance Law. The article presents the method of financing practiced in Israel
and proposes methods to improve the degree of progressiveness in collecting
health insurance fees, together with the restructuring of the deductible
payment system.
In his article Leon Epstein discusses the gaps in health prevalent in Israel
among different population groups and the development over the last decade of
a number of central health indexes. The article establishes that among the
prominent reasons for inequality and inequity in health are the cultural blocks
related to the background of the service providers and the members of the
establishment who determine the content of the service and the manner in
which it is operated. The author proposes a number of ways to reduce this
inequality, including reducing the gaps in the physical infrastructure and
preparing explanatory publicity material appropriate for the different cultural
backgrounds of various population groups.
The fourth chapter in the book deals with The Quality of Health Services
in Israel and opens with an article by Dan Greenberg, Ariel Hammerman
and Yossi Pliskin, who discuss the issues entailed in the economic evaluation
of medical technologies. The authors review the different approaches to
economic evaluation of technologies in the healthcare system, as well as the use
of these evaluations as a tool for supporting the decisions made in a number
of countries. The authors further describe the challenges of using economic
evaluation as a decision-supporting tool in the updating of the healthcare
basket in Israel.
Joshua Shemer, in his article, deals with the ramifications of the development
of new and sophisticated medical technologies and surveys the historical
development in this field. The author notes that the management of technologies
in medicine will continue to be a central process in healthcare systems and he
presents a number of examples of the evaluation of technologies in various
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countries around the world. In parallel the author analyzes the Israeli effort to
evaluate technology in the era of the National Health Insurance Law.
The article by Racheli Magnezi, Sima Reicher and Mordechai Shani
describes disease management programs, one of the management models
whose primary goals are maintaining the balance of the patient’s health and the
reduction of expenditure. This is part of the efforts of the decision makers to
achieve wise use of resources. In their article the authors point to the prevalent
diseases that are appropriate for the application of this method. In addition,
the article presents the tools and skills required for the execution of disease
management programs and reviews the existing models where experience has
been gained in the execution of programs of this type in the healthcare systems
both around the world and in Israel.
In his article Ronni Gamzu examines the ways of using the methods of settling
accounts between the insurer (the sickness funds) and the service providers
(the hospitals) as a tool for improving the medical quality. The article focuses on
the method of differential accounting and analyzes the development of its use
both as a tool for achieving efficiency and containing expenses and as a tool
for the promotion of quality both in Israel and abroad.
In their article Asher Elhayani and Sigal Regev Rosenberg discuss the
importance of executing control procedures in healthcare organizations. The
article describes different types of control used by the sickness funds in order
to improve efficiency and reduce the rate of growth of the cost per individual.
This is, inter alia, through the reduction of extraneous uses, improving
purchasing agreements and changes in the work processes. The authors
recommend the establishment of procedures and guidelines for the adequacy
of hospitalization, the registration of medicines and the use of laboratory tests
in order to prevent a lack of uniformity among the sickness funds, as well as the
construction of Israeli protocols as is customary around the world.
The production of this book and its editing would not have happened without
the enlistment of our fellow writers, who shared with us their knowledge and
professional experience and invested their time in writing the articles. Thanks
are extended to them all.
Special thanks go to Prof. Dan Meirshtain, the president of the Ariel University
Center, to the rector of the Center, Prof. Michael Zinigrad, and to Prof. David
Wolf, the vice president and the dean of R&D, who supported and aided in
financing the production of this book. A personal thank you to Prof. Yair
‫היבטים כלכליים וחברתיים במערכת הבריאות בישראל‬
Shapira, dean of the Faculty of Health Sciences, and to Mrs. Marta Ganot, Head
of Faculty Administration.
Thanks are also extended to Lior Almog, the language editor, who contended
with a lot of material with great skill in a short period of time; to Nava Moscko,
the graphic designer who demonstrated much creativity, dedication and desire
to help and promote the production of the book; and to Ziva Litvak and Sigal
Sheffer-Benton from the National Institute for Health Policy and Health Services
Research, for their constructive advice.
Gabi Bin Nun, Racheli Magnezi
Editors
September, 2010
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