Israel--a health system in transition. (A Health System in Transition).

WHEN THE STATE OF ISRAEL WAS ESTABLISHED IN 1948, a well-organized network of health services was already in existence. This pre-state health system determines, to a large extent, the structure and content of the Israeli health system to this day. Its underlying ideology-- socialist ideals of mutual assistance and collective responsibility-- remains strong, at least as far as health services are concerned. Universal access to medical services continues to be seen in Israel as a basic right.

Prior to 1948, health services were provided by three different entities: the British Mandate government, private voluntary organizations, and a number of sick funds. The most prominent of these funds was, and still is, the General Sick Fund (KHC), established by the Federation of Hebrew Workers (Histadrut) in 1921. In 1948, the newly created Ministry of Health (MOH) inherited the functions of the Mandate government and some of the voluntary organizations, thus becoming, contrary to its original purpose, a provider of health services.

This pre-state legacy can explain some of the characteristics of the Israeli health system. Despite many favorable aspects, including high quality medical care, near universal insurance coverage, and high availability of services, the health system has attracted criticism since its earliest days. Problems of politicization, dissatisfaction, inefficiency, lack of integration, duplication of services, and the unclear role of the MOH were repeatedly the subject of investigations by government-appointed commissions. Only the last of these commissions had any result. In 1990, the Netanyahu Commission of Inquiry submitted its report and started a process that ended with the passing of a National Health Insurance law in mid-1994.

On the eve of the enactment of the new law, about 96 percent of the population in Israel was insured by one of four sick funds. Welfare cases were insured by the government through the National Insurance Institute, so that, in effect, practically the whole population was covered. (1) The sick funds offered their members a basket of services covering primary, secondary, and tertiary care. Which services exactly were included in these baskets was, however, never clear.

The sick funds are not only insurers, but also providers of services. Providing services was divided between a few entities. Mother and child preventive care was provided mainly by the Ministry of Health, as was psychiatric care and some long term care. Ambulatory care was provided by the sick funds themselves and tertiary care was provided in hospitals belonging to the KHC (until recently, the only sick fund that owns hospitals), government hospitals, and public hospitals. The MOH's involvement in providing care has been viewed as a conflict with its role as planner and supervisor f health services. Long-term planning and policy setting were neglected in favor of day-to-day management. (2)

During the 1980s, a financial crisis built up in the KHC, he largest of the sick funds. In 1993, this fund insured 67 percent of the Israeli population. (3) One reason for the crisis was the fund's connection to the labor federation, which meant that some of the fees paid by members were directed for use by the labor federation instead of the sick fund. This also meant that the KHC had to accept all those who were members of the labor federation, while the other sick funds accepted members selectively. This problem was not a new one, but the labor federation's close ties with the labor party, a central power in Israeli politics, frustrated any attempt to solve it by separating the two organizations.

The National Health Insurance law passed in 1994 and was made operational on the first of January, 1995. The law requires sick funds to provide a basic service basket, determined by the MOH and equal to all funds. The sick funds themselves are to provide all health services, thus allowing the MOH to focus on policy making and regulation. The basic basket is funded by a health insurance tax so that the cost for the citizen is the same across all funds. However, the funds are also allowed to offer supplemental insurance. The law stipulates that all Israeli citizens will be insured, and guarantees freedom of movement between the funds.

Finance

Israel spent 7.8 percent of its GDP on health in 1990 through 1993, similar to the 8 percent average of the OECD countries (Organization of Economic Development). (1) During the 1980s, Israelis turned increasingly to the private sector, and private payments for health increased from 20 to about 31 percent of national health spending, while government financing decreased from 45 to 21 percent. (1) Contributions by sick fund members and their employers constitute the rest of the total health expenditure.

Health insurance fees are collected by the government through the National Insurance Institute, which distributes them between the funds according to a capitation formula based on age.

Health status

Israel's population has expanded rapidly in the last 45 years, mainly through immigration. From 1.17 million at the beginning of 1950, the population rose to 5.32 million at the beginning of 1994. Though it is still young compared to most OECD countries, Israel's population has undergone a rapid process of aging--in 1960, only 5 percent were over 65 years old, compared with 9.5 percent in 1993.

Health status indicators, such as life expectancy and infant mortality, compare favorably with those of OECD countries. In 1990, life expectancy at birth was 76.7, higher than the OECD average of 75.8 and higher than that of the United States. (4) Infant mortality was 10.1 per 1,000 for males and 9.1 per 1,000 for females. (5)

These average figures hide geographic and ethnic differences which, in some cases, are quite prominent, despite similar accessibility to medical care. In 1990, there was a two year difference in life expectancy between Jewish and non-Jewish males (75.3 and 73.3 respectively), and a three year difference between Jewish and non Jewish females (78.9 and 75.9 respectively). Infant mortality among non-Jewish males was 14.3 per 1,000, compared with 8.5 per 1,000 among Jewish males. (5)

Preventive care

Up until the enactment of the NHI law, mother and child preventive care was provided mainly by the MOH for a small fee. This law mandated that these services be gradually passed to the responsibility of the sick funds, which would provide care free of charge. Attempts to implement this part of the law have met with severe resistance from the public and health providers, and the law has been amended to remove this provision. Immunization coverage for children is high--about 85 percent of the children receive polio, measles, and triple vaccine.

Primary and secondary care

Primary clinics are spread throughout the country in every community. These clinics include family physicians and pediatricians, and occasionally some specialists. Specialists also have their own clinics in the community. Sick fund members can either be referred to the specialists through their family physician or approach specialists directly.

Hospitals

Israel has about 32,000 hospital beds, 6 beds per 1,000 population. There are 47 general hospitals, with 2.4 per 1,000 beds. Forty-five percent of these beds are owned by the government, 30 percent by the KHC, and the rest by private or non-profit public organizations. Hospitals are prospectively budgeted by their respective central offices. Prices of hospital services are regulated by the MOH, and payment is made according to a per diem rate, with an additional payment by diagnostic related groups (DRG) for a list of 15 major procedures.

According to the National Health Insurance law, the Ministry of Health will no longer operate hospitals, and government hospitals will become independent corporations competing for contracts from the sick funds. This change has so far not taken place because of strong resistance by hospital labor unions. Instead, government hospitals now have to submit an annual business plan and they receive a capped prospective budget based on their performance in the previous year.

Pharmaceuticals

Pharmaceuticals, prescribed by sick fund doctors, are provided at a token price through private pharmacies and pharmacies located in the clinics. In recent years, the issue of adding new drugs to the list of those covered under NHI has become prominent. The NHI law included a process for updating the basket of services and pharmaceuticals, but, until recently, only two drugs were added. However, at the end of the third year of NHI, as part of the tense and highly politicized process of approving the State Budget, 15 drugs were added overnight. This issue is likely to pose a continual challenge to Israeli health policy in the near future.

Medical education and licensing

Israel has four medical schools supported by a network of teaching hospitals. The medical association is responsible for setting standards, conducting tests for medical specialties, and recommending graduates for licensing by the ministry of health.

More than 50 percent of the doctors have not studied in Israel. Some of these are Israelis who have studied abroad, and many are new immigrants. The immigration wave from the former Soviet block of the last few years has brought with it thousands of doctors. In 1988, there were about 12,000 practicing physicians in Israel--one physician per 342 people. By the end of 1993, the population of doctors was doubled by 12,000 immigrating physicians, only a small portion of whom have a chance of being absorbed into the health system in the long run. (7) The Netanyahu commission addressed this problem and recommended converting one or two medical schools into postgraduate centers and limiting the number of residency positions.

The devil is in the details

From among the many proposals of the Netanyahu commission, three main foci emerged: the National Health Insurance law, the change in the function of the Ministry of Health, and the change in status of the hospitals to independent corporations. It remains to be seen whether the other problems of the system will also be solved as a result of movement in these areas or whether issues such as manpower planning will require explicit attention.

As with any such change, the devil is in the details. One of the problems is the under-financing of the system. Technical problems have emerged in collecting the health tax, and there is a gap between forecasted and actual revenue. This has resulted in deficits of hundreds of millions of dollars for the sick funds, which, in turn, have accumulated huge debts to the hospitals. A financial crisis in the hospitals was averted only by the government stepping in to fill the gap. Fundamental arguments persist over the budget of the health system.

The mix of public and private medicine is another as yet unsolved question. There is uncertainty over the appropriate role of the supplementary insurance and the impact of private out-of-pocket health expenditures. Despite these problems, the national health law has so far been well received by the public. A recent survey found that 59 percent of the Israeli population were satisfied that the law has been adopted, and only 24 percent were not satisfied. (8)

Though it might be too early to evaluate the impact of the law, these results are encouraging. Israeli health reform, implemented after many failed attempts throughout the years, represents an attempt to solve problems of politicization, dissatisfaction, unclear roles of government and public organizations, and lack of financial accountability, while maintaining a high quality and universally accessible health system. The Israeli experience is of interest to other countries considering similar changes.

References

(1.) Chernichovsky D. and Chinitz D. The Political Economy of Health System Reform in Israel. Health Economics. 1995; 4:127-141.

(2.) Chinitz, D. Reforming the Israeli Health Care Market. Social Science and Medicine. 1994; 39(10): 1447-1457.

(3.) Chinitz, D. Israel's Health Policy Breakthrough: The Politics of Reform and the Reform of Politics, Journal of Health Politics, Policy and Law. 1995; 20(4): 909-932.

(4.) Kop, Y. "Achy but Healthy: Lessons from the Israeli Health Sector." IMF Working Paper, 1994.

(5.) State of Israel, Central Bureau of Statistics. Statistical Abstract of Israel, 1994.

(6.) Penchas, S., and Shani, M. Redesigning a National Health Care System: The Israeli Experience. International Journal of Health Care Quality Assurance. 1995; 8(2): 9-17.

(7.) Bernstein, J.H,, and Shuval, J.T. Occupational Continuity and Change Among Immigrant Physicians from the Former Soviet Union in Israel. international Migration. 1995; 33(1).

(8.) JDC/Brookdale Institute. "The health system in the eyes of the public in the aftermath of the implementation of the National Health Insurance law." Press release, December 26, 1995.

Avi Israeli, MD, MBA, FACPE, is the Associate Director-General of the Hadassah Medical Organization and Head of the Department of Medical Ecology and Health Management at the Hebrew University-Hadassah School of Public Health. He can be reached by calling 972/2677-6089, via fax at 972/2642-0219, or via email at [e-mail].

Yael Ashkenazi was formerly a Research Associate in the Department of Medical Ecology and Health Management at the Hebrew University Hadassah School of Public Health. She can be reached by calling 972/2675-8518 or, via fax at 972/2643-5083.

David Chinitz, PhD, is a Lecturer in the Department of Medical Ecology and Health Management at the Hebrew University-Hadassah School of Public Health. He can be reached by calling 972/2675-8518, via fax at 972/2643-5083, or via email at [e-mail].