The Healthcare System: An Overview
Author: Dov Chernichovsky Policy Research

The Israeli population is relatively healthy compared to other developed countries; life expectancy has continued to rise over the past decade and is higher than the OECD average and similar to the average in Belgium, Germany, the Netherlands, and Switzerland – countries that have similar healthcare models to Israel (“similar countries”).

Life expectancy, though, is not sufficient to tell us about function levels and quality of life. Indices of loss of function due to premature death and disease burden paint a more complex picture. Although Israelis fare relatively well with regard to heart disease, stroke, and dementia, with regard to the disease burden due to chronic pain and diabetes, Israelis are at a relative disadvantage.

Funding the healthcare system

Israel’s national expenditure on healthcare remains lower than in other developed countries.

  • In 2018, national expenditure on healthcare out of GDP stood at about 7.45% – lower than the OECD average and lower still than the average in those countries with similar healthcare systems (11%). Even after adjusting for Israel’s relatively young population, expenditure is still low at about 8.4%.
  • In monetary terms, average health expenditure per capita (age-adjusted) in similar countries is $5,700, versus $3,300 in Israel.
  • The public portion out of all health spending is relatively low in Israel – about 64% versus about 78% in countries with similar systems.
  • Expenditures on voluntary insurance coverage continue to rise, primarily due to an increase in the share of commercial insurance and, since 2014, at the expense of supplementary insurance through the health funds.
  • The majority of insured individuals, primarily those with private commercial insurance and multiple insurance providers, indicate that they use insurance to cover surgeries and their choice of physician (mostly to shorten waiting times) as well as the financing of medicines not available in the healthcare basket.
  • The relatively high share of healthcare that is privately financed and the rise in the share of private commercial health insurance expose the system to increased disparities, including between the center and periphery of the country, as well as to market failures that manifest themselves in a rise in healthcare prices relative to other prices.

The price of medical care

Rising medical prices exacerbate health gaps and indicate a decline in the efficiency of the system.

  • In the current decade, per capita expenditure on healthcare rose faster than GDP per capita by about 4 percentage points. This increase has compensated for demographic changes – an increase in life expectancy (population aging) and high fertility rates. However, when taking into consideration the rise in medical prices relative to GDP price rises, the adjusted per capita rise is about 13 percentage points less than the increase without this consideration: the real adjusted expenditure on healthcare per capita has fallen in the current decade.
  • The OECD ranked Israel in fifth place in terms of level of healthcare prices – with prices that are 10% more than the US level, 26% more than the average in similar countries, and 53% more than the OECD average.
    index of healthcare basket prices in 2017
    Long-term care

Israel continues to face a challenge in the field of long-term care.

  • As of October 2019 commercial insurers in Israel decided to stop offering long-term care policies outside of those offered by the health funds.
  • According to Taub Center research, based, among other things, on international experience, commercial long-term care insurance is not viable because the client base is insufficiently large to accommodate paying out claims and there is actuarial difficulty in predicting the rise in long-term care needs.

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