A “Malignant Growth” in the Share of Private Expenditure for Healthcare and its Price
Author: Dov Chernichovsky, Guy Navon, Ronni Gamzu Policy Research

The achievements of the Israeli healthcare system – good according to all indicators, like the general health of the population, satisfaction with service and care, and cost of care – have been exposed in the past decade to an increasing risk following the steady decrease in the share of public funding of the system, and a corresponding rise in the share of private funding.

The situation exposes the system to increasingly to market failures and which are particularly problematic in Israel due to the unique arrangement whereby demand for privately funded services is encouraged in the publicly  funded healthcare system through privately paid supplemental insurance. Standing to gain extra incomes from privately paid MDs leave unduly their publicly paid posts, establish potentially unneeded private practices, and possibly adopt unnecessary technology.

These changes are expressed in the relative inflation in prices of privately paid healthcare that is spilling over into the cost of the publicly funded system. This inflation indicates a loss of efficiency and declining equity in healthcare. The public pays more but does not receive more services, comparable to the increase in spending. In terms of equity, rising prices relative to other prices and income also decreases accessibility to services which is harmed to start with by the increasing need for private funding to buy care. More than this, these developments are likely in the end to harm the public’s health and public health achievements. This is the story of the United States versus the other developed countries including Israel up until now. Despite the superiority of the American system from the perspective of technology and the level of resources invested in healthcare, its outcomes are modest by every indicator. The “Americanization” of the financing of healthcare in Israel which is currently expressed in inflation and its implications, brings Israel closer to the inferior elements in the American system.

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