Israel’s Population: Deceptively Young
Author: Taub Staff Bulletin Articles

Israel is a leader in humane care for its elderly population, but expected demographic changes mean that careful planning will be required to sustain adequate care for the country’s aged.

Due to Israel’s high birth rate and relatively young immigrants prior to the 1990s, its population is characterized by a rather low share, about 10 percent of the general population, of elderly persons (defined as those aged 65 and over).  However, the proportion of older seniors within this group (those aged 75 and over) is relatively high, due to Israel’s comparatively high life expectancy.  Moreover, Israel’s rate of aging in the population is high compared with that of all other developed countries – and it has recently taken off with increasing health standards and rising longevity.

The first figure depicts the underlying demographic change.  Over the past twenty years – between 1990 and 2010 – the ratio of elderly persons to working age adults between the ages of 25 to 64 has been relatively steady, with approximately 160 elderly persons per 1,000 working age adults.  In the next twenty years – from 2010 to 2030 – this ratio is expected to steadily increase each year, reaching 230 elderly people in Israel for every thousand people of working age in 2030, an increase of over 40 percent in just two decades, probably the sharpest among developed economies.


This demographic picture indicates a substantial increase in future long-term care needs.  Older seniors tend to have multiple and complex health problems.  These problems often manifest themselves in functional decline and in a loss of independence in daily living, resulting in a growing need for hospitalization, facility-based care or constant caregiving in the home.  A forthcoming Taub Center policy paper by Dov Chernichovsky, Avigdor Kaplan, and Yohanan Stessman, partially summarized in the latest Taub Center State of the Nation Report 2011-2012, describes some of the challenges Israel faces in providing adequate funding for long-term nursing care.

The second figure gives an idea of what this heightened aging of the population could mean for future expenditures.  The horizontal axis shows the percentage of elderly over the age of 80 in the population in a variety of OECD countries; the vertical axis shows expenditure on long-term care as a fraction of GDP.  Israel’s currently low share of elderly in the population makes it one of the left-most points on the graph.  But on the vertical axis, Israel is near the OECD average, spending 1.4 percent of its GDP on long-term care.  However, when taking into account the relatively low share of those aged 80 and over in the population, Israel actually spends a comparatively high proportion of its GDP on this form of care.  While this can be an indication of high quality, it may also signify inefficiencies in funding.


How is this care funded?  Long-term care in Israel is characterized by a relatively large share of private funding.  Chernichovsky, Kaplan, and Stessman found that about 50 percent of care in Israel is privately funded, including both out-of-pocket expenses and private insurance.  Of the countries examined, only Switzerland has a higher share of private funding.  The OECD comparable average is only 16 percent, meaning that Israel’s private funding share for long-term care is three times higher than the OECD average.  And, a substantial portion of this spending is out-of-pocket and not insurance premiums.

One uniquely Israeli finding was that a remarkable 42 percent of private expenditure for continuing care is spent on the employment of foreign workers as personal caregivers to roughly 57,500 elderly people receiving assistance.  Partially as a result, Israel’s percentage of those cared for in the community and at home is especially high, at 86.5 percent of all Israeli long-term nursing care patients, compared with an OECD average of 50.7 percent.

The authors question the sustainability of current privately based funding of long-term care in Israel in the face of anticipated developments: an aging of the elderly population with rising needs on the one hand, and a likely decline in private funding capabilities, on the other.  In response to these same concerns, two government ministries – the Ministry of Finance and the Ministry of Health – have proposed different approaches for future funding of long-term nursing care in Israel.

The Ministry of Finance has championed turning the long-term care insurance managed by Israeli health care plans (health funds) that is based on age related but not individual risk-based subsidies into premiums based on individual risk.  As a result, weak groups currently subsidized by the stronger groups would have to pay higher premiums.  This approach runs counter to international trends.  International experience, including that of the United States, clearly indicates that the private insurance market cannot contribute substantially to resolving the issue of long-term care funding; as a result, the developed countries have given up on any private-market based solution to the problem.

By contrast, the Ministry of Health’s approach aspires to expand the universal healthcare coverage to include long-term care insurance for those currently lacking it with payment on an equitable basis.  This approach in financing the care conforms to international trends and to principles of equity and efficiency, but the idea of integrating this in the universal healthcare coverage runs contrary to the rather common approach in other developed countries (except Belgium and Switzerland) of not integrating long-term care with healthcare.

Among the solutions proposed in the study:

  • A pre-defined basket of long-term care services could be provided in the form of an allowance – in cash and in-kind, depending on the circumstances – funded by pooling all public resources that currently exist for long-term care from the various ministries and agencies, plus new mandatory insurance.
  • Some of the private, health fund-based insurance could be converted to this mandatory insurance, with the state making up the difference for less affluent sectors, on a means test basis.
  • Transparent criteria for eligibility and for various levels of aid could be created and administered.
  • All such arrangements would be managed by a government authority in charge of managing and administering the public long-term care budget.
  • Private insurance to supplement the public arrangement would remain intact.

Israel’s unusually low ratio of elderly to working age population eases the burden of financing good long-term care for its elderly population.  But anticipated demographic and economic changes will require the government to be more proactive in creating the conditions for continued high-level care for Israel’s aged.


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