What’s the cost of health – and who’s paying?
Author: Taub Center Staff Bulletin Articles

More and more Israelis are turning to the private healthcare system in order to receive proper care

Overall, healthcare spending as a share of GDP has remained fairly stable in Israel over the past two decades, weighing in at about 7% of the GDP, which is low when compared with other OECD countries (10% on average). Most of this expenditure is paid by the government, as witnessed by the recently passed 2019 state budget, which included NIS 38 billion allocated to the Ministry of Health.

Alongside this public spending, a significant portion is paid directly by Israelis out-of-pocket. A recent Taub Center study sheds some light on the private-public divide in the provision of healthcare in Israel.

According to the study, the share of public funding out of the total national spending on health has dropped over the past decade: from about 70% to 61%. As a result, the Israeli government’s share in financing health services is currently 15 percentage points lower than the OECD average.

At the same time, there is a growing gap between supply and demand in Israel’s public health system. On the one hand, demand for medical care has increased over the past decade due to the rapidly aging Israeli population. On the other hand, there has been a drop in the supply of medical personnel in the system, at least in the public sector: the number of both physicians and nurses per capita have dropped since the early 2000’s.

As a result of the increasing excess demand in the public sector, more Israelis are turning to the private sector for their medical needs. Consequently, private spending on health has increased in Israel: from 4.5% of total household spending in 2000 to 5.7% in 2015. A large portion of the increase has been directed towards the purchase of private insurance plans, which rose from 18% of total household spending on healthcare to 37% over the same period.

 

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Of the citizens who report use of private medical services, 42% said they did so primarily in order to select the physician/surgeon of their choice. Another 22% turned to private healthcare in order to get a quicker appointment.

One of the great ironies of this is that Israelis are spending more out-of-pocket in order to receive proper care in private clinics, even though the care is often administered by the same doctors who work in the publicly-funded system. What’s more, doctors are known to refer their patients from the public system to their private practices.

This can be appealing for patients who are willing to spend more for better service (not to mention more lucrative for the doctors). However, the more time these doctors spend working in the private sphere, the more public facilities such as operating rooms are left underutilized. Additionally, more hours worked in the private system further exacerbates the problem of a limited supply of medical personnel in the public system.

Furthermore, as wealthier Israelis turn to the private system, gaps in access to health services are widening between households of different income levels and between the different geographic regions in Israel. While this, in and of itself, may not be problematic, it undermines the egalitarian spirit of the Israeli health system.

In recent years there have been a number of government efforts to address the challenges facing the public health system including efforts to shorten waiting times, prohibit doctors from referring their public system patients to their private practice, and allocating money to improving the infrastructure of hospitals.

However, there is still room for reforms in other areas including expanding physician choice in the public system and enacting policies that will result in an increase in the supply of medical practitioners. Improving Israel’s public health system could help to curb Israelis’ out-of-pocket spending on medical services and reduce socioeconomic disparities in access to quality medical care.

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