Nineteen years after enacting a universal coverage law, Israel continues to grapple with the triangular constraints of cost, access and quality that define the limits of any national health care system, according to David Chintz.

Speaking at a health policy seminar at the University of Pennsylvania’s Leonard Davis Institute of Health Economics (LDI), the Hebrew University Professor of Health Policy and Management provided an overview of the Israeli system. Entitled “Governing the Health Sector: Insights from Israel,” it detailed the country’s essential health benefits, information systems, financing and efforts to increase cost consciousness and quality improvement.

Second-to-last
In 1995, Israel became the second-to-last country of the developed world to provide health care insurance coverage to all of its citizens, leaving the U.S. as the only holdout.

“It was a big deal and a sea change not only in our health system but also in the whole Israeli political economy,” Chintz said.

Funded by a health tax and other government funding, the Israeli national system is administered through four different health plans. It guarantees a basic basket of health services to everyone and has established a transparent national Finance Ministry committee that governs what, if any, new services can be added to the basic basket each year.

Since 1998, the Ministry has indexed inflationary increases for that basket of services to the standard national inflation rate — and eliminated the previous practice of recognizing a separate and substantially higher inflation rate for the medical industry.

Tightly limited budget increases
The Ministry also limited the total of annual increases for those essential services to 1.5% of the total budget and only for “new technologies.” Chintz said a major controversy has been the Ministry’s unwillingness to recognize the increased cost of demographic changes in an aging population.

The tax revenues and government funding are pooled and distributed to the four health plans to pay for the basket of services according to a risk-adjusted capitation. For the first 15 years, that adjustment was exclusively for age. Since then, sex and socioeconomic status have been added.

HMOs that are part of the national system offer supplemental insurance for items not covered by the basic benefits.

“The (Finance Ministry’s annual budgeting process) process is very open, structured and orderly,” Chintz said. A 17-member Ministry committee consisting of 4 physicians, 4 economists, 4 health plan executives, 4 public representatives and the Ministry’s health ombudsman makes the decisions. The process is heavily covered by the press and the total funding requested is usually about ten times the amount the government agrees to spend.

115% hospital overflow rate
Chintz pointed out that Israel’s hospitals are “extremely efficient.” The average length of stay is four days; occupancy rate is 98% and during the flu season it rises to 115% as an overflow of patients are housed in the hallways.

This annual flu-season ritual, he said, “leads to a lot of press and questions about the financing of the health system.”

He said Israel now has 3.2 physicians per thousand residents, “but based on the age of our physicians and workforce, we anticipate a shortage that will dip below 3 per thousand. We’re making efforts to produce more physicians; we’re also very low in both the number of nurses-per-patient-population and the number of general hospital beds.”

Overall cost and quality
According to the latest Organization for Economic Co-operation and Development (OECD) figures, Israel’s health care costs constitute 7.5% of its GDP; in the U.S. they account for 17.9% of GDP.

According to the World Bank’s latest tally, Israel ranks 8th in the world for life expectancy; the U.S. ranks 26th.