By Jeffrey Barg

Published June 1988

• React to this article in the Discussion Forum.

PND: Can you describe Israel’s current health care system?

SG: Israel basically has had almost universal coverage all along largely because the labor union had an HMO for many years. Up to the time of the passage of national health insurance, 95 percent of the population was covered by voluntary employer-employee health insurance through sick funds. Originally the big one was the labor union sick fund. Over the years, the other sick funds began to bite into the sick fund of the labor union in large part because they skimmed. They selected younger people, and so they could offer better services for people who had means. The sick fund of the labor union was really limping along, getting the sick people, the old people. The government finally passed a tremendously politically controversial national health insurance bill. The bill basically provides for employer-deducted health insurance, collected by one collection agency and the money distributed to the four sick funds according to the number of members they have, weighted by the age distribution of the members. Also, the law provides that no sick fund can turn down any member. You can’t legally skim. There are ways, still, of skimming but it makes it more difficult. It also makes it less of a reason to skim because you’re getting paid more for an older patient. There’s free movement between sick funds now and everybody is covered. Meantime, over the last number of years, the major sick fund has been reduced in size by competition and now only has about 60 to 70 percent of the population. The idea was that competition would also improve services, which it did to some extent. Since 1996, you have four sick funds competing, getting paid by the government and taking the big sick fund’s basket of services. They were supposed to update the basket of services annually. There were inadequate provisions for three areas of inflation: an aging population, an increase in technology and a total increase in population. The Minister of Finance basically kept the lid on and did not provide adequate funding to do this, so every year there’s a crisis. Two of the sick funds are almost bankrupt because of this.

PND: Was the primary motivation for coming up with this form of health system to hold down costs?

SG: Every player has different motivations. The major sick fund was rescued financially by the national health insurance bill. But I think there’s a general feeling that health care should be provided for everybody without necessarily tying it to membership in the union or some organization. Everybody agreed in principle that there should be national health insurance. Most western countries now have national health insurance, except the United States.

PND: What was the position adopted by the physician organizations?

SG: I think they also wanted it. Most physicians are employees anyway, they always were, so that really didn’t worsen their position. Actually, one of the reasons that the system is bankrupt or having trouble is that, just before the bill went into effect, the physicians and nurses union negotiated a tremendous pay increase. This wasn’t taken into account in the cost increase. This is one of the reasons that the bill started off already with a deficit.

PND: Who was the primary payer?

SG: The physician negotiates with all the employers as a package. The employers are the Government, which has the Government hospitals, and the sick funds. The salaries are uniform. It’s one group of negotiations for everybody. Ultimately, the money comes from tax money. But the people who set the budget don’t necessarily take into account the negotiations.

PND: How many physicians are there in Israel?

SG: Israel probably has the most physicians of any other country in the world per unit population. They have over 20,000 physicians. The number of physicians in Israel doubled in a five year period by immigration from the Soviet Union. Think what would happen in the United States if 500,000 physicians came into the country over a five year period. That’s what happened in Israel. Over 12,000 physicians arrived between 1988 and 1993 on the shores of Israel. And before that, Israel already had a very high ratio of physician to patient, so they had a tremendous surplus of physicians. A significant number of them are still not employed as physicians and they never will be because there’s no way anybody can employ that number of physicians, absorb them into the economy.

PND: How would you evaluate the success of the system thus far?

SG: It depends what you compare it to. We were spending about a thousand dollars per capita on health care, which is about a third of what the United States is spending. There’s nobody in Israel who’s bankrupt like in the United States because of health care. Health care is available readily. It may not be as luxurious. It may not be as pleasant or offer as much choice, but I think most people are reasonably satisfied with the health care system. Each year we go into a problem. I don’t remember a year in Israel when there wasn’t a problem. Right now, because of the deficit, the Minister of Finance has come up with a plan which, at the present moment, cannot pass even with his own party because it aroused so much opposition. They said they weren’t going to raise taxes. So what did they do? Instead of raising the amount deducted from everybody or on a scale according to salary, they allowed each sick fund to put a head tax, a supplementary tax, and they’re allowing sick funds to charge a small amount per visit. It’s a whole package of what most health economists would regard as regressive taxation. In other words, the sick are going to be paying more at the time of illness. So now there is a big public uproar, every month that passes the deficit gets bigger and they’re going to have to come some head. I think this is the first time that there’s been a public outcry in Israel about health care. Consumer groups, the cancer society, diabetes, they’ve all gotten together and formed a very vocal constituency. The doctors and nurses have joined them too, each for their own reasons. The government doesn’t have the votes to pass it, so they have to go back to the drawing board and do something. What’s going to happen I don’t know.

PND: What do you think would be the best way to address the problem?

SG: What the Minister of Finance is proposing, to my mind, is insane. It’s going to require a whole new collection apparatus and then there are exemptions. It’s so complicated. The simplest thing and the least bureaucratic is to raise the ceiling so you have to pay a certain percentage of your income up to a certain amount and beyond that you don’t add anymore, or increase a tenth percent to affect everybody.

PND: How would you compare the Israel’s health care system to that in the U.S., and what could you see each learning from the other?

SG: Israel has always been committed to health care for everybody. That’s been axiomatic. There’s a very high proportion of dialysis compared to the overall income of the country. The highest number of IVF units in the world per population. Probably the highest number of transplantation units per population. If somebody needs a transplantation in Israel, they’ll raise money in the community, not to let somebody die. Although we’re getting away from socialism more and more, going to a free economy and America’s the model, that ethos still exists in Israel much stronger than it exists in the United States.

And yet, the quality of health care: there is no place in the world you can get better than in America. Competition has improved the quality of how the sick funds treat their patients because they don’t want to lose them to the other sick funds. On the other hand, it has also created competition which isn’t always healthy: competing not necessarily on what’s good for the patient, but what the patient would like. For example, the major sick fund used to require you to go to your family doctor before you go to a specialist. The other sick funds would let you go to your specialist directly. Whether that’ s good or bad, you can argue both ways. But because the other sick fund lets you go to your specialist, this sick fund has to do the same thing. Also, a tremendous amount of money was spent on advertising. You walk into a bus station and some girl would grab you and say, "You belong to so and so? If you join this sick fund we give you a suitcase or an umbrella. And you get three months free." It’s American stuff. How do you sell anything else? And there have been some tragic situations. I had a patient die because of that. She’s not too smart and her husband walked into one of these bus stations, some girl grabbed him and he switched out of the sick fund. The doctor in the other place didn’t really know the case, it’s a complicated case. So now they’re putting a clamp on that. But part of free market is free market. You give the public what it wants. Or what it thinks it wants.