New branch at Sha'arei Tzedek hospital (Olivier Fitoussi)
The panel in charge of improving public healthcare seems to be sick itself. Photo by Olivier Fitoussi
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Michal Fattal
Health Minister Yael German. Photo by Michal Fattal

In early March, the Health Ministry issued a progress report for a subcommittee of the committee headed by Health Minister Yael German that is examining ways to strengthen the public health care system.

Along with information about the subcommittee’s work, the press release noted that a summary of the work of the committee as a whole would be issued within two weeks. This was presumably an attempt to explain the delay in the work of the panel, which was convened in June and was expected to finish its assignment by the end of 2013. But 2013 is history, as are the two weeks since the March press release was issued. At this point, it’s anyone’s guess when the panel will conclude its work.

The committee appears incapable of concluding its deliberations. In recent weeks, there has been a ruckus over the recommendations of the subcommittee on health insurance, which would have the private insurance companies compete in providing coverage that is identical to the supplementary coverage offered by the country’s four health maintenance organizations. It would also bar the private companies from refusing to provide coverage to prospective policy holders.

The aim would be to improve the terms of the private medical insurance, which is currently very expensive, and to encourage competition between the private companies and the HMOs.

These goals are important, but how do they further the overall aim of the committee to strengthen the public health care system through which all Israelis are entitled to coverage?

There are increasing signs that the committee is running off course, not only off schedule, in its failure to restore the balance between the public medical system and private health care. The work of the subcommittees has generated an important recommendation strengthening oversight of government hospitals by transferring supervision of the hospitals from the Health Ministry to an independent agency. But where’s the bigger picture?

It is undisputed that in recent years there has been a sharp increase in outlays on private medical care, which has risen to 39% of all the nation’s spending on medical care. Put differently, only 61% of health care spending is provided by the government, below the average in developed countries (but significantly higher than the United States). The situation is the result of a shift by Israelis to greater reliance on private medical insurance. This in turn has delivered a major blow to the public health system while increasing disparities in the delivery of medical care.

There’s also no real dispute regarding why private medical care has been growing, at the expense of the public system. On one hand, doctors can earn more money working privately and therefore divert demand to their private practices by creating intolerable waits for appointments in the public system. This week one HMO, Maccabi Healthcare Services, reported waits of nine months to more than a year for simple ear-tube implant surgery for children at government hospitals. Because parents are unwilling to wait that long, most of these procedures are done privately, funded by the HMOs supplementary coverage or by private insurance.

On the other hand, the public wants private medical care, mainly because of long waits in the public system and because only the private system gives patients the option of choosing a surgeon. The switch to private health care is relatively easy: Nearly 75% of Israelis have supplementary insurance from their HMO, and about half of these individuals also carry private medical insurance.

There is also no argument about who wins and who loses in the prevailing situation. The big winners are the doctors, who supplement their generous public-sector salaries with incomes from private practice. Some have become millionaires in the process. The HMOs also win, by selling supplementary coverage and in large part saving themselves the expense of performing operations that are covered by insurance. It is thought that the four HMOs save about a billion shekels ($288 million) a year this way.

The private insurance companies are also huge winners, because they are selling duplicate insurance at a particularly steep price. For every 100 shekels in insurance premiums that the companies charge, they pay out on average only about 40 shekels, leaving the remaining 60 to be split between the companies and their insurance agents. Estimated annual profits in the health insurance sector are from 400 million shekels to 800 million shekels.

The government also wins, or so it thought until recently, because about 150,000 surgeries a year have been shifted from the public to the private sector. That’s a estimated annual savings of at least a billion shekels.

The problem, which the government only recently recognized, is that the public is the main loser, buying supplementary insurance for goods and services that in most cases are included in the government-subsidized health “basket.” This inefficiency inflates health care spending, hurts people who can’t afford health insurance and has the public paying multiple times for the same service—to the delight of the doctors and the insurance companies.

This is the problem the German committee was supposed to solve. But the parties involved cannot agree on a solution to the problem, and the committee is drowning in a sea of proposals that are impossible to reconcile.

The time has come for the committee to focus on the task at hand. Restoring the balance in the public health care system requires curbing doctors’ incentives to graze in more lucrative foreign fields. That’s the supply side. It also requires reducing the public’s incentive to seek out private health care funded by insurance instead of the public system. That’s the demand side.

A major step in the process must involve shortening wait times in the public system, which requires allocating more funds so as to increase the number of operations it offers and the compensation paid to its physicians. At the same time, carrot-and-stick policies should be employed to encourage the HMOs to redirect demand for private operations back into the public system. A similar approach should be used with the hospitals to guarantee that they do in fact increase the number of operations they perform. Steps must also be taken to rein in the private insurance companies, perhaps by increasing the scope of services that private hospitals are allowed to provide.

Ultimately, the German committee will have to answer the fundamental question, on the right of patients to choose their surgeon and whether it could be extended to the public health while preserving its public, egalitarian character. There may not be easy answers to these questions, but the committee must answer them nevertheless, and the sooner the better.