Israel Failing to Invest Enough in Health Care, Bank of Israel Warns

Bank of Israel report warns that system is unprepared to cope with aging population.

Nir Kafri

Israel’s health care system is ill-prepared to cope with an aging and growing population because investment in hospital equipment and infrastructure has declined over the past decade, the Bank of Israel warned on Wednesday.

Infrastructure accounted for around 5% of all state spending on health care in 1990, comparable to spending levels for member states of the Organization for Economic Cooperation and Development at the time. But while the share of spending in OECD countries has since dropped to about 4% on average, in Israeli such expenditures fell more steeply, to as low as 3%, although they have rebounded slightly from their lowest levels.

“Low investment over the years has led to lower stock of capital in the Israeli health system in relation to the world, which is expressed, for example, a smaller number of general hospital beds and scanners,” the central bank said.

Israeli hospital buildings are older, their equipment less likely to be state of the art and wards more crowded than the OECD average. The bed occupancy rate for Israeli hospitals is 96.6%, compared to an OECD average of 75.1%. That might explain why hospital stays in Israel are just 4.3 days on average, two days less than in the OECD generally.

“Intensive use of existing infrastructure partly compensates for the shortage and helps Israel to achieve better health outcomes with lower spending, but it hurts patients and is reflected in crowded wards and long wait times,” the Bank of Israel said.

Any increase in spending on health between 2008 and 2010 was due to higher spending in the private sector, which accounted for about one-fourth of total spending on health care in Israel and enabled private health care to expand at the expense of the public sector. Despite the high levels of private-sector spending, private hospitals accounted for only 3.3% of all beds in Israel, it said.

The report comes amid a coalition fight over proposals to restrict private health care and to tax medical tourism in order to help shore up the public health care system in Israel.

Apart from private hospitals, those controlled by nonprofit organizations, such as the Hadassah and Shaare Zedek medical centers in Jerusalem, accounted for a third of all spending on hospitals, although such institutions contain just 20% of all hospital beds in Israel. Government hospitals, which accounted for 77% of all hospital beds in the country, received just 41% of the total allocations to Israeli hospitals.

The Bank of Israel said that in 2011, spending on fixed assets in the Israeli health system was 2.5 billion shekels ($650 million), 3.6% of total spending on health care — a slight improvement over the 3.3% average in the 2002-2011 period, but significantly below the 4.3% average of the previous decade. In OECD countries the average was 4.5%, according to the Bank of Israel report.

The decline in spending on health care in Israel over the last decade came even as the rate of population increase in the country outpaced the OECD average, a development that should have spurred higher spending levels, the report said.

The report noted the high level of government control over spending on health care: The country’s health maintenance organizations must obtain state approval for all new hospital construction or expansion as well as licenses to operate all medical equipment. As a result, Israeli hospitals have been slow to introduce new innovations in medical equipment.

“This policy ensures that the Israeli health care system remains efficient but it diminishes the level of service to citizens,” the report said. “In addition, the anticipated shortage of medical personnel in the future reflects to a large extent the low level of investment in medical education.”

The Bank of Israel said that the Health Ministry’s development budget was cut over the past three years, to just 470 million shekels in 2013. While government spending is allocated according to the size of a hospital’s operations, in fact the big medical centers in the center of the country have more financial resources than smaller one in the periphery because they raise their own money.