Israeli Panel Offers Plan to Discourage Private Health Insurance

Committee proposes carrot-and-stick approach to HMOs as part of healthcare system overhaul.

Meirav Arlosoroff
Meirav Arlosoroff
The Assouta Medical Center in Tel Aviv, where many private operations are carried out, recently moved to new premises.
The Assouta Medical Center in Tel Aviv, where many private operations are carried out, recently moved to new premises. Credit: Ofer Vaknin
Meirav Arlosoroff
Meirav Arlosoroff

In an effort to improve Israel’s deteriorating public healthcare system, the country’s health maintenance organizations should be offered a package of penalties and incentives aimed at discouraging their members from using private supplementary insurance policies and instead using the state-subsidized health basket of services. This is one of the major changes under consideration by the committee headed by Health Minister Yael German, which is examining how to overhaul the ailing healthcare system.

The mechanism of carrots and sticks was devised by the panel’s subcommittee on health insurance, headed by Shlomi Parizat, and the full committee, headed by German, is expected to adopt the recommendations.

The health funds currently manage two parallel health budgets − the government’s subsidized health basket that funds a set list of medical services, and supplementary insurance budget, paid for privately by HMO members who opt to take it.

But there is some overlap between the two budgets. A large portion of the services provided by the taxpayer-funded health basket are also covered by supplementary insurance. The difference is that one is provided through the public healthcare system and the other is provided privately.

For example, a tonsillectomy can be done at a public hospital or at privately operated Assouta Medical Center. In the second, the policyholder can choose his or her surgeon.

In the first case, the HMO pays for the procedure out of its health basket budget provided by the state − that is, the taxpayers. In the second case, the procedure is paid for by the supplementary insurance policy. In practice this means that procedures paid through supplementary insurance will cost the HMOs nothing.

In fact, the HMO profits since health basket funding is allocated according to a statistical model and the number of members. The budget the HMO receives from the government covers a given number of procedures, even if many of them are carried out and paid for privately.

The funding system saves the HMOs an estimated 1 billion shekels ($290 million) a year and encourages the HMOs to push medical services out of the public health basket and into private medicine. Experts say this one of the main reasons for the growing imbalance between public and private medicine.

Incentive to return to public health system

On the demand side, the HMOs have encouraged members to use private medical services by allowing long waiting lists to develop in the public health system and by denying patients the right to choose their surgeon.

On the supply side, the HMOs have created conditions in which it is very difficult to schedule an operation or consult with a specialist through health basket-funded services, so patients feel they have little choice but to utilize their supplementary insurance.

The subcommittee proposes to pressurize the HMOs to improve public health services by manipulating the budget. The government would in effect fine HMOs for making significant use of supplementary insurance for services provided free through the health basket. The money taken from the offending HMO would be parceled out to the HMOs who make more use of the public health system.

The penalty is intended to force the HMOs to improve the public health system, in particular by shortening the long waiting lists for operations and appointments with specialists. Waiting times for specialists is solely in the hands of the HMOs, since they hire them and determine how many hours they devote to their patients. The issue of long waits for surgical procedures is more complicated, as the HMOs are dependent on the hospitals.

In this case, Clalit, Israel’s largest health maintenance organization, is in a unique situation as it owns its own hospitals and can shorten waits if it chooses. The Maccabi HMO, which has only one hospital of its own (the Assouta Medical Center in Tel Aviv), Meuhedet and Leumit have less control over the matter.

This difference could complicate the German committee’s carrot-and-stick program. But the committee is hoping that the hospitals will end up reducing the discounts they give the HMOs on their charges for procedures to improve their own shaky finances; in return, they will offer shorter waits.

This is another way to funnel more money to the hospitals, but at the same time it will make things more difficult financially for the HMOs, which have been running up deficits for years.

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