Obamacare and the Writing on Israel’s Crumbling Health Care Wall

To get his health care reform passed, Obama had to make great concessions to interest groups. That doesn’t bode well for Israeli advocates of the U.S. system.

AP

Plenty of hot potatoes will land on the desk of America’s next president on January 20, from racism to pressure to respond to international terrorism. There will also be a giant ticking time bomb that no one is talking about and no one knows how to defuse: Barack Obama’s great legacy, the health care law meant to expand health insurance coverage to millions of people who lacked it.

Conservatives say the Affordable Care Act is a liberal plot to increase government meddling in the economy and in life in general, though they don’t exactly suggest any alternatives. But neither side is confronting the real problem of the program, and of American health care in general: The system is grotesquely bloated, distorted, expensive and arguably the most corrupt system in the West. Legal corruption, of course, is one of the American ways.

The upside of Obamacare is ending the situation in which 30 million Americans had no health coverage at all, and 50 million had poor coverage. The downside is that Obamacare didn’t tackle most of the system’s problems.

Obamacare is based on the private American medical system and was shaped by compromises with five major interest groups: the drug companies, the medical equipment companies, the insurance companies, the hospitals and the doctors’ associations.

These five have spent billions lobbying and wooing politicians in both parties. Hundreds of congressmen, senators and top administration people have joined these interest groups. Obamacare finally got through not because of the greater good of the unwashed masses, but because the big five figured it would make them richer.

Jacking up premiums

They’re not wrong. Insurance stocks have galloped ahead. The same goes for profits and executive salaries at Big Pharma, medical technology companies and hospitals. Specialist doctors in the United States were already earning beautifully before Obamacare, and now they’re earning even more, well outstripping America's pace of salary increases.

hospital
Tomer Neuberg

In the absence of genuinely addressing the waste, distortions and corruption in the American health system, Obamacare can’t survive as it is. In the past year, insurance companies in several states have jacked up premiums; the biggest insurer in Texas, for example, says it’s raising rates by 60%. In other states the insurers discovered too many sick and elderly to handle following the reform and simply jumped ship. Instead of raising premiums, they’re simply quitting Obamacare.

The “historic reform” that doesn’t really deal with the interest groups could well collapse, and fast, teaching a lesson to the do-gooder reformers for the greater good. The conclusion: If a politician announces a reform that hasn’t been preceded by a genuine battle against the affected interest group(s), it’s probably empty words.

Obama’s capitulation to the health care interest groups is a warning sign for health reform in Israel. It touches on the desire among Israeli insurers and leading doctors to adopt the American model. The danger, beyond worsening inequality and waste, is that private companies will arise that have tremendous clout in the political system.

Israel’s health insurance companies tend to stay low-profile, as do the senior doctors who have profited from the creeping privatization of Israeli health care in the last decade. They haven’t been behaving ostentatiously like some of the tycoons squeezing the life out of the Israeli consumer, but the personal economic interests in the health care system can be very much like those in any other market.

Big money for doctors

In 2013, the average income of Israel’s 100 best-paid doctors totaled 3.4 million shekels ($892 million) an average of 285,000 shekels a month. That’s 40 times Israel’s median pay. Most of that, 83%, stemmed from private business, not the public health care system.

High pay for doctors is usually considered a function of global competition for good people. But the truth is, resource allocation isn’t a function of supply and demand but of the government setting the rules of the game. In the case of the Israeli health care system, the government sets most of the rules by commission or omission. First and foremost, it decides how many new doctors will be added to the market each year.

Let’s see how doctors’ pay developed in the decade from 2003 to 2013, during which the government enabled a creeping privatization of the system and let the insurance companies offer supplementary private health care plans.

During that time, the top doctors’ pay rose by 146% in real terms (adjusted for inflation). Their income from the public health care system grew by 23% in that time, while their pay from the private companies grew by 230%.

These top doctors aren’t old (58 is the median age) and many have decades of work ahead of them. They specialize mainly in plastic surgery, OB-GYN, eyes and orthopedics. A private banking manager working at the Israeli branch of a major international bank says he’s seeing more and more doctors achieving pay grades that impel them to seek risk diversification for their millions of shekels.