Israeli lessons for America about health reform

Our health system offers an interesting dynamic between private sector competition and state involvement.

top health 224 (photo credit: )
top health 224
(photo credit: )
Two main reasons are given for the necessity of health reform in the United States: The huge number of uninsured (one out of six Americans) and the escalation of health-care costs, which reached 16 percent of gross domestic product in 2007, or $6,500 per capita. These figures are the highest in the world, and far behind the health-care expenditure in Israel (8% of GDP or $2,000 per capita). Efficiency and access head the list of problems in the US health-care system. The dilemma which President Barack Obama needs to address is not the trade-off between affordability and efficiency, but r the trade-off between a competitive market (which has experienced failures in the area of health) and the level of government intervention necessary to improve access and fix those failures. Israel's experience with the National Health Insurance Law provides an important test case for the US. The implementation of the NHIL in 1995 was one of the country's most important social revolutions since its establishment. According to the law, all Israeli residents are insured, and there is an extensive benefit package backed by legislation. The incentives for screening insurees have declined, and insurees have complete freedom of choice of all four health funds. This led to improved accessibility to health services and to greater efficiency without inflating public spending on health as a percentage of GDP, or inflating national expenditure on health. THE EVOLUTION OF the Israeli health system after the law's passage illustrates an interesting dynamic between private-sector competition and state involvement: Although the government provides universal access to a uniform basic basket of health services, it also encourages competition among the four health funds. A government-mandated coverage plan in conjunction with legislated freedom of choice (without limitation) has created a healthy degree of competition among the health funds, leading to an increase in the quality of patient services as a tool for attracting new members and retaining existing ones. It has also brought a level playing field in which the phenomena of "cream skimming," (a problem among health insurers in the US) has decreased. These developments are particularly instructive for the US, where the fear of government intervention and health mandates has led to the belief that an active public sector will "strangle" private competition. The case of Israel has shown the opposite effect. Additionally, in cases where the basic basket of services is felt to be restrictive, supplementary insurance plans have been established that provide additional coverage. Again, the private sector has adapted to the new model, and market forces are working to fill any gaps (real or perceived). Finally, and perhaps most importantly from the US perspective, the Israeli experience has shown that a government-mandated universal health-care system provided with a central, fair and efficient collection of revenues along with a central resource allocation mechanism does not necessarily lead to greater overall health spending. In regard to its implications for the US - where more than 1,000 health insurance companies are seeking contracts with millions of employers - perhaps one could suggest that the reduction of duplicative bureaucracies dedicated to the collection of fees and monitoring the overall cost of health plans through a nationwide standard of resource allocation formulae (based on adjusted age, gender, region and institutional status) has the ability to reduce a large proportion of the "overhead" that currently plagues the health-care market. The savings may be able to cover the costs of bringing all the currently uninsured into a national health insurance plan. Every American will be required to register in a recognized health fund, and these will have to insure everybody, with no exclusions for existing conditions - just as in Israel. The writer was for more than two decades deputy director-general of the Health Ministry in charge of economics. Today he is a professor in the Department of Health Systems Management at Ben-Gurion University.