'Slice the pie fairly to improve national healthcare'

The capitation formula allocates income among the health funds to encourage competition; But it isn’t working well enough.

Cake pie slice graphic 370 (photo credit: Thinkstock)
Cake pie slice graphic 370
(photo credit: Thinkstock)
The four public health funds – Clalit Health Services, Maccabi Health Services, Kupat Holim Meuhedet and Kupat Holim Leumit – would much prefer to have only young, healthy members who live in the center of the country. Their staffers would be more relaxed; expenditures would be reduced and income raised; and their provision of medical services so much easier and more pleasant. The insurers would try hard to lure such “desirable” members from other health funds and discourage “more expensive” members from joining, despite the fact that since 1995, every Israeli resident has had the right to be insured by any of the four.
The fact that health funds’ customer magazines still largely present smiling, vibrant, photogenic couples and their cute kids reflects this, even though the insurers have been instructed by Health Ministry director-general Prof. Ronni Gamzu to include many more images of the elderly in their publications and advertisements in the media.
But that false picture does not reflect reality in this or any other country. There are many people who have serious diseases.
There are elderly and disabled and people who live in the far-off and disadvantaged periphery of Israel, far from luxurious apartment towers in Tel Aviv and villas in Herzliya Pituah. And unless the insurers receive higher compensation for providing high-level medical services to the “other Israel,” they will be unlikely to seek them out.
“Capitation” is known to health systems around the world as a method of paying healthcare service providers a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care, per period of time.
In Israel, it refers more specifically to bonuses given to health funds for having members from the “other Israel” who are more expensive to treat. A fair “capitation” formula would establish genuine competition among the health funds; there is no point for an elderly person with chronic diseases or a younger one with in a wheelchair to join a health fund if there are no clinics or medical specialists in his area. If these are absent, those who need more and better healthcare will just remain in the fund they joined decades ago.
The tool was instituted in January 1995 with the passage a few months before of the National Health Insurance Law to compensate the insurers for “undesirable” members. Today, the capitation formula affects the distribution of NIS 27 billion of the NIS 30b. basket of health services, but experts agree that as the actual amounts of shifted money is not large, the effect has not been good enough.
The formula has been changed several times since the national health insurance system was established, each mini-reform recommended by a temporary committee of health administrators and government representatives; there is no permanent panel including academics who are experts in the field. The recommendations are studied and approved by the Finance and Health Ministries.
However, most of the changes in the capitation formula have not had a significant impact; they have shifted health fund allocations by only one percent.
The Health Ministry section of the State Comptroller’s semi-annual report published last Tuesday afternoon includes a discussion of capitation. Almost simultaneously, a conference on the issue was held at Jerusalem’s Van Leer Institute.
With an attendance of several dozen experts, it was organized by the Israel National Institute for Health Policy and Health Services Research (NIHP). This body is headed by former Hadassah Medical Organization director-general Prof.
Shlomo Mor-Yosef, who wears a new hat as director-general of the National Insurance Institute (NII).
Mor-Yosef, whose NII collects health taxes from residents’ monthly income and distributes them among the four health funds according to the number of members they have and the capitation formula, commissioned a study on capitation formulas.
It was conducted and presented at Van Leer by Prof. Leah Ahdut of the Ruppin Academic Center along with Prof.
Amir Shmueli of the Hebrew University.
The timing was coincidental: The NIHP, Mor-Yosef told The Jerusalem Post, ordered and financed the study a long time before the State Comptroller worked on the section dealing with capitation. But both were perhaps inspired by the fact that for the first time since 2010, a new committee will meet soon to consider an updated formula. But how should the formula be altered? Ahdut said at the conference that new thinking on capitation is required, adding more social and economic variables to the formula. The health funds are required to provide health services to all comers but – unlike private health insurance companies – they can’t set the premiums according to risk. Therefore, capitation is needed as a mechanism to compensate the health funds for expensive care that should be of high quality.
“It’s almost impossible to measure patients’ future needs, thus the formula is based on actual spending,” said Ahdut, whose study carried out with cooperation from Clalit Health Services (the largest health fund, with 52% of residents covered) began in 2008. A health and socioeconomic profile of about one million Israelis was used for the research. Clalit has relatively more members living in the periphery and more with lower socioeconomic status than the three other insurers. This mix is different from that of Maccabi Health Services, which has more young members living in the center on the country; Meuhedet also has many such members but also has a higher share in the periphery; while Leumit is between Clalit and Meuhedet in profile.
Interestingly, Ahdut found that the higher the socioeconomic level of a city, town or village, the higher the health expenditure.
One would expect that the lower the income and education level, the more would be spent. But people who are better off make more demands on the health system and are more aware of their privileges, especially regarding disease prevention, health education and early diagnosis. In the periphery, more money is spent for treating serious diseases and those related to aging, disability, cancer, diabetes and organ transplants.
According to research partner Shmueli, there is a clear economic benefit for insurers to have younger and healthier members.
Although the insurers must accept all who want to join them, “there can be hidden selection by giving incentives to attract the young and healthy through advertising, selective marketing, lower-quality services for people who are expensive to treat and locating clinics farther away from the needy.”
Despite the fact that the chronically ill and elderly need medical services more than others, they do not get more consultation time with doctors than the healthy and young, he continued. Countries like Belgium and Germany include in their capitation formulas the objective health condition of health fund members according to the type and number of prescription drugs they receive and the conditions with which they have been diagnosed.
Possible capitation variables such as whether a person is employed, how many children he has, whether he is married or not and even income are not very influential in making a fair balance and encouraging the health funds to give them preferential treatment, said Shmueli. Others, such as disability, the socioeconomic level of where members reside, gender and age are more helpful.
“It is only fair that residents in the periphery get the same treatment as people living in the center who have the same health problem,” said the HU researcher.
“It is possible to compensate health funds for their extra expenditure on patients who suffer from disability; this criterion should be in the formula, along with age, gender and socioeconomic factors. I don’t know if capitation formulas are the best way to compensate and provide balance, but if it is used, it has to be done right.”
Age was the main new criterion for capitation from 1997, prior to which only the number of members was used. Later, 11 different age groups were created for the formula instead of the original nine, giving more compensation for infants and the elderly.
Later, distance from the periphery was added as well, but all agree that the way it was calculated did not add significant money to people living in distant areas.
There are wealthy towns and villages such as Meitar, Lehavim, Omer and Kfar Vradim in the periphery, while there are concentrations of poor people in the center, thus causing complications in criteria for bonuses. More recently, gender was added as a criteria, as younger women cost more in their fertile years, while men generally get chronically ill at a younger middle- or old age than women.
The health funds still receive no bonus for meeting health targets such as reducing the number of diabetes, osteoporosis or stroke cases and other chronic conditions by prevention, health promotion and early detection.
The comptroller wrote that way back in 1994, it was recommended that a permanent capitation committee be appointed for ongoing followup on the distribution of health taxes among the insurers rather than the two ministries appointing a temporary committee once every few years.
The Health Ministry is willing to do this, but the Treasury opposes it. The issue of a permanent, professional body even reached the High Court of Justice, and in his latest report, the comptroller endorsed the idea, as did Ahdut and Shmueli. The comptroller also called for adding “health condition” according to medical diagnoses in the formula, which is common in Europe.
For this, updated databases on their membership must be prepared and presented by all four health funds to the authorities – such as the Central Bureau of Statistics – but the comptroller said this has still not happened.
“A health fund that is not compensated for large expenditures for treating ‘expensive members’ is liable not to invest the necessary resources needed by such a patient,” the comptroller wrote. He called on the two ministries to change the capitation formula properly so the insurers will have the incentive to care for the “other Israel.”
Keren Gefen of Meuhedet’s planning branch told the NIHP conference the supply of accurate and updated information about the health funds’ members is critical.
“Unsuitable data is used, making it hard to compare the four insurers. It is not uniform.
The time has come to have a permanent team including apolitical academic researchers without vested interests who know the technique and can report ongoing data.”
Mor-Yosef suggested that the NII, which is the pipeline that allocates health taxes, should be the basis for coordinating new capitation formulas.
“We don’t set policy, but we can have a national database of information and do research on how much money to add to the insurers. We should use this opportunity to share data. The health funds are more willing.
We must go forward quickly.”
Meuhedet director-general Prof. Asher Elhayani said it was unfortunate that “there is no incentive for the health funds to offer preventive medicine or to treat patients in a more sympathetic way. Dialysis should be prevented. Kidney transplants instead of dialysis can be provided. But since the antirejection drugs after transplants are very expensive, health funds could prefer to keep kidney-failure patients on dialysis,” he said, not mentioning that their life expectancies are seriously reduced as result.
“There must be incentives to make people in their 40s and 50s healthier.”
Health Ministry director-general Gamzu concluded that the conference took place at a good time because a new capitation committee is about to be appointed.
“The ministry wants to make big changes using a fairer and more professional mechanism.
But it won’t be a drastic change, because only 1% of allocations will be affected... We must not only slice the cake but make it bigger. The health funds should not have to face sudden major allocation changes. The system has to be stable.
Changing the capitation formula must not be opportunity for a health fund to eliminate its deficit but rather to improve healthcare,” he said.