Policy Paper

Wanted: Reduction of the Private in Privatized Healthcare Services in Israel

Israel’s healthcare system will continue to exist as a mixed public-private model. The balance between the two – the public and the private — is of critical importance, if we aspire to equality in access to healthcare.

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The literature describes healthcare in Israel as a mixed public-private system. This appears to constitute acknowledgment that, if it ever was, purely public healthcare is no longer considered viable, due to a chronic situation of insufficient public financing. Indeed, the last public committee that examined Israel’s health system reflected that view when it mentioned one aspect of a mixed public-private system that may even be advantageous: competition between public and private sector institutions.

In the following, we will differentiate between the financing and the supply of healthcare, and between the effects of what appears to be an increase in private provision of healthcare services on patients, physicians, health maintenance organizations (HMOs) and hospitals.

Firstly, in contrast to Sweden, Canada and Germany, where public and private health services constitute two distinct systems, in Israel there has been a blurring of boundaries between the public and the private sectors. Public Health Maintenance Organizations (HMOs) market their own, private insurance to members (the so-called supplementary insurance – supplementary, that is, to the universal basket of health services that every resident is eligible to receive), HMOs own private hospitals — Maccabi Healthcare Services owns a chain of 8 Assuta medical centers (4 hospitals and 4 clinics), Meuhedet Health Services owns three private medical centers; and Clalit Health Services owns 51% of Herziliya Medical Center, a private hospital. In addition, public hospitals sell private services; and private hospitals sell public services to the HMOs via a commitment to cover the cost of the service (Form 17).

Among analysts of healthcare systems, the conclusion appears to be that privatization, whether of medical insurance or actual healthcare provision (physicians, hospitals and clinics, HMOs), has a number of negative consequences on both equity in healthcare and on the viability of the public system. Privatization affects equity because not everyone can afford private insurance and private services; privatization affects the viability of the public system, because a private sector that develops parallel to the public sector “reduces the number of staff available to work in the public sector“. Moreover, with reference to the UK’s National Health Service, but relevant to other public health systems as well, “the public sector is progressively destabilized as private providers offer higher pay and select easier cases but contribute little to training [as training is done in public hospitals B.S.]”. Moreover, the private sector tends to recruit stars that serve as magnets for patients as well as for other doctors.

Obviously, the purpose of the healthcare system is first and foremost to provide services to persons in need of preventive and curative care. Just as obvious, the higher the public financing of healthcare services, the higher the potential for equity of access among those persons in need. But if the matter of financing is obvious, the matter of provision is not. If the public services are inadequate to satisfy demand, there is a logic and a praxis that says, whynot develop private services so that there are more opportunities for healthcare? This is true, of course. However, lest we forget, the private healthcare market, like other markets, is profit-driven rather than service-driven. It supplies not just services, but also business opportunities. Of necessity, then, private health services usually cost more than public services. In Israel, public health services involve national health insurance fees and copays for medications and physician visits, but not the full cost of the services, and certainly not profits.

If public services (physician visits, diagnostic tests, surgery) are not available in real time, that is, in time of need, the needy turn to private services, if they can afford them. (If they cannot afford private services, they may forego treatment). But if too many persons turn to private services, these, too, can become inaccessible. The infamous queue for public health services may be reproduced in the arena of private services, because supply is always finite and demand is not. Thus, despite the fact that many persons in need will not be able to afford private healthcare services and are not in competition for the same, the presence of two parallel systems – the public and the private – may very well sow the seeds of their own inadequacy, so to speak.