American Journal of Law & Medicine

Is a flat-line a good thing? On the privatization of Israel's healthcare system. (Follow the Money: The Impact of Economic on the Delivery of Health Care)


Israel presents an intriguing conundrum: on the one hand, it provides quality healthcare in a near-universal healthcare system; on the other, it has maintained healthcare costs level at approximately 7.7% of GDP. This comes at a time when all western nations struggle with one or both sides of the equation: how to offer affordable, good quality health care to the population while curbing the sharp rise in health related costs. This paper explains both how Israel has achieved this 'flat line" effect and the social and political costs of this achievement.


Israel's population of 7.5 million is equivalent to the 13th most populous U.S. state, and its sovereign territory of 8,500 square miles means it is roughly the same size as the 48th largest state. (1) In world rankings, Israel ranks 96th in population and 151st in territory. (2) Yet for better and for worse, this nation gets significantly more international attention that its sheer size would mandate. There are some obvious reasons for this phenomenon: the ongoing Israeli-Arab conflict, this historical significance of the holy land to Judaism, Christianity and Islam, and the strong ties between the United States and Israel. (3) There are some subtler reasons: Israel being the only Western democracy in the Middle East, (4) its nature as a social and cultural melting pot, and its ability to outperform similarly-sized nations in most fields of human knowledge. (5) Israel is viewed with particular interest in many fields of academic studies, including those of law and medicine in a comparative perspective. (6)

Israel's healthcare record--the education of personnel, extensive scientific research and the provision and funding of healthcare services--has similarly been subject to great international interest. (7) Following the tragic events of January 2010 in Haiti, Israel's sense of urgency and humanitarianism combined with hard-won practicality won its medical teams accolades as it set up the first fully functioning hospital in Haiti. (8) As researchers Rosen & Samuel observe:

Israel has emerged as a medical tourism destination due to the many advantages is offers, including first-rate quality of care at reasonable prices. Israel's facilities are recognized throughout the world, with regular contacts maintained on a reciprocal basis with major medical and scientific research centers abroad. Israel is frequently the host venue for international conference on a wide variety of medical topics. (9)

This paper, however, focuses on a topic that is more mundane yet of more immediate comparative interest: the funding of Israel's healthcare system. Even if not immediately relevant to other countries, the hard work and compromises that stand behind the Israeli results are, I believe, well worth studying, if not necessarily replicating.

The paper aims to explain both how Israel has achieved this "flat line" effect and the social and political costs of this achievement. It has seven short parts: Part II presents the essential facts concerning the financing of the Israeli healthcare system and the "flat line" effect while presenting the system's relatively good performance; Part III outlines how this effect was achieved as a matter of law and policy; Part IV explains the social and political processes that are behind the "flat line effects"; Part V provides a reality check, explaining the human and social cost of the Israeli record and the public and academic criticism of it; Part VI raises the question of the likelihood of change, including the chance of judicial intervention in the current funding system of the Israeli healthcare system; and Part VII, concludes the paper, discussing the lessons to be drawn from the Israeli story.



One of the most intriguing features of the Israeli healthcare system has been its relative success in curbing the growth of national health expenditure as percentage of GDP, a feat made all the more remarkable in comparison with major Western nations. Indeed, "[i]n most OECD countries the share of the national expenditure on health as a percentage of the GDP rose gradually during 1995-2006, whereas in Israel the share of the national expenditure on health as a percentage of the GDP remained almost unchanged during that period." (10)

Even in table form this 'flat line" is evident: (11)

National expenditure on Health as percent of GOP

2007     2006   2005   2004   2003   2002   2001

 7.7     7.7    7.9    7.8    7.9    8.0    8.1
 8.8     8.9    9.0    8.7    8.4    8.5    8.3

2000     1999   1998   1997   1996   1995   [TEXT NOT REPRODUCIBLE
                                             IN ASCII]

 745     7.6    7.8    8.0    7.7    7.7    [TEXT NOT REPRODUCIBLE
                                             IN ASCII]
 8.0     7.9    7.8    7.7    7.8    7.8    [TEXT NOT REPRODUCIBLE
                                             IN ASCII]

Much more so, it is quite evident in graphic form: (12)


It is also evident in graphic form in comparative perspective, as suggested by other two official reports: (13)


[France: Blue; Germany--Green; Japan: Yellow; Britain: Pink; USA--Turquoise; Israel--Red]



HOW high is the quality of healthcare in Israel? By many commonly studied indicators, quite.

The World Health Organization's World Health Report for 2000 ranked Israel's health system 23rd in the world in terns of disability-adjusted life expectancy (DALE), i.e., the average number of healthy years of life for a population, and 7th in terms of distribution (the United States was 24th and 32nd, respectively). (14) Yet it ranked Israel already in 2000 as 38th-to-40th in terms of fairness in financial contribution (the United States was ranked 54th-55th). (15) At the same time, in terms of health expenditure per capita in international dollars, Israel was ranked 19th and the United States 1st. (16)

Another important measurement of health systems' performance is adult mortality risk. (17) This risk, known as 45q15, represents the probability that an individual reaching 15 years old in a given year will reach the age of 60. (18) Recent advances in statistical analysis have made it feasible to synthesize available mortality data in order to analyze trends in 45q15 on a global scale. (19) In a recent study, Israel, in comparison with current OECD member countries, (20) ranked eighth for male 45q15 and ninth for female 45q15 in 2010. (21) In other words, the probability of an Israeli who is fifteen years old in 2010 reaching the age of 60 is higher than that of either the United States or of the United Kingdom. (22) In terms of more specific commonly used indicators:

Life expectancy at birth in Israel was, in 2007, 79 years among males and 82 among females. (23) The figures are among the highest for OECD members for the former and among the lower range for the latter. (24) The figures for the United States in 2007 were 76 and 81 years, respectively. (25) Moreover, from 1986 to 2006 life expectancy increased by 5.3 years for males and by 5.4 years for females. (26)


Another commonly studied figure is infant mortality. In 2006, Israel's infant mortality rate was 3.9 per 1000 live births, a 38% decline since 1996. The infant mortality rate among the Arab population showed an even more rapid decline than that of the Jewish population, but remained about double than that of the latter. This compares quite well with other Western countries. The United States, with an infant mortality rate of 6.9 per 1,000 live births, ranks quite poorly among industrialized nations. (28) On a graph, displaying the improved healthcare standards since 1970, the decline in numbers in Western nations, and the disparity among them is clearly manifested: (29)


Finally a word on rankings: a satisfactory overall evaluation of the Israeli healthcare system can be found in the international ranking system of Spanish research group Cybermetrics Lab. (30) This ranking system of top world hospitals places Israel at the world's 17th spot in absolute terms, with 4 hospitals ranked in the world's top 500--ahead of Korea, Norway and Belgium. (31) If the table were correlated with population size, Israel's ranking would have been significantly higher. (32)


In fairness, one should balance compliments due to the Israeli healthcare system by highlighting some of its less cheerful features.

Having lived in both Israel and the United States, it seems to this author that a certain adjustment of expectations needs to be made in translating terms from the Israeli to the American context. What Israelis mean by a "government sponsored universal healthcare basket" falls well short of the coverage typical of most private American healthcare insurance plans. This is the case first and foremost in terms of actual coverage, i.e. the content of the healthcare basket. This explains why most Israelis pay out-of-pocket for supplemental insurance. An example is dental insurance: not only is this not covered by the government scheme but the introduction of dental coverage in the supplementary healthcare policies is seen as such a novelty that it had the promise to change "Israel's market for dentistry.., beyond recognition." (33) In addition, some of the medical facilities are in physical condition that, to put it delicately, are somewhat under par for a modern nation intent on joining the OECD. Money, and a lot of it, would make a difference, but the money is perennially short.

The various reports on the Israeli healthcare system--both domestic and foreign--highlight the difficulties and challenges that the Israeli system faces, particularly in terms of physical and human resources. As Rosen & Samuel note, the Israeli supply of acute care beds is 2.1 per 1000 population--well below the OECD average of 3.9 per 1000; Israeli nurses, while increasingly well trained, are available in much smaller numbers than the OECD average (5.8 compared with 9.6 per 1000 population); moreover, "the number of physicians in Israel is growing much more slowly than in other countries, and a physician shortage is being projected." (34)


The facts described in Part II are impressive, indeed, enviable when looked at from the American perspective: the United States has seen a huge rise in healthcare costs and--to date--enjoys no universal healthcare. Here follow the main reasons to the Israeli record, as I see them.


One happy explanation concerns the good shape of the Israeli economy in recent years. While Israel's national expenditure on health as percent of GDP the remained unchanged, Israel's GDP itself has risen healthily, more so than many other nations. One way to show this is to note the growth in healthcare expenditure over the years: (36)


And ...

This data shows that in terms of purchasing power parity (PPP) the national expenditure in Israel has risen significantly--from $951 in 1990, to 1,705 in 2000, to $2,048 in 2007. Yet viewed in a wider context this is seen to be at best on par with other Western nations: (37)



1990.2007(a)      [TEXT NOT REPRODUCIBLE          [TEXT NOT
                        IN ASCII]               REPRODUCIBLE
                                                  IN ASCII]
                  Expenditure per capita in
                  $, in terms of PPP(b) of     Percent of the
                  the Gross Domestic Product   Gross Domestic

                     2007    2000    1990           2007

Austria             3,763   2,824   1,618           10.1
Australia           3,137   2,271   1,203            8.7
Italy               2,686   2,062   1,359            8.7
Iceland             3,319   2,736   1,666            9.3
Ireland             3,424  1.806      701            7.6
United States       7,290   4,704   2,810           16.0
Belgium            3,595    2,477   1,357           10.2
Germany             3,588   2,871   1,768           10.4
Denmark             3,512   2,378   1,544            9.8
Netherlands         3,837   2,337   1,416            9.8
Hungary             1,388     852     ...            7.4
United Kingdom      2,092   1,433     963            8.4
Turkey                618     432     155            5.7
Greece              2,727   1,449     853            9.6
Japan               2,581   1,967   1,125            8.1
Israel              2,048   1,705     951            7.7
Luxembourg          4,162   2,553     ...            7.3
Mexico                823     908     296            5.9
Norway              4,763   3,039   1,369            8.9
New Zealand         2,510   1,805     990            9.2
Slovak Republic     1,555     603     ...            7.7
Spain               2,671   1,536     872            8.5
Poland              1,035     583     269            6.4
Portugal            2,150   1,509     636            9.9
Finland             2,840   1,453   1,636            8.2
Czech Republic      1,626     960     559            6.6
France              3,801   2,542   1,449           11.0
Korea               1,888     809     357            6.8
Canada              3,695   2,516   1,738           10.1
Sweden              3,323   2,283   1,596            9.1
Switzerland         4,417   3,217   2,033           10.6

(a) The data refers to 2007. or to the latest available year.


(b) Adjusted by PPP of GDP.

Source: OECD

This happy explanation is therefore clearly insufficient to explain the Israeli ease, as we shall see. It is also factually inaccurate, given that the Israeli healthcare system is perpetually under-funded, or at least the funding is not fully undated.


Healthcare services predate Israeli independence and they were historically (and for the most part still are) mostly provided by a group of independent sick funds. (38) Political impasse over proposed reforms was only breached in the mid-1990s when the Knesset passed the National Health Insurance Act, 5754-1994 and the Patients' Rights Act, 5756-1996. (39)

The 1994 Act is doubly important: first, it extends every resident of Israel the right to healthcare services under the Act, regardless of her ability to pay; second, the Act makes the Israeli government responsible for the funding of a national healthcare services "basket" funded by patients' premiums and the national budget. …

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