Achy But Healthy: Lessons from the Israeli Health Sector


WP/94/112-EA
Achy But Healthy: Lessons from the Israeli Health Sector by Yaakov Kop

Surgical treatment is sometimes essential, although risky. In some
situations, it may be avoided by using more moderate medical treatment; in
many cases, however, both treatments can be avoided if preventive measures
are taken early. This is true for individuals, and not less so for health
systems: overall reforms are analogous to surgical treatment; incremental
corrections are analogous to moderate medical treatment; and the proper
planning of health services ensures the healthy growth of a health sector,
just as preventive medicine does for individuals.

This paper identifies three fundamental requirements that a health
sector must fulfill in order to be considered satisfactory: universal
access, high-quality treatment, and moderate cost. The Israeli health
sector, although suffering some symptoms of illness, appears, in general, to
pass this three-dimensional test. Nevertheless, surgeons and internists
argue whether a comprehensive cure should be pursued through radical
operations or through more moderate, incremental treatment.

The paper shows that by international standards the health services in
Israel perform quite well, although they can be improved in a number of
respects. This level of performance has been achieved through balanced
doses of the three types of treatment: drastic, incremental, and
preventive. The third treatment, preventive--the backbone of the health
sector--is administered by means of a sick fund that was designed and
developed on the basis of equity principles, which have since been applied
by all other factors. The second treatment, incremental, has been carried
out by administrative control and by the managed competition that has
developed over time. The first treatment, drastic, has been applied in
various stages, such as through the budget cuts that were part of the
stabilization policy adopted in the 1980s. All treatments have included
efficiency measures to improve the utilization of existing capacity.

The international aspect of the research done for this paper reveals an
interesting pattern: ranked by their share of health expenditure in GDP,
most OECD countries had the same relative position in 1990 as in 1970,
despite the diverse reforms that had taken place in each. This is an
indication that the factors at work in each country's health sector are the
dominant determinants of the level of health expenditure.

The approach offered at the end of this paper is to classify countries
by their scores on the above-mentioned three-dimensional test. This is
suggested as an initial step in applying in other countries the lessons
learned from the Israeli experience.