- Email: [email protected]
Long-term care in Israel: Challenges and reform options
Health Policy 96 (2010) 217–225
Contents lists available at ScienceDirect
Health Policy journal homepage: www.elsevier.com/locate/healthpol
Long-term care in Israel: Challenges and reform options Dov Chernichovsky a,∗ , Michal Koreh b , Sharon Soffer c , Shirley Avrami c a b c
Department of Health Systems Management, Ben-Gurion University of the Negev, Israel School of Social Work, The Hebrew University of Jerusalem, Israel The Knesset – Research and Information Center, Israel
a r t i c l e Keywords: Long-term care Insurance Entitlement Reform
i n f o
a b s t r a c t Objectives: This paper has two objectives. The first is to examine the Israeli long-term care (LTC) system that is marked by rapidly increasing demands, and a multitude of public and private LTC arrangements. The second is to propose a reform to improve the system’s efficiency and equity. Methods: The paper studies the LTC services in Israel, and the private–public composition in funding, fund holding, and provision of LTC. It focuses on structural deficiencies in the organization of each of these functions separately, and in combination. Results: In many countries LTC has evolved in a patchwork fashion that at some point in time needs rethinking and rationalization. Israel is a case in point. In spite of numerous LTC arrangements supported by the state, in the absence of a comprehensive strategy, these have not generated a coherent system that can deal efficiently and equitably with existing and fast growing LTC needs, on the one hand, and the resources available to it, on the other. The current system is fragmented. It provides limited coverage and insufficient benefits in a troublesome fashion to public. The findings suggest that Israel can achieve at least in the short term, universal entitlement to LTC at lower financial and social cost, than the current costs of the system. In the medium and long term, the country will need to consider the trade between the burden of direct care on households or the tax burden of publicly supported and organized care. Conclusions: To remedy the situation the paper suggests a two-planked reform. The first is integration of the current fragmented publicly supported system while deciding on LTC either as a “social endeavor” under a separate authority responsible for implementing the public LTC budget, or as a “medical endeavor”, putting this responsibility under the Israeli sickness funds. The second plank, building on the first, comprises extension of universal entitlement to LTC. Such an extension would increase public spending in the long term; simultaneously, it would relieve the tax-paying population of a substantial privately borne burden of a fast aging population. Published by Elsevier Ireland Ltd
1. Introduction
∗ Corresponding author at: Department of Health Systems Management, Ben-Gurion University of the Negev, P.O.B. 653, Beer-Sheva 84105, Israel. Tel.: +972 8 647 9746; fax: +972 8 647 7690. E-mail address: [email protected] (D. Chernichovsky). 0168-8510/$ – see front matter. Published by Elsevier Ireland Ltd doi:10.1016/j.healthpol.2010.01.016
Long-term care (LTC) refers to the provision of services for persons of all ages who have long-term functional dependency [1]. The burden of LTC of Israelis age 65 and over has been relatively low but is growing fast, presenting Israel with a rapidly increasing LTC need. By the latest account, in 2007 there were about 705,100 Israelis, roughly 10% of the general population, in this age
218
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
category ([2], Table 2.19, pp. 140–145). This percentage is low when compared to that in developed countries, such as the USA (13.0%), Britain (16.0%), Germany (19.0%), and Japan (22.0%) [3]. Israel’s relatively young demographic profile reflects the young age of the immigrant population from statehood in 1948 through the 1980s, and the high fertility levels among the immigrants from oriental countries and the indigenous Arab population. Moreover, the population’s growth rate has been low as well; during the period 1990–2007, the share of elderly in the population increased by 1.4 percentage points. However, over the next 20 years this share is expected to increase by 3.7 percentage points, the share of the elderly reaching 13.7% by 2030 ([2], Table 2.26, pp. 159–162). That is, over the next two decades the growth rate will practically double. Moreover, this growth is accompanied by relatively rapid aging of the elderly. The share of the population aged 75 and over in the population over age 65 doubled, to about 45%, over the last 20 years [4,5]. The “transition period” – the period that has elapsed between the time when Israel was “young” in its age composition, and the time that it became a country with an appreciable percentage of seniors – has been rather short [6]. Consequently, the need for LTC in Israel is intensifying, and not only because of demographics. Use of long-term care services is rising among immigrants and minorities. In these populations – comprising about 35% and 20% of Israelis, respectively ([2], Table 2.19, pp. 140–145; Table 4.2, pp. 230–231) – their elderly were hitherto mostly cared for by the family, but they adopt care patterns similar to those of the rest of the “modernized” populations. In addition, it is almost certain that further liberalization in the definitions of dependency will compound the number of those classified as in need of long-term care. The growing need for LTC has led to legislation that has engendered a multitude of public and private for- and notfor-profit arrangements in funding LTC, on the one hand, and its provision, on the other. However, in the absence of a comprehensive policy, these arrangements have not added up to a coherent publicly led system that can deal efficiently and equitably with existing and fast growing need. Israel is not unique in this regard; LTC has been a particular challenge in other developed countries [7]; it has evolved in a rather unstructured fashion without clear concepts about its very nature, medical or social, and about the nature of public funding, social insurance or general revenues. The objectives of this paper are to examine the Israeli LTC system, identify its structural shortcomings, focusing on those that should be of concern in other systems, and suggest options to reform. Accordingly, the paper begins with the legacy, organization, and funding of LTC in Israel, and then discusses the system’s structural and financial deficiencies. The paper continues with the proposition of a two-planked reform, and concludes with pertinent political economy. 2. LTC in Israel – legacy and structure The National Insurance Law, enacted in 1953, established the social security system as we know it today. The
system pertaining to the elderly comprises three layers: a basic layer of old-age pensions, a second layer of workrelated pensions, and a third layer of retirement savings [8]. Ideologically and politically, the Israeli legislation followed that of the dominant labor movement and ruling labor parties at the time. In addition, the Histadrut, Israel’s Federation of Labor – a ‘state within a state’ institution through the eighties – kept a stringent watch over this system [9,10]. These arrangements had little to do, however, with LTC. Projections during the 1980s about a significant increase in the infirm aged population caused concern for two interrelated reasons. The first was that the costs of hospitalization would skyrocket. The second, that there were no solutions for the elderly in the community in spite of the consensus about advantages of keeping them there whenever possible. Added to these were the growing pressures from households who found it increasingly complicated to deal with the aged in need of care. Taken together, these factors resulted in the multitude of rather un-coordinated legislations designed to face the challenge [11]. Entitlements to LTC in Israel follow a series of statutes, and involve different arms of the state. These are discussed and summarized in Table 1 by institutional and functional perspectives separating conceptually four systemic functions: stewardship and oversight, funding, fund holding and OMCC, and provision.1 Under the 1958 Welfare Services Law, elderly patients who lack basic circles of social and economic support – lone elderly, those with poor housing and living conditions, and so on – are entitled to state-supported assistance. The budget execution is by the Ministry of Welfare (MOW). Provision of care is by-and-large through non-state institutions. Under the Nursing Insurance Law of 1988, while living in the community, an elderly person is entitled to services including cooking, cleaning, laundry. These include diapers and an emergency beeper. Services are provided through a caregiver or in a day care center. The services are given in addition to a universal old-age pension to which Israeli residents are entitled. The services in kind cannot exceed 15.5 h per week by a caregiver. Families who need extra care and wish to pay for it privately can combine the publicly and privately paid services. Indeed, about 40,000 Israeli households turn to the Ministry of Industry, Trade and Employment for a permit allowing them to employ a foreign worker as a caregiver (coined “Philipina”). In that case, this worker is partially funded by the public under the aforementioned law, in
1 The fund holding function concerns an agency function, combined with organization and management of care consumption (OMCC) and purchasing. OMCC entails first and foremost devising patterns for patients to realize the benefits to which they are entitled. These patterns are then supported by signing on providers, and guiding them through pay incentives and regulations to provide care according to these patterns. In the paradigm that has emerged in modern health care systems, the OMCC function with regard to entitled care is entrusted either with a state monopoly (e.g., the British National Health Service) or competing sickness funds (e.g., Germany as well as Israel) [12–14].
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
219
Table 1 Long-term care service by entitlement and eligibility, and functional responsibility. LTC service
Entitlement and eligibility
Support services in the community
Universal
Institutionalization of functionally dependent and demented Institutionalization of elderly suffering from social & economic deprivation Hospitalization for complex nursing care and rehabilitation Certifications to employ foreign workers as caregivers Regulation of the private nursing insurance market
Selective – means-tested subsidy
a
Agency Responsible for Funding
Fund holding and OMCC
Provision*
Stewardship and oversight
National Insurance Institute (NII) State
NII
Mostly private (for and not-for-profit)a
NII
Ministry of Health (MOH)
Mostly private (for and not-for-profit)
MOH
Selective – socio-economic tested
State
Ministry of Welfare (MOW)
Mostly private (for and not-for-profit)
MOW
Universal
State
Sickness funds/State
Mostly private (for and not-for-profit)
Ministry of Health
Ministry of Industry and Trade Ministry of Finance
In Israel, in 2007, the distribution of LTC and rehabilitation institutions was as follows: public, 9%; non-profit, 37%; for profit, 54% ([2], Table 6.6).
lieu of the entitled care this worker replaces. The National Insurance Institute (NII), the Israeli social security administration, oversees, funds, and OMCCs the public element of this activity. Provision is through private caregivers. Under the National Health Insurance Law of 1994, acutely and sub-acutely ill patients, as well as those needing rehabilitation and complex nursing care because of medical conditions, are the responsibility of the health care system. The treatment of these patients is essentially fully funded by the state but with the fund holding – OMCC responsibility entrusted with the four sickness funds that have this responsibility for general curative care [15]. Provision of care is mostly through hospitals of different types of ownership. Under the same law, the institutionalization of patients needing nursing care or with dementia is under the fund holding – OMCC responsibility of the Ministry of Health (MOH) and families, rather than sickness funds. Eligibility for state support and the level subsidy are means tested. An additional indirect subsidy for institutionalization is provided by the state through tax exemptions for workers who pay for their parents in geriatric institutions. 3. Structural deficiencies in the publicly supported system The different statutes and their implementation result in horizontal segregation of handling various aspects of LTC, and, at the same time, in a fairly centralized system to manage each aspect [16]. This is detrimental to the quality of service and care as well as the overall efficiency of at least the publicly supported LTC system, creating the following adverse consequences. Discontinuity of care. The functional condition of the LTC patients is dynamic and is liable to shift from one condition to another. As conditions change, treatment needs to change correspondingly. A need for acute treatment, for example, may be replaced by rehabilitation needs and then
by nursing care and vice versa. However, because of the segregation in responsibility, care is disrupted and the ability to build a comprehensive and continuous process of treatment is hampered. Disincentives for investing in preventive treatment and rehabilitation. Preventive treatment as well as rehabilitation can not only improve the quality of life of the patient, but can also reduce the expenditures involved in the decline into a more serious condition [17–19]. However, in the aforementioned segregated system, the investing institution may not benefit from the potential financial returns of the investment. Hence, institutions may be disinclined to engage in prevention. Worse, the segregation may even create an economic incentive for disinvestment, as a decline in the patient’s condition makes it possible to shift the costs to another institution. Promotion of institutionalization. Israel is committed to the goal of keeping the elderly person in the community for as long as possible. However, the fragmented nature of care services and the lack of care provisions in the community to elderly who need personal care for more than 15.5 h per week, forces the family who cannot pay for extra services of a caregiver, to seek institutional solutions, contrary to stated policy and the patient’s welfare. Bureaucratic maze and low awareness of rights. Under the current arrangements both patients and their families, when most in need, find themselves in a bureaucratic maze; they constantly face different institutions, each responsible for one aspect of LTC. This is compounded by low awareness and limited information: surveys and interviews show that public awareness of the issues associated with LTC rights is low. There is a lack of public information on how to choose wisely among the various insurance policies in the private market. A significant portion of insured individuals does not even know they are in possession of insurance policies, much less the terms and extent of their coverage [20]. A 2003 survey revealed that only 23% of the respondents knew that sickness funds were not obligated to pay
220
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
Table 2 Estimate of funding long-term care in Israel, 2003–2004. Main category
Type of care
Private
Personal home care by “Philipinas” Institutional non-medical care insurance Insurance premiums, net of benefits Share of private
2.1 1.8 0.5 4.4
25.0%a 21.3%b 6.0%b 52.3%
Public
Care in community Institutional non-medical care Acute medical care Share of public
2.5 1.2 0.3 4.0
29.8%c 14.3%d 3.6%e 47.7%
8.4
100.0%
Grand total a b c d e
Costs in 1000 million NIS
% of total
Based on $1000 US per month. 25% paid by private insurance. Based on the NII budget, cost of nursing insurance, 2004. Based on the Ministry of Health budget, 2003–2004. Based on estimated 400,000 care days (2004) at a daily cost of NIS 700.
for institutionalization in a nursing care facility. In general, the level of awareness of elderly persons, especially in the lowest income quintile and Russian speakers, was comparatively low [21]. This may follow a “cultural lack of experience” with aging. The current generation caring for its parents was born during the post-WW II baby boom. Many of this generation, born to Holocaust survivors, lack “a grandparent experience”. Cost shifting. Indeed, the situations discussed above are fueled by the incentives of the different budgeted institutions to shift costs from one to the other, and mainly to the family at the end. All the above issues are aggravated by the vertical concentration in the handling of each entitlement. The Ministry of Health, the Ministry of Welfare, and the National Insurance Institute determine eligibility rules and other regulations, OMCC of entitlements are under their jurisdictions, and in some cases the state even provides care. That is, institutions that set policy and standards also supervise themselves while implementing their respective budgets, with built-in incentives to shift costs. This situation gives rise to questionable governance and public accountability practices. 4. The financing of LTC – the public private mix in funding An estimate of the total funding resources available to the system is presented in Table 2. The share of private expenditures – out of pocket and insurance premiums, net of insurable benefits – is slightly higher than that of the public sector: 52.4% compared to 47.7%. It is likely that direct expenditure of households is even higher than these data suggest because they do not include expenses such as purchasing additional hours of treatment from local caregivers, and expenditures for extra products and support services. The calculations clearly do not take into account the potential loss of income to the household such as the loss of work days by family members. 4.1. Public funding Public funding comprises two central sources (Tables 1 and 2). The first is general revenue financing
from the state’s general budget. The second is earmarked taxation collected by the NII, including an earmarked health tax. The first source makes entitlements dependent on budget availability. This arrangement makes it easier to activate programs with a limited budget that is not carte blanche. Namely, eligibility rules can be implemented and changed according to budget availability. Supply restrictions resulting in queues can follow as well. Earmarked taxation for social insurance implies that benefit availability depends only on the patient’s functional state and not on explicit budgetary constraints [7,22]. Indeed, the community-based program funded through the NII runs a deficit, which is legally and practically impossible in the programs budgeted by general revenues [23]. 4.2. Private funding Private funding comprises two main sources, not counting direct family members’ time inputs: out-of-pocket pay (OOP) and commercial insurance of different types. OOP can impose a serious financial burden on the family. The monthly cost of a nursing institution licensed by the Ministry of Health ranges between 1.3 and 2.5 times the average monthly (2007) wage [24]. The cost of employing a foreign caregiver can reach as much as $1000 in direct cost or 0.85 the average monthly wage. It also involves high administrative costs. Consequently, private insurance remains a central tool by which the individual can cope with the financial risk involved in LTC, in spite a variety of entitlements that are limited to 15.5 h in the community and are meanstested for institutionalization. Affordable private insurance arrangements are superior to out-of-pocket pay because they enable families to anticipate the financial risk of future nursing care by sharing risk with relatively small periodic payments while the individual is still young and healthy. Three major types of private nursing insurance arrangements are available in Israel: • Individual commercial nursing insurance is purchased by an individual who can choose the scope and length of coverage. The premium is determined according to the personal risk level as well as coverage in scope and time.
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
• Group commercial insurance is usually purchased by an employer on behalf of its employees. The scope and length of coverage are limited. Insurance is discontinued when employment is terminated. • Sickness funds insurance is available to members by an insurance company through sickness funds, and commonly involves some community rated premium [20]. The sickness fund holds the policy, and is responsible for choosing the commercial insurance company and negotiating the terms of the nursing care policy. The terms of these policies are similar to the aforementioned group policies. The average cost to the privately insured is seven times that of group insurance [25]. Data limitations, in themselves indicative of a potential structural problem, prevent a good view of private LTC insurance in Israel. It is estimated that between one-third and two-thirds of the population aged 22 and above do not carry nursing insurance policies. Although private insurance for LTC in Israel is superior to OOP, it involves a series of structural shortcomings as follows. High premiums. As premiums rise with age and condition of health, the needy elderly find acquiring insurance difficult or outright prohibitive. It is important to stress in this regard that the nursing care insurance industry in Israel is relatively new. To argue that the elderly of today should have prepared for LTC when they were younger is not valid. At best, Israel is in a transition period in this regard. Coverage limitations. A significant gap can be expected between insurance benefits and the actual cost of pertinent services. There are two main reasons for this. First, the costs of private insurance are capped in advance. The insured is thus exposed to the risk of a rise in prices of LTC services. In addition, the coverage has a period limit. Most policies offer insurance coverage that lasts for 3–5 years. When a person needs care for a longer period, it is not available. Insurance discontinuity and lack of insurance. A typical problem arises when a group insured person is dropped from the policy due to retirement, layoff, or the like. This problem is especially serious when the insured are elderly or sick, as there is little chance that another insurance company will agree to insure them. Insurance companies that are not attached to the sickness funds or other group arrangements can refuse bad risks at will [26]. As a result, especially when retired, the elderly and sick are usually left without any insurance protection at all. Regulations issued by the state treasury require the group insurer to automatically transfer those dropped from group policies to individual policies [24]. This does not solve the entire problem or even most of it, since the higher priced individual policies are usually not affordable. The current system of private funding of care is characterized by a number of common systemic efficiency problems as follows. The limited ability of pooling resources for spreading the risk. As argued, within the private insurance market, there is an advantage of group insurance over individual insurance. High management fees. A large group saves management costs such as marketing, actuarial assessment, collection,
221
and management in general. For example, commission fees for a private policy are as high as 25%, while in group policies it is only 5% [20]. 5. Long-term care reform options The general share of private funding in funding LTC in Israel is, first, indicative of the magnitude of the direct financial burden of LTC on households. Second, it suggests that access to LTC depends on an ability and willingness to pay by the household, and hence is subject to corresponding variations in access to care and in its quality. Private insurance arrangements are at best partial, uneven, and outright insecure, especially when the probability of need and financial risk are highest. The individual and his family thus have limited options to supplement public entitlements that are limited in the community and subject to a means-tested subsidy. Universal coverage and its associated public regulated funding can thus be more equitable and efficient, at least in lower cost of administration, than current arrangements, especially if the state first puts existing public arrangements in order. Indeed, a reform can build on the current public system, and the public and private funds available to the system. A reform can be accomplished by horizontal integration of the public functions – policy making and oversight and not the least funding – and vertical separation of funding, OMCC, and provision functions [16]. Consequently, the reform comprises the following: (a) charging a single government ministry with the responsibility of setting policy and oversight; (b) pooling all available public funding into a single financial framework; (c) establishing a new budget holding authority that will implement the public LTC budget or, alternatively, assigning the pooled public budget to competing plans or sickness funds; (d) providing services by for- and not-for-profit suppliers as is accepted today; (e) establishing universal coverage for long-term care, funded by existing public funding plus an earmarked tax, replacing part of the current out-of-pocket pay and private insurance. These can be accomplished in two stages. The first stage comprises the first four steps. The second, building on these, integrates the last. Although a “big bang” single stage reform, as Israel did in the health care system, is not to be ruled out. 5.1. Stage I: reorganizing the existing public system The first stage does not change existing entitlements and their public funding, but integrates them through unified funding and allocation mechanisms, and unified OMCC of all LTC entitlements. Stewardship and oversight. As the NII is under the jurisdiction of the Ministry of Welfare, this ministry is responsible for the larger share of the public budget,
222
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
including that of the NII, for LTC (Table 2). Hence there can be merit to charge this ministry with the pertinent stewardship and oversight responsibilities. There are two alternatives: the Ministry of Health and the Ministry for Pensioners, established by the previous government. As suggested below, this issue needs to be resolved in conjunction with the decision about the fund holding responsibility. Funding. Integration of funding can follow the precedent set by the Israeli National Health Insurance Law (NHL) enacted in 1995 [27]. Accordingly, all funding in the reformed system – from general and earmarked taxation – for LTC entitlements would be pooled by the NII. This institution would, in turn, allocate the pooled funds to single or multiple budget holders responsible for OMCC of LTC, according to options discussed below. The funding arrangement combining general tax revenues with earmarked social insurance revenues raises at least a conceptual issue. The first is associated with hard budget constraints, and usually involves means-tested eligibility. The second, with unconditional eligibility, is usually based solely on functional and medical conditions and indications. The experience of the National Health Insurance Law enacted in 1995 is that this is a non-issue. The patient and his family have no idea and hardly care about the particular source of funding. The state considers the earmarked tax part of general taxation in the sense that it is allocated from general revenues, taking into account earmarked tax revenues so that the two sources amount to a budget targeted by the state treasury. In the case of funding medical care, the division between the two sources of funding is not even a legalistic issue; it has never been tested in courts. The different underlying principles associated with the two sources of public funding can still be reconciled by entitled benefits that have two layers. The first, funded by earmarked social insurance contributions, comprises basic universal benefits that are not subject to means testing. The second, funded by general revenues, comprises selective entitlement based on means-tested eligibility rules. This arrangement can win political support for the system since nobody is excluded from state support. Budget holding. As suggested, there are two budget holding options: (1) a single non-competing authority for long-term care that will purchase, using the public funds allocated to it, services from a variety of suppliers; (2) multiple competing budget holders that do the same. While competing budget holders with sole responsibility for LTC is not ruled out and should be considered, this option is not discussed here explicitly because, historically, Israeli reform proposals focused primarily on the second alternative, but one that is based on the existing competing sickness funds that handle medical care in Israel. This particular option gives the issue of competing budget holders for LTC a particular dimension. The two options are illustrated in Fig. 1. The preferred alternative depends on LTC philosophy. LTC has traditionally been seen as a medical rather than
Fig. 1. (Option A) Management of long-term care by an authority. (Option B) Management of long-term care by sickness funds.
a social issue. LTC was developed in Israel piecemeal as it probably was elsewhere, from the days when “old age” was recognized officially as a disease. This approach, however, is probably anachronistic. Not counting unreported family care, about 76% of total expenditures for LTC in Israel today is devoid of any medical dimension (Table 2). It should also be noted that in most developed countries, LTC is not part of the medical care system [7]. LTC can thus be considered from either a social or a medical perspective. Under the first, the OMCC of the LTC would be undertaken solely by the proposed authority that will have no other role, medical or otherwise (Fig. 1, Option A). This authority would be dedicated to keeping the elderly person in his or her home and community for as long as possible. It would also have the budget to do that. This alternative is preferable to the elderly themselves [28]. In this case the authority should be subordinated to either the Ministry of Welfare or the Ministry for Pensioners. The second alternative primarily ensures the continuity of medical care within the existing framework of the sickness funds (Fig. 1, Option B). This alternative, which would “medicalize” LTC in Israel, is at the outset attractive, since it results in the full integration of LTC into the sickness funds’ already existing systems. Its attractiveness in the long term is dubious and hard to establish as it depends on alternative philosophies. In this case, there is merit to subordinating LTC to the Ministry of Health.
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
223
Fig. 2. Financing of state nursing insurance.
5.2. Stage II: enactment of universal entitlement to LTC The enactment of universal entitlement to LTC builds on any OMCC alternative of the system just proposed. It involves combined expansion of coverage and entitlement; it will cover the segments of the population that have no private insurance while expanding entitlement to include some benefits that are now privately insured. Those would “justify”, so to speak, the nationalization of some of the private funding: taxing households to pay for new entitlements that are now benefits paid out of pocket, through private insurance, and even indirectly through family members’ time investments as depicted in Fig. 2. The potential efficiency and equity gains of expanding LTC coverage and entitlement have been discussed above. There are advantages to earmarked social insurance taxation, especially of funding that intends to replace private insurance [29]. The establishment of state LTC based on earmarked funding is likely to have broader public appeal than raising general taxes. As already suggested, social insurance contributions may give LTC some immunity from acrossthe-board budget cuts and from the transfer of its resources to other purposes [30]. At the same time, this type of financing is not immune to the business cycle. Funding drops during a financial downturn [31]. 5.3. Funding of universal entitlement to LTC The figures in Table 3 are estimates and projections of the funding needs and availability involving universal entitlement to LTC for the decade 2005–2015. These estimates and projections are based on the following maximalist (worst-case) assumptions about needs and costs2 : • The percentage of disabled people among residents over the age of 65 will rise from 16% in 2005 to 20% in 2015. Changes in definitions will bring about an expansion of entitlement. • With universal entitlement and other changes, the share of institutionalization in Israel will rise from 4% to 10% among those over 65. This is 1–2% higher than that accepted in Europe today. • In accordance with these rates, the percentage of elderly in the community is estimated as the difference between
2 Since comparative data are available only through 2005 for this paper compiled in 2008–2009, 2005 is the base year used for projections.
the share of disabled in the elderly population and the rate of those treated in institutions. • The annual cost of institutionalization was calculated on the basis of a monthly cost 2.1 times the average monthly wage (or about $90 per day) in 2005, with annual inflation of 2%. • The cost of long-term care in the community was based on a monthly cost of 0.4 times the average monthly wage in 2005, with 2% annual inflation. In accordance with these assumptions, the cost of universal entitlement arrangements would be $2.2 billion in 2010 and $4.0 billion in 2015. The resource availability estimates and projections are based on the following “minimalist” assumptions: • On the basis of 2004, the public budget for long-term care will grow by 2.5% annually. • Only half of the private resources will be converted into public budgets, under universal entitlement. On this basis, private resources will also rise by 2.5%. • A quarter of the system’s funding will come from copayments on the basis of means tests. • Each year’s funding will finance the costs of people cared for during the same year. Under this “pay as you go system” no money will be accumulated for future use. • Only those aged 25–64 will be relied upon to finance the system on an ongoing basis. The total expected resources at the system’s disposal are estimated to be $2.2 billion in 2010, becoming a deficit in 2015 with an estimated shortfall of $1.2 billion. Additional assumptions that are likely to help finance the proposed system are: • savings in collection costs and insurance premiums due to consolidation of collection and its administration; • continued contributions of those aged 65 and over who do not need long-term care; • some of those entitled to long-term care are likely not to apply for public assistance; • savings in expenditures by preventing duplications in the system in general and the purchase of services in particular. The estimated financial burden for those aged 25–64 in the civilian labor force was calculated per potential worker at 4.8% of the average monthly wage for 2010 and 7.8% of the average monthly wage for the following decade as
224
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
Table 3 Forecasts of needs and sources of finance – universal entitlement to LTC, Israel, 2005–2015. 2005
2010
2015
Needs Number of 65+ Percent disabled in 65+ population Percent institutionalized
685,400 16.00% 4.00%
725,800 18.00% 7.00%
875,500 20.00% 10.00%
Number institutionalized Number in community
27,416 82,248
50,806 79,838
87,550 87,550
Funding requirements Annual costs of institutionalized care (in NIS millions) Annual costs of community care (in NIS millions)
3619 1809
7404 1939
14,087 2348
Total annual costs (in NIS millions)
5428
9344
16,435
Funding sources Available public finds (in NIS millions) Private funds turned public (in NIS millions) Co-pay, up to 100%
4000 2000
4526 2263 2336
5120 2560 4109
Total funds (in NIS millions)
6000
9124
11,789
Surplus funding (in NIS millions)
572
(−220)
(−4655)
Table 4 Estimated monthly burden of financing universal LTC, per working capita, population aged 25–64. Year
2005 2010 2015 a
Burden
Projected per capita gross domestic product (GDP)a
NIS (1 ≈ US$4)
Index (base = 2005)
250 338 410
100 135 164
100 112 114
Based on 1995–2000–2005 income growth.
shown in Table 4 [32]. This means there will be an average annual increase of 5% of the financing burden on the general working population. This is less than double the rate of the average increase in real income, but less than the growth in the cost of LTC seen during the past decade. This is the price society needs to pay for the benefits of “freeing”, in an efficient and equitable way, the population from the growing burden of long-term for elderly family members.
p. 48). Support of new entitlements has not been on the agenda. Still, the increase in the aged population and its needs contributed to the growing political powers of this population in Israel’s democracy. A key political manifestation of this reality was the establishment of a political party – the Pensioners Party – that gained 7 of the 120 seats in the previous Israeli parliament. While this party is not represented in the new parliament, its legacy in the last government, in the form of a Ministry for Pensioners, remains. The party succeeded in increasing awareness about the needs of the aged, and in blocking the state’s efforts to reduce public funding for them. A clear and visible achievement of the presence of this party in the government and running the Ministry of Health has been the abolition of waiting lines for the state-supported LTC. Namely, means-tested LTC is readily available in Israel. This still does not make the system either efficient or equitable.
References 6. Conclusion Reform requires political will, which is still lacking with regard to LTC in Israel. The current fragmented publicly supported system is clearly hostage of the vested interests of the different stake holding institutions that are responsible for the different entitlements to LTC. The sizable Israeli coalition governments – requiring numerous ministries, on the one hand, and the lack of pertinent leadership, on the other hand – combine to stall efforts to initiate the first, ‘costless’, plank of reform suggested in this paper. The lack of a state willing to commit to the two-planked comprehensive reform, which might be an opportunity for one step big bang’ reform, must be viewed as part of the change in Israel’s political economy since the mid-nineties; successive governments, mostly with a liberal economic orientation, systematically reduced the share of government support per capita to the social welfare system ([33],
[1] Brodsky J, Habib J, Hirschfeld M. Long-term care strategies in industrialized countries: case studies of insurance based and non-insurance based long-term care system. Jerusalem: Myers-JDCBrookdale Institute and World Health Organization; 2003. [2] Israel Central Bureau of Statistics (CBS). Israel annual statistical manual #59; 2008 [Jerusalem]. [3] Population Reference Bureau (PRB). 2008 world population data sheet; 2008 [Washington, DC]. [4] Brodsky J, Davis M. Demography and epidemiology of aging and the elderly population. In: Rozin A, editor. Aging and old age in Israel. Jerusalem: Eshel; 2003. p. 289–342. [5] Israel Central Bureau of Statistics (CBS). Israel annual statistical manual #57; 2006 [Jerusalem]. [6] Kop Y. The Graying Sabra: a demographic view of the elderly population. Social Security 1988:49–68 [Special Edition]. [7] Gleckman H. Medicaid and long-term care: lessons from abroad. Boston: Center for Retirement Research at Boston College; 2007. [8] Gal J, Pesach R. The development of the social security system for the aged in Israel and its implications. Social Security 2002;62:114–41 [in Hebrew]. [9] Arian A. Political and administrative aspects of welfare policy in Israel. Tel-Aviv: Tel-Aviv University; 1978.
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225 [10] Grinberg L. The Histadrut above all. Jerusalem: Nevo; 1994 [in Hebrew]. [11] Habib J, Factor H. Services for the elderly: changing circumstances and strategies. In: Kruger AM, Morely D, Shahar A, editors. Public services under stress: a Canadian-Israeli policy review. Jerusalem: Magnes Press; 1993. p. 154–75. [12] Chernichovsky D. Health systems reforms in industrialized democracies: an emerging paradigm. The Milbank Quarterly 1995;73(3):339–72. [13] Chernichovsky D. Pluralism, public choice and the state in the emerging paradigm in health systems. The Milbank Quarterly 2002;80(1):5–39. [14] Chernichovsky D. The emerging paradigm revisited. Beer-Sheva: Ben-Gurion University of the Negev; Processed. [15] Rosen B. Health care systems in transition: Israel. Copenhagen: European Observatory on Health Care Systems; 2004. [16] Chernichovsky D, Chernichovsky M. Decentralization in healthcare: a framework for design and application. Washington: World Bank; 2006. [17] Xakellis GC, Frantz RA, Lewis A, Harvey P. Cost-effectiveness of an intensive pressure ulcer prevention protocol in long-term care. Advances in Wound Care 1998;11(1):22–9. [18] Cohen JT, Neumann PJ. The cost savings and cost-effectiveness of clinical preventive care. Research Synthesis Report No. 18. NJ: Robert Wood Johnson Foundation; 2009. [19] Langhorne P, Duncan P. Does the organization of postacute stroke care really matters? Stroke 2001;32(1):268–74. [20] Bramli-Greenberg S, Gross R. Supplemental and commercial health insurance, 2001. Jerusalem: Myers-JDC-Brookdale Institute; 2003. [21] Gross R, Brammli-Greenberg S, Matzliach R. Public opinion on the level of service and performance of the health system in 2003, in comparison to previous years. Jerusalem: Myers-JDC-Brookdale Institute; 2005. [22] Brodsky J, Habib J, Hirschfeld M, Siegel B, Rockoff Y. Choosing overall LTC strategies: a conceptual framework for policy development.
[23] [24]
[25] [26]
[27] [28]
[29]
[30] [31]
[32] [33]
225
In: Brodsky J, Habib J, Hirschfeld M, editors. Key policy issues in long-term care. Geneva: World Health Organization; 2003. p. 245– 70. Israel National Insurance Institute. Annual actuary report for 2001 and the financial report for 2001. Jerusalem; 2001. Myers-JDC-Brookdale Institute, Eshel, the Ministry of Finance. Annual Report 2005. Private Nursing Insurance – Information for the Public. Jerusalem; 2005. Ministry of Finance, Office in Charge of the Capital Market, Insurance and Savings. Annual Report 2004. Jerusalem; 2005. Chernichovsky D. Voluntary medical insurance and entitlement to medical care—the potential trap; the case of Israel. Beer-Sheva: BenGurion University of the Negev; Processed. Chernichovsky D, Chinitz D. The political economy of health system reform in Israel. Health Economics 1995;4(2):127–41. Brammli-Greenberg S, Gross R, Weizberg R. Factors influencing holding of private nursing insurance in Israel. Presented at a Meeting of the Israel National Institute for Health Policy and Health Services Research, Tel-Aviv, 12 December 2007. Korpi W, Palme J. The paradox of redistribution and strategies of equality: welfare state institutions. inequality, and poverty in the western countries. American Sociological Review 1998;63(5):661–87. Koreh M. Changes in the structure of a welfare state—from social insurance to state service. Social Security 2004;67:62–82. Chernichovsky D, Chernichovsky M, Homann J, Schramm B. Social health insurance; The road to an integrated equitable and efficient healthcare system. Forthcoming in Preker A. et. al. Editors. Scaling Up Affordable Health Insurance. Washington DC. World Bank. Processed. Israel Central Bureau of Statistics (CBS). Israel annual statistical manual #58; 2007 [Jerusalem]. Horev T, Kop Y. Israel’s social services 2008. Jerusalem: Taub Center for Social Policy Studies in Israel; 2009.
Contents lists available at ScienceDirect
Health Policy journal homepage: www.elsevier.com/locate/healthpol
Long-term care in Israel: Challenges and reform options Dov Chernichovsky a,∗ , Michal Koreh b , Sharon Soffer c , Shirley Avrami c a b c
Department of Health Systems Management, Ben-Gurion University of the Negev, Israel School of Social Work, The Hebrew University of Jerusalem, Israel The Knesset – Research and Information Center, Israel
a r t i c l e Keywords: Long-term care Insurance Entitlement Reform
i n f o
a b s t r a c t Objectives: This paper has two objectives. The first is to examine the Israeli long-term care (LTC) system that is marked by rapidly increasing demands, and a multitude of public and private LTC arrangements. The second is to propose a reform to improve the system’s efficiency and equity. Methods: The paper studies the LTC services in Israel, and the private–public composition in funding, fund holding, and provision of LTC. It focuses on structural deficiencies in the organization of each of these functions separately, and in combination. Results: In many countries LTC has evolved in a patchwork fashion that at some point in time needs rethinking and rationalization. Israel is a case in point. In spite of numerous LTC arrangements supported by the state, in the absence of a comprehensive strategy, these have not generated a coherent system that can deal efficiently and equitably with existing and fast growing LTC needs, on the one hand, and the resources available to it, on the other. The current system is fragmented. It provides limited coverage and insufficient benefits in a troublesome fashion to public. The findings suggest that Israel can achieve at least in the short term, universal entitlement to LTC at lower financial and social cost, than the current costs of the system. In the medium and long term, the country will need to consider the trade between the burden of direct care on households or the tax burden of publicly supported and organized care. Conclusions: To remedy the situation the paper suggests a two-planked reform. The first is integration of the current fragmented publicly supported system while deciding on LTC either as a “social endeavor” under a separate authority responsible for implementing the public LTC budget, or as a “medical endeavor”, putting this responsibility under the Israeli sickness funds. The second plank, building on the first, comprises extension of universal entitlement to LTC. Such an extension would increase public spending in the long term; simultaneously, it would relieve the tax-paying population of a substantial privately borne burden of a fast aging population. Published by Elsevier Ireland Ltd
1. Introduction
∗ Corresponding author at: Department of Health Systems Management, Ben-Gurion University of the Negev, P.O.B. 653, Beer-Sheva 84105, Israel. Tel.: +972 8 647 9746; fax: +972 8 647 7690. E-mail address: [email protected] (D. Chernichovsky). 0168-8510/$ – see front matter. Published by Elsevier Ireland Ltd doi:10.1016/j.healthpol.2010.01.016
Long-term care (LTC) refers to the provision of services for persons of all ages who have long-term functional dependency [1]. The burden of LTC of Israelis age 65 and over has been relatively low but is growing fast, presenting Israel with a rapidly increasing LTC need. By the latest account, in 2007 there were about 705,100 Israelis, roughly 10% of the general population, in this age
218
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
category ([2], Table 2.19, pp. 140–145). This percentage is low when compared to that in developed countries, such as the USA (13.0%), Britain (16.0%), Germany (19.0%), and Japan (22.0%) [3]. Israel’s relatively young demographic profile reflects the young age of the immigrant population from statehood in 1948 through the 1980s, and the high fertility levels among the immigrants from oriental countries and the indigenous Arab population. Moreover, the population’s growth rate has been low as well; during the period 1990–2007, the share of elderly in the population increased by 1.4 percentage points. However, over the next 20 years this share is expected to increase by 3.7 percentage points, the share of the elderly reaching 13.7% by 2030 ([2], Table 2.26, pp. 159–162). That is, over the next two decades the growth rate will practically double. Moreover, this growth is accompanied by relatively rapid aging of the elderly. The share of the population aged 75 and over in the population over age 65 doubled, to about 45%, over the last 20 years [4,5]. The “transition period” – the period that has elapsed between the time when Israel was “young” in its age composition, and the time that it became a country with an appreciable percentage of seniors – has been rather short [6]. Consequently, the need for LTC in Israel is intensifying, and not only because of demographics. Use of long-term care services is rising among immigrants and minorities. In these populations – comprising about 35% and 20% of Israelis, respectively ([2], Table 2.19, pp. 140–145; Table 4.2, pp. 230–231) – their elderly were hitherto mostly cared for by the family, but they adopt care patterns similar to those of the rest of the “modernized” populations. In addition, it is almost certain that further liberalization in the definitions of dependency will compound the number of those classified as in need of long-term care. The growing need for LTC has led to legislation that has engendered a multitude of public and private for- and notfor-profit arrangements in funding LTC, on the one hand, and its provision, on the other. However, in the absence of a comprehensive policy, these arrangements have not added up to a coherent publicly led system that can deal efficiently and equitably with existing and fast growing need. Israel is not unique in this regard; LTC has been a particular challenge in other developed countries [7]; it has evolved in a rather unstructured fashion without clear concepts about its very nature, medical or social, and about the nature of public funding, social insurance or general revenues. The objectives of this paper are to examine the Israeli LTC system, identify its structural shortcomings, focusing on those that should be of concern in other systems, and suggest options to reform. Accordingly, the paper begins with the legacy, organization, and funding of LTC in Israel, and then discusses the system’s structural and financial deficiencies. The paper continues with the proposition of a two-planked reform, and concludes with pertinent political economy. 2. LTC in Israel – legacy and structure The National Insurance Law, enacted in 1953, established the social security system as we know it today. The
system pertaining to the elderly comprises three layers: a basic layer of old-age pensions, a second layer of workrelated pensions, and a third layer of retirement savings [8]. Ideologically and politically, the Israeli legislation followed that of the dominant labor movement and ruling labor parties at the time. In addition, the Histadrut, Israel’s Federation of Labor – a ‘state within a state’ institution through the eighties – kept a stringent watch over this system [9,10]. These arrangements had little to do, however, with LTC. Projections during the 1980s about a significant increase in the infirm aged population caused concern for two interrelated reasons. The first was that the costs of hospitalization would skyrocket. The second, that there were no solutions for the elderly in the community in spite of the consensus about advantages of keeping them there whenever possible. Added to these were the growing pressures from households who found it increasingly complicated to deal with the aged in need of care. Taken together, these factors resulted in the multitude of rather un-coordinated legislations designed to face the challenge [11]. Entitlements to LTC in Israel follow a series of statutes, and involve different arms of the state. These are discussed and summarized in Table 1 by institutional and functional perspectives separating conceptually four systemic functions: stewardship and oversight, funding, fund holding and OMCC, and provision.1 Under the 1958 Welfare Services Law, elderly patients who lack basic circles of social and economic support – lone elderly, those with poor housing and living conditions, and so on – are entitled to state-supported assistance. The budget execution is by the Ministry of Welfare (MOW). Provision of care is by-and-large through non-state institutions. Under the Nursing Insurance Law of 1988, while living in the community, an elderly person is entitled to services including cooking, cleaning, laundry. These include diapers and an emergency beeper. Services are provided through a caregiver or in a day care center. The services are given in addition to a universal old-age pension to which Israeli residents are entitled. The services in kind cannot exceed 15.5 h per week by a caregiver. Families who need extra care and wish to pay for it privately can combine the publicly and privately paid services. Indeed, about 40,000 Israeli households turn to the Ministry of Industry, Trade and Employment for a permit allowing them to employ a foreign worker as a caregiver (coined “Philipina”). In that case, this worker is partially funded by the public under the aforementioned law, in
1 The fund holding function concerns an agency function, combined with organization and management of care consumption (OMCC) and purchasing. OMCC entails first and foremost devising patterns for patients to realize the benefits to which they are entitled. These patterns are then supported by signing on providers, and guiding them through pay incentives and regulations to provide care according to these patterns. In the paradigm that has emerged in modern health care systems, the OMCC function with regard to entitled care is entrusted either with a state monopoly (e.g., the British National Health Service) or competing sickness funds (e.g., Germany as well as Israel) [12–14].
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
219
Table 1 Long-term care service by entitlement and eligibility, and functional responsibility. LTC service
Entitlement and eligibility
Support services in the community
Universal
Institutionalization of functionally dependent and demented Institutionalization of elderly suffering from social & economic deprivation Hospitalization for complex nursing care and rehabilitation Certifications to employ foreign workers as caregivers Regulation of the private nursing insurance market
Selective – means-tested subsidy
a
Agency Responsible for Funding
Fund holding and OMCC
Provision*
Stewardship and oversight
National Insurance Institute (NII) State
NII
Mostly private (for and not-for-profit)a
NII
Ministry of Health (MOH)
Mostly private (for and not-for-profit)
MOH
Selective – socio-economic tested
State
Ministry of Welfare (MOW)
Mostly private (for and not-for-profit)
MOW
Universal
State
Sickness funds/State
Mostly private (for and not-for-profit)
Ministry of Health
Ministry of Industry and Trade Ministry of Finance
In Israel, in 2007, the distribution of LTC and rehabilitation institutions was as follows: public, 9%; non-profit, 37%; for profit, 54% ([2], Table 6.6).
lieu of the entitled care this worker replaces. The National Insurance Institute (NII), the Israeli social security administration, oversees, funds, and OMCCs the public element of this activity. Provision is through private caregivers. Under the National Health Insurance Law of 1994, acutely and sub-acutely ill patients, as well as those needing rehabilitation and complex nursing care because of medical conditions, are the responsibility of the health care system. The treatment of these patients is essentially fully funded by the state but with the fund holding – OMCC responsibility entrusted with the four sickness funds that have this responsibility for general curative care [15]. Provision of care is mostly through hospitals of different types of ownership. Under the same law, the institutionalization of patients needing nursing care or with dementia is under the fund holding – OMCC responsibility of the Ministry of Health (MOH) and families, rather than sickness funds. Eligibility for state support and the level subsidy are means tested. An additional indirect subsidy for institutionalization is provided by the state through tax exemptions for workers who pay for their parents in geriatric institutions. 3. Structural deficiencies in the publicly supported system The different statutes and their implementation result in horizontal segregation of handling various aspects of LTC, and, at the same time, in a fairly centralized system to manage each aspect [16]. This is detrimental to the quality of service and care as well as the overall efficiency of at least the publicly supported LTC system, creating the following adverse consequences. Discontinuity of care. The functional condition of the LTC patients is dynamic and is liable to shift from one condition to another. As conditions change, treatment needs to change correspondingly. A need for acute treatment, for example, may be replaced by rehabilitation needs and then
by nursing care and vice versa. However, because of the segregation in responsibility, care is disrupted and the ability to build a comprehensive and continuous process of treatment is hampered. Disincentives for investing in preventive treatment and rehabilitation. Preventive treatment as well as rehabilitation can not only improve the quality of life of the patient, but can also reduce the expenditures involved in the decline into a more serious condition [17–19]. However, in the aforementioned segregated system, the investing institution may not benefit from the potential financial returns of the investment. Hence, institutions may be disinclined to engage in prevention. Worse, the segregation may even create an economic incentive for disinvestment, as a decline in the patient’s condition makes it possible to shift the costs to another institution. Promotion of institutionalization. Israel is committed to the goal of keeping the elderly person in the community for as long as possible. However, the fragmented nature of care services and the lack of care provisions in the community to elderly who need personal care for more than 15.5 h per week, forces the family who cannot pay for extra services of a caregiver, to seek institutional solutions, contrary to stated policy and the patient’s welfare. Bureaucratic maze and low awareness of rights. Under the current arrangements both patients and their families, when most in need, find themselves in a bureaucratic maze; they constantly face different institutions, each responsible for one aspect of LTC. This is compounded by low awareness and limited information: surveys and interviews show that public awareness of the issues associated with LTC rights is low. There is a lack of public information on how to choose wisely among the various insurance policies in the private market. A significant portion of insured individuals does not even know they are in possession of insurance policies, much less the terms and extent of their coverage [20]. A 2003 survey revealed that only 23% of the respondents knew that sickness funds were not obligated to pay
220
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
Table 2 Estimate of funding long-term care in Israel, 2003–2004. Main category
Type of care
Private
Personal home care by “Philipinas” Institutional non-medical care insurance Insurance premiums, net of benefits Share of private
2.1 1.8 0.5 4.4
25.0%a 21.3%b 6.0%b 52.3%
Public
Care in community Institutional non-medical care Acute medical care Share of public
2.5 1.2 0.3 4.0
29.8%c 14.3%d 3.6%e 47.7%
8.4
100.0%
Grand total a b c d e
Costs in 1000 million NIS
% of total
Based on $1000 US per month. 25% paid by private insurance. Based on the NII budget, cost of nursing insurance, 2004. Based on the Ministry of Health budget, 2003–2004. Based on estimated 400,000 care days (2004) at a daily cost of NIS 700.
for institutionalization in a nursing care facility. In general, the level of awareness of elderly persons, especially in the lowest income quintile and Russian speakers, was comparatively low [21]. This may follow a “cultural lack of experience” with aging. The current generation caring for its parents was born during the post-WW II baby boom. Many of this generation, born to Holocaust survivors, lack “a grandparent experience”. Cost shifting. Indeed, the situations discussed above are fueled by the incentives of the different budgeted institutions to shift costs from one to the other, and mainly to the family at the end. All the above issues are aggravated by the vertical concentration in the handling of each entitlement. The Ministry of Health, the Ministry of Welfare, and the National Insurance Institute determine eligibility rules and other regulations, OMCC of entitlements are under their jurisdictions, and in some cases the state even provides care. That is, institutions that set policy and standards also supervise themselves while implementing their respective budgets, with built-in incentives to shift costs. This situation gives rise to questionable governance and public accountability practices. 4. The financing of LTC – the public private mix in funding An estimate of the total funding resources available to the system is presented in Table 2. The share of private expenditures – out of pocket and insurance premiums, net of insurable benefits – is slightly higher than that of the public sector: 52.4% compared to 47.7%. It is likely that direct expenditure of households is even higher than these data suggest because they do not include expenses such as purchasing additional hours of treatment from local caregivers, and expenditures for extra products and support services. The calculations clearly do not take into account the potential loss of income to the household such as the loss of work days by family members. 4.1. Public funding Public funding comprises two central sources (Tables 1 and 2). The first is general revenue financing
from the state’s general budget. The second is earmarked taxation collected by the NII, including an earmarked health tax. The first source makes entitlements dependent on budget availability. This arrangement makes it easier to activate programs with a limited budget that is not carte blanche. Namely, eligibility rules can be implemented and changed according to budget availability. Supply restrictions resulting in queues can follow as well. Earmarked taxation for social insurance implies that benefit availability depends only on the patient’s functional state and not on explicit budgetary constraints [7,22]. Indeed, the community-based program funded through the NII runs a deficit, which is legally and practically impossible in the programs budgeted by general revenues [23]. 4.2. Private funding Private funding comprises two main sources, not counting direct family members’ time inputs: out-of-pocket pay (OOP) and commercial insurance of different types. OOP can impose a serious financial burden on the family. The monthly cost of a nursing institution licensed by the Ministry of Health ranges between 1.3 and 2.5 times the average monthly (2007) wage [24]. The cost of employing a foreign caregiver can reach as much as $1000 in direct cost or 0.85 the average monthly wage. It also involves high administrative costs. Consequently, private insurance remains a central tool by which the individual can cope with the financial risk involved in LTC, in spite a variety of entitlements that are limited to 15.5 h in the community and are meanstested for institutionalization. Affordable private insurance arrangements are superior to out-of-pocket pay because they enable families to anticipate the financial risk of future nursing care by sharing risk with relatively small periodic payments while the individual is still young and healthy. Three major types of private nursing insurance arrangements are available in Israel: • Individual commercial nursing insurance is purchased by an individual who can choose the scope and length of coverage. The premium is determined according to the personal risk level as well as coverage in scope and time.
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
• Group commercial insurance is usually purchased by an employer on behalf of its employees. The scope and length of coverage are limited. Insurance is discontinued when employment is terminated. • Sickness funds insurance is available to members by an insurance company through sickness funds, and commonly involves some community rated premium [20]. The sickness fund holds the policy, and is responsible for choosing the commercial insurance company and negotiating the terms of the nursing care policy. The terms of these policies are similar to the aforementioned group policies. The average cost to the privately insured is seven times that of group insurance [25]. Data limitations, in themselves indicative of a potential structural problem, prevent a good view of private LTC insurance in Israel. It is estimated that between one-third and two-thirds of the population aged 22 and above do not carry nursing insurance policies. Although private insurance for LTC in Israel is superior to OOP, it involves a series of structural shortcomings as follows. High premiums. As premiums rise with age and condition of health, the needy elderly find acquiring insurance difficult or outright prohibitive. It is important to stress in this regard that the nursing care insurance industry in Israel is relatively new. To argue that the elderly of today should have prepared for LTC when they were younger is not valid. At best, Israel is in a transition period in this regard. Coverage limitations. A significant gap can be expected between insurance benefits and the actual cost of pertinent services. There are two main reasons for this. First, the costs of private insurance are capped in advance. The insured is thus exposed to the risk of a rise in prices of LTC services. In addition, the coverage has a period limit. Most policies offer insurance coverage that lasts for 3–5 years. When a person needs care for a longer period, it is not available. Insurance discontinuity and lack of insurance. A typical problem arises when a group insured person is dropped from the policy due to retirement, layoff, or the like. This problem is especially serious when the insured are elderly or sick, as there is little chance that another insurance company will agree to insure them. Insurance companies that are not attached to the sickness funds or other group arrangements can refuse bad risks at will [26]. As a result, especially when retired, the elderly and sick are usually left without any insurance protection at all. Regulations issued by the state treasury require the group insurer to automatically transfer those dropped from group policies to individual policies [24]. This does not solve the entire problem or even most of it, since the higher priced individual policies are usually not affordable. The current system of private funding of care is characterized by a number of common systemic efficiency problems as follows. The limited ability of pooling resources for spreading the risk. As argued, within the private insurance market, there is an advantage of group insurance over individual insurance. High management fees. A large group saves management costs such as marketing, actuarial assessment, collection,
221
and management in general. For example, commission fees for a private policy are as high as 25%, while in group policies it is only 5% [20]. 5. Long-term care reform options The general share of private funding in funding LTC in Israel is, first, indicative of the magnitude of the direct financial burden of LTC on households. Second, it suggests that access to LTC depends on an ability and willingness to pay by the household, and hence is subject to corresponding variations in access to care and in its quality. Private insurance arrangements are at best partial, uneven, and outright insecure, especially when the probability of need and financial risk are highest. The individual and his family thus have limited options to supplement public entitlements that are limited in the community and subject to a means-tested subsidy. Universal coverage and its associated public regulated funding can thus be more equitable and efficient, at least in lower cost of administration, than current arrangements, especially if the state first puts existing public arrangements in order. Indeed, a reform can build on the current public system, and the public and private funds available to the system. A reform can be accomplished by horizontal integration of the public functions – policy making and oversight and not the least funding – and vertical separation of funding, OMCC, and provision functions [16]. Consequently, the reform comprises the following: (a) charging a single government ministry with the responsibility of setting policy and oversight; (b) pooling all available public funding into a single financial framework; (c) establishing a new budget holding authority that will implement the public LTC budget or, alternatively, assigning the pooled public budget to competing plans or sickness funds; (d) providing services by for- and not-for-profit suppliers as is accepted today; (e) establishing universal coverage for long-term care, funded by existing public funding plus an earmarked tax, replacing part of the current out-of-pocket pay and private insurance. These can be accomplished in two stages. The first stage comprises the first four steps. The second, building on these, integrates the last. Although a “big bang” single stage reform, as Israel did in the health care system, is not to be ruled out. 5.1. Stage I: reorganizing the existing public system The first stage does not change existing entitlements and their public funding, but integrates them through unified funding and allocation mechanisms, and unified OMCC of all LTC entitlements. Stewardship and oversight. As the NII is under the jurisdiction of the Ministry of Welfare, this ministry is responsible for the larger share of the public budget,
222
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
including that of the NII, for LTC (Table 2). Hence there can be merit to charge this ministry with the pertinent stewardship and oversight responsibilities. There are two alternatives: the Ministry of Health and the Ministry for Pensioners, established by the previous government. As suggested below, this issue needs to be resolved in conjunction with the decision about the fund holding responsibility. Funding. Integration of funding can follow the precedent set by the Israeli National Health Insurance Law (NHL) enacted in 1995 [27]. Accordingly, all funding in the reformed system – from general and earmarked taxation – for LTC entitlements would be pooled by the NII. This institution would, in turn, allocate the pooled funds to single or multiple budget holders responsible for OMCC of LTC, according to options discussed below. The funding arrangement combining general tax revenues with earmarked social insurance revenues raises at least a conceptual issue. The first is associated with hard budget constraints, and usually involves means-tested eligibility. The second, with unconditional eligibility, is usually based solely on functional and medical conditions and indications. The experience of the National Health Insurance Law enacted in 1995 is that this is a non-issue. The patient and his family have no idea and hardly care about the particular source of funding. The state considers the earmarked tax part of general taxation in the sense that it is allocated from general revenues, taking into account earmarked tax revenues so that the two sources amount to a budget targeted by the state treasury. In the case of funding medical care, the division between the two sources of funding is not even a legalistic issue; it has never been tested in courts. The different underlying principles associated with the two sources of public funding can still be reconciled by entitled benefits that have two layers. The first, funded by earmarked social insurance contributions, comprises basic universal benefits that are not subject to means testing. The second, funded by general revenues, comprises selective entitlement based on means-tested eligibility rules. This arrangement can win political support for the system since nobody is excluded from state support. Budget holding. As suggested, there are two budget holding options: (1) a single non-competing authority for long-term care that will purchase, using the public funds allocated to it, services from a variety of suppliers; (2) multiple competing budget holders that do the same. While competing budget holders with sole responsibility for LTC is not ruled out and should be considered, this option is not discussed here explicitly because, historically, Israeli reform proposals focused primarily on the second alternative, but one that is based on the existing competing sickness funds that handle medical care in Israel. This particular option gives the issue of competing budget holders for LTC a particular dimension. The two options are illustrated in Fig. 1. The preferred alternative depends on LTC philosophy. LTC has traditionally been seen as a medical rather than
Fig. 1. (Option A) Management of long-term care by an authority. (Option B) Management of long-term care by sickness funds.
a social issue. LTC was developed in Israel piecemeal as it probably was elsewhere, from the days when “old age” was recognized officially as a disease. This approach, however, is probably anachronistic. Not counting unreported family care, about 76% of total expenditures for LTC in Israel today is devoid of any medical dimension (Table 2). It should also be noted that in most developed countries, LTC is not part of the medical care system [7]. LTC can thus be considered from either a social or a medical perspective. Under the first, the OMCC of the LTC would be undertaken solely by the proposed authority that will have no other role, medical or otherwise (Fig. 1, Option A). This authority would be dedicated to keeping the elderly person in his or her home and community for as long as possible. It would also have the budget to do that. This alternative is preferable to the elderly themselves [28]. In this case the authority should be subordinated to either the Ministry of Welfare or the Ministry for Pensioners. The second alternative primarily ensures the continuity of medical care within the existing framework of the sickness funds (Fig. 1, Option B). This alternative, which would “medicalize” LTC in Israel, is at the outset attractive, since it results in the full integration of LTC into the sickness funds’ already existing systems. Its attractiveness in the long term is dubious and hard to establish as it depends on alternative philosophies. In this case, there is merit to subordinating LTC to the Ministry of Health.
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
223
Fig. 2. Financing of state nursing insurance.
5.2. Stage II: enactment of universal entitlement to LTC The enactment of universal entitlement to LTC builds on any OMCC alternative of the system just proposed. It involves combined expansion of coverage and entitlement; it will cover the segments of the population that have no private insurance while expanding entitlement to include some benefits that are now privately insured. Those would “justify”, so to speak, the nationalization of some of the private funding: taxing households to pay for new entitlements that are now benefits paid out of pocket, through private insurance, and even indirectly through family members’ time investments as depicted in Fig. 2. The potential efficiency and equity gains of expanding LTC coverage and entitlement have been discussed above. There are advantages to earmarked social insurance taxation, especially of funding that intends to replace private insurance [29]. The establishment of state LTC based on earmarked funding is likely to have broader public appeal than raising general taxes. As already suggested, social insurance contributions may give LTC some immunity from acrossthe-board budget cuts and from the transfer of its resources to other purposes [30]. At the same time, this type of financing is not immune to the business cycle. Funding drops during a financial downturn [31]. 5.3. Funding of universal entitlement to LTC The figures in Table 3 are estimates and projections of the funding needs and availability involving universal entitlement to LTC for the decade 2005–2015. These estimates and projections are based on the following maximalist (worst-case) assumptions about needs and costs2 : • The percentage of disabled people among residents over the age of 65 will rise from 16% in 2005 to 20% in 2015. Changes in definitions will bring about an expansion of entitlement. • With universal entitlement and other changes, the share of institutionalization in Israel will rise from 4% to 10% among those over 65. This is 1–2% higher than that accepted in Europe today. • In accordance with these rates, the percentage of elderly in the community is estimated as the difference between
2 Since comparative data are available only through 2005 for this paper compiled in 2008–2009, 2005 is the base year used for projections.
the share of disabled in the elderly population and the rate of those treated in institutions. • The annual cost of institutionalization was calculated on the basis of a monthly cost 2.1 times the average monthly wage (or about $90 per day) in 2005, with annual inflation of 2%. • The cost of long-term care in the community was based on a monthly cost of 0.4 times the average monthly wage in 2005, with 2% annual inflation. In accordance with these assumptions, the cost of universal entitlement arrangements would be $2.2 billion in 2010 and $4.0 billion in 2015. The resource availability estimates and projections are based on the following “minimalist” assumptions: • On the basis of 2004, the public budget for long-term care will grow by 2.5% annually. • Only half of the private resources will be converted into public budgets, under universal entitlement. On this basis, private resources will also rise by 2.5%. • A quarter of the system’s funding will come from copayments on the basis of means tests. • Each year’s funding will finance the costs of people cared for during the same year. Under this “pay as you go system” no money will be accumulated for future use. • Only those aged 25–64 will be relied upon to finance the system on an ongoing basis. The total expected resources at the system’s disposal are estimated to be $2.2 billion in 2010, becoming a deficit in 2015 with an estimated shortfall of $1.2 billion. Additional assumptions that are likely to help finance the proposed system are: • savings in collection costs and insurance premiums due to consolidation of collection and its administration; • continued contributions of those aged 65 and over who do not need long-term care; • some of those entitled to long-term care are likely not to apply for public assistance; • savings in expenditures by preventing duplications in the system in general and the purchase of services in particular. The estimated financial burden for those aged 25–64 in the civilian labor force was calculated per potential worker at 4.8% of the average monthly wage for 2010 and 7.8% of the average monthly wage for the following decade as
224
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225
Table 3 Forecasts of needs and sources of finance – universal entitlement to LTC, Israel, 2005–2015. 2005
2010
2015
Needs Number of 65+ Percent disabled in 65+ population Percent institutionalized
685,400 16.00% 4.00%
725,800 18.00% 7.00%
875,500 20.00% 10.00%
Number institutionalized Number in community
27,416 82,248
50,806 79,838
87,550 87,550
Funding requirements Annual costs of institutionalized care (in NIS millions) Annual costs of community care (in NIS millions)
3619 1809
7404 1939
14,087 2348
Total annual costs (in NIS millions)
5428
9344
16,435
Funding sources Available public finds (in NIS millions) Private funds turned public (in NIS millions) Co-pay, up to 100%
4000 2000
4526 2263 2336
5120 2560 4109
Total funds (in NIS millions)
6000
9124
11,789
Surplus funding (in NIS millions)
572
(−220)
(−4655)
Table 4 Estimated monthly burden of financing universal LTC, per working capita, population aged 25–64. Year
2005 2010 2015 a
Burden
Projected per capita gross domestic product (GDP)a
NIS (1 ≈ US$4)
Index (base = 2005)
250 338 410
100 135 164
100 112 114
Based on 1995–2000–2005 income growth.
shown in Table 4 [32]. This means there will be an average annual increase of 5% of the financing burden on the general working population. This is less than double the rate of the average increase in real income, but less than the growth in the cost of LTC seen during the past decade. This is the price society needs to pay for the benefits of “freeing”, in an efficient and equitable way, the population from the growing burden of long-term for elderly family members.
p. 48). Support of new entitlements has not been on the agenda. Still, the increase in the aged population and its needs contributed to the growing political powers of this population in Israel’s democracy. A key political manifestation of this reality was the establishment of a political party – the Pensioners Party – that gained 7 of the 120 seats in the previous Israeli parliament. While this party is not represented in the new parliament, its legacy in the last government, in the form of a Ministry for Pensioners, remains. The party succeeded in increasing awareness about the needs of the aged, and in blocking the state’s efforts to reduce public funding for them. A clear and visible achievement of the presence of this party in the government and running the Ministry of Health has been the abolition of waiting lines for the state-supported LTC. Namely, means-tested LTC is readily available in Israel. This still does not make the system either efficient or equitable.
References 6. Conclusion Reform requires political will, which is still lacking with regard to LTC in Israel. The current fragmented publicly supported system is clearly hostage of the vested interests of the different stake holding institutions that are responsible for the different entitlements to LTC. The sizable Israeli coalition governments – requiring numerous ministries, on the one hand, and the lack of pertinent leadership, on the other hand – combine to stall efforts to initiate the first, ‘costless’, plank of reform suggested in this paper. The lack of a state willing to commit to the two-planked comprehensive reform, which might be an opportunity for one step big bang’ reform, must be viewed as part of the change in Israel’s political economy since the mid-nineties; successive governments, mostly with a liberal economic orientation, systematically reduced the share of government support per capita to the social welfare system ([33],
[1] Brodsky J, Habib J, Hirschfeld M. Long-term care strategies in industrialized countries: case studies of insurance based and non-insurance based long-term care system. Jerusalem: Myers-JDCBrookdale Institute and World Health Organization; 2003. [2] Israel Central Bureau of Statistics (CBS). Israel annual statistical manual #59; 2008 [Jerusalem]. [3] Population Reference Bureau (PRB). 2008 world population data sheet; 2008 [Washington, DC]. [4] Brodsky J, Davis M. Demography and epidemiology of aging and the elderly population. In: Rozin A, editor. Aging and old age in Israel. Jerusalem: Eshel; 2003. p. 289–342. [5] Israel Central Bureau of Statistics (CBS). Israel annual statistical manual #57; 2006 [Jerusalem]. [6] Kop Y. The Graying Sabra: a demographic view of the elderly population. Social Security 1988:49–68 [Special Edition]. [7] Gleckman H. Medicaid and long-term care: lessons from abroad. Boston: Center for Retirement Research at Boston College; 2007. [8] Gal J, Pesach R. The development of the social security system for the aged in Israel and its implications. Social Security 2002;62:114–41 [in Hebrew]. [9] Arian A. Political and administrative aspects of welfare policy in Israel. Tel-Aviv: Tel-Aviv University; 1978.
D. Chernichovsky et al. / Health Policy 96 (2010) 217–225 [10] Grinberg L. The Histadrut above all. Jerusalem: Nevo; 1994 [in Hebrew]. [11] Habib J, Factor H. Services for the elderly: changing circumstances and strategies. In: Kruger AM, Morely D, Shahar A, editors. Public services under stress: a Canadian-Israeli policy review. Jerusalem: Magnes Press; 1993. p. 154–75. [12] Chernichovsky D. Health systems reforms in industrialized democracies: an emerging paradigm. The Milbank Quarterly 1995;73(3):339–72. [13] Chernichovsky D. Pluralism, public choice and the state in the emerging paradigm in health systems. The Milbank Quarterly 2002;80(1):5–39. [14] Chernichovsky D. The emerging paradigm revisited. Beer-Sheva: Ben-Gurion University of the Negev; Processed. [15] Rosen B. Health care systems in transition: Israel. Copenhagen: European Observatory on Health Care Systems; 2004. [16] Chernichovsky D, Chernichovsky M. Decentralization in healthcare: a framework for design and application. Washington: World Bank; 2006. [17] Xakellis GC, Frantz RA, Lewis A, Harvey P. Cost-effectiveness of an intensive pressure ulcer prevention protocol in long-term care. Advances in Wound Care 1998;11(1):22–9. [18] Cohen JT, Neumann PJ. The cost savings and cost-effectiveness of clinical preventive care. Research Synthesis Report No. 18. NJ: Robert Wood Johnson Foundation; 2009. [19] Langhorne P, Duncan P. Does the organization of postacute stroke care really matters? Stroke 2001;32(1):268–74. [20] Bramli-Greenberg S, Gross R. Supplemental and commercial health insurance, 2001. Jerusalem: Myers-JDC-Brookdale Institute; 2003. [21] Gross R, Brammli-Greenberg S, Matzliach R. Public opinion on the level of service and performance of the health system in 2003, in comparison to previous years. Jerusalem: Myers-JDC-Brookdale Institute; 2005. [22] Brodsky J, Habib J, Hirschfeld M, Siegel B, Rockoff Y. Choosing overall LTC strategies: a conceptual framework for policy development.
[23] [24]
[25] [26]
[27] [28]
[29]
[30] [31]
[32] [33]
225
In: Brodsky J, Habib J, Hirschfeld M, editors. Key policy issues in long-term care. Geneva: World Health Organization; 2003. p. 245– 70. Israel National Insurance Institute. Annual actuary report for 2001 and the financial report for 2001. Jerusalem; 2001. Myers-JDC-Brookdale Institute, Eshel, the Ministry of Finance. Annual Report 2005. Private Nursing Insurance – Information for the Public. Jerusalem; 2005. Ministry of Finance, Office in Charge of the Capital Market, Insurance and Savings. Annual Report 2004. Jerusalem; 2005. Chernichovsky D. Voluntary medical insurance and entitlement to medical care—the potential trap; the case of Israel. Beer-Sheva: BenGurion University of the Negev; Processed. Chernichovsky D, Chinitz D. The political economy of health system reform in Israel. Health Economics 1995;4(2):127–41. Brammli-Greenberg S, Gross R, Weizberg R. Factors influencing holding of private nursing insurance in Israel. Presented at a Meeting of the Israel National Institute for Health Policy and Health Services Research, Tel-Aviv, 12 December 2007. Korpi W, Palme J. The paradox of redistribution and strategies of equality: welfare state institutions. inequality, and poverty in the western countries. American Sociological Review 1998;63(5):661–87. Koreh M. Changes in the structure of a welfare state—from social insurance to state service. Social Security 2004;67:62–82. Chernichovsky D, Chernichovsky M, Homann J, Schramm B. Social health insurance; The road to an integrated equitable and efficient healthcare system. Forthcoming in Preker A. et. al. Editors. Scaling Up Affordable Health Insurance. Washington DC. World Bank. Processed. Israel Central Bureau of Statistics (CBS). Israel annual statistical manual #58; 2007 [Jerusalem]. Horev T, Kop Y. Israel’s social services 2008. Jerusalem: Taub Center for Social Policy Studies in Israel; 2009.