Do you realize what health care spending is as a percentage of the G.D.P. in Israel? Eight percent. You spend eight percent of G.D.P. on health care. You’re a pretty healthy nation. We spend 18 percent of our G.D.P. on health care, 10 percentage points more. That gap, that 10 percent cost, compare that with the size of our military — our military which is 4 percent, 4 percent. Our gap with Israel is 10 points of G.D.P. We have to find ways — not just to provide health care to more people, but to find ways to fund and manage our health care costs.
Israel… requir[es] all residents to carry insurance and capping revenue for various parts of the country’s health care system. Israel created a national health care system in 1995, largely funded through payroll and general tax revenue. The government provides all citizens with health insurance: They get to pick from one of four competing, nonprofit plans. Those insurance plans have to accept all customers—including people with pre-existing conditions—and provide residents with a broad set of government-mandated benefits…. Israel’s health care costs have hovered around 8 percent of its gross domestic product for over two decades…. Israel’s lower health care spending does not look to sacrifice the quality of care. It has made more improvements than the United States on numerous quality metrics, and the country continues to have a higher life expectancy….
The national government exerts direct operational control over a large proportion of total health care expenditures, through a range of mechanisms, including caps on hospital revenue and national contracts with salaried physicians. The Ministry of Finance has been able to persuade the national government to agree to relatively small increases in the health care budget because the system has performed well, with a very high level of public satisfaction.
The Israeli Ministry of Finance controls about 40 percent of Israel’s health care expenditures through those payments to the four insurance plans. The ministry decides how much it will pay the health plans for each Israeli citizen they enroll, making adjustments for how old a person is and how high their health care costs are expected to be. It’s then up to the health insurance plan to figure out how to provide coverage within that set budget. If they spend too much—have a patient who is constantly in the hospital, for example—they will find themselves in the red. It’s that set budget—a capitated budget, in health policy terms—that seems to be crucial to the Israeli health care system’s success in cost control.