2013 - Dov Chernichovsky

by
Guy Navon and Dov Chernichovsky

Abstract

The study examines the impact of private expenditure on healthcare in Israel on income distribution, poverty, and catastrophic spending. The study also discusses the functioning of the publicly supported system by studying private expenditure on entitled care. In addition, the study examines the trend in private spending during 2003–2009 for its implications on the various impact aspects. The context of the study is the relatively sharp rise in the share of private funding of healthcare in Israel. This share reached about 40 percent of total healthcare expenditure in Israel in 2010, and is the highest among developed economies that provide universal healthcare coverage. The study is based mainly on the 2009 Household Expenditure Survey by Israel’s Central Bureau of Statistics that includes a sample of 6,270 households, representing 2.136 million Israeli households, a fifth of whom are classified as poor. The study is innovative in that it classifies into categories to by their nearness to satisfying a basic need, to be included in the measurement of the poverty line, or by their nearness to a tax, to be included in the analysis of income distribution. Special attention is given the households which, unlike in the tax situation, forgo expenditure. Nearly all Israeli households, 93 percent, report private expenditure on medical care at 5.1 percent of average spending on consumption. Households spend increasing shares of their disposable income on medical care, or they forgo more and more other consumption for the sake of medicine. The expenditure as a whole and by components is positively related to level of income, and not to other common correlates of poverty in Israel such as being religious or an Arab. Co-payments (mitigated since the end of 2011), which are considered closest to basic need or tax like, are reported by about a fifth of total households. About a tenth of households report spending out of pocket on care that parallels care included in entitlement. Four percent of households, 80,000, insure privately for such care. The share of expenditure for parallel care in total private expenditure has been increasing with time. The trend is led by high education and high income groups that increasingly forgo publicly supported care. The data suggest supplier-induced demand for parallel care. Spending on co-payments and supplementary care, which is regarded as a need or tax-like but not included in entitlement, is regressive in spite of the evidence that low income households forgo such spending because of its economic implications. This spending adds about 6,000 households to poor households in Israel of which 1,300 households join the ranks of the poor because of private expenditure on entitled care. About 68,000 households incur spending that threatens the household’s vitality, including its health.

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