Wednesday, August 15, 2012

Mitt Romney's (uninformed) praise for Israel's thoroughly un-Republican health care system

There has been a lot of chatter about Mitt Romney's various gaffes and stumbles during his recent trip abroad. But one of those incidents is worth examining more carefully, because the subject involves serious policy implications for us here in the US. While Romney was in Israel, he praised the Israelis for running a high-quality health care system while spending a dramatically smaller proportion of their national income on health care than the US. Informed analysts seem to agree that this is an accurate assessment of what Israel has accomplished. But how has it done so? NOT by moving toward an unregulated market in health care, with minimal government involvement. Instead, Israeli health care is dominated by a single-payer non-profit system with universal coverage, an individual mandate, tight government regulation, and effective cost controls.

There may be some lessons there—though giving them due consideration would require both knee-jerk free-market fundamentalists and habitual Israel-bashers to look beyond some of their ideological prejudices.

A recent piece by Sarah Kliff (see below) would be a good place to start. I was going to offer some highlights, but the piece is clear and concise, so just read the whole thing.

It's worth paying especially close attention to the two graphs in this article. Their combined message, as Kliff sums it up, is that "Israel’s health care costs have hovered around 8 percent of its gross domestic product for over two decades, while other countries’ have seen theirs rise," but at the same time "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."  Given that the US is a considerably richer country than Israel, and that Israel—like the US—is an ethnically diverse country which now has higher levels of income inequality than most European countries, those last points are worth noticing. I'm impressed.

Of course, one shouldn't get too carried away.  I don't think anyone claims that Israel's health care system is ideal, or close to it.  And like health care systems in all countries, the full picture is complex enough to resist easy summary. In Israel's case, those complications include the fact that not all medical services are covered by the core single-payer system, and most Israelis supplement it with some private health insurance.  But the basic point seems clear enough.  The central features of Israel's health care system that make it work well are precisely those that Mitt Romney's party (and, nowadays, Mitt Romney) would denounce as "socialized medicine" and a "government take-over of health care." So far, I haven't seen any serious arguments to the contrary.

—Jeff Weintraub

(P.S. For an enlightening discussion of another comparison case by a committed pro-market ideologue who is, nevertheless, also willing to take account of his own personal experiences, see Matt Welch admits that the French health care system is much better than ours. From what I have read, the funding for French health care seems to involve a basically single-payer system combined with a role for non-governmental insurance companies that are non-profit, tightly regulated, and subject to cost controls. Of course, there is a lot more to health care systems than their funding mechanisms.)

Ezra Klein's Wonkblog
July 30, 2012
Romney praises health care in Israel, where research says ‘strong government influence’ has driven down costs
By Sarah Kliff

Republican presidential candidate Mitt Romney had some very kind things to say about the Israeli health care system at a fundraiser there Monday. He praised Israel for spending just 8 percent of its GDP on health care and still remaining a “pretty healthy nation:”
 When our health care costs are completely out of control. Do you realize what health care spending is as a percentage of the GDP in Israel? 8 percent. You spend 8 percent of GDP on health care. And you’re a pretty healthy nation. We spend 18 percent of our GDP on health care. 10 percentage points more. That gap, that 10 percent cost, let me compare that with the size of our military. Our military budget is 4 percent. Our gap with Israel is 10 points of GDP. We have to find ways, not just to provide health care to more people, but to find ways to finally manage our health care costs.
Romney’s point about Israel’s success in controlling health care costs is spot on: Its health care system has seen health care costs grow much slower than other industrialized nations.

How it has gotten there, however, may not be to the Republican candidate’s liking: Israel regulates its health care system aggressively, requiring 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.

Health insurance does not, however, cover every medical service. Dental and vision care, for example, fall outside of the standard government set of benefits. The majority of Israelis—81 percent —purchase a supplemental health insurance plan to “use the private health care system for services that may not be available in through the public system,” according to a paper by Health Affairs.

Now, let’s get to the costs. As you can see in the chart below, Israel’s health care costs have hovered around 8 percent of its gross domestic product for over two decades, while other countries’ have seen theirs rise:

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:

Source: New England Journal of Medicine

How’d they do it? Jack Zwanziger and Shuli Brammli-Greenberg took a crack at that question in a 2011 Health Affairs paper. The answer, they say, has a lot to do with "strong government influence":
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.