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BANK OF ISRAEL
Office of the Spokesman and Economic Information
Press Release
June 2, 2013
Health expenditure in Israel - an international comparison of demographic factors
and cost structure
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Health expenditure in Israel as a share of GDP is low when compared
internationally, even when neutralizing the effect of the young age of the
population. This is in parallel with the fact that the indices obtained for the state
of national health indicate good results when compared internationally.
Savings in expenditure in Israel are derived in part from the fact that growth in
expenditures on those above age 70 (compared to those younger) is relatively
moderate. In contrast, health expenditures on those of intermediate age (50-64)
are not particularly low when compared internationally.
The public sector finances 85 percent of health expenditure on young children and
about 70 percent of health expenditure on those above age 75. In contrast, private
financing is more significant on those aged 19–49, covering about half of health
expenditure.
National health expenditure in Israel is low when compared internationally, reaching 7.7
percent of GDP. In parallel, the indices obtained for the state of national health (such as
life expectancy, infant mortality rates, potential years of life lost, self-evaluation of
health, and so forth) indicate good results when compared internationally, and the Israeli
health system wins praise in international surveys. This combination should show that,
compared to other countries, the healthcare system in Israel is characterized by a
relatively high level of efficiency in an aggregate cost-benefit analysis.
A study conducted by the Bank of Israel Research Department assessed health
expenditures in Israel compared to ten other developed economies while taking into
account the age composition of the population. The study found that while the young age
composition of the population in Israel contributes to savings in health expenditures in
Israel, expenditures in Israel are low when compared internationally even when
neutralizing this factor (Figure 1). Neutralizing the effect of the age composition is
required since a simple international comparison of health expenditures and health
indices without taking into account the age composition could be misleading, due to the
fact that the health needs of the elderly (and to a lesser extent of infants) are larger than
the needs of the rest of the population.
This study also assesses, for the first time, the relative path of public health expenditures
by age in Israel, compared to this path in other countries. It finds that the savings in
health expenditures in Israel (even when neutralizing the young age composition) also
derives from moderate growth, relative to other countries, in expenditures on the elderly
(compared to younger people). For instance, public health expenditure in Israel on a
person aged 80+ is 2.58 times higher than expenditure on a person aged 50–64, while in
Norway, this expenditure is 3.41 times higher, and in Canada it is 7.54 times higher
(Figure 2).
After neutralizing the effects of the young age composition and the relatively low
expenditures on the elderly, the expenditure per “standardized” individual (an individual
of intermediate age—50–64), which constitutes an indicator of the base costs in the
health system, was calculated. In the public system in Israel, this expenditure amounts to
6.9 percent of per capita GDP—a relatively low rate, but similar to four out of the ten
countries examined in the study (Australia, UK, Canada and Japan). If we add private
expenditure, total national expenditure on health per standardized individual in Israel
amounts to 12.4 percent of per capita GDP. This is not low by international comparison.
See Figure 3.)
Through the analytical framework that served for the international comparison, this study
also assessed the effect of expected aging in Israel on health expenditures (if the current
expenditure structure by age is maintained). The population aging forecast by the Central
Bureau of Statistics until 2039 (middle scenario) generated growth in national health
expenditure of 0.9 percentage points—a relatively small level of growth in relation to the
current gap between Israel and the comparison countries.
For the purpose of this study, for the first time, an assessment of private expenditure on
health in Israel was conducted by age group (through the Household Expenditure Survey
of the Central Bureau of Statistics), and it was found that the private expenditure path by
age is very different than the public expenditure path. Compared to the private health
expenditures of households on a person in the intermediate age range (50–64),
expenditures on children and youth are very low, while expenditures on the elderly are
only moderately higher. In 2009, the public sector was dominant in financing health
expenditures on children (aged 0–14), covering 85 percent of all expenditures in this age
group. Public financing declined at older ages, and private financing financed about half
of health expenditures on those aged 19-49, an age group with relatively low health
expenditures. With advancing age and the attendant increase in total health expenditures,
public financing again took on a significant role. For those above age 75, public
financing covered about 70 percent of expenditures.
Figure 1
Actual national expenditure on health,
2009 (percent of GDP)
National expenditure on health had the
composition of age in the population been
identical in all countries to that of Israel,
2009 (percent of GDP)
Figure 2
Public health expenditure on a person aged 80+ compared to a person aged 50–64
12
10
11.53
8
7.54
6
4.65
4.23
3.53
3.41
2.58
2.48
1.99
1.99
2
2.17
4
0
Figure 3
National health expenditure per person aged 50–64 (standardized individual), 2009
(percent of per capita GDP)
16
14
12
2
0
15.7
15.3
12.7
12.4
12.2
11.4
11.1
10.4
4
8.8
6
9.9
8
13.5
10