Book: ‘Policy Making at the Margins of Government: The Case of the Israeli Health System’ by Yair Zalmanovitch

Policy Making at the Margins of Government: The Case of the Israeli Health System was a real find. First published in 2002 by Dr Yair Zalmanovitch, an expert in public administration and health policy at the University of Haifa, the book documents the history and development of the Israeli health system, which today is a world-class example of a universal social health insurance system underpinned by solidarity, pluralism and mutualism, as noted by rising-star Labour MPs Rachel Reeves and Jonathan Reynolds in the Labour Friends of Israel publication Making the Progressive Case for Israel. Somewhat more recently, Dr Zalmanovich also co-wrote an article in the British Medical Journal in February 2010 warning about the potential “trilemma” of balancing quality, equitable access and funding discipline in modern Western healthcare systems such as the NHS, and the need for proper public consultation and funding increases if quality and equity were to be defended. 

In Policy Making at the Margins of Government, Zalmanovitch focuses in particular on a five-decade long struggle for legitimacy and policy control fought between the trade union-run socialist mutual aid society Kupat Holim Clalit (KHC - ‘General Sickness Fund’), a body “on the margin of government” that has provided healthcare to most Israelis since 1911, and the Israeli central state, which needed to assert its role as a new nation-state and curtail some of KHC’s excesses. Also heavily explored is the relationship between KHC, its parent institution the Histadrut (General Federation of Labour – the Israeli TUC, though it was once much more, also owning various enterprises and running much of Israel’s economy) and the Israeli Labour Party, which like it’s British sister party went through changes in the 1980s and 90s that forced it to re-evaluate its approach to economics and its relationship with the movement standing behind it.




Hadassah Medical Centre, a non-profit voluntary hospital in Jerusalem (from Flickr).
Founded in 1934, in 2005, the hospital "was nominated for the Nobel Peace Prize due to its equality in treatment, its ethnic and religious diversity, and its efforts to build bridges to peace”

The book starts by discussing the debate in Europe, North America, Australia and Israel about the relationship between governments and the various third sector and private bodies on the ”margin of the state” that they increasingly devolve services to, and whether these bodies should be valued for their “vaunted efficiency, flexibility, and responsiveness to community needs” or viewed with suspicion due to their lack of accountability and ability to set policy outside the bounds of democratic government (p.2-4). It then explains the concept of the policy “veto” that an organisation on the margin like KHC can exercise, which in this case allowed the KHC to for a long time effectively make many decisions about structure and spending in the Israeli health system without much actual input from the Israeli Ministry of Health. This was because up until the late 1980s, KHC served as the health insurer for about 85% of the Israeli population and ran a network of non-profit clinics and hospitals of its own, meaning the government needed both to attract KHC members to its own hospitals in return for payment and rely on KHC facilities to meet demands the state-run hospitals could not (in some areas, KHC was the sole health provider).

Over the course of the book, Zalmanovich explains how the nature and strength of the veto evolved over time, before eventually fading. It starts as an “informal preventative veto” in the pre-state era, when KHC was a health provider and crucial source of mutual assistance for the Jewish community in Mandate Palestine, and in the early statehood days when the Histadrut/KHC-aligned socialist Mapai Party (later renamed Labour in 1968) was in power and was willing to grant the KHC substantial informal autonomy in the fledgling country’s new health system.

This later evolved into a “formal preventative veto”, as Mapai/Labour began formally including KHC in health policy planning, partly due to the desire of one of the Labour health ministers of the era, Victor Shem-Tov, to properly “rationalise” the structure of the health system and reduce some of the disorganisation that resulted from KHC’s unregulated informal power. After 1977, when the right-wing Likud gained power for the very first time due to 70s-era economic concerns and Labour’s failures in the 1973 Yom Kippur War, KHC began exercising an “obstructive veto”, deliberately blocking the implementation of central government health policies that it considered contrary to its interests. 

Finally, in the 80s and 90s KHC’s policy veto eroded, as the state-KHC struggle began to cause chaos in the health system and even Labour came to feel the need to distance itself from the ‘old guard’ of the Histadrut-KHC network. This culminated in 1994, when Yitzhak Rabin’s Labour government and its reformist Health Minister Haim Ramon (a sort of Israeli Alan Milburn figure) passed the National Health Insurance Law (NHI). This formalised Israel’s health system around social health insurance, guaranteed all Israelis state-mandated health insurance cover (up from only 96% before the law) and access to a comprehensive package of treatments from one of four non-profit quasi-public/private sickness funds that they can choose between, of which Kupat Holim Clalit is still one (54% of Israelis are today members). Controversially, this required cutting the link between the Histadrut and the KHC, and in a way a link between the movement and the Labour Party. Zalmanovich concludes that the battle between KHC and the government was “not over health policy as such, but over would make it – over stateness, defined by Tilly (1975) as ‘the degree to which the instruments of government are differentiated from other organisations, centralised, autonomous, and formally coordinated with each other’” (p.207).

Zalmanovitch also details the unique histories of the KHC and Israel’s welfare tradition. The relationship between Labour, the Histadrut and KHC, and the latter’s dominant role then and still-substantial role now in the Israeli health system, was the product of a communitarian and socialist ethos dating to the Mandate days. Then, poor Jewish migrants were arriving in a barren and hostile region, and had to rely on a sense of common identity, collective endeavour and mutual assistance in order to sustain themselves and build a secure and liveable society. For many years, the KHC successfully resisted systemic change and the loss of the veto by warning that centralisation “threatened the principle of mutual assistance on which Kupat Holim was founded” (p.166). Zalmanovitch stresses how this settlement eroded somewhat as the need for a more organised state and a modern market economy in Israel came to be seen as more important - the KHC’s loss of its veto in healthcare policymaking was a key sign of this. 

However, it is still worth noting that by our own British standards, mutualism and the willingness of the central state to devolve to third sector bodies on the margin remains much stronger in Israel than it is today in the UK. For example, though the 1994 law nationalised and centralised control of healthcare in Israel somewhat in order to create a comprehensive and universal system, it also mandated that it would still be managed by the competing sickness funds and provided by both government and non-government facilities, thus integrating civil society into the state health system rather than excluding it. Zalmanovitch specifically mentions the nationalised British NHS several times (p.109, p.162 & p.174) when outlining what options for a universal health system Israeli policymakers considered, but ultimately makes clear that a social insurance system based on the several sickness funds was always considered more likely, a mark of deference to organisations like the KHC and Israel’s mutual aid tradition. This story and these principles of the Israeli labour movement are deeply relevant to modern British politics, as many of the Israeli movement’s communitarian, social market and mutualist ideals are the same ones that Lord Maurice Glasman now seeks to embed in the modern UK Labour Party, arguing that we once had similar traditions but lost them to the overt nationalisation of the late 1940s, and further to the neoliberalism of the post-Thatcher era.

Throughout the book, Zalmanovich documents examples of why various Israeli figures preferred the pluralist, sickness fund-based healthcare model to an outright nationalisation approach and were thus suspicious of any large-scale reform – even the reformist Health Minister in the early 1970s, Shem-Tov, and the leaders of two separate commissions on health reform (in 1957 and 1967) had tended to simply recommend a more coherent and universalised version of the insurance system along the lines of what would eventually come to be in 1994 (Shem-Tov was said to be “ideologically committed to the working class” and “believed that the public would be better served by their own voluntary health care organisations than by the state” - p.95). 

One line on page 60 is also perhaps telling about the potential of the more social economy-based Israeli approach to healthcare – “Kupat Holim [Clalit’s] voluntarism in the early years of the state, its provision of health care in the immigration transit camps, and its readiness to set up ambulatory clinics in poor, sparsely populated and distant parts of the country were driven by more than ideology and public spiritedness. They were calculated measures taken to keep ahead of its rivals, whether the other sick funds or the Ministry of Health”. Another on page 80 is also indicative – it quotes Minister Shem-Tov as having supported the establishment of a new KHC-owned hospital in Haifa because “as there were two government owned hospitals in operation there and another hospital would be needed, it was necessary to build a Kupat Holim [Clalit] hospital so as to maintain the pluralism of the health system”. Zalmanovich also explains that some Mapai/Labour officials in the early statehood days claimed that by taking a lead role in providing healthcare to Israelis, KHC “frees [the government] from the burden of healthcare, and handles it better and more cost effectively than state would” (a Finance Ministry official of the era, Pinchas Sapir, said “Every lira I invest in Kupat Holim [Clalit] is worth more to me than the same lira invested in the Ministry of Health. Virtually everything I do through the Ministry of Health is less good and costs me more” – p.43).

It is of course questionable whether Sapir’s statement was actually backed by empirical evidence or was simply based on blind faith in Mapai’s extremely close (and at times corrupt) relationship with the Histadrut and KHC. Further, not all senior figures shared the view. Israel’s first Prime Minister David Ben-Gurion (Mapai) initially supported nationalisation of some kind, and although he came to profess the pro-pluralism views of many of his contemporaries (“it would be a serious mistake…if, for example, the whole health service were to be administrated by the official bureaucracy of the state, once the majority of the citizens of the state, led by the members of the Histadrut, have by their own efforts organised medical services on the basis of mutual assistance, which have reached a high level. But the state must guarantee general medical insurance for the whole population of the state” - p.49), Zalmanovich’s account makes clear this was mostly political expediency, especially as Ben-Gurion “would later return to his more statist position” (p.49). Nevertheless, the fact that this was the default position of most Mapai policymakers and was one that even a figure as prominent as Ben-Gurion struggled to challenge represents a sharp contrast to the nationalising zeal of the UK Labour Party at a similar point in time.

In the final two chapters, “Erosion of the Veto” and “Stateness in Health”, Zalmanovich goes into detail about the 1994 reform process and the new, comprehensive health system that resulted. Though the book was published in early 2002 and thus avoids commenting on some issues still developing in the system at the time, 6-7 years still seems to have been enough for Zalmanovich to have developed a clear vantage point. In the 1980s, a string of election losses led the Israeli Labour Party to re-assess its relationship with both the Histadrut movement and with market economics. When it returned to power in 1992 Haim Ramon, who was one of the party’s rising ‘Young Turks’ (think Blairites), asked to be health minister and subsequently introduced the NHI Law. This established a universal insurance system on the model that previous health commissions, Labour minister Shem-Tov and the Likud Party had all argued for, including free choice as to which of the four non-profit funds would act as your insurer (which meant it was necessary to sever a previous KHC-Histadrut joint membership link, so as to allow easy switching between funds) and a funding mechanism based primarily on a hypothecated and progressively-levied payroll ‘health tax’ (previously, the Histadrut-KHC had collected contributions from members directly, and not always spent them purely on healthcare). 

The Knesset voted for Ramon’s law on the first reading, but the Histadrut, fearing a loss of prominence, fought back and on a special conference vote, Histadrut-sympathetic Labour members voted against the law, forcing Yitzhak Rabin to temporarily abandon it. Ramon responded in an unorthodox fashion – he resigned from his ministry, announced that he would run in an upcoming Histadrut internal election on an independent reformist “New Life in the Histadrut” platform and won in an upset, the first ever non-Labour ticket to win the organisation’s leadership. Zalmanovich cites polling data explaining Ramon’s unexpected win – on a range of issues, Histadrut rank-and-file members no longer supported many positions of the organisation’s traditional socialist leadership, including its opposition to the NHI law, creating a space for a candidacy like Ramon’s (in light of recent polling in the UK showing how out of touch Len McCluskey is with his Unite membership on many key issues of our day, this is perhaps something for the modern British Labour movement to dwell on). As a result of Ramon neutralising the Histadrut as an opponent of the law, Rabin was able to re-introduce the NHI and pass it on the final two readings.

Ramon trumpeted the new law as making Israel "the same as most progressive countries in the world in health care”, after decades of efforts towards that goal. By contrast, in the final chapter Zalmanovich treats the law as not being of much significance and blames it for new problems, though he does acknowledge some of its benefits; the post-1994 system’s newfound universality (even if the difference was between 96% and 100% coverage), its more transparent and progressive finance base and the fact that its rules created a level playing field between the four sickness funds, important both from the perspective of patient choice and in terms of the fact that KHC was being fiscally destabilised by the disproportionate burden of insuring poorer, sicker, older and rural Israelis. Nevertheless, his summary of the pre-reform system’s performance and basis is interesting:

“Israel’s politicised [pre-reform and KHC-controlled] health system was both singularly responsive and relatively cost efficient, claims to the contrary notwithstanding. It allowed for voluntary insurance, which covered more than 96% of the population and provided reasonably accessible and available universal coverage of almost all the citizen’s health demands (other than dentistry, mental health, and long-term geriatric care) with no relation to the person’s ability to pay. The four sick funds, which doubled as health care deliverers and insurers, competing on their premiums and services; and the expenditures of the system were modest relative both to Israel’s economy and to the outlays of health care in wealthier Western countries (State of Israel, Netanyahu Report, 1990, p.47)…It’s responsiveness can be attributes to the convergence of values and politics in Israel. The conviction that health is the responsibility of society is deeply rooted in Israel. Its roots lie not only in the collectivist values of the country’s pioneers, but also in the long-standing Jewish tradition of mutual aid. It was accepted by both political blocs, which disagreed not on the principle, but how it should be implemented” (p.215)

I’d point out again that the plural structure of Israeli healthcare did appear to stay largely in place within the new and more official framework, similar to the healthcare systems of Western and Central Europe and in the contrast to public provision single-payer systems like the NHS, which had to be built on the mass-nationalisation of the UK’s previous civil society health structures (Zalmanovich notes this distinction, incidentally, noting that an International Organisation of Sick Funds opposed nationalisation is Israel and “supported plans based on insurees’ organizations, as were all of Europe’s health schemes, excluding Great Britain’s [sic]” – p.174). In addition to maintaining its multi-payer sickness fund system, provision in Israel also remains pluralistic; Israelis are treated in clinics and hospitals that are variously run by the government (central or local), the sickness funds, other voluntary/non-profit organisations or the for-profit private sector. Due to the fact that KHC and some other sickness funds run their own hospitals, Israel is not a pure example of purchaser-provider split when compared to other social health insurance systems, it is worth noting. 

Along with the relative praise of the “mixed public/private” Israeli health system by MPs Reeves and Reynolds in the Making the Progressive Case for Israel pamphlet previously mentioned, ACEVO Deputy and Hove & Portslade Labour PPC Dr Peter Kyle’s comments about the strength of the Israeli third sector in health are also worth noting. He points out that Magen David Adom (Red Star of David, Israel’s Red Cross/Crescent equivalent society) was long ago granted status as the official emergency provider in Israel, which provided “the security of state backing, yet enabled it to retain its third sector status and therefore its close links with civil society” and says that “the avoidance in a few instances of wholesale nationalisation has facilitated a more direct relationship with civil society, keeping the door open to volunteer participation on a scale unimaginable within parts of the British NHS” (though he adds that NHS too benefits from volunteers, even if on a slightly smaller scale). On a number of key health measures, including life expectancy, infant mortality, Potential Years of Life Lost (PYLL) and the important mortality amenable to healthcare (“premature deaths that should not occur in the presence of effective and timely care”), Israeli health also appears to be ever so slightly better than ours and that of some other Western nations. The OECD ranked them fifth out of 36 nations for health. This is in spite of the fact that Israel spends just 7.7% of its GDP on healthcare, low compared not only to our own 9.4% spend, but also to Germany’s 11.3%, France’s 11.6% and the obscenely wasteful and inequitably-spent 17.7% in the United States. It has a world-class medical research sector, another fact noted by Reeves and Reynolds. In 2010, 80% of Israelis were satisfied with their healthcare.

Other results of the law Zalmanovich criticises, including a legally-defined benefits package for each insuree and priority setting (rationing), are also common in European health systems, although the UK lacks the former, something official BMA policy in 2007 wisely suggested we should examine. The current Israeli package includes:

▪ "Medical diagnosis and treatment

▪ Preventive medicine and health education

▪ Hospitalization (general, maternity, psychiatric, chronic)

▪ Surgery and transplants

▪ Preventive dental care for children

▪ First aid and transportation to a hospital or clinic

▪ Medical services at one’s workplace

▪ Medical treatment for drug or alcohol abuse

▪ Obstetrics and fertility treatment

▪ Treatment of injuries caused by violence

▪ Medication ordered by a ministry of health provider

▪ Treatment for chronic illnesses

▪ Physical, occupational, and other therapies"

Zalmanovich does criticise the Likud government subsequently elected in 1996 for repealing an employer tax included in the original 1994 legislation, pointing out this destabilised the funding base of the system. On this Zalmanovich is correct (although employer taxes in the French and German healthcare systems do tend to act as an economic drag). 

He also doesn't mention another more serious side-effect of Likud’s changes – while the original 1994 Labour-passed law envisaged the system as being largely divorced from ability to pay at the point of use, to make up for the new funding shortfall Likud required the sickness funds to introduce new user charges, which have damaged equity. 26% of Israeli health expenditure is now out-of-pocket, compared to an OECD average of 19.6% and just 9.9% in the UK, many Israelis (80%) take out extra private insurance to protect themselves from the additional costs and others still delay or avoid seeking care for financial reasons, undercutting the intention of the system Labour designed. We are lucky not to have to face such problems in our own NHS, but I’d stress these issues are the result of the decision to graft charges onto the original system Israeli Labour designed and are not necessarily inherent to a system like Israel’s. The 130-year old German social health insurance system, which the Israeli system draws heavily from (“Kupat Holim/sick fund” derives from the German krankenkasse, “sickness funds”) and which the Irish Labour Party cited as the inspiration for the universal health insurance reform plan it ran on in  the 2011 Irish elections, abolished GP charges late last year and had only had them since 2004. The Netherlands, another case study being used for the Labour-Fine Gael coalition’s reforms, is generally also opposed to upfront charges in its insurance system.

All in all, Policy Making at the Margins of Government: The Case of the Israeli Health System can contribute to our understanding of many debates that we have in the UK; about the ideal relationship between civil society and government (and its effects), about the changing nature of the Labour movement in the modern political environment and about the ever-sensitive and complex politics of healthcare. It also offers a powerful example of a country where the welfare ethos has always consisted of the consensus that Glasman and Blue/One Nation Labour now seek to renew in the UK. Zalmanovich’s book is good and worthwhile read, and I’d recommend it for anyone who is interested in public policy processes, comparative healthcare policy, Israeli politics or the Labour movement. Another related book I recently downloaded is The Israeli Third Sector: Between Welfare State and Civil Society (2004), which might also be worth a look.