A significant part of health care costs in Israel, especially in the community, comes from doctors’ salaries. A report by the chief economist at the Ministry of Finance published today (Wed) shows that the salary of family doctors in the health insurance funds has increased, which will affect the negotiations for the collective agreement with the Medical Association – and accordingly the amount of resources that will be available to the health system.
The health funds employ family doctors in two different ways: one, as employees in a collective agreement with the Medical Association. The second, as freelancers in a more flexible model. The salary of independent doctors increased by 66% between 2010 and 2018 (the last year for which there is documentation in the report), while the salary of salaried doctors increased even more – 74% during the same period. The independent young doctors received a huge salary increase of 211% between 2010 and 2018. According to the chief economist, this “may imply, among other things, greater competition by the health insurance funds for these doctors who have a relatively long career horizon.”
Despite the increase in the compensation of employees, the salary of independent doctors is much higher: starting from a gap of 13% in favor of the independents in the General Health Fund up to a gap of 32% in the Maccabi Health Fund. Self-employed doctors are required to set aside a salary for themselves for retirement, but according to the chief economist the gap is too high to be explained by pension contributions alone (11.5% of the salary). So what is the cause of the wage gap? While the salary of the salaried doctors is relatively rigid and limited in the collective agreement, the flexibility in the salary of the self-employed allows the HMOs to increase the salary of the outstanding ones: in the Maccabi, United and National HMOs, in the two upper quintiles of salary, the gap between the self-employed and employees reaches 54% to 57%.
The Treasury hints: the workers’ wages are already quite high
There is also a considerable difference between the funds in the nature of the employment: while Klalit (the largest health fund in Israel) employs mainly salaried doctors, and the independents make up only 16% of the doctors’ position. At the Maccabi Health Fund, the rate of self-employed people reaches up to 70%.
The Ministry of Finance, as they do before negotiations on a new collective agreement (this time, with the Medical Association), hint that the workers’ wages are already quite high. It seems that they are afraid of the employment of the self-employed in the health insurance funds, due to the danger of an upward spiral of wages as a result of tough competition for a limited number of talented doctors. According to the Chief Economist’s report, the salary of family doctors in Israel is 21% higher than the standard in the UK, when the average salary in the economy (in 2018) was 40% lower than the average salary in the UK. Therefore, the Economist’s report explains “the ratio between the average salary of independent doctors in Israel and the average wage in the economy was 1.5 times in 2018, compared to a wage gap of 1.3 times in this comparison in the United Kingdom.” This leads to considerable concern of the Ministry of Finance ahead of the upcoming collective agreement with the doctors. In the last agreement from 2011, the doctors’ wages rose dramatically, so that the health budget increased dramatically without a noticeable improvement in the quality of care. The Treasury may be afraid of a “rerun” of this scenario in the upcoming agreement as well.
The independent doctors themselves see it differently, of course. The Chairman of the Independent Doctors Organization (ARCI), Dr. Eyal Shapira told Globes that “through the study written by the Ministry of Finance, a distorted picture is again presented with the aim of inciting the Israeli public against the doctors who work from morning to evening. The independent doctor is required to pay rent, take care of calling appointments, hire employees and many other related expenses. At the same time, the Ministry of Finance leaves him without rights and pretends to compare him to an employed doctor, who is not required to deal with the financial significance of running an independent business. Does the Ministry of Finance want to turn all independent doctors into employees? Has the Ministry of Finance prepared a budget for this?”
A senior official at the Ministry of Health: The solution is a massive increase in medical graduates
According to a senior official at the Ministry of Health, “There are very positive aspects to being employed as a freelancer. Mainly – the balance between the doctor’s investment and the remuneration. An employed doctor cares less whether the patient is satisfied or not or which doctor he chooses. Passing a card, while the employee receives a salary according to the number of patients that the fund determines for him. It is very important to recognize this and not to throw the baby out with the water through regulation. Supervision of the salary of the freelancers will do more harm than good. There is probably a selection of those who go to work as a freelancer (more diligent, young and not Afraid of risk) for those who are going to be an employee (prefers work without risk and minimal investment)”.
So what is the solution? In his eyes “the only and obvious solution is a massive increase in medical graduates”. Indeed, Israel suffers from a shortage of doctors, and even worse – a shortage low especially of medical graduates. In Israel, 7.2 doctors per 100,000 people are trained each year, compared to the average of 13.1OECD and 16 in the Netherlands. According to the senior official at the Ministry of Health, “The Ministry of Finance thinks that an increase in medical students will not necessarily translate into a decrease in doctors’ salaries, because in hospitals these are collective agreements. They ignore the fact that in the coffers, the income of a family doctor is determined by the supply of candidates in the market. There, the effect of increasing the number of graduates will be immediate. There will be wide-ranging consequences, because the hospitals are synchronizing with the salary of community doctors. If the salary of family doctors soars, then salary pressures are created in hospitals as well.”