How Did The Mental Health Insurance Reform Affect The Financial Hardship Imposed On Israeli Households?

Background

The mental health insurance reform came into effect on July 1, 2015, and transferred responsibility for financing and providing mental health services from the Ministry of Health to the health plans. The main goals of the reform were to improve the quality, availability, and access to mental health services in the community, including improving economic access – the ability to receive quality services without experiencing financial hardship, as measured by the amount of out-of-pocket expenditure (hereinafter: expenditure). Access was improved by including mental health services in the public benefits basket, with full or partial coverage, and expanding the supply of services in public outpatient clinics. However, until now, the impact of the reform on the financial hardship of Israeli households due to the utilization of these services has not been examined.

Objectives

To assess the trend of financial hardship of Israeli households resulting from the expenditure on the use of mental health services in the community, and to examine the impact of the insurance reform on this hardship.

Method

A descriptive analysis of data from the Household Expenditure Surveys of the Israeli Central Bureau of Statistics (CBS) in the years 2008-2022. The dependent variables analyzed were: (1) the share of households with annual expenditure on mental health services in the community (the intervention group) and the share of households with annual expenditure on rehabilitation and child development services (hereafter: development) in the community (the control group) out of all households each year; (2) The average annual expenditure among households with expenditures on these services. Two differences-in-differences (DID) analyses were performed. This analysis assesses the causal effect of an intervention when a randomized controlled trial cannot be performed.

Findings

After the reform was implemented, there was a significant increase in both the share of households with expenditures for mental health services and the level of expenditure. The share of households with expenditures for these services increased significantly more than the share of households spending on rehabilitation and development services (from 2.2 percent to 2.9 percent compared to 1.6 percent to 1.8 percent, respectively). Therefore, this increase was caused by the implementation of the reform. In addition, the amount of annual expenditure on mental health services increased (from about NIS 7,800 to about NIS 9,000, on average), but the increase was not significantly different from the increase in the amount of annual expenditure on rehabilitation and development services. Therefore, it is not possible to link this increase to the implementation of the reform.

Discussion

The findings of the study are in line with previous data that showed a significant increase in the utilization of mental health services in the community as part of the public benefits basket after the implementation of the reform. Despite the increase in the supply of public services, the share of households with expenditures has increased, indicating that the public system provides only a partial response to the demand. In addition, the increase in expenditure on these services is consistent with previous data that showed that psychotherapeutic treatments are widely sought within the independent or entirely private caregivers’ track which entail high expenses. All of this indicates that the reform has not reduced the share of households that need to pay out-of-pocket for mental health services.

Policy recommendations

In addition to the Ministry of Health’s efforts to expand the training of psychiatrists and psychologists, it is worthwhile to continue to expand and diversify the workforce skill-mix and train a wider range of professionals. It is also advisable to continue diversifying the provision of services and to offer new models of care beyond individual sessions with a psychiatrist or psychotherapist. This additional provision should be provided free of charge within the public system.

In order to allocate public system resources more efficiently, the Ministry of Health should establish eligibility criteria for mental health services based on diagnosis, with evidence-based treatment protocols for each diagnosis, giving priority to short-term community-based treatments, as needed.

Finally, it is advisable to promote a progressive financing policy and protect low-income individuals in need of services from financial hardship or even from having unmet needs. Cost sharing for mental health services in public clinics or health funds should be avoided. It is also advisable to reduce the co-payments for visits to independent therapists working with the health plans through discounts, ceilings, and exemptions based on income level, for example, for recipients of income support.

Citing suggestion: Waitzberg, R., & Norman, T. (2026). How did the mental health insurance reform affect the financial hardship imposed on Israeli households? RR-075-26. Myers-JDC-Brookdale Institute. (Hebrew)