How is Israel’s national health insurance financed and budgeted each year?

1. How the money is raised: a three‑part financing mix

Public financing of the health system combines earmarked NHI contributions collected through the NII and general government budget allocations, with private financing—voluntary health insurance and out‑of‑pocket payments—supplementing the system; in recent years roughly two fifths of national health spending has come directly from the state budget while health‑tax (NHI) contributions and private sources cover the rest, with private financing accounting for around a third of total health spending in recent data ^{[1] [3] [6] [2]}.

2. How funds are pooled and distributed: the NII and capitation

The National Insurance Institute pools earmarked contributions and government transfers and then allocates funds to the four competing nonprofit health plans using a risk‑adjusted capitation formula that adjusts for age, sex, geography and certain chronic diseases so that plans serving sicker or older populations receive higher per‑capita funding ^{[1] [5] [7]}. This capitation mechanism is the central budgeting instrument for recurring operational payments to the Kupot Holim and is intended to equalize resources across funds according to measured needs ^[7].

3. Annual budgeting and the “health basket” decisions

Yearly additions to the statutory benefits package are handled through a formal “health basket” process managed by the Finance Ministry and Ministry of Health: a multi‑member committee evaluates proposals for new medications and technologies and recommends which items to include within a constrained annual pot, with explicit limits on budget growth for essential services and a long‑standing practice of tightly capping increases for new technologies ^{[4] [5]}. Recent government approvals have set multi‑hundred‑million‑shekel budgets for the committee’s 2026 expansions, illustrating that the basket is funded as a discrete line item and negotiated politically each year ^{[8] [9]}.

4. The share of private spending and its policy consequences

Voluntary health insurance—both health‑plan supplementary policies and commercial plans—plays an outsized role in Israel compared with many OECD peers, historically reaching over 30 percent of financing at peak periods and remaining important for access to services outside the basic basket; this trend has implications for equity and for the growth of privately financed care inside and outside public settings ^{[10] [2] [6]}. Analyses warn that while the system remains efficient and high‑performing on many metrics, the growing role of private spending contributes to gaps in financial protection for some households ^{[11] [2]}.

5. Constraints, annual trade‑offs and political pressure points

Budgeting is constrained by macro fiscal policy and explicit Ministry rules—indexation for the basket is linked to general inflation and incremental spending on essential services has been tightly limited, which produces recurrent tension between unmet needs from demographic change or new expensive therapies and the Finance Ministry’s fiscal limits ^{[4] [7]}. That tension drives annual controversy at the basket committee and helps explain why private insurance and out‑of‑pocket payments have expanded as patients seek services beyond the capped public package ^{[4] [10] [11]}.

6. What the sources do and do not allow this report to conclude

Official and scholarly sources make clear the mechanics—NII collection, government transfers, capitation allocation, and the basket committee’s constrained annual additions—but published material in this collection does not provide a single, fully consolidated line‑item table of the most recent year’s NHI receipts and allocations across every ministry and fund; detailed annual figures and intra‑year adjustments therefore require consulting the Ministry of Finance or NII budget documents for a given fiscal year ^{[1] [5] [7]}.