The Knesset approved the cap law: a change in the accounting of funds and hospitals

Change in the accounting mechanism: The Knesset’s health committee approved today for a second and third reading the accounting model between the health insurance funds and the hospitals for general hospitalization for the years 2026-2030, within the framework of the economic efficiency law. The arrangement, known as the cap law, regulates one of the central mechanisms in the public health system and defines the manner of payments between the health funds and the hospitals in the coming years.

According to the approved arrangement, the accounting between the parties will continue to be based on a consumption ceiling mechanism, designed to control the scope of spending on hospital admissions. This mechanism states that beyond a certain level of consumption, the health funds pay a reduced price for additional services, with the aim of limiting the increase in expenses and maintaining budgetary stability in the health care system.

The law includes a settlement with a total amount of about NIS 20 billion per year. As part of the discussions, a number of changes were also introduced designed to deal with burdens in the hospitals and to encourage the expansion of services in the community and in alternative settings for hospitalization.

One of the key elements added is the expansion of the use of home hospitalization. According to the new arrangement, hospitals that refer suitable patients to a home hospitalization framework will receive financial compensation from the Ministry of Health. The compensation will also be given in cases where the HMO performs the hospitalization at home and also when the hospitalization is performed by the hospital or under its supervision, after the HMO has announced that it will not operate such a service.

In this framework, the health committee increased the budget that will be allocated to encourage home hospitalization. The amount will be 30 million shekels in 2026, will rise to 40 million shekels in 2027 and will reach 50 million shekels each year starting in 2028. The committee determined that it will monitor the distribution of the funds and the extent of the implementation of the move.

It was also determined that the hospitals will focus on the activities carried out within their campuses and will not provide community services instead of the health funds without special arrangements. According to the law, health insurance funds will be able to pay hospitals for services provided outside the hospital only in specified cases, such as home hospitalization, a service provided as part of an agreement between the parties or a service that received special approval from the Director General of the Ministry of Health.

The law also refers to the loads in the internal departments, which are considered one of the main pressure points in hospitals. The accounting mechanism in these departments will continue to be based on a consumption floor model. This means that the health insurance funds will pay the hospital a minimum amount based on their relative share in the number of hospitalization days – a figure that will be provided to them once a quarter.

Along with this, a realistic increase was determined which will be determined mainly according to the number of beds in the hospital, with the aim of reducing the incentive to increase occupancy in the wards. The law also includes an increased payment for patients who are hospitalized for an extended period of time even though they are intended for transfer to other settings, for example geriatric or rehabilitation institutions. While in the original bill the increased payment was 140% of the normal rate, the committee reduced it to 120%.

Regarding the services that are not in the internal departments, it was determined that the consumption ceilings will be calculated according to the relative share of each health fund in 2023. However, in the case of hospitals whose operations were significantly affected in the last quarter of that year due to the war, the calculation will be based on the data of 2022. In addition, it was determined that a change in the number of insured persons of a health fund within the capitation mechanism will affect the height of the ceiling.

In cases where a hospital exceeds the consumption ceiling set for it, payment for the additional services will be provided at a reduced price. The health committee decided to change the reduction rates established in the original bill in order to reduce the economic damage to the hospitals.

The committee also decided to cancel a clause in the bill according to which private services within the framework of the RAP that exceed the ceiling would be compensated at a rate of only 10% of the price. This decision was made as part of the discussions on the structure of the hospitals’ economic incentives.

The approved law is expected to regulate the budgetary relationship between the health funds and the hospitals in the next five years and serve as a basis for the financing of hospitalizations and activities in the public hospitals in Israel.