Estimating the budget impact of new technologies added to the National List of Health Services in Israel: Stakeholders’ incentives for adopting a financial risk-sharing mechanism

Abstract

The Israeli National List of Health Services (NLHS) is updated annually according to a government allocated budget. The estimated annual cost of each new technology added to this list is based on budget-impact estimations provided by the HMOs and the manufacturers. The HMOs argue that once a new technology is reimbursed, extensive marketing efforts by industry expands demand and renders the allocated budget insufficient. Industry claims that HMOs, in order to secure a sufficient budget, tend to over-estimate the number of target patients. We provide a framework for a financial risk-sharing mechanism between HMOs and the industry, which may be able to balance these incentives and result in more accurate early budget-impact estimates. To explore the current stakeholders' incentives and behaviors under the existing process of updating the NLHS, and to examine the possible incentives for adopting a financial risk-sharing mechanism on early budget-impact estimations. According to the financial risk-sharing mechanism, HMOs will be partially compensated by the industry if actual use of a technology is substantially higher than what was projected. HMOs will partially refund the government for a budget that was not fully used. To maintain profits, we assume that the industry will present a more realistic budget-impact analysis. HMOs will be less apprehensive of technology promotion, as they would be compensated in case of budget under-estimation. In case of over-estimation of technology use, the budget re-allocated will be used to enlarge the NLHS which is in the best interest of the health technology industry. Our proposed risk-sharing mechanism is expected to counter balance incentives and disincentives that currently exist in adopting new health technologies in the Israeli healthcare system.