August 2009 - Public sector health financing is at a critical crossroads in the West Bank and Gaza. The emergency environment in the Palestinian Territory since 2000 has engendered significant and unsustainable imbalances in the financing of public sector health services. While economic growth and fiscal revenues contracted during the post-2000 period due to continued Israeli-imposed economic closures, public sector health spending ballooned, particularly during 2003-2005. This expansion in expenditures was driven by an increase in MOH employment, an increase in average salary levels, greater spending on pharmaceuticals and specialty care referrals for treatment to private and overseas providers. Spending by MOH alone increased from US$ 95 million to 157 million from 2000 to 2005 – a 65 percent increase. Other public sector expenditures included spending by the Humanitarian Aid Committee attached to the Office of the President. Part of the financial imbalance also stemmed from policy decisions related to the design of the Government Health Insurance Scheme (GHI). Since its establishment as an extra revenue-generating scheme for the MOH, there has been a significant financial gap between insurance revenues and the cost of benefits extended by the GHI. This financial disequilibrium grew with the adoption of the ‘free’ Al Aqsa program – a PA voluntary insurance program aimed at ameliorating the social conditions of the unemployed population after the beginning of the 2nd Intifadah.
This report aims to address and analyze these policy concerns with a focus on providing recommendations for medium-term reforms. The report builds on previous analytical work conducted by the World Bank on the Palestinian health sector and is aligned with the strategic objectives of the Palestinian Reform and Development Plan (PRDP) and the MOH National Strategic Health Plan (NSHP) for the years 2008-2010. The earlier reports by the World Bank consisted of a 1997 health sector report , a 2006 public expenditure review (PER), two 2008 reports prepared by World Bank consultants on pharmaceuticals and health equity issues. Between the years 2003-2007 the World Bank participated with several international donors (DFID, EC, Italian Cooperation, WHO) and the Palestinian Ministry of Health in the preparation of a health sector review document published in 2007. The health sector review document was the culmination of several years work by five task force committees focused on the areas of health status outcomes, health financing, health service delivery and health sector performance.