Israel Proposes Shift from Group Long-Term Care Insurance to Personal Savings Accounts

Israel's national long-term care insurance system, which covers approximately 5.2 million adults, is facing instability due to increased life expectancy and a rise in approved claims. The system, previously reliant on cross-generational subsidies where younger individuals' premiums funded care for older generations, has become financially unsustainable. In response, the Israel Securities Authority (ISA) is proposing a new model that shifts towards personal savings accounts, similar to pension funds.

Under the proposed plan, individuals under 50-60 would contribute to a personal savings account instead of paying premiums for group insurance. The accumulated savings and their returns would then be used to purchase long-term care insurance around age 70. For those over 70, the state would cover their insurance costs during a transition period. This new model aims to ensure that individuals have funds for long-term care without relying on the current intergenerational subsidy system, which has led to near-collapse in some health funds, such as Clalit.

The ISA has already implemented emergency measures, including reducing monthly benefits from NIS 6,100 to NIS 5,000 and tightening eligibility criteria. The proposed savings model, however, raises concerns about its feasibility and high costs. Initial estimates suggest a significant state budget expenditure of several billion shekels over 20-30 years to cover the transition period for older individuals. Furthermore, the savings accumulated may not fully cover the actual costs of care, which are higher than the current benefit levels.

Questions remain about coverage for individuals who become disabled before age 70, as the new system primarily focuses on those aged 70 and above. While most long-term care cases occur after 70, a significant minority require care at younger ages. The proposal also leaves open issues regarding the accessibility of funds for healthy individuals wishing to withdraw their savings early or for beneficiaries in case of the saver's death. The plan is still in its early stages and requires legislative approval, facing potential opposition from the Ministry of Finance, which some believe views the current system as stable.