Israel’s National Insurance System Faces Earlier-Than-Expected Funding Crisis

Israel’s National Insurance Institute is heading toward a financing crunch sooner than expected, according to the Finance Ministry’s new three-year budget forecast. The ministry warned that by 2029 the agency may no longer have enough income to meet all its obligations and pay full benefits, a much earlier timeline than previous estimates. The warning comes after years of concerns about the system’s future and follows reforms that expanded some benefits while weakening the fund’s balance.

The National Insurance Institute pays benefits for old age, disability, children, unemployment, maternity, nursing care and more. It used to build up reserves and transfer them to the state in special government bonds, but its latest actuarial report, published in August 2023 for the end of 2022, said benefit payments exceeded revenues starting in 2023. At that point the reserve stood at 245 billion shekels, with early redemption expected from 2030 and a complete depletion now projected for 2036. In 2024, the institute’s current deficit already reached 6.4 billion shekels.

Officials and experts point first to the 2018 nursing-care reform, which expanded eligibility without a matching funding source. The number of benefit recipients and annual spending have risen sharply since then. The reform expanded nursing tiers from three to six, increased the option to convert services into cash, and shifted assessments mainly to medical-document reviews instead of home visits. The ministry also cites the 2022 expansion of disability benefits for children, including fixed payments for parents of children on the autism spectrum and support for children with severe allergies. Spokesman and former director-general Meir Spiegler defended the changes, saying, “I did everything so that whoever is entitled by law would receive full rights,” and argued that elderly people should not be subjected to humiliating inspections.

Spiegler and other critics say broader demographic and policy trends are also driving the crisis, including population aging, lower returns on the institute’s investments, weaker employer contributions, and past cuts in benefit indexation. Economist and gerontologist Dr. Alex Kaplon said that if nothing changes, “we’ll all pay more and receive less,” warning that rights will keep eroding. The institute’s own projections say its deficit will rise to 18 billion shekels in 2030 and 48 billion in 2050. A 2012 committee and later Israeli Democracy Institute proposals recommended structural fixes, including separating old-age and nursing benefits, raising retirement age, and improving collection, but most were never adopted. The Finance Ministry says the problem has multiple causes and requires a broad package of solutions.