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

Background: 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. Objectives: 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. Results and conclusions: 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 bud et 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 underestimation. 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. (C) 2008 Elsevier Ireland Ltd. All rights reserved.