This is a study prepared by Kevin C. Lomax on the structure of the Swedish healthcare system and its financing. It is being completed as a substitute course for my program of study for the master of health administration at my home institution, the University of South Carolina-Columbia campus. This work is to be prepared, completed and defended at the University of Örebro under the university's terms of academic performance. The desired audience for the information presented consists of health administration faculty and graduate public health students at the University of South Carolina, as well as health professionals and health students in Sweden. Although the audience is primarly academic and professional, the average Swedish citizen could gain a clearer understanding of the current state of the Swedish health system from the information contained in this study.
The Swedish healthcare system has developed extensively since Middle Ages when care of the sick and elderly was provided by families. Those without family relied on the charity of the church. In the beginning of the 17th century the Swedish Crown designated that the sick were to be cared for in small government or church-supported facilities with very few beds. As of 1640 there were no hospitals in Sweden and the first hospitals were constructed during the 18th century.
From 1688 and beyond, public health care was divided into two areas of responsibility, urban and rural. Provincial doctors were responsible for large rural districts. At first these positions were financed by a combination of state and local funds. In 1733, the national government took over the financial responsibility for the rural areas while urban physicians were paid from local town funds. These financial arrangements remained in effect until the 1960's in Sweden. Nelson and Rogers (1994) point out a significant factor in the development of Sweden's healthcare system. "Sweden was little urbanized up to the mid-19th century and thus avoided many of the health problems associated with large cities of the period". The first public health law in Sweden came into effect in 1874 reflecting a need for a higher standard of healthcare in the country. The Swedish healthcare developed slowly until the beginning of welfare politics in Sweden.
The 1950s brought such major healthcare developments as hospital expansion, increased outpatient care and general social insurance. The management of the Swedish healthcare system was placed with the county councils in the 1960s. During this decade healthcare resources were increased. A major cost reform was implemented in the 1970s known as the "seven crowns" reform. It required all Swedish citizens to pay seven crowns for a physician visit. It was intended to discourage inappropriate utilization of health services. The 1980s produced a deteriorating financial condition within the healthcare system. The Dagmar Reform, discussed later in the study, was a significant response to the impending crisis. There has been and currently is a focus within the healthcare sector to contain costs and reduce expenses. This has partly been mandated by the individual county councils as their fiscal resources diminish with the current unemployment situation.
This work will present an overview of the current Swedish healthcare system and financing. It will describe the components of Swedish healthcare and financing mechanisms inherent within the system. Trends in healthcare reform will be presented and analyzed for economic feasibility given certain population and disease statistics.
The following specific questions will be addressed:
What are Sweden's current healthcare expenditures, both in aggregate and as a percent(%) of gross national product(GNP)?
What are the prices and costs for Sweden's healthcare services?
What are the measures of fiscal responsibility, hospital effectiveness and efficacy within the Swedish healthcare system?
Describe Sweden's healthcare budget process, including projections if available?
Examine the decision making process for capital expenditures within the Swedish healthcare system?
What are the current trends in Swedish healthcare and social program financing?
As an American student preparing a work on a foreign healthcare system, I faced many method choices for retrieving information. I chose to perform extensive data research at my home university due to the potential language barrier of Swedish literature available at the University of Örebro. I utilized various CD-ROM databases of academic journals, such as Periodical abstracts (1990-1995), Allied health periodicals (1990-1995) and Silverplatter - the U.S. government information database (1990-1995). I also reviewed the current unbound journals in the stacks in the Thomas Cooper Library at the University of South Carolina. For articles unavailable at my home university library, the inter-library loan service was utilized to acquire the missing information. Concurrently, the search topic 'Sweden and healthcare finance' was submitted to the World Wide Web netsearch function. Selected finance and statistical information on Swedish healthcare was retrieved.
In Örebro additional methods were used to obtain data. The University of Örebro's library offered some healthcare information in the form of books. Dr. Sven Larsson, a local physician, provided meetings on the Swedish healthcare system and facilitated meetings with hospital and county council officials. One academic journal, Scandinavian Journal of Social Welfare, was obtained from the internal library at the Department of Community Medicine and Public Health. A meeting with Mr. Hasse Zettergren, chief economist at Örebro Medical Centre Hospital, supplied information on healthcare financing, internal financial monitoring mechanisms and current hospital issues. This information offered a more practical look at current management initiatives. A meeting with Mr. Göran Ekstrand, an Örebro county council financial director, contributed valuable information on the county healthcare budget process, the Swedish taxation process, county council organization and political trends and issues.
One complementary method to obtaining research for this work would have been to secure a work placement residency with a local healthcare provider. This would have allowed first-hand observation of the current system, its strengths and weaknesses. However, due to the short duration of my stay in Sweden, five months, and full courseload, this method was not feasible. Even so, it would have provided the possibility of greater insight into the Swedish model in the current economic environment.
As this study is primarily concerned with the financing of the Swedish healthcare system, aggregate health economics is not emphasized. However, it is useful to discuss the economic functions within the healthcare sector to gain a clearer understanding of the forces affecting healthcare financing in Sweden.
The economic model of the Swedish healthcare system has been described in two terms: non-market and planned market. In actuality, the system exhibits characteristics of both models. Rehnberg (1990) discussed Swedish health economics in terms of a "non-market" framework. The underlying concept of this theory is that the organization, i.e. the healthcare system, generates revenue from non-priced sources. The Swedish system displays this concept in two ways. Healthcare services are charged to other county's at cost and not priced by the market to include a profit while in-county care is provided based on a fixed budget. The non-market model is consistent with Jacob's organism model where the hospital is an single-goal entity which moves away from traditional profit maximization.
Saltman and Von Otter (1992) refer to the Swedish healthcare system as a "planned market" system. The "planned market" theory centers on the concept of fixed supply and demand producing an inflexible "price". The Swedish healthcare system technically exhibits this concept since the county councils allocate fiscal resources, in the healthcare budget, for a fixed supply of healthcare services thereby creating a fixed compensated demand. However, other factors affecting the healthcare sector do not demonstrate "planned market" characteristics.
Regardless of the fixed demand of fiscal healthcare created by the healthcare budget, patients can seek care without regard for the fixed demand because the healthcare system must treat every citizen regardless of the county council budget. There is no control, with the exception of primary care gatekeepers, to ensure that care-seeking behavior operates under the constraints of the county council's "planned healthcare market". Also, healthcare technology suppliers behave according to "pure market" principles. Healthcare technology must be purchased from the general market at market price as there are no state-controlled suppliers of healthcare technology.
Sweden is considered to have one of the most progressive health care systems by international comparison. However, the fact that Sweden only has to deliver health care to a limited population, 8.9 million, could be a factor of its high international ranking. Sweden's population could allow the country to provide more comprehensive health care services and thus, obtain better national health outcomes. Several underlying principles of the Swedish health care system have been offered to expand this reasoning.
Weisbrod (1991) noted the social consensus in Sweden is that there should be "equal access" to social and health services. However, he argues that Swedish society, by example of queues for certain surgeries, does not define "equal access" as "immediate access". A cornerstone in Swedish social policy is the connection between the health care system and the national insurance system. This is evidenced by the social belief that disabled citizens should be assisted clinically as well as financially. The human link between these two systems is the physician. Weisbrod (1991) states that the physician is the "fiscal gatekeeper" for the health care system, but may not have the incentive for social insurance costs containment. The "fiscal gatekeeper" concept will be explored further in this work.
Each Scandinavian country, Sweden included, has established the fundamental human right of all citizens to obtain adequate and equitable health care. The patient's need should determine access to medical care, not ability to pay. Eliason (1995) discusses that Scandinavians may resist higher taxes, but they consistently oppose any reductions in health care funding. The generally less litigious nature of Scandinavian society contributes to the efficiency of their health care delivery system. Reduced aggregate legal fees and lower malpractice insurance for surgeons are significant results of this social concept and provides more national revenue and resources for patient care allocation.
The Nordic health policy-making process has been cited as one reason for the progressive health care systems within those countries. This approach emphasizes negotiated compromises, rational solutions, and a desire to experiment with alternatives that do not pose a threat to the basic principle of universal access. A genuine national commitment to adaptation and ongoing reform assures responsiveness to changing circumstances, opportunities, and constraints (Eliason, 1995).
Scandinavian health care policy also emphasizes preventive health, not just medical care alone. Public education campaigns are channeled through schools while pre and post-natal care has contributed to one of the highest infant survival rates in the world. In the short run, prevention may be costly, but if the long range goal is to promote a healthy society and decrease costs associated with long-term illness, disability, and preventable diseases, then it is money well spent. Agdestein & Roemer (1992) cite that comparisons between Swedish counties show that those focusing on health prevention, spend relatively less on hospital care than others. These cost savings may be explained by the use of other medical personnel for routine illnesses.
No major health care decision can be made without the involvement of midwives, NPs and HHC providers (Eliason, 1995). The focus on preventive health care within Sweden's national health policy is a rational concept given the future demographics of Sweden's population (See Appendix A). In future decades, health care costs for the older adult population will have to be monitored and contained while sustaining quality of life for the 85+ population.
John Calltrop (1990) presented a model which can be related to the interaction between these healthcare principles and aggregate economic forces. The area in marked "common ground" is the area of agreement and balance between the two sectors. Figure 2 presents this diagram.
Sweden's health care system is comprised of four levels of care, primary (with a sub-level of primary physicians), central county, district and regional (Swedish Institute, 1995)(See Appendix B). These levels were created to perform distinct health services for the population. However, Dr. Sven Larsson (1995) stated that there is an increasing overlap in the functional levels of the health care system. A common example can be found in Örebro. Its regional hospital also functions as the county hospital for a certain population as well as the district hospital for the city population. This overlapping questions whether a clear hospital mission can be in place when so many roles are being performed?
The levels of care should be independent of each other for effective care distribution and rationing. However, Ekstrand (1995) commented that the levels of care are just a mechanism of segmenting the healthcare system on paper. The system levels are actually fluid, with patient treatment classifying the care level, not the specific site of care. This fluidity of the system is brought into question when budget constraints for the district level are different from those for the regional and teaching level yet all of these levels are being performed under one roof.
Primary health centers treat illnesses and injuries that do not require hospitalization. This level employs physicians, nurses, auxiliary nurses, midwives, and physiotherapists. As of January 1994, all Swedes can choose their own general practitioner for public health care, with primary care also being provided by private physicians.
Within the primary level there are specialized treatment programs. Children's clinics provide immunizations, health checks and certain treatments free to children under school age. Maternity clinics provide free of charge regular check-ups during the entire pregnancy. This is one possible explanation of Sweden's low infant mortality rate, 4.8 per 1000 births (Statistics Sweden, 1995).
The central county level provides medical services at some 80 county hospitals. Somatic care is provided in a number of specialists fields on both an in-patient and out-patient basis. The county level also provides psychiatric care in an increasingly out-patient form. According to Dr. Sven Larsson (1995) counties typically have fifty outpatient psychiatric clinics.
The district level of care supplies its population with treatment for basic illnesses. The care is more acute than that of the primary health centers, but less specialized than the county hospitals. A district's population is by definition smaller than a county's. Therefore, equipment and treatments available at the district hospital should not duplicate those at a county hospital unless there is an acute need in a particular clinical area.
The regional level consists of 10 regional hospitals, located within six regions, that have greater specialists and sub-specialists fields. This level of the health care system is most commonly utilized through a physician referral system. Specialists services provided here range from neuro, thoracic, plastic surgery, etc. The Swedish Institute (1995) reports that a relatively large portion of the health care resources (58% in 1993) are allocated to the provision of care in hospitals. Given this financial emphasis on acute settings, Sweden's high number of medical specialists is not surprising. Only 9% of Swedish physicians are general practitioners (Agdestein & Roemer, 1992).
Approximately 300,000 people are employed in the health care field. This is about 10% of all Swedish employees making health care an important economic industry. In 1993, there was 1 public physician per 340 inhabitants. There are about 2,500 physicians and 3,500 physiotherapists working in private practice (Swedish Institute, 1995).
Since 1990, as the cost containment measures were implemented, the number of healthcare employees at the regional level have been notably reduced. Örebro Regional Hospital's employment decrease is described as follows:
1990 - 6000 employees
1991 - 5200 employees
1994 - 4622 employees
1995 - 4622 employees
1996 - 3822 employees
With such a large decrease in healthcare employees, the questions of healthcare need and treatment quality must be addressed as the population continues to grow. Healthcare management stress that quality of care will never be compromised and that to balance the operating budget, these changes must be made. As for healthcare need, the opinion exists that certain levels within the Swedish healthcare system have been over-utilized and the current patient shifts are simply regulating the system to its optimal level.
Sweden's strong union involvement with industry, with management also unionized, creates additional financial burdens on the hospital in terms of salaries. Over the next three years, nurses salaries will increase by 11.5%. These are increases which the hospital must pay and thus, one reason for the lay-off of certain personnel (Zettergren, 1996).
All Swedish residents, regardless of nationality, are entitled to use the Swedish health services at subsidized prices, as well as patients from EU/EEA seeking emergency care. Pensioners pay SEK 75 per day in the hospital. All others(except children 16 and under) SEK 80 per hospital day. There is no charge for children under 16. As of December 1994, there were 1,962,121 Swedish citizens under the age of 17. Given 5.8 bed days per citizen in Örebro county (Zettergren, 1996), at only SEK 50 fee per day, SEK 589 million in additional revenue could be generated. With the current tax base diminishing, this simple calculation could support the argument to introduce a reduced fee for younger patients.
Each of the twenty-six county council sets its own fees for out-patient care. A family doctor visit costs from SEK80-SEK130, depending on county council. Hospital specialist visits range from SEK100-SEK180. According to current legislation, the fee which patients pay to consult a private specialist is 150% of the family doctor fee (Swedish Institute, 1995).
An income stabilizing component in the health care system is the medical care and medicines cost limit for patients at SEK 2,100 per year. The beginning of each twelve month period is calculated from the first doctor visit or medicine purchase. The National Corporation of Swedish Pharmacies has the sole and exclusive right to sell medicine, both to the general public and hospitals. There is a network of 800 pharmacies. Pharmacies also have insurance to compensate patients who are harmed when using medicines. For the first medicine, patients are charged a maximum fee of SEK 125, for additional prescriptions on the same medical visit, the fee is SEK 25 per item.
According to Sweden's Central Bureau of Statistics, in 1993, public healthcare expenditure for illness was SEK 126 billion. This corresponds to 7.5% of the gross domestic product and is projected to decrease with the current fiscal restraints. In 1990 and 1992, respectively, the expenditure was SEK 170 billion and SEK 140 billion. These figures show a clear reduction in national public spending contrasting Weisbrod's (1991) statement about Swedish society's desire to maintain healthcare spending.
National Healthcare Expenditure has been primarily financed and administered regionally with central regulation. Glennerster & Matsaganis (1994) argue that Sweden is more concerned with the consequences of containing health care spending while sustaining universal access. A clash between demand for new resources and an economic need to reduce spending has caused the paradigm shift in health care thinking throughout northern Europe, Sweden being the classic example. The distinguishing characteristic of the Swedish healthcare system is its democratic and decentralized structure. In contrast to the Weisbrod (1991) article, the taxable capacity of the Swedes became evident in 1990 when the national parliament passed a law freezing local county tax rates for two years. The constraints on health service that resulted began to increase wait times for treatment (Glennerster & Matsaganis, 1994).
Banque Paribas (1995) offers a possible explanation for Sweden's social policy crisis. The article discusses the fact that Sweden has been relatively isolated for many decades regarding social spending. Swedish society has become use to a high level of government support for all public services. Rising unemployment and increased national debt from the 1980's have exposed Sweden to problems never faced before. Sweden has demonstrated that even with sound national financial ratios, a minor economic event, such as rising unemployment, can cause spiraling chain reactions in countries with large public sectors and high taxation. Sweden must reduce the national debt more quickly while creating employment and stabilizing social spending and taxation.
The responsibility for health care provision and financing lies with the 26 county councils. The political composition of the county council is decided by popular vote every four years (Glennerster & Matsaganis, 1994). The only qualifications for political office are eighteen years of age and Swedish citizenship which brings into question the validity of healthcare decisions within the political decision-making process .
The Swedish Institute (1995) reported that SEK 99.5 billion of the 1992 SEK 140 billion in healthcare expenditure was spent on care provided by the county councils and the three local councils. 75% of county council operations are health and medical services. 71% of these are financed by tax revenues from the proportional tax, 11.09% on average for 1995 (See Appendix C), levied by the county council on resident's income. A reduction in the tax base, resulting from higher unemployment, as well as a general reduction in county council tax rates (See Appendix C), has caused a decrease in county council revenue.
Appendix C1 shows this general reduction graphically over time. The 1991 shift to the municipalities of the care of the mentally ill and older adult is most apparent. However, the scaling of this graph is misleading. It implies that Sweden's county councils were taxing citizen at relatively the same rate while providing "equal" healthcare. Appendix C2, rescaled to show detail, reveals the council's autonomous actions. Until 1991, wide variations can be seen regarding tax rates. One might say certain counties were simply randomly assigning tax rates based on their revenue need with complete disregard for future planning. A consensus is detailed in 1991 as the tax transfer to the municipalities was implemented. However, 1992 and beyond has emphasized, yet again, the autonomous nature of the county councils. Regarding the guaranteed "minimum level of healthcare". Does the graph suggest that Dalarna provides Sweden's "minimum" level since it historically has levied the lowest tax rate. Or does it mean that Dalarna can provide healthcare more efficiently? An inter-county comparison of health status versus healthcare expenditure would be useful to further research.
On the surface, a tax base reduction does not indicate a significant decrease in tax revenue since unemployment benefits are taxes at the same rate as income. However, Dr. Larsson (1996) explained that unemployment income is only 75% of a person's previous earnings, thereby creating a smaller taxable income base. The 1991 Adel reform, which shifted the responsibility of care for the older adult and mentally handicapped to the municipalities, prompted the significant decrease in county council tax rates. The reduction was transferred to the municipalities tax rate causing a zero-sum effect on personal tax burden, but significantly reducing the county council budget, by 20% in Örebro (Örebro County Council, 1991).
Since January 1996, Sweden's Riksdag has introduced a tax redistribution method in the Swedish system, the guarantee of "equal tax power" for all counties (Ekstrand, 1996). This concept subsidizes counties with lower tax bases, due to higher unemployment, with money from counties with higher tax bases (See Appendix D). The method for calculating the subsidy for any particular county is:
Counteracting the reduction in finances, county councils have reduced their expenditures by 2% per year since 1992 (Swedish Institute, 1995). In 1994, 14 county councils introduced forms of purchaser-provider models in their medical services to contain costs. Under this model, the traditional system of fixed payments to hospitals has been abandoned. Instead payment is made by results or performance i.e., the number of patients it treats. On the surface, this appears to resemble the current health maintenance organization (HMO) system in the U.S. However, Sweden's hospital payments are based on diagnostic related groups (DRGs) on a predetermined number of treatments/surgeries. This method is a mixture of the U.S. Medicare payment structure and the HMO health outcome structure with the exception that Sweden's health care system does not reject any patient.
Unemployment has a significant effect on the Swedish health care sector because of Sweden's use of taxation for public expenditures. It is the strongest determinant of the size of public expenditure budgets since the tax base is generated from the working population. The taxation of unemployment benefits only provides a buffer during periods of higher unemployment. Theoretically, increasing unemployment and a constant or decreasing workforce will create a spiral decline in tax revenue from these sources because the working population tax revenue would not support the unemployment benefits.
Statistics Sweden reported unemployment at 7.7% for February 1996. From January 1994 to February 1996, unemployment has fluctuated between 6.5%-9.5% (See Appendix E). It is feared that rising unemployment, which tends to strike hardest at groups that are already disadvantaged, can increase mortality. The National Board of Health and Welfare (1994) stated that the mortality increase is through suicide rates. However, there is a lack of empirical data to support or refute this argument.
Dr. Larsson (1995) suggested the cause for the lack of research is that Sweden has not experienced an unemployment crisis since the 1930's. This is a new phenomenon in relation to the advanced system of healthcare with only limited studies on the health effects of unemployment. Future research opportunities could be focuses in this area and would contribute to a clearer understanding of any cause and effect relationship. The National Board of Health and Welfare (1994) also noted an increase in mental problems resulting from unemployment. This is a rational statement given the psychological difficulties associated with accepting public assistance and the desire to work.
Immigration is another factor affecting Sweden's public health financing. It not only increases health care expenditures from the care provided; it reduces revenue available for health care services with the increasing number if immigrants who receive untaxed social benefit income. Newly settled immigrants, occupationally handicapped persons and young persons are among those who have most difficulty in gaining a foothold in the employment sector (National Board of Health and Welfare, 1994).
Statistics Sweden (1996) reported for the year 1994, 74,734 immigrants entered Sweden (See Appendix F). Immigration to Sweden has increased over the past decades (See Appendix G), but with growing fiscal problems, Sweden may have to adjust the immigration policy. Statistics Sweden was unable to provide data on immigrants share of unemployment expenditure. However, with their increasing numbers and growing unemployment in the general population, immigrants could account for a large percentage of the expenditure. Studies have shown (Sundquist, 1995)(Aguilar & Gustafson, 1994) that immigrants more often receive early retirement and unemployment benefits and on average receive larger sums as sickness compensation and pay less income tax.
Aguilar & Gustafson (1994) also reported that non-native Swedes have notably higher unemployment rates and a different dispersion by sector and occupation than native Swedes. Specifically, new immigrants have very high unemployment rates. They also found that immigrants are chiefly employed in mining and manufacturing, wholesale and retail trade and restaurants and hotels sectors and have a negligible presence in agriculture and forestry. Coupled with higher unemployment rates, immigrants show a deterioration in relative earnings over the past decades (Aguilar & Gustafson,1994). If this financial erosion continues during the 1990's at the same pace as during the 1980s, at the beginning of the 21st century, immigrants in Sweden will be earning only slightly more than half of native Swedes earnings. This will create a basis for discontent and further seperate the standards of living of the two populations.
The demographics and health statistics of Sweden's population reveal a need for cost containment, emphasis on preventative care while reflecting the high quality of the current healthcare system. Infant mortality is down from 6.1 in 1991 to 4.8 in 1994 per 1000 in the first year of life. The quality of the maternity clinics provided by the Swedish healthcare system could be a significant factor in this reduction.
Sweden's two leading causes of death are consistent with other developed nations. In 1993, deaths from cardiovascular disease and cancers were 48,367 and 20,561, respectively (Statistics Sweden, 1996). The fact that cardiovascular disease accounts for 50% of all deaths shows that the population still suffers from the common Western health problems, even with Sweden's advanced healthcare system. Deaths and disability resulting from accidents and violent crime are future issues which must be addressed. In particular, disability resulting from socially preventable causes, i.e. accidents and crime, strongly affect the healthcare system. This is done through increased social expenditure over a greater number of years added to the acute use of healthcare in the older adult years.
A general increase in life expectancy in the developed nations, currently 75.5 years for men 80 years for women in Sweden, had created the Swedish population's current age structure. Sweden has the world's oldest population with 18 percent of the population being is 65+ or older. The 85+ segment of the population is experiencing the greatest increase and also utilizing more healthcare resources in proportion to the remainder of the population.
With the 60+ population accounting for about 65 percent of all inpatient days in acute settings, the need for alternate methods of care and cost containment in the later years of life are crucial to Sweden's healthcare budgets in the future. Sweden's healthcare system not only provides assisted-living care to the older adult, but it intensively utilizes the advanced technology for medical care of the older adult. This increases the overall costs in the last years of life with possibly no gain in years of life for the patient. The increase in Sweden's general population (See Appendices H & I) and the overutilization of advanced technology will continue to strain already finite healthcare resources if the macro-economy does not show improvement in the next decade.
Sweden's non-market system for healthcare delivery does not utilize "American style" internal measures for effectiveness and efficiency. There are no measures for efficacy because you cannot place a empirical value on a medical treatment. There are, however, internal hospital mechanisms to monitor cost containment activities, but not for market positioning as there is no real competitive threat. Medical treatments are valued with an DRG-based point system (See Appendix J). Each clinic is then given a point rated budget for the fiscal year. Quarterly meetings are held with clinic directors and hospital administration to review the actual points versus the budgeted points. Clinics that are overbudget are given the opportunity to justify the variance. Justifications could include a higher percentage of intensive-care patients for a quarter. A more significant financial problem is the clinic that shows no reduction in department costs when clinic treatments are underbudget (Zettergren, 1996).
Within the Swedish healthcare system prices and costs for treatments are technically the same. This is a result of the non-market structure which does not utilize profit requirements. Costs are automatically set at the actual minimum to optimize service allocation and usage. Hospital economists review historical cost data and determined future-year prices.
Örebro Regional Hospital uses a micro-costed DRG-based price schedule for patients it treats from other counties (See Appendix K). However, Örebro regional receives a fixed budget from the local county council for the care of Örebro residents (Zettergren, 1996)(See Appendix L). An interesting point about the Swedish healthcare budgets is that there are no methods for calculating care need.
The county council determines a fiscally responsible, i.e. balancing the budget, amount of healthcare to purchase from the system for its residents and then the system must allocate the revenue to cover expenses. Örebro's Regional level of care has run a deficit for the past two years. Hospital administration has until 1998 to balance its operating budget. It is containing costs by reducing healthcare staff and shifting certain patients to lower levels in the system.
The Swedish healthcare system places the highest medical technology at the regional level in the health care system due to the specialized treatments. Clinic directors submit equipment requests to the chief economists for review. Priorities are given based on the treatment need and useful life of the equipment. Then the hospital borrows money from the local county council, which in turn, obtains it from the capital market. However, the hospital cannot go directly to the capital market for financing. The equipment is purchased with the borrowed and the cost placed into the price of treatments which utilize the equipment. Interest on the borrowed money and service related costs are included in the fixed budget revenue received from county council. Theoretically, the hospital could purchase an unlimited supply of equipment. However, there is a fiscal and practical limit the county council would loan. The autonomous county councils cause misallocation of resources in that counties compete to have the most advanced technology in their regional hospital. You can have an underutilized treatment because the equipment is duplicated in nearby counties (Zettergren, 1996).
Scott (1995) discusses the different adoption methods of several countries regarding large medical equipment. She cites Sweden is slower to adopt certain new medical technology, CT scanners for example, because hospitals first perform a financial feasibility test. The use of feasibility tests for other purchases should increase with the current budget deficit situation of most hospitals. When equipment is purchased it is concentrated in regional hospitals with waiting lists for elective and non-life threatening surgery (Eliason, 1995).
Health service demand is projected by each county council administration without regard to market forces. County council economists determine a set amount of healthcare to purchase from the system based on expected tax revenue. Purchased health services are allocated in terms of x units of a specific surgery, preventive care, dental care, etc. However, if the resident county population uses an excess of a particular service, the hospital or clinic incur a deficit because the county council will only pay for the fixed number of service units.
This non-market budgeting method seems to imply that the healthcare system can create an indefinite budget deficit since their is no market incentive for profit. However, the political decision-making process forces them to manage the health services purchased and creates a system of checks and balances. One of the "checks" in the current political agenda is cost containment. With 4600 employees, all union members, Örebro Regional was faced with an 800 person lay-off as a result of the SEK 1.5 billion deficit which the hospital incurred over the past years. The Örebro County Council has required the hospital budget to be in balance by 1998.
Since the Swedish healthcare system will not sacrifice its high quality of care, and healthcare prices are costed at the lowest level, the only practical cost containment measure is to reduce the number of patients treated at the regional level and shift them into other levels of the health care system. Transferring the burden of care does not reinforce Sweden's healthcare principles (Zettergren, 1996). There must be an increased awareness of priority setting in the healthcare system.
THE DAGMAR REFORM: Replaced the fee-for-service system with a capitation payment from the national insurance fund directly to the counties. Counties assumed full responsibility for primary care and plan for the provision of services on the basis of an annual fixed budget. It allowed each county council to decide whether and how to reimburse private practitioners for services provided to local residents. This made private practitioners rely on public officials for their income, which is an policy inconsistent with private market economics. It established 26 county-led planned markets for ambulatory health markets. Glennerster & Matsaganis (1994) noted that the counties have developed rather different policy directions.
There are several healthcare delivery implications which can be associated with county council autonomy. Healthcare service duplication is a major implication. It is feasible that two regional, county or district hospitals could be located within close distance to each other while being separated by county boundaries. The added pressure of county competition for health technology makes this implication more likely in future years. It is also possible that one particular health treatment could be duplicated at every regional or county hospital simply because the specific counties want the treatment in their county, even without healthcare need for it.
The Crossroads Report of 1988 began to shape the public healthcare debate with the three models it discussed: The national insurance fund, the coordinated county model, and the population based model (Glennerster, H. & Matsaganis, M., 1994). The debate eventually developed the individual county reforms discussed below.
The main feature of the Stockholm model was the creation of an internal market for hospital services in place of the global budgeting (Glennerster, H. & Matsaganis, M., 1994).
The Dala model's main feature is the decentralization of decision-making within the county structure. The entire county health care budget is divided among the medical care area boards in proportion to the number and age distribution of the resident population (Glennerster, H. & Matsaganis, M., 1994).
Sweden's reform have contributed nothing to healthcare cost containment. The Stockholm and Dala reforms were initiated to reduce the incidence and expense of inappropriate use of hospital-based acute care (Eliason, 1995). By releasing the consumer, Sweden may have laid the foundations for an American-style explosion of health costs.
There are almost as many reform programs as there are councils, although common features are evident. Production is separate from finance as defined in non-market systems. Resources are allocated (through capitation) to the health districts that are responsible for the delivery of services to their specific population. Hospitals are financed(through DRG's) for a predetermined volume of services they can provided. Counties supervise the' internal market' and monitor quality aspects along with internal hospital quality controls(Glennerster, H. & Matsaganis, M., 1994).
One argument for council autonomy is the difference in health status of each region. Regional differences are considerable, and mortality is consistently higher in the north of Sweden. Eating habits, high cholesterol counts, overweight, diabetes, unemployment, and lack of minerals in drinking water have been cited as reasons for differences (National Board of Health and Welfare, 1994). These differences provide support that each county should assess its population's health status and develop a healthcare structure with its specific health status in mind.
However, Van de Ven (1991) argues that with the significant healthcare role of the county councils, one may point at their regional monopoly and wonder whether the county councils have sufficient incentive to perform their tasks properly. I would say the incentive results from both the Swedish principles of healthcare and the politicians desire to get re-elected. The Swedish public must still be satisfied with the healthcare system or they will vote for the party that has their concerns. However, Ekstrand (1996) stated that all Swedish political parties, except the conservatives, share similar views on Swedish healthcare.
Culyer (1991) states that "the Swedish system is far less monolithic that in some other countries". Local management at county level combined with county council powers of taxation makes the Swedish healthcare system more responsive to the mood of the voting public. Larsson (1996) stated one of the current political discussions is to increase the price ceilings for acute treatment, primary care and prescriptions. Evans (1991) suggests that Sweden's health care political pressure points are not from an overall shortage of resources, but from inadequate management of the resources available. Examples of this mismanagement include, increased surgery queues for certain treatments and physicians refusing to perform surgery at an underutilized hospital because of travel distance.
In an effort to more effectively manage healthcare resources, the "treatment guarantee" was passed by all county councils. It is not a law but a goal each county want to achieve for its population. The guarantee states "that no patient will need to wait more than three months for treatment after the decision for surgery or treatment has been made. If the county council medical service cannot manage this, you will be offered treatment at another medical institution" (Örebro County Council, 1995). This policy would be ineffective if all hospitals are over-budget and over-utilized, then only a noble goal on paper. Weisbrod (1991) says that Sweden's excessive preoccupation with cost containment may well be at the root of the current health policy debate. It may well be that Sweden's success in controlling costs has caused growing public dissatisfaction with reduced patient numbers, longer queues and the possible sacrifice of care quality. These factors could be leading to mounting pressures to reform the system yet again.
Current social developments may lead to a growth of inequality where health is concerned, with one group developing more social and health-related problems while another enjoys progressively better health (National Board of Health and Welfare, 1994). Swedish society has become more heterogeneous. Once Sweden has given up its neutrality and has joined the European Community (EC) this will only increase (Schulenburg, 1991). The free movement within Europe for member states could increase "European immigration" and place increased burdens on Sweden's healthcare system. New European workers could increase unemployment for the "Swedish" population and cause resentment for the EC.
The current literature discusses several strengths of the Swedish Healthcare System. It should be noted that any particular strength could be argued as a weakness given a different perspective. This paper is presenting the findings of specific authors and offering constructive comments
Sweden offers universal access to health care for the entire population regardless of financial circumstances. There is also the desire to provide equal access to healthcare regardless of residence, i.e. urban or rural. The system provides quality health care by international standards (Van de Ven ,1991). Within the Swedish health system, primary care is organized around the local health centers, staffed with salaried GPs, nurses and some specialists. Teamwork and multidisiplinary management is encouraged (Glennerster, H. & Matsaganis, M., 1994). This reflects a focus on preventive health measures for the county's population.
Sweden's "access to all" health policy should correspond with similar health status within all segments of the workforce. However, a study by Lahelma, E., Manderbacka, K., Rahkonen, O., & Karisto, A. (1994) showed that lower socio-economic positions in Sweden were associated with increased illness. Sweden's non-market system of healthcare should deliver care to all population segments based on care need. If any specific economic class were experiencing increased episodes of illness the Swedish system should automatically allocate more resources to that segment.
The study also suggested that a small absolute change in a small socio-economic group does not have a significant implication to the total extent of inequality of a population. However, a small change in a large socioeconomic group, basic education for example, implies a substantial decrease in the extent of inequality, other things being equal. "Egalitarian policies, as in Sweden, can only be considered successful when both the mean level of health and reduced inequality exists."
Comparative statistical analysis (Eliason, 1995) has shown that a single-payer system of health insurance significantly reduces administrative costs. It also eliminates most of the paperwork for the patient. The Scandinavian systems provide universal coverage through general taxation using a smaller percentage of national income while delivering a very high quality of care. Evans (1991) states the only way to maintain control of health care costs is through a system with a single payer that cannot pass costs on to another. However, should costs be controlled by passing the patient onto another level in the system. That action alone implies a single payer system passing the cost of patient treatment to another, though technically the "other" is another part of the same system.
There is an ongoing improvement in the general health status of those who have healthy jobs and are socially and economically established. A growing proportion of people living to progressively greater ages and enjoying better health even in old age (National Board of Health and Welfare, 1994).
There are ample opportunities for experimentation and innovation in the Swedish system due to a high degree of decentralization. The County Councils are autonomous and have already demonstrated significant initiative to experiment. By having a structure of elected local politicians responsible for local health care, Swedish healthcare provides the opportunity for expressing consumer preferences at a local level (Van de Ven, 1991).
At the clinical level there exists a hierarchical structure for physician work assignments. Instead of being in the same position for 30 years, young physicians have the opportunity of applying for higher positions and obtaining promotion. There is increased incentive to remain current in the field of expertise because of job competition. The current staff layoffs can only intensify the competition for the remaining positions.
As with strengths, a system weakness can be viewed from different perspectives. Author's of literature reviewed even viewed similar ideas as both a strength and weakness. The purpose of discussing the current academic opinions if not to agree or disagree with any particular idea, but to postulate suggestions for system improvement based on these ideas.
Sweden's primary health level was the source of one weakness noted in the literature. Local health centers find it difficult to attract doctors in spite of the good salaries. General practitioners have low status and doctors have little control over there work. Of the 4,000 posts in the 800 centers, only 2,000 are filled with acute shortages in the North of Sweden. Örebro has eliminated its previous shortage of primary care with 100% of vacancies filled (Ekstrand, 1996).
The Swedish healthcare system also lacks a 'gatekeeper' for care at the regional level. Patients can simply arrive at the hospital for treatment or a consultation with a specialist. This has obvious implications for cost control and management, some of which have been detailed previously. Healthcare structure in Sweden is biased toward hospitals. Institutional spending accounts for about 75% of total healthcare expenditure (Van de Ven, 1991). Örebro recently adopted a gatekeeper scheme in an attempt to control improper care utilization. The primary care physician must refer the patient for hospital treatment or a specialist consultation.
Producer domination and no efficiency incentives have been noted by critics and some observers as the most serious failings of the systems (Glennerster, H. & Matsaganis, M., 1994).
The belief that the best Swedish doctors were at the county-run hospitals combined with long waits (2 days to a week) to see a primary care physician, lead Swedes to seek care at hospitals rather than district doctors. Rationing by waiting lists or ability to pay is a necessary component of any health care system within the bounded resources inherent to every health care system (Eliason, 1995).
A more polarized health situation is developing in Sweden, moving towards greater inequalities of health. The health of many people will steadily improve, at the same time as the health of an increasing number of people will become steadily worse. Health differences between different socioeconomic groups are increasing. A growing proportion of people, especially women of the working class and lower middle class, have both social, financial and health-related problems. An increased proportion of people with both social and economic health problems, especially working class and lower class women. Sweden's population is predicted to have increased injuries resulting from increased alcohol consumption and drug addiction.
In 1984 Sweden endorsed the WHO objectives for the European region, expressed in Health for All by the Year 2000. The Riksdag resolved that 'greater equality' should be an overriding objective. From July 1, 1992 the National Institute of Public Health was created by Riksdag to engage in health promotion and disease prevention. This endorsement coupled with the employee reductions at the regional level could indicate a policy move away from an acute-based health system.
In Swedish society today, with decreasing resources and demands for economy measures, there is a concentration on getting "as much health as possible for the money". If achievements are given priority exclusively with reference to cost efficiency, regardless of how problems are distributed within the population, this can lead to an increase in inequality (National Board of Health and Welfare, 1994).
Culyer (1991) was struck that there seems to have been almost no empirical research in Sweden to discover whether and to what extent equity is really to be found in the actual patterns of provision and finance and the trend of these over the last 10-20 years.
There is little evidence of actual productivity trends in Swedish health care. This is decidedly the result from an inability in measuring "health products" and assessing appropriateness of treatment. Efficacy and quality measures should be the future focus of healthcare research. Sweden cannot indefinitely adopt the policy of employee and patient reduction to balance health budgets. The strain on the social insurance and health infrastructure will be too great.
Van de Ven (1991) suggests the Swedish healthcare system has a lack of incentives for efficiency, responsiveness to consumer preferences and for coordination. However, each county healthcare system has internal measures for efficiency and cost effectiveness, even though there are no aggregate measures for comparison or patient competition. Consumer preferences are directed through the political system via county council elections and the county council-based hospital board of directors. The role of Landstingsförbundet, Sweden's advisory board for county council coordination, is insignificant because they have no legislative power over each council. They can only act in an advisory capacity.
In retrospect, I will reflect on the methods and materials of this study and discuss my personal conclusions concerning the Swedish healthcare system. Since no study is ever complete because the researcher must close the paper and report the results, this study has its limitations, though hopefully few in number.
If I were to prepare this study again I would alter my method for data collection in Sweden. I would contact significant healthcare professionals and request my data prior to my arrival in the country. However, I wish to note that an attempt was made prior to January 10, 1996 to have a preceptor assigned to me for my study. The University of Örebro's International office was unable to pre-assign my preceptor for reasons that were not revealed to me. I would also enroll in a U.S. taught Swedish language course to improve my communication skills. However, the University of South Carolina does not offer any Scandinavian language course in its curriculum. The lack of Swedish language skills and pre-assigned preceptor made research for parts of this study more difficult and required more time of all those involved.
Regarding the substance of my study, I feel the quality and length of my study interviews was more than adequate for the requirements of this paper. Also, the literature research both in South Carolina and Örebro was current and valid. I can find no fault in the availability or accessibility of research on the Swedish healthcare system and its financing.
My initial thought on the financing of the Swedish healthcare system after completing my study was that given the present economic conditions in Sweden the healthcare system still provides comprehensive and high quality care at a lower cost than any other developed nation. However, I am most concerned with how the current mechanisms used to stabilize the national economy are interacting with the healthcare structure and possible detrimental effects.
A continual systematic reduction in healthcare staff in Sweden will eventually sacrifice healthcare quality since healthcare need will exists at the same, if not a greater, level. The hospitals are not completely to blame because the county councils have mandated a balanced budget regardless of the method. Staff reductions are there only means of controlling costs within their segment of the system since healthcare costs are already at a minimum and the labor union negotiates wages. However, since unemployment has increased and reduced the county tax base, county councils are being forced to manage costs. Also, high unemployment correlates with increased self-reported illness, increasing healthcare service utilization and thus continuing the cycle.
This is not intended as a criticism of the healthcare system's functioning but an example of the weakness of the overall decision-making process in the healthcare and political system. Throughout my research and interviews, I had the impression that the average Swedish does not comprehend the current problems facing the healthcare system nor do they want to. There was an underlying denial of any problems in the system. However, people seemed to be dissatisfied with some part of the system. Also, the political arena surrounding healthcare appears filled with empty suggestions for reform or cost containment without addressing the fundamental economic problems causing the crisis.
The autonomous feature of the Swedish county councils may contribute to the lack of concrete decision making. However positive autonomy may be regarding individual community health status and health planning, with counties implementing different strategies, national factors can be overlooked in solving problems collectively. Sweden's emphasis on acute care delivery has place the healthcare sector at a disadvantage in times of economic crisis. The resources of acute facilities are not readily transferable to other care settings, such as residential care or prevention programs.
These criticisms, however insignificant separately, are together causing the health sector to be less responsive to the changing economic situations. My suggestion would be for the national government to increase its efforts in reducing unemployment thereby increasing the tax base and stabilizing the social welfare and health system. Until the aggregate national economic problems are reduced, the health sector is going to face hard financial choices that could begin to compromise patient care.
In closing, I would like to thank the following people for there time and advise concerning my study. Without there generous assistance this paper would not have been complete: Dr. Sven Larsson, Prof. Göran Bergström, Mr. Hasse Zettergren, Mr. Göran Ekstrand, Dr. Saundra Glover, Dr. Roger Amidon, Dr. Samuel Baker and the staffs of the university library at both the University of South Carolina and the University of Örebro.
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Unpublished Work © 1996 Kevin C. Lomax.
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