Published September 9, 2010

Aki Kangasharju: A change in the healthcare system would provide municipalities with more tasks and leverage

Last summer, Sitra published a proposal for a healthcare funding and steering system, which the editorial of Helsingin Sanomat on 5 June 2010 described as the most realistic utopia for a long time. We, the authors, were happy with that description. Real change cannot be achieved without radical proposals.

Last summer, Sitra published a proposal for a healthcare funding and steering system, which the editorial of Helsingin Sanomat on 5 June 2010 described as the most realistic utopia for a long time. We, the authors, were happy with that description. Real change cannot be achieved without radical proposals.

And what is more, our proposal is not even as radical as it may first appear. For example, it will not necessarily decrease municipalities role in society or tasks at all, even though the Association of Finnish Local and Regional Authorities is doubtful about that.

In the new system, there would be free competition between the providers of healthcare and social services, and customers’ freedom of choice would increase. The tasks of municipalities would only decrease if the customers were unsatisfied with the services provided by municipalities and would change providers, opting for a private-sector company.

Pressure promotes results

If the international comparisons concerning the quality and efficiency of the Finnish healthcare system are accurate, the municipalities should not have any cause for concern in this regard. However, it is important to ensure that the threat of competition is present for the future. The municipal sector needs pressure in order to renew its structures.

In fact, our proposal adds to the work of municipalities. Citizens’ freedom of choice would require that counselling services be increased, and it would be a good idea to arrange this function as a municipal one. Municipalities’ own healthcare and social service production would either become public utilities or companies. Service counselling would be steered by a separate body which would not participate in steering or managing the service production.

The national orderer-financier is the most radical element of our proposal. It also is the most fundamental element if the intention is to create a system that endures the challenges related to the ageing population. Multi-channel funding involves such an extent of part optimisation and wrong incentives that a single funding channel and genuinely separating the orderer from the providers are imperative.
 
In addition, being a national organisation, the national orderer-financier would have a very high level of orderer competence, negotiating power in relation to the providers, and the opportunity to address citizens’ health needs in an equal way. The national orderer-financier’s monopoly power, functioning to the benefit of the citizens, would eliminate the system’s focus on supply because the providers would be funded by it on the basis of the customers’ risk groups and medical history. The existing funding, paid on the basis of procedures carried out, would be eliminated.

The existing system is about to fail

Customers’ freedom of choice and the national orderer-financier would introduce a considerably more cost-efficient system in Finland than the existing one.

It is understandable that establishing an organisation such as the national orderer-financier would require a lot of courage from decision-makers, as well as an unselfish will to promote the common benefit of the whole nation. However, the need for an open, far-reaching approach is immense because the existing system will not endure the pressures brought about by the ageing population. The issue will be even more difficult if we do not take care of the treatment of those in the worst position.

It is argued that the Finnish healthcare system is efficient because Finland allocates a small amount of money to it in comparison to the other OECD countries and because Finland has a reasonably high average life expectancy. However, the average does not reveal the extensive differences between the extremes. The underprivileged do not receive sufficient care, and men with low-level education still die prematurely.

If the system remains unchanged, it will not collapse, but the increase in health status differences will become more rapid. The system becomes internally disabled although the external structures remain as they were.

Therefore, something should be done about the situation. The challenge is to find the political will and support to execute the changes.

Kangasharju, Dr.Econ.Sc., works as a research professor at the Government Institute for Economic Research (VATT), focusing on the impact of public services. Upon an assignment by Sitra, Kangasharju, together with Timo Aronkytö and Aatos Hallipelto, prepared the proposal for renewing the healthcare funding and steering system. The report has been published online: Sitra Reports 24, 2010 (in Finnish).