The Stockholm Syndrome: Swedish health-care reforms show a private-public mix can lower costs while pleasing patients, doctors and unions

Proposals to allow a bigger role for the private sector in health care are viewed by some as a threat not only to universality but also to Canada’s national identity itself.

In this context it’s instructive to look at what is going on in Sweden, the country that has come to symbolize the ethos of egalitarianism and social democracy.

A little revolution has been going on since the early 1990s in that country, particularly in its capital, Stockholm. A political coalition at the Greater Stockholm Council, the regional authority responsible for local health-care management, decided then to introduce some competition, to help shake up its underperforming monopoly services.

About 150 small and medium-size health-care contractors, many of them nurses demoralized by poor working conditions and low pay who jumped at the chance to start up their own enterprises, were issued licenses. More service units are now preparing to leave the public sector. One of the biggest hospitals in the city was even sold to a private company; the others are being transformed into commercially viable, and thus saleable, entities. A profusion of private health-care companies is replacing the single-provider system.

The logic behind this is common-sense economics. Allowing entrepreneurs to compete for public contracts creates an environment conducive to improved problem solving, new approaches and budget discipline. Competition between firms exposes bad operating practices and neglected opportunities. Competing organizations also tend to concentrate on customer satisfaction because their profits – or, for employee-owned coops, the surpluses that will go to higher salaries – depend on clients being satisfied and coming back.

Performance measurement data suggests that this new competitive environment is having the expected result. Councils where authorities are buying services from competing suppliers are more efficient – by an estimated 13 percent.

So, an incentives-based compensation system, a purchaser-provider split and the use of private entrepreneurs have reshaped the system. Today waiting time is no longer a major problem in Stockholm, where you can, for example, get a hip replacement in four weeks and a new hearing aid device in two. In “unreformed” regions, you might have to wait three months to one year for such treatment.

Better treatment

Private health-care entrepreneurs also generally tend to treat their employees better, working conditions are improving and wages in the health-care sector have been going up faster that before. The National Union of Nurses, with 120,000 members, actively supports nurses who want to leave public employment and emulate the success of their colleagues who started new careers as contractors in the early 1990s.

One might think doctors in the private sector will rush their patients, so they can make more money by seeing more of them, productivity and profit being the essence of the market system. On the contrary, a recent evaluation has shown private medical specialists are more efficient than their colleagues in public service. They focus on “with-patient time”, which results in more patient value. The reason is that not only do they want their patients to be satisfied and to come back, but their publicly employed colleagues need to spend more time on paperwork, need more staff and ask for 10- to 15-per-cent higher budgets to provide the same treatment levels.

The key point is that for universal services to be maintained, the state does not need to be the sole provider of services, it simply needs to pay for them. And when private providers compete with each other and with the public sector to offer the best, cheapest, fastest health care services, this not only brings more satisfaction to the patients, it also reduces the costs to the taxpayer.

In short, instead of throwing money at an inefficient system that offers poor services, Swedish reformers decided to change its structure, and the result has been a more efficient system. Stockholm is in the midst of change and as always when you move from one system to another there are questions not yet answered and incentives and regulations not yet fully implemented. It is like painting a house while building it; you can no more expect to have stable conditions for reform. The Stockholm Transition is far from perfect but opens no doubt new perspectives to the health care of tomorrow.

Commissions take heed

Two federal inquiry commissions, the Kirby and the Romanow commissions, have been touring Canada and are due to report on the state of the country’s health-care system and to propose solutions to its defects. Of course, each country has its own peculiarities and the Swedish experience cannot be transposed as is to Canada.

But whatever these commissions decide, Canadians should know that public-private partnerships in health care can work, without tempering with universal access.

Canadians would be well advised to let the law of supply and demand, competition, real prices, entrepreneurship and incentives play their essential economic functions in health care, just as they do in other economic sectors.

Michel Kelly-Gagnon is President of the MEI, Johan Hjertqvist is manager of the Timbro Health Unit.

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