The Nordic public welfare system is a form of insurance for which we pay taxes

In the Nordic countries, our welfare system, for which we pay taxes is a form of insurance. The public sector acts as the insurer for our welfare to cover the costs of social- and healthcare. Well functioning public education and welfare services is seen as the most efficient path to high productivity. If people are well educated, have easy access to public healthcare, and if needed, social care, then we can compete more effectively in the global markets.

Nobel prize-winner Kenneth Arrow, who died this year at the age of 95, created the science of welfare economics stating that the healthcare market is no ordinary market. He noted that the incentives for patients and their doctors to agree to medical procedures of questionable value when a third party, the insurer, pays the bills. This moral hazard problem was emanated to be avoided when ObamaCare was designed, by including as many people as possible into the insurance funds.

This same problem of “moral hazard” arises with normal travel insurance. If you get taken ill on vacation, the costs spiral because the insurance company has to pay the bills. Doctors, private hospitals and the big global medical transportation and management companies know how to milk the insurance companies. This is just the same “moral hazard” practised by banks, who know that they will be bailed out by the taxpayer when they speculate and suffer big losses. “Depositors’ money must be protected and we are such an important part of the economy” are their excuses…

The costs of healthcare are always full of surprises or risks that cannot be forecast beforehand. Most patients have no idea if this doctor or if this treatment will be successful. If the doctor works for a private healthcare company he will perform plenty of tests and try out expensive treatments so long as a third party is paying, and that could be an insurance company, central government or a city. The risk is either too much or too little depending on what the payer allows…

If the doctor is working for the public sector that it is responsible for bearing the costs, where the doctor’s salary is not related to the cost of care, then the cost of care is guided by long-term policy based on what the city sets through the political process working with medical experts and experts in welfare economics.

This has been Finland’s traditional solution alongside the occupational healthcare that employers are by law obliged to prove their employees. Occupational healthcare covers 2 million workers. The remaining 3.5 million uses  public healthcare with a very small percentage using private healthcare at their own cost.

The original idea for the social- and healthcare reform was to integrate services in a single chain to save costs – this has been verified by Finland’s National Institute for Health and Welfare (THL) as a major cost saving.

However, an expert professor of healthcare economics, Professor Hiilamo, has pointed out that the Finland’s proposed social- and healthcare reform (SOTE) will not drive integration sufficiently strongly because so much of public healthcare is dominated by private companies, and they are not allowed to provide social care for patients, an activity that has to be under the direct control of the public sector.

The Conservative Party has been the dynamo behind privatisation with the implicit support of the Centre Party. Integration of service chains has almost been forgotten when it has become clear that the Centre Party has used the SOTE reform to cement its political power with the creation of 18 new Counties (maakunnat in Finnish) that will move social- and healthcare services from municipalities to the Counties under the false claim that this will establish these service chains of care – or single points of service.

The other major impediment to cost efficient healthcare has been the Conservative Party’s favourite policy that is practically meaningless but sounds good, called “Freedom of Choice”. This has been dealt with earlier and it is very clear that it is virtually impossible to implement throughout the whole country, will certainly increase costs and destroys the basis for one stop integration of services, as described above. The whole concept, within the framework of the current SOTE proposal is purely political posturing and political theatre fro the right-wing neo-liberals.

There is no doubt that the extensive privatisation of public healthcare has led to qualified doctors leaving the public sector for private healthcare companies where their salaries and work loads are much more favourable.

The results are as follows:

  1. There is a lack of medical staff at public healthcare centres creating queues and backlogs for treatment
  2. Public healthcare centres must pay much higher salary costs to attract staff
  3. Taxpayers are expected to pay these increased costs or receive less treatment!
  4. Private companies have higher costs and naturally want to maximise profits and dividends.
  5. Many private healthcare companies minimise their tax bills by being located for tax purposes  in low-tax foreign domiciles.
  6. Many private healthcare companies are owned by doctors and they seek to maximise income by over-testing and over-treatment.

In a recent article, Professor Hiilamo has stated that this SOTE reform is one of the most poorly planned reforms ever seen in Finland. According to him he states that the present social- and healthcare system is clearly more efficient than this proposal even though it is in dire need of reform!

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