Current healthcare financing and its development needs
The Finnish healthcare financing system is mostly tax-based in line with the other Nordic countries. In most other Western countries, the system is built on health insurance or private funding mechanisms.
The Finnish municipalities and local government regional authorities are responsible for primary healthcare services, and together with the hospital districts, they cater for the public special healthcare. The public services are complemented by private healthcare services, and most of the regularly employed people are covered by occupational healthcare services provided by the employers.
Finnish healthcare financing is characterised by a multi-tier model: the costs are paid by the state, the municipalities, the Social Insurance Institution Kela and by private parties, such as households and insurance companies.
The state share diminished radically as a result of the economic recession of the 1990s. Households covered a larger share of the whole. Throughout the first decade of the third millennium, the state share has been growing and is now 24%, which is still less than in the peak years: in the early 1980s, the state accounted for about 35% of the whole.
The municipal sector plays an important role in the financing. The municipalities assumed a larger share as the state allocations grew smaller. Today, the municipalities pay almost 40% of the expenses.
Kela accounts for about 15% of the whole. This share is virtually constant, showing a very slow growth trend.
Private households pay almost 20% of the current healthcare expenditure. Their stake is high by EU standards.
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Source: Markku Pekurinen, Institute for Health and Welfare THL, 25 September 2009.
Annual expenditure about 15 billion euro – for what?
To quote an example, the Finnish state allocation to healthcare in 2008 was almost four billion euro.
- Most of this sum or almost three billion went to municipal healthcare and was paid out in state subsidies to municipalities.
- A minor share was allocated as the state contribution to the health insurance and went to healthcare reimbursed from the health insurance covering medicines, private healthcare and other smaller items, such as travelling expenses.
Municipalities pay 5,6 billion of the annual healthcare costs, which are incurred for
- the primary health care organised by the municipal healthcare services, including outpatient care, healthcare centre-level hospital care, maternity and child clinics, school healthcare, inpatient care of the elderly, dental care and mental care services.
- specialist care organised by the municipalities in collaboration with the hospital districts.
Households and employers pay for the rest.
- The majority of the private healthcare services are paid by the users themselves.
- Employers arrange for occupational healthcare services for their employees while the Finnish Student Health Service organises the healthcare for university students. Kela contributes to these expenses.
Multi-tier system’s pros and cons
The development of the Finnish system is not a new topic. However, the reform has not progressed due to political differences, the immense dimensions of the task at hand and the independent role of Finnish municipalities.
Generally, the tax-based financing of the current system is seen as an advantage. It is equalitarian, and it is easy to influence the expense frameworks. Moreover, the system’s administrative costs are fairly low. The multi-tier system provides additional sources of money for the production of healthcare services.
However, the current financing system has its problems. Although it is good that the costs are evened out between many parties, the overall responsibility is not shouldered by anyone. A frequently used term is partial optimisation meaning that each financier tries to pass the costs to another payer.
Small municipalities find it particularly difficult, if not almost impossible to provide healthcare services without co-operating with others. According to calculations, the system starts to work when the municipality has at least 20,000 inhabitants.
Focus of financing system development
It is generally considered that the development work should focus on the following
- evaluate and streamline the multi-tier system so that the single-channel system could even be considered (for example, Kela)
- clarify and establish the responsibilities and financing relationship between the state and the municipalities so that the municipalities could retain a real chance to produce services
- enhance the steering impact of the financing so that the financing would promote the health policy outlines
- enhance the encouraging aspect of the system so that the correct and rational mode of operation is rewarded.
Two-tier financing of medicines
The responsibility of medicine financing is divided between the parties following the same principles as in healthcare in general:
- the health insurance pays part of the medicine expenses of people in outpatient care
- the public sector pays for the patients’ medicine expenses when they receive care at the healthcare facilities.
The health insurance and the patient pay for the outpatient medicines that the patients can buy from the pharmacies.
In the respect of equality of the citizens, the patient should not end up paying for a medicine that should, according to the regulations, be paid by the place of care. In principle, two sources of funding for the pharmaceutical supply could be a resource. National terms and conditions apply to the health insurance, and therefore the reimbursements paid to the patient for the medicines do not depend on the financial possibilities of the individual municipalities of residence. Unfortunately, the pharmaceutical supply also shows signs of partial optimisation resulting from the two-tier financing system – the costs and patient pharmacotherapies tend to be passed on to the other financier.