A Conversation with Johan Hjertqvist

We have redefined what is good healthcare and have been quite successful in some parts of Sweden - cutting waiting lists, speeding up productivity, improving quality, satisfying personnel working in healthcare.
Published on October 4, 2000

Frontier Centre: In Canada, everyone is very surprised that Sweden has privatized parts of its healthcare system because it is regarded as the home of cradle-to-the-grave welfare. Could you summarize what changes have been made?

Johan Hjertqvist: We have redefined what is good healthcare and have been quite successful in some parts of Sweden – cutting waiting lists, speeding up productivity, improving quality, satisfying personnel working in healthcare. While the government continues to finance most healthcare, it is moving to buy services from competing suppliers who are finding ways to focus on customer service and increase productivity.

FC: The healthcare reforms are apparently a part of a wider policy, especially in Stockholm of allowing competition in the provision of government services. What other sectors have been affected in healthcare?

JH: You can say that all industries related to healthcare – including pharmaceuticals, laboratories, ambulance services, restaurants, technical support services are all partially in competition.

FC: Can you identify the performance improvements?

JH: The savings range from 10 to 50 percent. For example, fifty percent when it comes to laboratories; thirty percent when it comes to support services; fifteen percent when it comes to ambulance transport.

FC: Sweden’s largest nurses union enthusiastically supports the licensing of private providers and assists its members in becoming nursing entrepreneurs. This fact shocks healthcare unions in Canada because they are fervent defenders of monopoly medicare. What factors helped Sweden’s nurses and other unions to break out of the monopoly rut?

JH: They failed for decades to raise the salaries of their members so they thought things over and found that it was much easier to raise salaries when you negotiate with 200 independent contractors or employers rather than trying to negotiate salaries with one monopoly.

FC: In her defense of healthcare pluralism, Eva Fernvall, the chairwoman of the nurses union reveals a sophisticated knowledge of subtle economic concepts like the need for a provider/purchaser split. Could you explain that term as understood in Sweden?

JH: I’ll make it easier by using the words buyer and seller. The authorities are buying services from a large number of competing contractors who are selling healthcare services.

FC: Does that mean that the privatization is limited primarily to the provision of various services on contract or competitively to the government or does money change hands between the patients and the doctors?

JH: We have a user fee of about $20 Canadian in Sweden which you pay as a patient for all kinds of treatments and accommodations. Ninety to ninety-five percent of healthcare is financed by taxes and that means that we have one buyer and many competing producers and equal access for everybody. So, if you want to talk about privatizing it means that large numbers of contractors are delivering services but only within the tax-financed system.

FC: Is it not inevitable that some of the best of medical care will disappear into the private system?

JH: I don’t think so. Not in the Swedish way, where you satisfy the demand by contracting with a lot of producers. So, since we have been successful in that operation – it will limit the purely private market.

FC: How big is the purely private market? We understand it is not very large.

JH: Less than 1%.

FC: In Sweden, patients pay a user fee that amounts to about twenty dollars in Canadian funds. How long has that policy been in place and what have been its effects? What provision is made for those who cannot afford the fee?

JH: We introduced patient fees in the early 70’s. Since then it has not been very controversial. One out of four Swedes, high consumers, you could say, like people with chronic diseases, don’t pay any fees at all.

FC: Why do you have a user fee?

JH: The idea is to reduce marginal demands, cases where urgent or more expensive emergency care is not appropriate.

FC: You mention an experiment in Stockholm involving the removal of user fees. Can you talk about that?

JH: We experimented with removing the fees for emergency healthcare visits for children. By making the service completely free we found that the demand increased quite rapidly. Waiting lists in emergency wards increased. So they implemented the fees again to cut demand.

FC: You mentioned today that Swedish healthcare consumers can go on the Internet and compare waiting lists. Can you talk about that?

JH: You can compare waiting lists at both the national and regional level. All hospitals are listed on the Internet so as a patient you can make an informed choice if you put a priority on short waiting lists.

FC: So, could we say, that providers that have long waiting lists have suffered a decline in business or have they even gone out of business?

JH: The system is fairly new so it’s a bit too early to judge. But, in the long run, no doubt clinics and hospitals with long waiting lists will suffer from it.

FC: You have mentioned that there are plans in the works to privatize more hospitals following the successful experience with the sale of Stockholm’s St. George’s Hospital. Is there any more news on that topic?

JH: I know there have been discussions about another one – I can’t say the name of it – but I would say that in a couple of years another hospital will be sold.

FC: So, do the private hospitals put pressure on the public hospitals to perform better?

JH: Yes, because they compete for the same kind of contracts and if they are more efficient, of course, as measured by benchmarking results and so on, you put the pressure on the other competitors.

FC: You report that after the latest round of privatization is complete that private contractors bidding on contracts will provide 80% of Stockholm’s medical services. Do you think these changes will be permanent or will they be held hostage to changing political winds?

JH: No, I would say that most of the process in Stockholm is irreversible. It is very difficult to turn the clock back. Even if there would be another political majority it is hard to say that they would change this.

FC: You have suggested that the debate in Canada today seems to mirror the debate of Sweden in the 1980’s. Why do you say that?

JH: We also had trade unions blocking development, suspicion about private initiatives, not private financing, but private contractors and private providers, and politicians involved at all levels and in all kinds of healthcare activities. There was widespread inefficiency throughout healthcare because we didn’t measure costs and what came out of the system. A lot of bad vibrations from the Sweden of the 80’s I would say are prevalent here.

FC: So, you don’t believe the answer in Canada is to pour more money into the system?

JH: No, we tried that in the 80’s and in Sweden, at least, that didn’t solve the problem.

FC: What happened in Sweden?

JH: We put more and more money into the system but it did not make it more efficient. We increased efficiency only when we reduced the amount of money in our economic crisis during the first part of the 90’s. Then we had to implement new mechanisms and a lot of things happened.

FC: So, why would unions favour a system where there was competition?

JH: It was a much better environment in which they could increase the salary for themselves. It gives them a stronger bargaining position no doubt. In general we ended up with more transparent structures in healthcare delivery and much more freedom to experiment with new forms of organizations.

FC: So, did anybody lose? Did the people at the bottom of the wage scale see their salaries go down?

JH: No, I would say that it was literally a win-win situation where patients, and taxpayers, and even the politicians gained.

FC: Measuring and comparing service delivery costs appears to be a critical aspect of your competitive system. Are you confident that you have a transparent healthcare system?

JH: It is getting more transparent but it isn’t perfect. It took us five or ten years to develop it. When you create a market mechanism for service delivery, you must start a procedure for creating transparency. It is a critical part of a larger process.

FC: It sounds like the health reforms in Sweden embrace the Frontier Centre’s three determinants of high-performance government — transparency, neutrality and separation?

JH: Yes, I would say so. We are trying — in a good Swedish tradition — to bring together the best from different worlds – harnessing the power of market forces within an egalitarian system – to preserve universal access, for example. I would say that is good basic social democratic policy.

FC: So, Social Democrats in Sweden today would not want to reverse the reforms and go back to a system such as we have here.

JH: No, I would say they support this transition in general.

FC: They support competition in public service delivery?

JH: Sure.

FC: What is happening in Sweden’s electricity industry?

JH: During the second part of the 90’s energy was completely deregulated. So, we have moved from one or two large monopolies to a large number of – 150 or so – producers of energy. We have quite the competition and prices are much lower today than they were before.

FC: Has the government sold any of the facilities?

JH: Yes. Regional and local governments have sold a large number of power plants and local power companies have merged into new industry players.

FC: We have significant confusion here that public ownership of the power company somehow guarantees lower prices. However many fail to understand that the government power company doesn’t pay taxes and has lower prices while a private power company pays taxes and therefore has higher prices. How does Sweden deal with this issue?

JH: If public operations are turned into public or government companies, for example, power generating companies, then they are supposed to pay income taxes in the same way – equal to those paid by private companies.

FC: Mass transit throughout Europe is now subject to competitive delivery. How does it work in Stockholm? Is the transit system broken up into different routes and supplied by multiple competitors or has the entire system been contracted to a single supplier.

JH: When it comes to commuter trains, the underground, you try to hold it together, so that’s one contract. When it comes to bus transport you can have competing suppliers for different geographic segments – there are a number of contractors when it comes to bus service in Stockholm.

FC: How many?

JH: Roughly five.

FC: Last question. You seem surprised that the government runs an auto insurance monopoly here in Manitoba?

JH: Yes, I really am. That reminds me not of Sweden, because we never had one, but rather East Germany in the 70’s.

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