Sweden’s Model of Consumer Choice in Healthcare

Commentary, Healthcare & Welfare, Johan Hjertqvist

European governments have struggled to combine their traditional ethos of equity in healthcare with the demands of a more sophisticated, consumer-driven society. Few expected that their inspiration for reform might come from Sweden. Yet this country, known for its deeply-rooted belief in the welfare state, has changed as it has come under pressure from both patients and health service workers.

The shift from a healthcare system characterised by public service monopoly, hierarchy, and top-down attitudes to one having diverse providers, networks, and consumer power has been most striking in Stockholm. But all over Sweden, consumers have gained access to a healthcare market which allows individuals to use public funding for treatment throughout the country. The number of contracted private healthcare providers has risen, reflecting consumer choice and the apparent preference of many young doctors and nurses to work for private contractors.

Stockholm’s revolutionary approach – public funding, public-private co-operation, and freedom of choice – has begun attracting international attention. National and regional officials in states such as Canada, Norway, the Netherlands, Germany, Japan and the UK have all begun visiting Stockholm to analyse the outcomes.

The most striking consequence so far has been the British government’s recent decision to modify its National Health Service, long the untouchable ‘sacred cow’ of UK politics. The NHS is slowly being reformed from a monopolistic and bureaucratic entity into a more decentralised agency with greater consumer focus. Most important, it is becoming more efficient in delivering health services.

Much of New Labour’s plan will have a familiar ring to Stockholmers. Waiting periods for treatment are to be reduced to three months at most (equivalent to those in the Stockholm region), though not until 2008. ‘Perverse incentives’ within the NHS are to be replaced with constructive ones. Hospitals are to be paid for what they actually deliver – as is the case with Stockholm’s Diagnosis Related Groups (DRG) system. The DRG system allocates a price to every diagnosis or treatment and only compensates hospitals once the service has been delivered. In Stockholm, this step has dramatically reduced waiting lists. British patients will be able to choose freely among healthcare providers, in order to reduce waiting times and improve quality. As in Stockholm, healthcare authorities will be required to inform people of the options available to them. To strengthen freedom of choice and expand supply, publicly-funded private care providers are to be contracted, as in the Stockholm County Council (Sweden’s elected regional authority responsible for funding and delivery of health services). Independent hospitals are also to be introduced under NHS auspices, as is already the case in Stockholm.

With this combination of decentralisation, consumer influence, and productivity incentives, the UK Government hopes to remould the NHS. But the Stockholm County Council is not the only source of inspiration. Elements of Sweden’s national model are now also being exported. Local authorities, for example, are to be made financially responsible for so-called ‘bed-blockers’ (elderly patients who remain in hospital beds longer than is medically necessary because they do not have access to long-term care). Budgeting responsibility is to be moved down to Primary Care Trusts, freestanding bodies within the NHS responsible for commissioning and providing community healthcare services. These Trusts will in future control 75 percent of all NHS funding allocations, along the same lines as Swedish County Councils.

British Prime Minister Tony Blair’s NHS advisers are taking a pragmatic view of developments in Stockholm and other reformist county councils. As they see it, public healthcare cannot stand still in a changing world.

The UK and Sweden are not the only countries struggling with these problems. The challenge to reform healthcare is universal. Other Scandinavian countries such as Norway, Denmark, and Finland could also benefit from the Stockholm approach. Basic financial incentives and options for workers to start their own businesses could revolutionise the delivery of healthcare in eastern Europe, and Sweden’s independent hospitals are already attracting interest in the Netherlands and Germany. In future, healthcare consumers in the developed world will become less and less tolerant of long waiting lists, inadequate information, and lack of influence.

The new Swedish model — consumer-driven, and incorporating positive economic incentives — is the future of healthcare. Governments neglect it at their peril.