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An overview of the healthcare, social welfare and regional government reform package

17.3.2016

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Current situation: social welfare and healthcare services in mainland Finland

Healthcare services

• Municipalities (local authorities, 297 in total) are responsible for arranging health care services

• Hospital districts (20 in total) are responsible for specialised medical care. A municipality has to be part of a hospital district to arrange specialised medical care.

• 5 specific catchment areas are responsible for arranging highly-specialised medical care

Social welfare services

• Municipalities (local authorities) are responsible for arranging social welfare services

• Municipalities are members in joint municipal authorities of special welfare districts (15+2 in total) that arrange services for people with developmental disabilities.

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Why is the reform needed?• The increasing need for services among the

aging population, the changing variety of illnesses and wider possibilities for treatment along with greater expectations from the population create a pressure for costs to rise

• Slow economic growth and a high total tax rate when compared internationally are an impetus for finding new ways to curb rising costs.

• Inequalities among different areas and groups

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Government programme• The aim of the social welfare and health care

reform is to narrow disparities in health and manage costs

• The reform will be implemented with complete integration of services and by strengthening the carrying capacity of service arrangers

• The Government is strengthening the sustainability of public finances by implementing structural changes– Social welfare and healthcare reform´s share EUR 3

billion by the end of 2029

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Solution for arranging the services• 18 autonomous regions (counties) will be established.

Counties will have responsibility for social and health care services– Also some other duties will be under the

responsibility of the counties• Centralizing on specialized operations and emergency

duties on fewer counties• Counties will be managed by elected councils

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Production of services• Each county will provide the necessary healthcare and

social services itself or together with other counties, or may use the services of the private sector or the third sector

• Indicators for efficiency and quality of services will be created

• Wider freedom of choice for customers

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New structure of healthcare and social welfare services

Finnish GovernmentDecision on the organisation of healthcare and social welfare services, national work division, division of duties over the county boarders, policies for providing services, public service promise, broad-based investments, other measures needed to safeguard the availability of services

Other joint support services

• Joint purchases• Expert assessments of

the quality and effectiveness of own provision compared with other ways to provide the services

• Premises caretaker services

• HR and finance services

• ICT services• Research coordination

services• Potentially: equipment

infrastructure services•Expert assessments of the quality and effectiveness of own

Municipalities• Promoting health and welfare

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Autonomous regions (18 counties)

5 university hospitals and 7 other units operating on a broad basis around the clock

Municipalities (promoting health and welfare)

Counties• Healthcare and social welfare

services• Rescue services• Duties of Regional Councils• Developing of regions and their

business life• Potentially: environmental

healthcare

•Duties of Regional Councils•Developing of regions and their business life•Possibly also environmental healthcare

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Healthcare and social welfare reform – a functional change• Focus on people and effectiveness• Customer-oriented, integrated services

– customers get appropriate, sufficient and timely services– the service chain works smoothly for the customer– various measures and expertise within healthcare and social

services are combined in a flexible way – the service and care chains are managed as an entity, and

information is transferred smoothly between the different operators

– in this entity with several providers, the service chains need to be cross-organisational.

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Reform process and formation of autonomous regions (counties)• Track 1: organisation reform

– the organisation and funding of healthcare and social welfare services will be separated from municipal services

– in April, the Government will set guidelines for the Government proposal and a draft of it will be sent to a consultation round

• Track 2: freedom of choice and funding– Rapporteur working group (chaired by Prof. Brommels) has started their

work– Working group’s preliminary report incl. alternatives on 15 March,

Ministry of Social Affairs and Health will inform of the proposals in April, final report incl. proposals in May 2016

– In April, the Government will plan policies for the organisation reform and have a preliminary view on how to simplify the current multisource financing• => coordination

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Basic guidelines for funding• The Government set the following guidelines for further

preparation of funding:– Municipalities cannot have any significant responsibility for

funding the healthcare and social welfare services. Main responsibility for funding would be in conflict with municipal autonomy.

– Funding of the new autonomous regions (counties) will be prepared mainly on the basis of state funding.

– In an alternative model, part of the funding would be based on the counties' right to levy taxes.

• A more detailed funding model will be prepared and included in the Government proposal in April 2016

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Basic guidelines for funding (2)• Total tax rate must not increase and labour

taxation must not be tightened at any income level.

• The principle of equality in the Constitution must be taken into account

• Taxation models and a change of income taxation, municipality-specific calculations

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Funding alternatives• Funding of healthcare and social welfare services

and counties– A) revision of current income taxation categories and

reduction of municipal tax– B) state tax for healthcare and social welfare: tax tables

from municipal taxation, and lower municipal taxes– C) combination of state tax (for healthcare and social

welfare) and county tax and reduction of municipal tax• Municipalities will reduce their tax rates

– the reductions correspond to the funding transfers– maximum taxation level for a fixed term may be used

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Comparison of the main funding alternatives• State funding

– easy to steer in theory, a rather simple taxation system– promotes equality– risk of moral hazard, potential problems with joint terrain– top-down rules result in weak spending discipline=> clearly a problem of soft budgetary control

• Model partially based on counties' right to levy taxes– "own" taxation only enables part of the funding, due to differences in the

counties' carrying capacity (less than a half)– perspectives of fiscal federalism– balance between powers and responsibilities, incentives for own economic

management– coordination of the tax system becomes more difficult– Risk of tax rates rising too much– Who will compete: municipalities/cities, or counties, or both of them? How does

this affect municipalities' position?

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Property arrangements – starting points

• Property transfers will be made in line with duty transfers

• Single taxpayer principle– Public finances will be considered as a whole

• Property items will be paid for only once• Several alternatives will be considered

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Solutions supporting effectiveness (1)• Provision of healthcare and social welfare services will

be made more versatile– Each county will provide the necessary healthcare and

social services itself or together with other counties, or may use the services of the private sector or the third sector

– The organisation and provision of services are separate duties within the county organisation, and expert services support this arrangement

– Systematic comparisons of different production patterns will be made more often, and competition will be promoted

• All data on public and publicly financed private healthcare and social welfare services must be public in order to enable transparent comparisons– Private sector and transparent comparisons expedite public

production

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Solutions supporting effectiveness (2)• National joint procurement unit owned by the counties

– handles the tendering process for procurements decided by counties– supports the organising of a strategic procurement system and innovative

procurements– participates in the assessment of the effectiveness of counties' in-house services and

county economy when in-house provision is compared with outsourced services; a more profound assessment may be made by the National Institute for Health and Welfare, for example

• Joint support services owned by the counties– premises, caretaking services – potentially: equipment infrastructure services– financial and personnel administration – ICT services aiming at perfect integration of data

– probably a limited liability company– good practices from state, large cities and municipal cooperation will be used

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Reform of the operational network• The number of units operating on a broad basis around

the clock will be 12 (hospital incl. a unit for emergency social services)

• Other central hospitals continue to operate on a narrower basis around the clock, supported by the 12 units operating on a broad basis and the prehospital care system

– This will safeguard the availability of 24/7 emergency services in all parts of the country, with regard to the distances and other regional characteristics

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Wider freedom of choice for customers• As part of the reforms, a new legislation on freedom of choice

will be enacted: customers can choose between public, private or third sector service providers.– the freedom of choice will be the main principle at the basic service

level and also in specialised services where appropriate• The legislation simplifying the multisource financing and

widening the freedom of choice will come into force on 1 January 2019 – basic level services will be strengthened and swift access to care

will be safeguarded– freedom of choice will be supported for customers by bringing in

uniform quality principles for services and by disseminating public information that helps people make their choices about the services

• High-level preparation (Rapporteur working group) and practical preparation were started in 2016

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Timetable• 4/2016 Circulation of the new bill for

comments• 11/2016 The bill will be presented to the

Parliament• 7/2017 Enactment of the new legislation• 2017 - 2018 Elections• 1/2019 Responsibility for the organization

of healthcare and social services will be transferred from joint municipal authorities and local authorities to the counties