Sweden's Single-Payer Health System Provides a Warning

Sweden's Single-Payer Health System Provides a Warning to Other Nations

by David Hogberg, Ph.D.

Sweden is a country of about 9.1 million people on the Scandinavian Peninsula of Northern Europe. Geographically, it is slightly larger than California. It is by any measure a first world country, with a labor force working primarily in industry or the service area, a GDP per capita of about $31,600 and an unemployment rate of 5.6 percent.

For much of the 20th century, Sweden had a single-payer system of health care in which the government paid almost all health care costs. Like other nations with a single-payer system, Sweden has had to deal with the problem of ever-growing health care expenses causing a strain on government budgets. It has dealt with this problem by rationing health care - instituting waiting lists for medical appointments and surgery.

Sweden stands not merely as a warning about single-payer systems, but also as an example of what happens when market-based reform of such systems do not go far enough.

In the 1990s, Sweden set about reforming its health care system by introducing aspects of privatization. These reforms were limited, however, and the old problems with waiting lists and rising costs had re-emerged by the beginning of this decade.

The experience of Sweden demonstrates that when a nation adopts market-oriented reform for its health care system, the reforms will fail if the market is not permitted to work.

Structure

For much of the last fifty years Sweden has had a heavily socialized health care system. Almost all of the funding comes from government revenue, and most aspects of the health care system, such as hospitals, primary care centers and prescription drugs, are controlled by the government. Doctors could still have a private practice, although by the 1960s about 80 percent of doctors worked in government-run hospitals.

The Swedish Parliament first tried to provide comprehensive national health insurance in 1946 with the passage of the National Health Insurance Act. Because of financial restraints, it was not actually implemented until 1955. Since that time, that national government has given increasing authority and responsibility for the health care system over to county governments (commonly known in Sweden as "county councils") to the point where they now have more power over the health care system than either the national or municipal governments. Nevertheless, the national government still plays an important role.

At the national level, the agency with the most authority over the health care system is the Ministry of Health and Social Affairs. It is responsible for ensuring that the health care system runs efficiently and supervises the health care activities of county councils. It also provides research and advice to the Swedish parliament on legislation and policy matters regarding health care. National legislation sets the goals and ground rules for the provision of health care in Sweden.

There are a number of boards and institutes at the national level that focus on health care, but they have little more than advisory or research roles. The three exceptions are the Medical Products Agency, the Pharmaceutical Benefits Boards and the National Corporation of Swedish Pharmacies. The Medical Products Agency regulates the manufacturing and sale of drugs and other medicinal products. Before a drug (including natural remedies) can be sold in Sweden, the Medical Products Agency must approve it. The Medical Products Agency also provides information about medicines and gives permission to conduct clinical trials.

The Pharmaceutical Benefits Boards is charged with deciding whether a drug is included in Sweden's pharmaceutical benefits scheme and setting the price. The primary factor that the Pharmaceutical Benefits Board considers when deciding whether to approve a drug is the drug's cost effectiveness. If the Pharmaceutical Benefits Board does not approve the drug, then people who use it will not be reimbursed by the government.

Also at the national level is a state monopoly known as the National Corporation of Swedish Pharmacies. It owns all of the pharmacies in Sweden, which enables it to maintain a countrywide distribution system. It runs both community and hospital pharmacies. It is responsible for supplying drugs at uniform prices throughout Sweden.

The next level of government in Sweden is the county councils, which are run by elected members. County councils are responsible for operating most of the health care delivery system, from primary care to hospital care.

County councils have complete authority over hospital structure in Sweden. Either an executive board or an elected hospital board at the county level determines the management structure of hospitals within its county. County councils have similar authority over primary health care centers, which differ from hospitals in that they are responsible for providing most outpatient care.

While physicians can practice privately in Sweden, county councils heavily regulate the establishments of new private physicians. They regulate the number of patients that private providers can see in a year. Private physicians must also have an agreement with the county council in order to get reimbursed by the government. If a physician does not have an agreement, then the patients will have to pay the full charge of the physician.

County councils also have the responsibility of providing dental care through the Public Dental Service. Dental care is also provided by private dentists.

Municipal governments are left with the responsibility of overseeing patients who have been discharged from a hospital and need public nursing homes or home care.

Financing

In 2004, Sweden spent about 9.1 percent of its gross domestic product (GDP) on health care, which is slightly above the average for nations that belong to the Organization of Economic Cooperation and Development. The largest share of funding for the Swedish health care system comes from taxes. Both county and municipal governments have broad authority to levy income taxes. Since 90 percent of county revenues are expended on health care, a breakdown of the sources of county revenue give a roughly accurate picture of the revenue sources for health care provided by county councils. In 2003, 72 percent of the revenues for county councils came from taxes, while 18 percent came from grants from the national government, three percent came from user-fees, and the remaining seven percent came from other sources. Municipal government generated about 69 percent of their revenues from local taxes in 2003, and 20 percent of their revenues are spent on health care.

Patients in Sweden pay user fees (similar to co-payments in the United States) that are set by county councils. The fee for seeing a primary care physician varies from 11 to 17 kronas (the Swedish unit of currency; $1 U.S. equals about 6.90 kronas), while the fee for seeing a specialist ranges from 22 to 33 kronas. While county councils have discretion in setting user fees, the national government limits the amount of total user fees paid per patient at 100 kronas annually for physician and specialist visits. The maximum user fee for hospital care is nine kronas per day.

For prescription drugs, patients pay no more than 200 kronas annually. Payment for prescription drugs is set on a sliding scale, in which patients pay 100 percent of the first 100 kronas charged, 50 percent of the next 89 kronas, 25 percent of the next 178 kronas, and 10 percent of the next 111 kronas. After that, the state pays 100 percent of the cost for drugs.

County councils provide dental care without charge for patients under age 20. For the remainder of the population, the national government sets fixed subsidies for dental care, and patients must pay the difference between the subsidy and what the provider charges. Municipalities set the user fees for nursing homes and home health care, although the national government limits such user-fees to no more than 175 kronas per month.

Private funding, beyond user fees, plays a small role in Swedish health care. Only about 2.3 percent of the population has supplementary health insurance, and the primary benefit of it is the ability to avoid waiting lists for treatment.

Reform

During the 1990s, many county councils adopted market-oriented reforms of the health care system. This reform wave had its roots in an attempt in the 1980s to control the burgeoning cost of the Swedish health care system.

By the early 1980s, with an aging population and increasingly expensive health care technology, the system had become unsustainable. In a ten-year period from 1972-1982, the health care portion of Sweden's GDP grew from 7.2 percent to 9.3 percent . Until 1985, the national government reimbursed county councils for health care expenses on a fee-for-service basis. The Dagmar Reform of 1985 changed the reimbursement formula to one of "capitation," in which counties were reimbursed for the number of patients served. This led to "global budgets" - a fixed amount that each county could spend annually on health care services.


Cost of Swediesh Heath Care

Global budgeting would prove to have serious consequences for Sweden's health care system, most notably expanding waiting lists. Waiting lists for surgery and other procedures had long been a problem in Sweden. Like most government-run systems, the Swedish health care system was already plagued by declining productivity - a consequence of which included delays in care. Global budgeting, however, worsened the problem of waiting lists. With county councils now operating with fixed budgets and citizens facing few restraints on demand for health care, county councils needed to ration health care services. An increase in wait times was the result. By 1988 the wait time for an angiogram - a heart X-ray - was up to eleven months. The wait time for bypass surgery could be an additional eight months.

Although the Dagmar Reform had some success in containing health care costs, the rationing that resulted from it led to public outcry over waiting lists that grew throughout the late 1980s and early 1990s. During the 1990s, the national government shifted responsibility for funding of health care to county councils but also gave counties more freedom to structure health care delivery. This led to a number of market-oriented experiments by county councils. Of all counties, Stockholm County engaged in the most aggressive reform regimen. Under this reform, which became known as the "Stockholm Model," the county council still provided the funding, but health care providers could be owned by private individuals or companies. The initial results were impressive. Stockholm County encouraged doctors, nurses and private companies to take over the operation of primary health care centers. Over 60 percent of primary care centers were run privately by 2002. Costs declined, particularly for laboratory services, which dropped by 30 percent. Stockholm also privatized one of its seven hospitals, St. George's. St. George's Hospital began running a profit in 1994, and 90 percent of patients were satisfied with the care they received there.

Other county councils followed suit and initiated a purchaser-provider split, in which the government would continue to pay for health care, but the provider would become a private entity. The county council would contract services out to primary health care centers and other private providers. Providers would be paid on a "per-case" basis, and, thus the provider would be able to make a profit based on his ability to attract patients while also holding down costs. Additional reform at the national level created circumstances in which a patient could go to any hospital of his choice, even one in another county. This reform was the Patient Choice and Guarantee of 1992, which required patients to be treated within three months of diagnosis. According to Swedish economist Ragnar Lofgren, "The logic behind this reform was to let the money follow the patient. This approach would give hospitals and doctors a strong incentive to increase efficiency in order to attract patients from outside their hospital's catchment area and avoid losing patients to other hospitals." These reforms at the national and county levels had some early success. Waiting lists dropped by over 20 percent from early 1992 to late 1993. Furthermore, health care expenses did not increase, as health care as a percent of GDP held steady during the 1990s.

Unfortunately, waiting lists began to increase in 1994 and in late 1996 the Patient Choice and Guarantee was abandoned. By the early part of this decade, most counties once again faced a problem with waiting lists.

Worse still, costs have clearly been on the rise again, as demonstrated . Part of the recurrence of these problems stems from the purchaser-provider split, or lack of one. First, a majority of county councils did not implement a provider-purchaser split based on a per-case payment basis or did so only partially. Thus, there was not sufficient pressure on providers to attract patients for fear of losing funding. Second, the split was weak to begin with. As one study of the split policy noted, the contracts between purchasers and providers often amounted to little more than "letters of intent," and the "escape route back to traditional planning and management was always open to the central county-council administration."

Another problem was that although patients were free to choose which hospital in which they could get treatment, there were few penalties on providers that failed to attract patients. For example, in Stockholm, the county council did not permit any emergency hospital - public or private - from shutting down. Additionally, market-reform initiatives were vulnerable to the whims of politicians. In 2004, the left-leaning Social Democratic coalition, which controlled parliament, banned the privatization of hospitals and forbad the practice of private patients buying their way past waiting lists.

One of the underpinnings of any successful market is that entities that do not adequately satisfy consumers eventually go out off business. The greatest failing of the market- oriented reform of the Swedish health care system is that they did not permit private providers to, in essence, "fail." As a result, one of the hallmarks of single-payer systems, waiting lists, are again plaguing the Swedish patients.



Görann Persson had to wait eight months during 2003 and 2004 for a hip replacement operation. Persson was not considered to be a very pleasant person to begin with, and he became even grumpier due to the pain he endured while waiting for his operation. As a result, Persson walked with a limp, reportedly used strong pain medication and had to reduce his workload.

What made Persson unique was not his wait for hip surgery. Despite the government promise that no one should have to wait more than three months for surgery, 60 percent of hip replacement patients waited longer than three months in 2003 . Rather, Persson stood out because he was Prime Minister of Sweden at the time. Persson could surely have used his position in the government to gain access to private care, essentially jumping the waiting list. Yet Persson stated that he planned on waiting for his surgery like everyone else.

Whether Prime Minister Persson did this out of benevolent motives is an open question. His party, the Social Democrats, have used the phrase "equal access to health care" to attack the center-right parties on the issue of health care for many years. Persson would have greatly undermined the effectiveness of that attack had he jumped the waiting list.



Sweden's Waiting Lists

In practice, the political notion of "equal access" actually means "restricted access." Swedes who do not have private insurance must wait, often for months, for treatment. For all Swedes who needed an operation in 2003, slightly more than half waited more than three months . The situation continues. Moreover, patients often wait in great pain and distress.

Researchers studying Swedes waiting for hip or knee replacement concluded that "almost every aspect of daily life is affected by the indeterminate wait for surgery and the related experiences of pain and disability. The respondents express a deep sense of lost dignity, powerlessness and frustration." One patient complained that the pain had gotten so bad that she "had no quality of life." "I can't participate in anything," she said. "I can't go for a walk, I can't do anything, so why on earth do I need to wake up in the morning!"Depression and hopelessness were other common symptoms. Another patient complained, "I feel as though I've lost my human dignity. You get depressed and fed up with the pain. Still I try to be patient. But you lose the desire (to live)." She further complained of her treatment by the clinic where her surgery was to take place. "I felt so neglected, you get treated, yes, worse than an animal because you can take an animal to the veterinary... I feel so powerless."

Pain and anxiety are also common problems for Swedish heart patients waiting for surgery. One study found that more than half of patients waiting for heart surgery experience chest pain daily, and longer wait times were associated with increased nervousness. Another study found that 88 percent of patients waiting for heart surgery reported chest pains that limited their daily activities. It also found symptoms of anxiety and depression to be strongly associated with the pain.

While rationing may permit the government to save on costs and thereby restrain health care budgets, putting patients on waiting lists is not cost-free. One study that examined over 1,400 Swedes on a waiting list for cataract surgery found that 5.2 million kronas were spent on hospital stays and home health care for patients waiting for surgery. That was the equivalent of what it would have cost to give 800 patients cataract surgery.

A recent study that examined over 5,800 Swedish patients on a wait list for heart surgery found that the long wait has consequences far worse than pain, anxiety or monetary cost. In this study, the median wait time was found to be 55 days. While on the waiting list, 77 patients died. The authors' statistical analysis led them to conclude that the "risk of death increases significantly with waiting time." Another study found a mean wait time of 55 days for heart surgery in Sweden and a similar rate of mortality for those on the waiting list. Finally, a study in the Swedish medical journal Lakartidningen found that reducing waiting times reduced the heart surgery mortality rate from seven percent to just under three percent.

Sweden is one of several nations whose practices offer proof that single-payer health care systems lead to the proliferation of waiting lists. It also shows that waiting lists have adverse and sometimes tragic consequences for patients.

Conclusion

While Sweden is a first world country, its health care system - at least in regards to access - is closer to the third world. Because the health care system is heavily-funded and operated by the government, the system is plagued with waiting lists for surgery. Those waiting lists increase patients' anxiety, pain and risk of death.

Sweden's health care system offers two lessons for the policymakers of the United States. The first is that a single-payer system is not the answer to the problems faced as Americans. Sweden's system does not hold down costs and results in rationing of care. The second lesson is that market-oriented reforms must permit the market to work. Specifically, government should not protect health care providers that fail to provide patients with a quality service from going out of business.

When the United States chooses to reform its health care system, reform should lead to improvement. Reforming along the lines of Sweden would only make our system worse.

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David Hogberg is a senior policy analyst at the National Center for Public Policy Research

National Policy Analysis
May,2007