Goals of Financing a Health System

The World Bank provides three goals by which all health financing systems aim to follow.

  1. Raise enough revenues to provide individuals with basic packages of essential services and financial protection against catastrophic medical expenses caused by illness and injury in an equitable, efficient and financially sustainable manner.
  2. Manage these revenues to pool health risks equitably and efficiently.
  3. Ensure the purchase of health services in ways that are allocatively and technically efficient.

How Health Finance Relates to Overall Health

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Source: The World Bank

The Swedish Economy and Its Correlation to Health

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In 2005, health care costs accounted for 9.2% of the gross domestic product (GDP).
High taxes account for the majority of health care costs. These taxes come from both county and municipal governments.
  • 73% of revenue for health care costs comes income taxes
  • 16% of revenue for health care costs comes from user charges
  • 11% of health care revenue comes from federal grants

In 2005, Primary care accounted for 16% of the total costs of health care, whereas specialized physical care accounted for 52% of all health care costs. Surprisingly, pharmaceuticals accounted for only 11% of health care expenses.

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Source: World Health Organization

Differences Between the Swedish and American Economies


The World Bank analyzed many factors of the partnering countries, and generated comprehensive reports on the economic state of the countries. The economies of both Sweden and the United States were examined closely in these reports.

Swedish Economy



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Source: The World Bank

United States Economy

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Source: The World Bank

One of the main differences between Sweden and the United States that we see is the relation between life expectancy and gross national income (GNI). As we see, there is a greater balance between life expectancy and GNI in Sweden than in the United States. The average life expectancy in Sweden at birth is 80 years and the GNI is $321.4 billion (US dollars) according to the 2004 report. The United states has a greater imbalance between GNI and life expectancy, with a life expectancy of 77 years at birth and a GNI of $12,151.2 billion (US dollars). In order to be more efficient, the United States does not need to spend more money, but refocus the spending of capital on health care. The largest question will be over whether a reduction on GNI will be worth an extra three years of life.

Both countries exhibit a similar pattern in the relationship between growth of capital and GDP. Both countries bottomed out in 2001 and are both on a continuous upward trend into 2004. This trend can also be a possible cause of the rising expenses on health care--if people have more money, they will spend it. Spending on health care is quite common whther it be with traditional care or complementary and alternative care not covered by insurers.

Another difference between the two countries lies
in the rate of inflation. The consumer price index rises along with the the gross domestic product in the United States. However, in Sweden, there is an erratic relationship between the two variables. Even with these erratically changing figures, Sweden shows signs of progress with both inflation percentage and gross domestic product declining together. This could explain the low cost of medicine and other forms of health care in the Swedish health system.

History of Financing Health Care in Sweden


From 1930-1980 health and welfare went from 5% of the Swedish GDP to 40% of the Swedish GDP. In an effort to control costs, the Swedish government gave much control of the health care field to the local governments. However, with over 300 municipalities in 1982, something still had to be done in order to centralize health care and the costs associated with it. In 1988, with disparities between the income levels of the municipalities, the Swedish government decided on giving the power to 26 county councils. Still, disparities existed between county councils, so the Swedish government adopted a tax model that came from the Stockholm County Council. This model adjusts for variations in population focusing on age, education, employment, and housing tenure. Expenses on chronic diseases like cancer, and cardiovascular disease are also used in the model. The Swedish national government also provides compensation to poorer counties so they can provide an equal amount of medical care to their residents.

In the time period between 1990 and 1996, Sweden's health expenses rose by only 3.4%, while health expenses in the United States rose by 59.8%. In the past ten years, though, financial concerns have still riddled the Swedish health care system. 25% of health care related jobs have been cut in an attempt to save money. These jobs have primarily been in the nursing field, yet non-medical support staffs have also seen job losses. The graph below demonstrates the various changes in %GDP of Sweden in regards to health care expenditures that followed these changes.

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The reason the Swedish government decided to structure health care in this manner was due to the strength of the health system's decentralized nature. The county councils ultimately are able to control for the imbalances that could not be fixed on a national scale. There is even more attention paid to details of care with such a focused system. With such stringent regulations the spending excess that occurs in the United States would easily be detected in Sweden. In fact, with so much government involvement in health care, many employees in health-related fields are switching over to the private sector. Sweden has eight regional hospitals and 70 county hospitals. In 2005, Sweden also had 26,500 in-patient beds. With the same number of facilities, patients are struggling with access to care. Unless the number of employees increases, Sweden's governmental strength will ultimately turn into the health system's weakness--driving away employees.

To focus the Swedish health care system on a national system would lead to many disparities between the counties. The county councils are able to give more power and care to the individual than could be possible on a national system. With such a small population (9.0 million in 2004), this is much easier to do. People will "fall through the cracks" much less with a county council controlling the health system than the national government. The county can tailor the amount of coverage they provide based upon the demographics of their county. A national plan, for instance, would presuppose a plan for all Swedish citizens, with less variance in the coverage, for after all it is a plan for the entire country. With the Swedish national government providing broad guidelines for the county councils, each council is able to allocate funds and coverage as needed. They are also able to take into consideration the tax rate at which residents pay for health care.

Taxes in Sweden are paid on three levels: municipal, county, and national. Swedish citizens pay both indirect taxes and direct taxes. The Swedish Ministry of Finance defines direct taxes on labor as:
"taxes payable on income from work, taxes on income related to work (such as sickness benefits, pensions and parental benefits) and basic pension contributions. " The Ministry defines indirect taxes on labor as: "social security contributions (employers contributions and self-employed contributions for self-employed persons), general payroll taxes and special employers contributions payable on certain types of compensation and employee benefits. " Direct taxes consist of both local and state taxes. The local tax rates differ from anywhere between 29% to 34% of each 100 SEK earned (1 USD = 7.28903 SEK, so 100 SEK =13.7193 USD) . Anyone earning over 31,600 SEK (4,337.3 USD) must pay a 20% state income tax. An additional 5% tax is added onto anyone earning over 44,900 SEK (6,161.16 USD) . 7% pension taxes are also assessed on citizens earning up to 34,158 SEK (4,685.943 USD) .


Source: Swedish Ministry of Finance

Sweden's Core Health Indicators

Indicator
Value (year)
External resources for health as percentage of total expenditure on health ?
0.0 (2005)
General government expenditure on health as percentage of total expenditure on health ?
81.7 (2005)
General government expenditure on health as percentage of total government expenditure ?
13.6 (2005)
Out-of-pocket expenditure as percentage of private expenditure on health ?
88.50 (2005)
Per capita government expenditure on health at average exchange rate (US$) ?
3044.0 (2005)
Per capita government expenditure on health(PPP int. $) ?
2460.0 (2005)
Per capita total expenditure on health (PPP int. $) ?
3012.0 (2005)
Per capita total expenditure on health at average exchange rate (US$) ?
3727.0 (2005)
Private expenditure on health as percentage of total expenditure on health ?
18.3 (2005)
Private prepaid plans as percentage of private expenditure on health ?
1.6 (2005)
Social security expenditure on health as percentage of general government expenditure on health ?
0.0 (2005)
Total expenditure on health as percentage of gross domestic product ?
9.2 (2005)
Source: World Health Organization

Complete Overview of Health Financing in Sweden


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Source: World Health Organization







References


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"Different Types of Taxes."
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"Health and Medical Care in Sweden, A Fact Sheet." 16 (Aug. 2007): 1-4. Government Offices of Sweden. Regeringskansliet, Aug. 2007. Web. 22 Nov. 2009. <http://www.sweden.gov.se/content/1/c6/08/60/40/982480dd.pdf>.

"Health Systems in Transition."
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Hjortsberg, Catharina, and Ola Ghatnekar. "Health Care Systems in Transition: Sweden." European Observatory on Health Care Systems 3.8 (2001). World Health Organization. 2001. Web. <http://www.euro.who.int/document/e73430.pdf>.

Hogberg, David. "Sweden's Single-Payer Health System Provides a Warning to Other Nations."


National Policy Analysis (May 2007). National Center for Public Policy Research. May 2007. Web. 14 Nov. 2009. <http://www.nationalcenter.org/NPA555_Sweden_Health_Care.html>.

"The Swedish Health Care System: Recent Reforms, Problems, and Opportunities."
Public Policy Sources 59 (2002): 1-48. Frasier Institute, July 2002. Web.

XE - The World's Favorite Currency and Foreign Exchange Site. Web. 18 Dec. 2009. <http://www.xe.com/>.