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Personal Budgets and Health Economics

Author: Simon Duffy

In his fifth blog from Finland, Simon Duffy explores the relationship between personal budgets and the idea that health and social care can be integrated. He questions the idea of such integration and suggests an alternative path for policy-makers in Finland.

Finland is the middle of the most profound reform of its health and social care system. There are still so many uncertainties, but a proposals will be published in May 2016. What is clear is that the Finns face several challenge:

  • Get better control of the overall cost of healthcare
  • Integrate health and social care to improve prevention
  • Reorganise power by giving responsibilities to new level of regional government
  • Introduce more choice into the system

The process of reform is also highly political. Some parties wish to see greater equity, some want to ensure resources are not pulled out of communities, others seek to further advance liberal economic reforms.

The reality of healthcare in Finland might surprise readers from outside Finland. Although Finland had a long period of social democratic control, in recent years it has embraced the privatisation of health and social care services. It has also encouraged people to take out healthcare insurance. The result is a system which seems rather fragmented and unfair. Here is the experiences of one my colleagues:

  1. I have toothache and use the public dental care system, and so I call the Tampere dental health service.
  2. I know that I have caries, but am not allowed to diagnose myself. There has to be a check first, made by a dental assistant (not a dentist).
  3. The city doesn’t have a system that lets me find a suitable time for my appointment; instead I get a letter telling me when my appointment will be.
  4. The law says, that if you need a health check (or social service), municipalities have 3 months to organise it. So I get a letter from the city, after 3 months (the city does what the law says). The time that I get never fits my calendar so I have to call again and try to change the time.
  5. The public sector doesn’t have enough dentists, so I’m forwarded to Attendo who are subcontracted by the city. (Attendo are the biggest health company in the country, owned by international venture capitalists, and one which has grown extremely fast by buying itself into the market.)
  6. I give a call to Attendo, they answer right away, and even give me times on Saturdays. I get an appointment very fast.
  7. I have my teeth checked and book some extra times.
  8. I pay about 40 euros per visit. The city pays the rest. Central government pays some part from my bill, I think. It’s not clear to the citizen.
  9. After two years I realise that I still have some unfixed caries. I have to call the city again.
  10. They see, that Attendo treated me, so they let me book a time there myself.
  11. I get a time from Attendo in two weeks. But only for fixing the one caries, that was undone two years ago. They can’t do the dental health check, despite the fact that it’s 2 years since my last visit, and there will be more jobs to do.
  12. I have to call to the city again and ask for another dental check.
  13. I can’t book an appointment directly, instead I get the time by mail etc….

My colleague says:

“Unsurprisingly, in this twisted process, the public sector loses out and organisations like Attendo win more and more business. The situation is similar in social services. Since I can afford it, I now have private health insurance for the kids. I don’t use public services, I’m willing to pay and get a good service. It’s very common, only the poor (or strong social democrats) use public services. And the poor have the most health problems. The work is easier on the private side, and the salaries are double, so there aren’t enough doctors in public health centres.”

Perhaps the Finns have got the worst of all worlds here: expensive healthcare, heavily subsidised by the state, but a system that only works well for the better-off.

It seems to me that when we are reorganising health and social care systems then there are some basic things to remember. First, we must remember that healthcare is a very unusual thing. Nobody wants it for its own sake, but we will pay almost anything we can afford to get it if we think we need it. So the iron law of health economics is this: money always flows towards doctors.

This is also why the usual rules of economics do not apply in healthcare and why nationalised systems can be very effective. One of the great strengths of the UK’s NHS has always been that it is a great system for limiting doctors’ incomes and providing good healthcare for everybody. The systems says: ‘We will pay doctors and nurses well; but what we ask in return is that they treat everybody equally and that they don’t offer people better care privately.’ (There is still some exploitation by doctors, but overall the system works well for most people, most of the time.)

So may be the first law of health policy is: pay doctors to treat everybody equally.

Another reason that health economics is very unusual is that choice in healthcare is never very important. The most important thing is quick access to decent healthcare. For most healthcare we are reliant on the advice of experts. We cannot diagnose our own heart conditions and we certainly cannot do our own heart surgery. We need to feel trust in the professionals who take care of us. Shopping for healthcare is usually only a matter of convenience - getting seen more quickly, or being in a hospital close to family. We need to trust our doctors and to feel that they have done everything reasonable to meet our needs.

So perhaps the second law of health policy is: pay doctors to organise the best healthcare possible within the overall budget.

Third, health and social care integration always sounds good, but rarely seems to work in practice. The major problem is that the iron law of health economics means that instead of money flowing from the medical system into the social care system, money always tends to flow in the opposite direction. So a policy which aims to increase community investment and prevention often fails. This is a particular risk for Finland, which currently has 317 municipalities, but which is intending to reduce their power considerably. In practice it seems likely that these reforms will increase the flow of money and people into the cities, and away from the country and away from local government.

The other problem with health and social integration is that you are integrating two very different things. Most healthcare is a professionally organised system of treatments (medicines, therapies and surgical operations). But social care is not a treatment. It is about how we live, and how we live together. Good social care empowers people to be in control of their life, it makes families stronger and it helps communities work together. Social care is not a treatment and it cannot be improved in the same way as healthcare.

The good news is that personal budgets could offer exactly the kind of solution Finland needs. For instance, Finland could choose to:

  1. Define and protect the overall level of funding for social care
  2. It could ask municipalities to manage the social care funds, and ask municipalities could work with local agencies to manage these budgets
  3. It could invest those funds directly in citizens, using personal budgets
  4. Or it could use those funds to strengthen other community-led initiatives
  5. This whole system can be taken out of the procurement system which is currently undermining social care in Finland
  6. Exclude personal budgets users from the restrictions of the social care regulations
  7. Establish an independent committee, including people with disabilities, to review the overall social care budget

This is a quite realistic policy for Finland. It would protect Finland’s communities from the iron law of health economics and it would obey the third law of health policy: invest in people, families and communities first.

These problems are widespread across welfare states. There is a pressure on all things to spend more money on the wrong things, at a higher price, and its always hard to reverse this trend and move resources upstream to the place where there are better and more efficient solutions. But personal budgets are one important tool for moving resources upstream (see figure below).

In the middle of trying to solve these kinds of problems it is not surprising that the idea of personal budgets can get lost. So we’ve been very grateful to have been able to talk to so many political leaders, from across the political spectrum, and it’s clear that many do understand the value of personal budgets and what it might add to the reform process. I hope these suggestions on how to advance policy in Finland prove useful.


The publisher is the Centre for Welfare Reform.

Personal Budgets and Health Economics © Simon Duffy 2016.

All Rights Reserved. No part of this paper may be reproduced in any form without permission from the publisher except for the quotation of brief passages in reviews.