Opinion Constantin GurdgievRegardless of the subject, a general law applies to Irish public debate - the "Law of Swedish Experience". Alcohol abuse, poverty, public infrastructure, social housing. Any occasion for the left's criticism of the alleged "market failures" warrants invocation of the socialist state.
The law is used without regard for geographical, cultural, economic and historical realities - as if the Swedish quality of life can be transported to Ireland by a magic wave of a wand - the wand of government control over the markets.
In fact, over the last 20 years, Sweden has moved away from the failed policies of central planning. Following the realisation that throwing more funding into the black hole of government services does not improve efficiency and quality, Sweden engaged in a series of reforms scaling back the welfare state. As a result of one such reform, Stockholm has a healthcare system that is largely private and no longer state-controlled.
The so-called Stockholm Transformation, is the example of the "new economy" of healthcare that combines lower regulations, depoliticised budgeting, greater consumer orientation, and efficiency. These reforms started in 1991 when the Swedish economy was slowing down after 30 years of rapid growth.
The publicly-funded healthcare system, accustomed to ever-increasing funding, was delivering less and less. In line with our own experience, as waiting lists and costs grew, the central budget system continued to reward the least efficient care providers. In response, a coalition of Moderates and Social Democrats in Stockholm created a Diagnosis Related Group (DRG), modelled on the US experience, entrusted with addressing the four main points of the reforms: incentives to increase provider productivity (payment on delivery), entrepreneurship (changing the status and ownership of the public enterprises), ensuring that politicians do not interfere with service suppliers, and supporting consumer choice.
The DRG introduced new funding procedures - hospitals were financed on the basis of service delivery. It set and regulated prices for specific procedures regardless of which facility provides them. The more patients the hospitals attracted, the more revenue generated. This resulted in an immediate reduction in waiting times, improved service quality and access. Within the first year of reforms, Stockholm hospitals saw productivity gains of 16-20 per cent.
By 1996 the DRG separated purchasers and providers of services, removing the state bureaucracy and political interests from the production management. Publicly-owned hospitals in the city were transformed into limited companies, and in 1998 private contractors were invited to take over the operation of facilities. The outcome was a 40 per cent increase in productivity, and average long-term cost savings of up to 30 per cent, according to the Stockholm School of Economics.
Today, over 40 per cent of the primary care suppliers and 23 per cent of all healthcare providers in Stockholm are private contractors. Yet, these companies operate within the public system under the same rules, as those owned by local government. As a result, private facilities are available to all regardless of socio-economic status and there is no evidence of patient screening.
Many of the private companies are managed by former public-sector employees. Original reforms included legal and educational support to the employees who wanted to start their own companies or take over existing facilities as contractors. By "voting with their feet" these new entrepreneurs oversaw a general improvement in the employment conditions in the sector. Wages and salaries rose at a faster pace than ever before, work hours fell, while the private firms maintain excellent employee satisfaction.
According to the World Health Organisation, consumers rank private healthcare providers higher than the public-sector alternatives. At less than three months, average waiting lists for diagnosis and treatment are shorter in Stockholm than in unreformed parts of the country. Outside Stockholm, waiting times for hearing aid, hernia surgery, knee replacement and other non-emergency procedures are over 14 times greater than in the capital. Although the reforms' progress has slowed down over time, the costs of treatment remain lower in the city.
While Sweden has the Stockholm Transformation, we have Department of Health (DOH) lofty plans for more Byzantine bureaucracy. Despite the years of tough talks, the reforms of the health boards and the HSE are still lagging.
As the health system slides deeper into a quagmire of increasing waiting periods, failing quality, fewer provider choices and more restricted access, the crisis mentality of the state-managed health system demands more taxpayer money. Eager to appease, politicians and the DOH throw funds at a crumbling bastion of social engineering - the latest promise being €2.73 billion for "capital development" announced less than a month ago.
Fearful of competition-restricting interest groups, the DOH will continue to build new facilities it cannot staff, yet no private operator will be allowed to put them to use. If anything, instead of implementing an aggressive Stockholm-style agenda, we are moving towards the more centralised, less flexible bureaucratic model reminiscent more of a Soviet than of the Swedish approach.
So why is the Swedish experience not being applied to the Irish healthcare reforms? The reason is simple. Empowering consumers and providers may leave the healthcare bureaucrats looking for new jobs and overpaid consultants admitting more of their junior colleagues into the ranks. These are the powerful interest groups that keep our hospitals understaffed, inefficient and, at times, Third-World in quality of care. As long as health remains the domain of political bargaining, the shameless pillaging of the taxpayer purse will go on.
Along with it, the DOH will continue to waste our money on surveys of our attitudes to the smoking ban, while remaining silent on our attitudes towards their management of the healthcare system. For once Ireland does need to pay attention to the Swedish experience.
Constantin T. Gurdgiev is a lecturer in economics (TCD), and a director of the Open Republic Institute. gurdgic@tcd.ie