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The Fraser Institute: Sweden Shows Canada How to Reduce Health Spending While Improving Medicare

CALGARY, ALBERTA -- (Marketwired) -- 05/22/13 -- Sweden's universal health care system, which ranks among the world's best in terms of patient outcomes, offers critical lessons for Canada on reducing costs while improving health system performance, argues a new report from the Fraser Institute, an independent, non-partisan Canadian think-tank.

"Canadians are paying for the most expensive universal-access health care system in the developed world, but what we get in return ranges from mediocre to terrible," said Nadeem Esmail, Fraser Institute director of health policy studies and author of Health Care Lessons from Sweden.

"Sweden, on the other hand, is a fine example of a system that provides high-quality health care regardless of patients' ability to pay, and at substantially lower cost than Canada. Canada would be wise to follow Sweden's lead on cost-sharing, activity-based funding, and private-sector involvement."

Health Care Lessons from Sweden is part of a Fraser Institute series examining the way health services are funded and delivered in other developed countries. The nations profiled all aim to achieve the noble goal of Canada's health care system: universal access to prompt, high-quality treatment.

In comparing the Canadian and Swedish health care systems, the report notes that Canadian health expenditures (age-adjusted) were 36 per cent higher than Sweden's in 2009 (Canada's health spending as a share of GDP was the highest among all developed nations with universal-access health care). At the same time, Canadians are forced to endure poor access to medical professionals and medical technologies as well as some of the longest waits for medical care in the developed world.

Sweden's health policy framework differs from that of Canada in the following important ways:

--  Cost-sharing for all forms of medical services

--  Some private provision of acute care hospital services

--  Activity-based funding for hospital care

--  Broad private parallel health care with dual practice

--  Salary payment for physicians

"Sweden has a long history of promoting equality for all its citizens. In that light, it is valuable for Canada to examine how Sweden has structured its universal health care system. The Swedes clearly have valuable lessons to impart," Esmail said.

"A Swedish approach to health care in Canada would primarily require important changes to financial flows within provincial tax-funded systems and a greater reliance on competition and private ownership. It would not require a marked departure from Canada's current tax-funded, provincially managed, federally supported health care system."The report suggests the following Canadian health policy reforms based on Sweden's proven framework for providing high-quality, affordable, universal health care:

1. Activity-based funding models, possibly with competitive benchmarking employed to set fees.

Activity-based funding creates incentives for hospitals to treat more patients and to provide the types of services that patients desire, while global budgets (the dominant form of hospital funding in Canada) disconnect funding from service provision. Studies have shown that activity-based funding can lead to a greater volume of services being delivered, reduced wait times for patients, improved quality of care, more rapid diffusion of medical technologies and best practices, and greater overall efficiency.

2. Private health care for medically necessary treatment; dual practice for physicians to maximize the volume of services provided to patients in both public and private settings.

A private parallel health care sector plays several important roles: first, it provides individuals an option to return to normal life more rapidly than might be possible through the universal system. Second, when patients use the private sector they free up resources in the universal system for patients who have opted not to seek private care. Third, a private parallel health care sector provides a safety valve for the public system in the event of a capacity limitation or sudden increase in demand.

"In addition, a private parallel health care sector creates incentives for better service in the public system through competition," Esmail said."

Sweden also allows physicians to work in both the public and private health care sectors rather than requiring them to opt out of the universal system. This has the benefit of making more efficient use of highly skilled medical resources.

"Dual practice for physicians is common in developed countries including Denmark, England, Ireland, New Zealand, Norway, Spain, Sweden, Australia, Finland, and Italy," Esmail said.

3. Cost-sharing regimes for universal health care with reasonable annual limits and automated exemptions for low-income populations.

Cost-sharing encourages patients to be more careful about when and where to seek health care, thus increasing the cost efficiency of the system (ultimately reducing total spending) and improving access to treatment for those in need. A lack of cost-sharing (i.e. when patients are required to pay for a portion of their insured medical services) has resulted in excessive demand and wasted resources in Canada's health care system. Cost-sharing policies have been shown not to have an adverse effect on health outcomes as long as low-income populations are exempt.

4. Consider a blended funding approach for primary care with a large fee-for-service component.

Sweden's reliance on salary payments for physicians will not work in Canada due to Canada's independent practitioner model and doctor shortage. However, Sweden's use of a blended payment model for primary care services, including both capitation and fee-for-service, may be worth further examination.

Follow the Fraser Institute on Twitter and Facebook

The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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The Fraser Institute
Nadeem Esmail
Director of Health Policy Studies
(403) 216-7175 ext. 422
Twitter: @NadeemEsmail

The Fraser Institute
Kendal Egli
Communications Specialist
(416) 363-6575 ext. 235

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