From Plan to Market: a comparison of health and old age care policies in the uk and Sweden

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From Plan to Market: a comparison of health and old age care policies in the UK and Sweden

Marianna Fotaki*

Lecturer in Healthcare and Public Management

Alan Boyd

Research Associate in Healthcare and Public Management

Centre for Public Policy and Management,

Manchester Business School

Booth Street West

Manchester M15 6PB

*corresponding author


This study reviews changes in the organisation, delivery and financing of health care and old age services in the UK and Sweden over the last 25 years. User autonomy has become a more important policy objective than equity of access or equality of opportunity, with a greater reliance on market mechanisms for delivering services. Although competition, choice and decentralisation, may result in widening of regional and geographical inequalities, and the erosion of the universal character of the welfare state both public and politicians seem to be prepared to accept or at least they do not seem to oppose the incoming changes. The authors argue that these developments reflect broader normative shifts in both societies, and that such changes are likely to continue and become more widespread in the future, as they will be strongly influenced by demographic and social factors, fiscal constraints and policies of the supranational bodies such the European Union.


This paper seeks to explore the extent and nature of shifts to market mechanisms and a less universal welfare state in systems that were formerly both publicly funded and provided, through examining the changes in British and Swedish healthcare and care of older people over the last 25 years. The UK and Swedish welfare states represent the two archetypal models of public financing and integrated delivery of services: the modest universalist, and generous Scandinavian types of welfare states, respectively (Esping-Andersen, 1996). Healthcare is the most universal public service and attracts stable and broad support from voters. It is also an issue over which electoral battles are often fought, particularly in the UK but also increasingly in Sweden too. Social care of older people, however, although it has close links to healthcare in practice, is less universal and less prominent electorally. This comparison between two countries and services makes it possible to draw relatively strong conclusions about any common trends, and also to consider the extent to which policies express wider societal aspirations rather than pro-actively shaping what the public wants. We mostly focus on the market oriented reforms in the UK and Sweden, that occurred during the 1980s and 1990s, because they paved the way for current reforms, which, as we will argue, are their natural although unacknowledged continuation.

Health care reforms in the UK and Sweden

The common features of the post-war health systems in both the UK and Sweden were public financing and ownership of production, coupled with central planning of the delivery of services. In both systems, the concept of equity was an important component pertaining to the philosophy of the welfare states. Its roots, as explained by Klein, can be sought in the long nurtured social expectations, which the NHS came to fulfil in 1948 (Klein, 1995). In Sweden, there is an even longer and more continuous tradition of commitment to equity principles (Garpenby, 1992). Both health care systems produced remarkable achievements, whether measured in terms of health care indicators, universality and equity of access, or technical efficiency, but at the same time, they were subject to persistent criticism for their poor management and low responsiveness to the needs and wants of users (Enthoven, 1985; Saltman and van Otter, 1995).

Competitive market elements and the separation of functions between producers and buyers of care were formally introduced into the health systems of the UK in the late 1980s and Sweden at the start of the 1990s, in order to enhance the responsiveness of health services by bringing them closer to the users’ needs and wants, and also to increase efficiency in the UK (Glennerster and Le Grand, 1995), and productivity in Sweden (Anell 1996). Services in the UK had already been deregulated to some extent and made less universal, but as a result of unrelated and gradually implemented policies rather than strategic planning (Higgins, 2004). Similarly, in Sweden, deregulation and decentralisation measures to reduce the control of central agencies had also been introduced between 1986 and 1990 (Blomqvist, 2004). In both countries, this reform process has often been initiated as organisational restructuring, aimed at achieving better value for money and promoting users’ satisfaction with services, through a reliance on market mechanisms. In the UK, market-orientated reforms were centrally orchestrated and were aimed at a wholesale redesign of the system following a 'big bang' strategy (Ham, 1997). The anticipated changes were dressed up in rhetoric and were heavily charged with political overtones, which often obscured their real content (E.g. DoH, 1989). In Sweden, in the true spirit of decentralised decision-making, half of the 23 counties gradually adopted different types of market-oriented reforms between 1991 and 1995 (Anell, 1996).

The quasi-market reforms did not, however, demonstrate improvements in quality, efficiency or responsiveness. They appear to have had an adverse impact on choice of provider and on modalities of treatment (Fotaki, 1999). In Sweden, the reforms seem to have resulted in only certain users exercising choice, dependent on class, education and health condition (Rosen et al, 2001, Burström, 2002). There was only a moderate increase in information, a necessary precondition for exercising choice (Bartlett et al, 1998), and the information was primarily tailored to meet purchasers’ requests rather than to be of use to service users (Fotaki, 2001).

Some improvements in the quality of care may have taken place in the UK (Le Grand et al, 1998), but there is also evidence of reduced quality (Propper and Burgess, 2004). The evidence from Sweden is also mixed. Improvements in quality in terms of process were suggested by some studies in Sweden (Garpenby, 1997) but this was questioned by others (Forsberg et al, 2001). Evidence about the impact of the GP fund-holding scheme on equity is also varied, with some researchers suggesting no adverse impact on quality of care or equity (Glennerster et al, 1994) while others demonstrated that indirect discrimination occurred for non-fundholders’ patients (Kerrison and Corney, 1998). Power shifted from health professionals to managers (Harrison and Smith, 2003), but this appeared merely to replace one form of bureaucracy with another, in both health and social care (Farrell and Morris, 2003). During the same period, the number of managers rose and transaction costs were high (Light, 2001).

In 1997 the new UK government abandoned the most contentious elements of the quasi-market such as GP fundholding, and replaced them with targets and collaborative agreements (DoH, 1997). But a few years later more radical market reforms were introduced (DoH, 2003), which were again accompanied by obfuscating rhetoric (E.g.; Blair, 2003) that glossed over all conflicts between choice and equity and choice and efficiency, to name the most obvious antitheses. By contrast, in Sweden there was only a short reversal of policy in most County Councils that adopted one or another form of public competition, before market policies were resumed again, particularly in Stockholm and other urban areas (Burström, 2002), with increased choice of hospital and forms of treatment.

Reforms in old age care in the UK and Sweden

The marketisation of social care in the UK can also be seen to stem from a policy change introduced by the new conservative government in 1980. People who entered residential or nursing homes provided by either the private or the voluntary sector became entitled to greater social security benefits (House of Commons Social Security Committee, 1991). An unintended consequence of this was a massive increase in the number of care home residents, leading to alarm about rising costs to the state (Hudson and Henwood, 2002), especially in view of the potential impact of an ageing population. The 1990 NHS and Community Care Act aimed both to control costs by formally introducing a quasi-market, and to remove incentives favouring residential care over care at home (Weiner et al, 2002). A ring-fenced grant for community care was set up, with local authorities purchasing services on behalf of older people from both the state and, increasingly, the voluntary sector, based on assessments of individual need (Ware et al, 2003). Local Authority expenditure was capped by successive Conservative and Labour governments, resulting in a squeeze on funding for social care (Johnson, 2002).

One outcome of these policies has been a shrinking of care services provided directly by local authorities. By 2001, only 15% of places in residential care in England were provided by the statutory sector (DoH, 2002), and there has also been a growth in independent sector provision of homecare, overwhelmingly by profit-making providers (Curtice and Fraser, 2000). Organisation-wide procedures for care management, which constrain individual choices by workers and clients have also been put in place (Ware et al, 2003). Furthermore, stricter eligibility criteria for state support have focused such support on an ever smaller number of people with the greatest needs, with more care being provided informally (Simms, 2003). There has been a privatisation of care, with a greater number of older people paying a greater proportion of their care costs, either in cash or in kind. Meanwhile boundaries between health and social care remained as demarcated as ever.

The Labour government of 1997 attempted to tackle the collaboration problem by placing renewed emphasis on partnership in its Health Act (DoH?, 1999). This was followed by increased central regulation, with a view to tackling issues of poor service quality in Health and Social Care Act in 2001, and a strengthened Social Services Inspectorate (Hudson and Henwood, 2002). The government following from the previous legislation has also recognised the needs of informal carers in the Carers and Disabled Children Act (DoH?, 2000).

But these changes do not appear to be based on a commitment to remove inequalities. Although charges may put off some vulnerable clients from taking up services and have led to some inequalities in the services received by some individuals when the Commission on Long Term Care recommended that “personal care” should be free, and not means tested, the government rejected its proposals and instead made the boundary between health and social care clearer (Johnson, 2002). Indeed, it seems likely that inequalities will increase under Labour’s policies (Rummery and Glendinning, 2000), and increased regulation and standards monitoring may lead to under-provision of services by for profit, private operators, which may not be replaced by state provision.

In Sweden, local municipalities provide care for elderly people. The Social Services Act (X? 1982) gave older people statutory rights to state assistance with regard to services such as home help and care homes, where the person’s needs could not be met in other way. During the 1980s, increasing numbers of people aged over 80 and better conditions of service for staff meant that more money was required for these services (Sundstrom and Tortosa, 1999). Many municipalities introduced market-oriented systems of care, with an emphasis on economy and targeting of the frail elderly, rather than welfare for all (Blom, 2001).

This process was accelerated by a deep economic recession in the early 1990s, where total unemployment increased from 2.1% in 1990 to 12.5% in 1993, while the national budget ran into heavy deficit (Lindblom, 2001). In addition, the Ädel reform introduced in 1992, which transferred responsibility for long term health care of the elderly from counties to local municipalities, may have been economically advantageous for municipalities in the short term but unduly expensive in the long run. At this time, the market ideology gained ground in local politics, with a view that communities should support themselves rather than use state services (Bergmark et al, 2000).

As a consequence of these factors, and older people not having the same level of rights as some other client groups, care services for older people were not invested in, there were greater trends towards market involvement, resources were concentrated on people most in need, and fees were increased and related more strongly to income. But increased quality has not been achieved as the experience of the municipality of Linköping indicates, because of organisational directives to cut costs and limit the choice of provider, provider uncertainty about future contracts, bureaucracy, and a lack of information for clients about different services. Increased responsiveness has – to some extent – been achieved for relatively strong, competent and well-informed clients, but not for the most vulnerable clients (Blom, 2001). The organisational responses to quasi-markets in Sweden appear to parallel those in the UK, and so do the outcomes. During the 1980s and 1990s the proportion of older people receiving home help has decreased markedly (Sundstrom and Tortosa, 1999). Local politicians have tried to retain control, in the light of concerns about equity and underfunding. The market has fragmented care and made it difficult for professional identity and development in social care, with consequences for recruitment while fees have put off some potential clients from taking up services, particularly those with low incomes (Welfare Commission, 2001). Public expenditure on care of the elderly has not fallen, however, indeed it increased slightly between 1990 and 1997 (Bergmark et al, 2000).

Why did the plan become a market?

Despite historical differences regarding the levels of decentralisation of decision making, delegation of responsibilities for service provision and benefits offered, the previous section has demonstrated striking similarities between policies in the UK and Sweden, and between the effects of those policies. There is increased reliance on market mechanisms such as competition, choice and decentralisation, with concomitant tolerance of regional and geographical inequalities, and the erosion of the universal character of the welfare state. Furthermore, this shift can be observed for all mainstream parties across the political spectrum in both countries.

Competing explanations for these changes have been put forward. Liberal minded economists focused their critique on the failure of the welfare state to fulfil its own promises about transforming society, delivering quality and reducing inequalities. This failure led to disenchantment with the social engineering philosophy, and perhaps, coupled with political changes in communist Europe, even discredited the state’s role in designing social policies and in welfare provision per se (Snower, 1993). Ostensibly, the changes were part of a search for greater efficiency in the health sector and old age, prompted by global economic trends, internal fiscal pressures, an apparent increase in demand and demographic trends (Hurst, 1991). But, as we have described, there is no conclusive evidence that markets have increased efficiency. Markets have not proven either to be intrinsically effective, or less bureaucratic. The current health and social care systems are equally dependent on bureaucracy as previous systems, but the locus of this bureaucracy seem to have shifted, with increased hierarchical coordination by national departments, despite a rhetoric of greater local autonomy (Farrell and Morris, 2003; Ware et al, 2003). A market orientation has also reduced choice for certain users in health (Fotaki, 1999) and old age (Ware et al, 2003).

What then are the reasons for this rejection of planning in favour of seemingly unquestioned acceptance of markets? Do the changes reflect governments’ priorities or shifts in users’ expectations, or both? We postulate that complex phenomena have altered societal values from post-war solidarity, and the primacy of community defined needs to individual wants. These normative shifts in society find their ways into policy agendas because no government irrespective of its political orientation can ignore them. Policies can, however, also instigate changes in societal aspirations as in the case of patient choice and user empowerment rhetoric in public services that are presently central to policy makers’ agendas England, with policies being designed and justified as a response to explicit or implicit users’ expectations.

In the UK, solidarity was rooted in a moral prerogative resulting from transcending barriers among social classes during the war, which led to the creation of the NHS (Klein, 1995). In Sweden, the creation of the welfare state was aimed at transformation of a largely rural population into an urban society, thus fulfilling a developmental prerogative (Blomqvist, 2004). The equality of opportunity that access to comprehensive and universal social services signified, played an important role and represented a value for citizens during the post-war period, giving legitimacy to the idea of the welfare state. This idea symbolised hopes for a transformation of social structures and a reconstitution of the moral order that were characteristic of the post-war period in the UK (Klein, 1995) and Sweden (Svallfors, 2004).

It seems however, that the more affluent societies became, the more health changed from being a universal and basic need, to being a commodity in a market place, with corresponding attributes such as variety and differentiated quality. The disruption of the post-war consensus on equality and solidarity as objectives of the welfare state (Diderichsen, 1995), influenced by the rise of consumerism (Winkler, 1987), has been then translated by policy makers into users’ desire for more autonomy and freedom in decisions surrounding their health. Meanwhile, conjectures about agents’ and providers’ ‘knightish’ or benevolent motivations that underpinned planned and publicly delivered post-war welfare states in the UK and elsewhere, as opposed to ‘knavish’ motivations intuitively associated with market exchange, have also been refuted as being idealised and unrealistic (Le Grand, 2003). Other important dynamics affecting public service users have been proposed by post-modernists, such as the evolution of the passive recipient into an active welfare subject (Giddens, 1994). Political emancipation of different social groups with lesser voice (Lister 1997) and the changing nature of demands from redistribution of benefits to pursuits of the recognition of one’s own worth by individuals and equal moral worth by groups (Williams, 1999), have also played a role in this process. While not wanting to pay higher taxes, voters also seem to favour universal benefits rather than means tested ones, which explains their different attitudes to healthcare and old age care policies. For example popular support for the welfare state has grown every year in Sweden during the 1990s, but support for means-tested public services such as social care is considerably less than for universal services (Bergmark et al, 2000).

In the same time, governments find it necessary to maintain a rhetoric of ‘need’ and ‘equality’ in relation to public services, even while in practice these values have been diluted because universal services, and particularly the NHS in the UK, are important concerns for all, central to defining the success or failure of governments. Therefore, in difficult economic times, governments want to "depoliticise" public services at a national level, so that any blame for the inevitable service problems in a situation of insufficient state funding to meet public expectations does not fall on the national government (Pierson, X). Furthermore, government’s behaviour - its constant reinvention of itself and experimentation with ‘innovative’ policies – has been also conceptualised to represent a striving for expansion akin to a business entity (Light, 2001).

What might be the consequences of the market approach that has been adopted by governments? Firstly, inequalities are likely to increase. Arguments that offering patients choice ‘will promote equity by extending choice beyond the well off and articulated’ as proclaimed in recent UK government documents (DoH, 2003) are implausible because they contradict the libertarian concepts that choice originates from (Snower, 1993), and also because of the existing health inequalities related to socio-economic factors (Marmot et al, 1998), which are likely to impact upon users’ ability to exercise choice. As the Swedish example shows, so far choice seems to have worked well in health care mostly for urban populations in some regions of the country (Burstrom, 2002). On the other hand, the evidence from old age policies presented here, illustrates how market has reduced choice for users and staff alike.

Secondly, quality and efficiency may well not improve, because market mechanisms introduced into public services, and particularly health, rely on over simplified assumptions as the discrepancy between expectations and the users’ or professionals’ actual behaviour presented in this study demonstrates. Health seeking behaviour and decision making are determined by a variety of factors that include cultural beliefs (Dixon et al, 2003), severity of the condition (Luker et al, 1995) and the nature of the procedure involved (Fotaki, 1999), in addition to subtle psychological mechanisms such as avoidance of experiencing regret (Ryan, 1994). Even when users behaviour is more predictable such as in the choice of the care home market means may not produce the most efficient ends as the example of Sweden demonstrates.

Thirdly, levels of trust are likely to decline further. There is an undesirable impact on trust when tools associated with commodity exchange are introduced into an imperfect market (Arrow, 1963). Trust is important because trust enables ‘social embeddedness’ to happen (Granovetter, 1985), and is also an attribute of care with likely therapeutic effect (Balint, 1957). However, with the widening gap between expressed political ambitions and actual conditions, and with inequalities of provision and fewer people receiving support from the state, it seems likely that trust in governments will deteriorate and it may be that public care systems may come under threat in the long term.

The trends in health and old age policy discussed here seem likely to continue in the UK, Sweden and in other industrialised countries in Europe. A critical mass of people has demonstrated increased acceptance of choice in public services in the UK (Page, 2004), and there is reinforcement of this shift towards market-based solutions in public services from outside the borders of national policy making, namely cyclical fluctuations of the globalised economy, and policy initiatives originating in supra-national bodies such as the European Union (Blomqvist, 2004). The influence of the Aquis Communautaire on national policy in seemingly unrelated sectors such as health care has been well documented in highly publicised cases (Leibfried and Pierson, 2000). It may also have an indirect impact on old age care through affecting cross-border workforce mobility. Moreover, there is also an increased scope for European Union regulation in health care matters per se, such as pricing of pharmaceuticals and the growing European private insurance market (Maarse, 2004) with a possible spill-over effect on public health policies.


The study concludes that privatisation, choice and competition incorporated in health and old age care policies reflect normative shifts from post-war values of solidarity and equality to autonomy and individualism. Societal values influence policies but are also significantly shaped by them. It is predicted that this tendency is going to increase for economic, demographic, social, and psychological reasons. Inequalities are likely to widen, with long term problems posing another type of sustainability challenges for the arrangements in health and old age care. Influences from supra-national organisation and globalised economy are likely to further strengthen these processes.


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