Department of Political and Social Sciences Adapting the Welfare State Privatisation in Health Care in Denmark, England and Sweden Jeppe Dørup Olesen Thesis submitted for assessment with a view to obtaining the degree of Doctor of Political and Social Sciences of the European University Institute © 2010 Jeppe Dørup Olesen No part of this thesis may be copied, reproduced or transmitted without prior permission of the author EUROPEAN UNIVERSITY INSTITUTE Department of Political and Social Sciences Adapting the Welfare State Privatisation in Health Care in Denmark, England and Sweden. Jeppe Dørup Olesen Thesis submitted for assessment with a view to obtaining the degree of Doctor of Political and Social Sciences of the European University Institute Examining Board: Professor Sven Steinmo, EUI (Supervisor) Professor Pepper Culpepper, EUI Professor Bo Rothstein, University of Gothenburg Professor Jens Blom-Hansen, Århus University © 2010 Jeppe Dørup Olesen No part of this thesis may be copied, reproduced or transmitted without prior permission of the author 2 Welfare State Adaptation Privatisation of Health Care in Denmark, England and Sweden Abstract: This dissertation deals with the following question: In the past decades some of the countries most dedicated to the universal public welfare state have privatised many of their welfare service provisions. Why is this so? The dissertation takes a close look at privatisation policies in health care in Denmark, Sweden and England in order to figure out how and why the private health care sector has expanded rapidly in recent years. Health care services in Denmark, Sweden and England provide good examples of welfare state service privatisation because these three countries have spent decades building up universal public health care systems that offer free and equal access to all citizens – and these programmes are very popular. In this dissertation I find that the most common explanations for welfare state reform fail to explain these changes: Privatisation policies are not the result of partisan politics, instead they are supported by Social Democratic / Labour parties and in some cases the unions as well. Privatisation is not the result of pressures for fiscal retrenchment; in fact, public health care funding has increased in all three countries over the past decade. Neither is privatisation the straight forward result of new right wing ideas. Certainly, new ideas play a role in this change, but it is difficult to sustain the argument that ideas alone have been the cause of privatisation in these three health care systems. Finally, it has been debated whether privatisation is the result of pressure from EU legislation. This explanation does not hold either for the basic reason of timing. The policies leading to privatisation in Denmark, England and Sweden were all implemented before the European debate over health care services started. Instead, I suggest that privatisation in health care in Denmark, Sweden and England can best be understood as the product of policy makers puzzling over important policy problems (Heclo, 1972). I call this an adaptive process. In this analysis I show that privatisation is the result of several interconnected attempts to adapt health care systems to a changing context. By taking a long historical view of the changes in health care systems, it becomes evident that the changes towards privatisation do not occur overnight or as a result of a ‘punctuated equilibrium’. Rather, the increasing privatisation in health care is the accumulated effect of several small step policy changes, which, over time, result in rising levels of privatisation. Some scholars have suggested that neo-liberal policies, such as privatisation of service provision, will ultimately lead to the end of the welfare state. In this study, I come to a different conclusion. Rather than undermine the welfare state, privatisation in health care may help the welfare state survive. Privatisation can be seen as a way of adapting welfare state services to a changing political context. 3 4 Content List of Figures................................................................................................................... 6 List of Tables.................................................................................................................... 7 Preface .............................................................................................................................. 9 Privatisation in Public Health Care Systems .................................................................. 13 Denmark: The Rise of a Private Health Care Sector...................................................... 63 England: The Planned Private Market.......................................................................... 129 Sweden: Privatisation From Below .............................................................................. 187 Conclusion: Welfare State Adaptation ......................................................................... 241 References .................................................................................................................... 271 Appendix ...................................................................................................................... 289 5 List of Figures Figure 1.1: Dimensions of privatisation ......................................................................... 39 Figure 2.1: Public health care expenditure, Denmark, 1971-2007 (constant 2000-prices, mill. DKr) ....................................................................................................................... 70 Figure 2.2: Public expenditure on private hospitals, 2002-2007.................................... 99 Figure 2.3: The rise in private hospitals and clinics, Denmark, 2002-2008................. 100 Figure 2.4: Share of operations done in private hospitals, 2002-2007, selected operations. .................................................................................................................... 104 Figure 2.5: Private health insurance on the rise in Denmark. ...................................... 108 Figure 2.6: Rising activity, operations in hospitals, 2001-2006................................... 115 Figure 2.7: Waiting time (weeks) for selected hospital treatments, Denmark, 1998-2009. ...................................................................................................................................... 117 Figure 2.8: Equality and holders of private health insurance, 2008............................. 120 Figure 2.9: Public health care expenditure, Denmark, 1996-2006............................... 121 Figure 3.1: Private health insurance, UK, 1975-2007 .................................................. 143 Figure 3.2: Number of persons on waiting lists for NHS treatment, 1949-2008. ........ 146 Figure 3.3: Waiting times, NHS, 1987-2008................................................................ 147 Figure 3.4: Popularity of government spending on health care. People’s priorities for public spending*, Surveys, 1983-2007, UK................................................................. 153 Figure 3.5: Public health care expenditure, UK, 1975-2006........................................ 158 Figure 3.6: The independent Sector Treatment Centres, 2002-2006............................ 165 Figure 3.7: Number private hospital beds, UK, 1980-2008. ........................................ 171 Figure 3.8: The value of private acute health care markets, UK, 1997-2007 (£ mill.). 173 Figure 3.9: Public health care expenditure on private services .................................... 175 Figure 3.10: Satisfactions with the NHS in Great Britain, 1983-2006......................... 184 Figure 4.1: Growth in Cost of Health Care, % of GDP, Sweden, Denmark and the UK, 1971-2007..................................................................................................................... 199 Figure 4.2: Swedish Counties’ Purchasing of health care from private companies..... 224 Figure 4.3: Private Health Insurance, Sweden, 2000-2007 (no. of persons insured) ... 229 Figure 5.1: Directions of privatisation.......................................................................... 247 6 List of Tables Table 1.1: Which party held government power? Left and Right wing parties in Government in Denmark, Sweden and Britain............................................................... 17 Table 1.2: Increases in public health care expenditure, 1991-2007 ............................... 20 Table 1.3: Summery of country similarities and differences.......................................... 47 Table 2.1: Voting habits among different classes, 1964-1994 ....................................... 77 Table 2.2: Voters’ preferences, 1969-1994, selected issues........................................... 78 Table 2.3: Voters views on public spending, 1979-1994. The public spends too much /too little on…................................................................................................................. 78 Table 2.4: Perceived quality in public and private health care (% of population, 1999) 91 Table 2.5: Survey: How well do the public hospitals work?.......................................... 92 Table 2.6: Share of treatments in private hospitals (selected treatments) .................... 103 Table 2.7: The loss of state revenue due to the tax-exemption of PHI (mill. kr.)........ 109 Table 2.8: Where is hospital treatment preferred? ......................................................