sou · GWB3105EN · 2009-01-01 00:00:00 — and the potential for increased exchange. There is still very international exchange in elder care and therefore it is not discussed in this section. There is trade in health care services... There are major shortcomings in the statistics on direct trade in health care services. One of the appendices to the Survey brings more clarity to how extensive this type of trade is.242 Part of the exchange in the health care area is reflected in the number of reimbursements allowed for planned treatment in the EU/EEA (table 7.6 and also fact box 7.2). It should be noted that these reimbursements are few but they have grown very rapidly. There is, however, no data on the number of patients who have come to for planned treatment. Table 7.6 Reimbursements authorised for planned treatment for Swedish patients in the EU/EEA 2002–2006 Number of prior authorisations Number of reimbursements authorised *The possibility of demanding cross-border health care with the support of Articles 49 and 50 in the did not exist before January 2004. Source: Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). The volume of the exchange in monetary terms is also difficult to estimate on account of inadequate statistics. The rough estimate in the appendix indicates exports of more than million a year. Imports are also roughly estimated at about million. Total exports and imports of care services are thus equivalent to a modest 3 per cent of total health care expenditure in of about billion. Exports and imports of health 242 Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). The Long-Term Survey 2008 care services represent about 1 per cent of the total foreign trade in services. However, the authors state that the estimates are probably too low since the county councils direct exports appear to be higher than the amount reported and that purely privately financed health care is not included in the amount. However, there still appears to be very direct trade in health care services. Fact box 7.2 Free movement of health care services in the EU Even though cooperation in the EU does not expressly concern welfare services, national welfare policy is affected by EU regulations and economic policy. Increased mobility has brought to the fore the question of EU citizens' right to seek treatment in other countries and who then is to be responsible for the cost. In the latter half of the 1990s, a number of much publicised disputes that concerned treatment were referred to the Court of of Communities. All the cases concerned patients who went to another EU country to get treatment (in one case, to buy products) and after their return home, claimed compensation for their costs from the public health schemes in their home country but were refused it. The Court chose to look at these cases in what was for treatment a new light, namely as a question of the free movement of services in the EU. In principle, care services are considered like any other service and should therefore not be exempted from the requirement that producers are to be allowed to compete freely in the region without being hindered by national borders.1 The Court in its judgments primarily regarded having the right to get care in the event of illness only in ones own country as a restraint on competition for producers of health care services. However, EC law in some parts is still relatively unclear. There is also a difference in how care in a hospital and other health care is handled.2 In matters of or dental care not supplied by a hospital, patients may in principle choose whether they want the care to be performed in the home country or in another EU or EEA country. A prerequisite is that it concerns care that is provided by the public health care service in the home country. As to hospital care, the Court of has ruled that patients may abroad for care only after getting permission from the authorities in their home country. In a proposed directive, however, the EU Commission has established that advance notification will not, in principle, be required, if the outflow of patients does not threaten to undermine the national health care system. currently has no system requiring prior authorisation for hospital treatment. This means that Swedish patients can seek and dental care unhindered in other EU/EEA countries and claim reimbursement of the costs afterwards. reimburses the costs, less a deduction for patient fees, on condition that the health care concerned an illness or health condition that in is treated by the national health care system and the method of treatment is identical or corresponds in several respects to that used in for a similar condition. 1Blomqvist, P. [2004]. 2Edwardsson, E. [2007]. 3European Commission [2008b]. The Long-Term Survey 2008 but somewhat greater direct investment in health care and social services Since costs limit the direct trade in services, not least welfare services, the of companies in other countries through direct investment is a natural alternative. Direct invest- ment means that foreign companies enter the domestic market. In many instances their entry may help lower costs and increase variety. Swedish companies invest heavily abroad both in com- panies producing goods and those producing services. However, there is direct investment in welfare services in . In health care and social services, about 3 500 people are currently employed in foreign companies in , while about 7 500 work in Swedish companies in foreign countries.243 trade in the area of education During the academic year 2006/07, almost 28 000 foreign students were pursuing a higher education at the first or second level in . The number of students coming to has tripled since the academic year 1997/98 and today there are more students coming to than there are . In 2006/07, there were 25 600 Swedish students travelling abroad to study.244 One factor contributing to the in- creased number of foreign students is probably that many colleges and universities have expanded their programmes offered in English, particularly at the graduate level. Another explanation may be the introduction of tuition fees by several other countries such as the and in recent years. It is difficult to estimate how large a part of the trade in services consists of trade in education services. Since education is usually free for students, it is not reported in trade statistics. In an appendix, there is an estimate of Swedish exports and imports of education services for the academic year 2004/05.246 In the estimates, the assumption is made that if incoming and outgoing students at colleges and universities paid school expenses 243Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). 244National Agency for Higher Education [2008b]. 245Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). 246Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). The Long-Term Survey 2008 equivalent to the cost of the education (about 000 per student per year) and also paid living expenses (about 000 a year), education imports (including living expenses) would amount to billion and constitute 1.5 per cent of Swedish imports of services. Similarly, Swedish exports in higher education would amount to billion and constitute 1 per cent of exports of services. These are thus very modest figures, particularly when compared with those for , the leading exporter of education services, (table 7.7). International trade in education services, percentage of total trade in services 2005 Note: The figures for are based on estimates (see the text), while the figures for and the are drawn from trade statistics. Source: Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). The appendix also notes that there is direct investment in education in . Swedish investment abroad in education companies in pre-school, compulsory school, upper secondary school and post-secondary education is almost non-existent. However, there are a number of Swedish education companies specialising in staff training and education services that have some form of activity outside . Modest potential for more international exchanges under current conditions Increased international competition in welfare services may lead to lower costs and provide a variety that does not exist nationally. understanding of the routines, control systems and organisa- tion of welfare services in other countries may lead to changes that are also positive in . What the scale of the opportunities for the international exchange of services in health care and education The Long-Term Survey 2008 will be in practice is still an open question. Future developments depend on improvements in the quality of the services in their country of origin, as well as on cost differences. The appendix reaches the conclusion that there should be considerable opportunity for direct investment in the area of welfare services, judging from the extensive direct investment in other areas.247 The authors point to the existence of successful Swedish service providers that have grown into big international companies. At the same time, they note that it is difficult to imagine such a development for activities in the public sector if certain basic principles are not changed. A trend to a more international exchange of welfare services is therefore more likely if private enterprise takes over at least some of the production and companies have functioning markets with clear rules governing their operations. 7.4Further development of welfare services requires change Increased demand for welfare services can be met in various ways. The current policy aims inter alia to increase the labour supply and thereby increase tax revenues. Another aim is to maintain a surplus in public sector finances in order to save and thus be better prepared for weakening budgets in coming years. 7.4.1An increase in the labour supply may help in the short term The labour supply has grown modestly in recent decades as shown in chapter 3. The expansion in the welfare services has thus not been due to an increase in the number of hours worked in the economy. For an increased labour supply to be able to provide more resources for public consumption, the first step required is therefore to stop this trend. Increasing the length of working life, which is also discussed in chapter 3, would make a substantial contribution to financing wel- fare. Average life expectancy has increased steadily and is expected 247 Appendix 4 to the Long-Term Survey 2008 (SOU 2007:95). The Long-Term Survey 2008 to continue to do so in the years ahead. Given rising life expectancy and indications of improving health for the elderly, it is not inconceivable that leaving working life could take place later. Such has certainly not been the case earlier, but in the last few years exit has been later (table 3.2). The measure often used to illustrate the seriousness of the demographic situation is the elderly ratio, which is based on an exit from working life at age 65. The elderly ratio is measured as the number of people aged 65 and older as a percentage of the total population. The ratio is forecast to increase from over 17 per cent in 2007 to over 23 per cent in 2050.248 Another measure is the dependency ratio for older people, which is measured as the number of people who are 65 or older in relation to that part of the population of working age, i.e. people aged 20–64. The dependency ratio for older people was about 30 per cent in 2007. To maintain the ratio at 30 per cent between now and 2035, the group designated elderly must be defined as those aged 70 and older. The working age population would then be those aged 20–69.249 The effective exit age is, however, a bit below age 65 and the first step therefore is to raise it. Chapter 3 discussed how economic incentives and norms in society influence the time of retirement. It points out that the welfare systems need to be tightened considerably, various means of exit limited and norms changed. To effect a later exit from working life is therefore not an easy way of solving the long-term financing problem. 7.4.2Public sector surplus creates a buffer The current fiscal policy framework is based on the state of central government finances in the early 1990s and the need to consolidate them. In addition to the surplus target, the fiscal policy framework also includes a central government expenditure ceiling.250 The aim of the framework has been to reverse a trend that has meant large deficits in the public sector and a growing central government debt. Public sector deficits have been turned into surpluses and the 248Statistics [2007a]. 249Government 2008/09:1. 250The surplus target means that general government finances are required to show a surplus of 1 per cent of GDP on average over a business cycle. The Long-Term Survey 2008 central government debt has fallen from over 70 per cent of GDP to just over 30 per cent.251 The surplus target (or balance target) for general government net lending is a key part of the framework. It is partly motivated by the need to save for future generations when the demographic situation is less favourable.252 There are some objections to justifying the fiscal policy framework on grounds of needing to save for the future. Lindbeck253 has argued that this distribution argument is not a valid reason for retaining the surplus target since future generations will be richer than todays generations. In order to improve its ability to meet the demographic challenge, , unlike many other countries, has also completed a reform of its pensions system, which reduces the need for surpluses. Another reason for the surplus target is to create a tax equalisation between different generations.254 The aim is to limit the tax distortions by avoiding extreme tax hikes in times of unfavourable demographic developments. also objects to this argument and thinks that future generations should take their own measures to limit the need to raise taxes, for example, by gradually raising the retirement age to correspond with the improved health of older people. Since changes will eventually need to be made to maintain welfare standards, the current design of the fiscal policy framework would thus only postpone needed reforms. At the same time, points out that strict rules for budget policy are important to strengthen budget discipline and thus avoid a sharp rise in public indebtedness. , one of whose tasks is to follow up and assess whether fiscal policy objectives have been met, thinks that one issue that should be discussed more is the extent to which raising the retirement age would warrant lower surpluses now.255 also has some objections to the way in which the surplus target is constructed. sees a risk that the current surplus target will cause current expenditure to displace investment since investment must be tax financed. 251Government 2008/09:1. 252Government 2007/08:100. 253Lindbeck, A. [2008]. 254This is called tax smoothing. 255Fiscal [2008]. The Long-Term Survey 2008 The debate reflects the existence of good arguments both for and against the surplus target as a benchmark for fiscal policy. To sum up, there appears to be a consensus supporting the stability motive for the surplus target – but deciding how large the surplus should be in a given situation is more difficult. The generational distribution motive is more controversial. One question that should be asked is whether the demographic problem is temporary – which would warrant tax smoothing – and to what extent it is about a more permanent change in the composition of the population. Figure 7.4 shows how large a part of the increase in the elderly ratio can be explained by differences in the size of various generations (the cohort effect) and how large a part is due to increased life expectancy in the population as a whole. A relatively large part of the increase in the elderly ratio is due to generations of different size, which is a temporary effect. At the same time, a substantial, and in the long term increasing, part of the rise in the elderly ratio can be explained by the fact that people are living longer, which is a permanent change. The problem of a single age group that is large and getting older can be managed by surpluses in the public finances when this group is still of working age. But in the very long term, the welfare systems will need to be restructured since the longer life expectancy is a permanent change. In addition, demand for welfare services can be expected to increase when a societys standard of living rises, as discussed earlier in this chapter and the next section will revisit. The Long-Term Survey 2008 Figure 7.4 Elderly ratio with the cohort effect removed Percentage of elderly in relation to the total population Note: The base scenario states the percentage of people over the age of 65 in relation to the population in accordance with Statistics population forecast (Statistics [2008b]). risk of death means that the risk of death is held at the 2008 level in the estimates, and therefore average life expectancy does not increase and the trend in the elderly ratio is only accounted for by differences in the size of generations. Source: calculations. 7.4.3Long-term financing requires other solutions A steady increase in additional resources is needed to be able to extend the welfare services more in line with the expected rise in demand. But a steady rise in revenue is difficult to achieve via the measures that have been discussed. However, more extra resources could be found if parts of the services offered are financed in a way other than with taxes. User fees and changes in priorities should be considered One way of increasing revenues in the welfare systems is to raise the existing user fees for some of the publicly financed welfare services. Well-designed fees can also lead to more effective The Long-Term Survey 2008 production by steering demand to the service in question. One example of incentive charges is the differentiated patient fees in some counties that make it more expensive to visit an emergency department than a primary health care provider. In this way the system tries to steer patients to the most appropriate type of health care facility and reduce the strain on the more expensive care at a hospital emergency department. Some municipalities also used to have time-related child care charges which gave parents economic incentives to have a short agreed time period for child care.256 However, there are relatively few user fees now and thus raising them can only provide limited additional resources.257 Another possibility is for the activities to be financed by taxes up to a certain level, but for households to supplement these activities by paying for services above this level. Such a construction would allow for some freedom of choice without needing to compromise the basic level. This type of system already exists today. For example, public pension commitments are limited but those who wish to may supplement their public pension with their own pension savings and in most cases, public pensions are also supplemented by labour market agreements. Likewise it is possible to take out private sickness insurance that provides supplementary benefits in the event of loss of income. The number of people taking out private individual sickness insurance has increased in recent years. Between 1999 and 2004, the number of those with private individual or group insurance providing a one-off payment in the event of illness has about doubled, albeit from a low level.258 Another option is for the public sector to completely pull out of financing an activity, which instead becomes privately financed. But the areas that cost the most such as health care and social services are at the same time the areas where it is difficult to set priorities that lead to such radical solutions. Here again it is rather a matter of setting priorities that eliminate some of the activities. 256 The incidence of various forms of time related charges in childcare has declined after the introduction of maximum childcare charges and now concerns full- or part-time charges. 257Fees finance about 4 per cent of public expenditure. 258 , G. & Wadensjö, E. [2007]. The Long-Term Survey 2008 Distribution and efficiency considerations should guide the setting of priorities Several different measures are probably required to reform the welfare systems, both through elimination and different fee-based systems. Since the activities are different, there is no solution for them all. Instead the forms of financing in all likelihood need to vary from case to case. In the introduction to this chapter, it was noted that there are both efficiency and distribution reasons for tax financing. Changing activities priorities should not change the basis for welfare policy but rather strengthen the distribution effect and increase efficiency. Changes in priorities should also be made in light of rising incomes in Swedish society, more demand for diversity and increased internationalisation. Internationalisation makes it possible for those who have the financial means to go abroad for health care if the waiting times are considered too long or the quality too low. In the long term this may also affect peoples willingness to pay for the national system. The increased demand for diversity makes the ambition that the welfare services are to be characterised by equal access and equal value all the more difficult to interpret. Creating more equality of opportunity as a guiding principle One possible guiding principle for welfare policy is to give due consideration to individuals means of exerting an influence over their own situation. That being so, the challenge is to create equal opportunities.259 Economic growth that contributes to higher household disposable income means that people are better able to control and determine their own living conditions through their own efforts. In our base scenario, household disposable income grows an average of 2.9 per cent a year between 2008 and 2030. This increase in disposable income, together with higher levels of education in society, can also be expected to make individuals better able to make well-informed choices. This Survey only has room for a very general discussion of how the welfare system could be reformed. The specifics need to be 259 A discussion of how to link welfare with the freedom of choice rather than with the result of different choices was conducted as early as the Long-Term Survey 1990 (SOU 1990:14). The Long-Term Survey 2008 determined for individual welfare services. The design of the systems is a delicate task that requires striking a balance between the distribution and efficiency aspects, which may be different for different welfare services. Studying the price and income elasticity for different services is pertinent here.260 With the basis that more equality of opportunity will be created, it seems natural that basic education should be entirely tax financed. Several reports, some of which are included in an appendix to this Survey, show that the social bias in recruitment to higher education decreases if resources are invested early in the education chain.261 In light of these circumstances, it should also be possible to introduce charges in higher education without this resulting in undesirable distribution effects. However, at the same time there must be a well-functioning arrangement for financing studies. Most people need to be able to distribute the costs that arise during their studies, when they often lack an income, more evenly over life. Charges in higher education might also encourage students to complete their studies more rapidly, as pointed out in chapter 3. care is another area where some responsibility can be placed on the individual if the priority is to create equal oppor- tunities.