How do different healthcare financing models influence the efficiency of health systems? A comparison of Switzerland and Finland

Abstract

This study compares the efficiency of two different ways of financing the healthcare system: the government scheme, financed mainly by taxes in Finland, and the compulsory private insurance scheme, financed mainly by compulsory household insurance premiums in Switzerland. The first system, based on a Beveridgean model, and using Finnish data before the 2023 healthcare reform, shows good cost control, thanks in particular to regulated and generalised funding, despite a slight but inevitable rise in costs according to the Baumol model. In fact, as the Finnish system is more centralised than the Swiss one, it benefits from much lower administrative costs thanks to economies of scale and simplified processes. However, the increase in health expenditure seems inevitable due to the slight Baumol effect occurring in Finland but also due to the aging of the population. In fact, age does not seem to be the best indicator of the increase in health expenditure, it should be replaced by the proximity of death which is much more accurate. On the other hand, the analyses show that administrative costs are significantly higher in Switzerland, due to competition between private insurers. In addition, the Swiss healthcare financing model seems to be more affected by Baumol’s “cost disease”, leading to a more marked increase in healthcare spending.