Evaluating health care financing in a highly decentralized Beveridge model

The Finnish health care system is financed in a highly decentralized manner. In the tax-financed Beveridge model each municipality is responseble for financing and organizing health care services for its residents. This paper examined the annual incidence and treatment costs of three cost-intensive DRG-groups, and all DRG-groups together. The objective was to estimate municipal level predictions on the incidence of new illness cases and their associated costs, and to analyze whether there was greater uncertainty in anticipated specialized health care costs in municipalities with smaller populations. The dataset comprised of longitudinal hospital utilization and discharge data from Hospital Discharge Registers. The expected annual variation of illness cases and costs was assessed with respect to 95% confidence intervals estimated for each morbidity group and municipality. The results indicated that the costs of the selected morbidity groups fluctuated in a completely uncontrollable manner in municipalities with small populations. As the median size of Finnish municipalities is less than 6000, the inability to anticipate periodic health care costs constitutes an extensive financial problem and calls for the establishment of larger regional units and funding pools.