The Swedish welfare model is gradually losing its characteristics, noticed not least by the extensive privatization of provision that began in the early 1990s. But funding has also been privatized to a certain extent, primarily through new supplementary services in healthcare, education and elderly care. Rather than full privatization, however, it is about semi-private welfare solutions, where the consumer has been able to reduce the private cost through different types of tax breaks, and where private providers have been able to freeride on an infrastructure built up with public funds.
The clearest example is the rapid growth of private health insurance, which is today signed by every tenth Swede in working age. With a private health insurance, the policyholder is guaranteed quick access to care, normally at a privately run healthcare facility that also receives publicly funded patients in accordance with the slower course of events regulated by the public care guarantee. The insurance also includes a number of other services, including a healthcare coordinator who is responsible for booking patients with the private providers.
The emergence of a parallel healthcare system is fully in line with what has been called the hidden welfare state (Howard 1999). It is a type of welfare that is partly publicly funded but rarely included in the statistics on public expenditure; a welfare that more people want to take part of but few want to recognize as welfare; a welfare that is difficult to investigate due to business secrecy and secret agreements, for example between insurance companies and private healthcare providers; a welfare based on political decisions that go under the radar, decisions that can be so complicated that legislative politicians do not themselves understand what they mean.
The hidden welfare state and the visible welfare state together form the divided welfare state (Hacker 2002). What is a divided welfare state? The short answer is that it is two very different welfare states within one and the same nation, one welfare state that is aimed at some groups and one that is aimed at other groups. Moreover, in the divided welfare state, between the two welfare states, there is often a gap where many people tend to fall down.
The classic example of a divided welfare state, consisting of a visible welfare state and a hidden welfare state and the gap right between them, is the United States. In terms of healthcare, the visible welfare state in the United States is the means-tested systems directed to those who can prove themselves sufficiently poor (Medicaid) or old (Medicare). We call it the visible welfare state just because it is visible. It is about direct government expenditures that are neatly set up in the state budget and tangible in the welfare debate. It is the visible welfare that US-Americans refer to when talking about welfare. It is thus said He is on welfare and She is on welfare about people who qualify for the visible welfare state (Bowman 2013). Thus, people are pointed out in the very stigmatizing way (Moffitt 1983; Besley and Coate 1992) that is normally avoided in universal welfare states, this by creating welfare services on equal terms for all citizens.
The word welfare gets a completely different meaning in a divided welfare state. The word does not refer to a collective social right, but to a means-tested welfare service that is directed at the most vulnerable groups. It is the recipients of the visible welfare that comes into focus for those who consider the welfare costs to be too high. In the United States, there are countless examples of bumper stickers with texts like You have to work harder: millions on welfare depend on you. 1 At the same time, there is often a lot of confusion not only on the hidden welfare state but also on the visible one. In a country that is so much semi-privatized, it may even happen that recipients of the visible, means-tested, state-funded public welfare actually think it is private, why expressions such as Take your government hands of my Medicare! are quite common. 2
Butâa big but!âthose who get their healthcare through private health insurance also receive state support for their welfare consumption, mainly through different types of tax breaks and tax deductions which are a major cost for the state in the form of lost tax revenue. The more they earn, the greater the support. So, the rich are also on welfare even if they would never express it that way. Hence, private health insurance policies are not as private as the name suggests.
Titmuss (1958) was one of the first to note the phenomenon. He considered it misleading to focus only at direct spending on welfare, but instead one must study the âsocial division of welfareâ which included, among other things, the indirect expenditures (in Titmussâ terminology fiscal welfare ) associated with the hidden welfare state. The phenomenon was also noticed by another of the nestors of welfare state research, who argued that this type of tax breaks is particularly evident in liberal welfare models, where âone of the fastest growing components of public expenditure is tax subsidies for so-called private âwelfare plansââ (Esping-Andersen 1990).
As Esping-Andersen claims, the cost for tax subsidies grew quickly. When summing up the visible welfare state and the hidden welfare state, it turns out that the US-American welfare state is not as small as it often appears. In fact, public welfare spending is approaching northern European levels (Adema et al. 2014) and âSuddenly, the American welfare state did not look so small anymoreâ (Howard 2008). The state expenditures for universal and divided welfare models are thus more similar than what they seem to be at first glance, even though the models are very different in other aspects.
What do the visible and the hidden welfare states have to do with Sweden? Here, we still have one and the same tax-funded healthcare system aimed at all the nationâs citizens? Yes and no. It is not that we suddenly got a divided welfare state like the US-American, but it is obvious that we are moving in that direction. It is obvious not least in the healthcare sector. In a short time, just in lines with the principles of the divided welfare state, we have created a parallel healthcare system where 650,000 people buy quick access to healthcare via their private health insurance policies.
The hidden welfare is growing rapidly in Sweden. On the other hand, apparently, nothing has yet happened to the visible welfare state. You do not have to prove that you are sufficiently poor or old in order to utilize the public health system. It is not that we contemptuously say They are on welfare about people who see a doctor within the publicly funded system. And it is not that people generally look down on the one who lacks a private health insurance policy, even if there are probably some circles where people would blame you for not having one.
However, appearances are deceiving. In reality, the hidden welfare gradually erodes the visible, public and former universal welfare on every conceivable level. There are a large number of erosive factors that physically weaken the public welfare sector, but there is also a psychological level where our values tend to change over time. The trust in the state-funded healthcare system is reduced when a parallel healthcare system is created with direct support of the state, a parallel system which is obviously more efficient and better in many ways. The tax willingness decreases among those who buy private health insurance and, at the same time, pay tax for a healthcare that they no longer use to the same extent. The most vocal societal groups disappear as opinion formers for a functioning public health system when they, by signing private health insurance, are no longer part of the system and no longer have a self-interest in making sure that the public healthcare works in the best possible way.
There are many more examples of the erosive effects of the hidden welfare, but in the most obvious way, it is about the direct and indirect freeriding on the public sector. In Sweden, the emerging hidden welfare revolves around a confusion of public and private, where the public, in different ways, directly and indirectly, sponsors the private so much that we should talk about semi-private or pseudo-private or half-private health insurance rather than private health insurance.
On the one hand, an indirect state sponsorship, in which the policyholders in various ways freeride on the public by attending private healthcare providers who have agreements with the public sector, agreements in which the public already covers much of the costs. Examples of this are that private hospitalsâ rents are often paid for by the public and that policyholders thus do not pay a penny to stay there, which means that insurance companies can keep prices down and sell even more insurance. Another example is the doctorsâ further education and specialization, which is often financed by the public, although during this training period the doctors can be active in the private and semi-private welfare sector.
On the other hand, a direct and statutory state sponsorship via the new options for healthcare, school and elderly care, mainly used by the well-off layers of the population. Here we find the so-called Rut deduction for home care and elderly homes, the so-called homework assistance deduction for education and, not least, the disputed gross salary deduction which has been the driving force behind the rapid growth of private health insurance.
Some of these state sponsorship methods within the framework of the hidden welfare state have come and gone and come again. Some have been politically disputed. But on the whole, they have strengthened their position in the new welfare market as well as in the labour market (the employment tax deduction) and in the housing market (the interest deduction), where we als...