The Nordic Model - Embracing globalization and sharing risks

c. Vouchers
Vouchers are issued by a central or a local government to consumers
so that they can pay for a service that the government
wants to subsidize. A voucher is a generic term that covers all
types of subsidies channeled directly or indirectly through the
consumer. Vouchers are always issued for a specific purpose. They
are non-tradable and may be means-tested or cover only part of
the service cost.
The purpose of vouchers is to give consumers a choice among
various service options, that is, free them from being captive by
giving them an exit option. Vouchers combine a concern for equity
with the allocational and productive efficiencies that come
from letting consumers express their own preferences and having
service providers compete for their business. For some services
it makes less sense to let consumers choose, because they are
in a poor position to judge which service provider is best. For
instance, in garbage collection or local transportation it may be
efficient to have one service supplier, in which case having the
government ensure competition by putting the service up for bid
makes more sense.
Vouchers are extensively used in the OECD to subsidize consumer
driven services like health care, child care, elderly care and
schooling. In the Nordic countries, vouchers play a smaller role,
because so many services are government supplied. The health care
sector is probably the heaviest user of vouchers, though people do
not recognize the subsidies under that name. The Nordic health
care systems are a complicated mix of public and private supply
with physicians often working for both sectors. In Finland, basic
health services are essentially free, but private services are also
heavily subsidized. Screening via differentiated subsidies is also
practiced by private health insurers, for instance in the U.S. It can
be rationalized as an efficient way to regulate the consumption of
services and to steer people towards cheaper services where appropriate.
Those who want more or better health services have to
prove it through a higher co-payment.
Vouchers are also used in the care for the elderly, but not in
a major way. The fraction of private nursing homes in Finland is
the lowest within OECD. The rest of the Nordics are also at the
Vouchers reconcile
choice and competition
with social
objectives
There is scope for
more private supply
and vouchers in the
area of care
152 · The Nordic Model