1

Preliminary proposals for legislation on the health and social services and regional government reform 31 August 2016

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Objectives of the reforms

The objective of the regional government reform is:

• to coordinate regional state administration and county government.

• to establish an appropriate division of work between regional state administration, counties and municipalities.

The objective of the health and social services and regional government reform is: • to implement a service

and administration system based on the autonomy of counties.

• to implement a system that will respond to people’s service needs more clearly and in a more straightforward manner.

• to strengthen the sustainability of public finances.

The objective of the health and social services reform is: • to narrow the disparities

in well-being and health,

• to improve the equality, accessibility and effectiveness of services, and

• to curb the increase of costs.

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Regional government reform New, multisectoral counties

Health, social services and regional government reform

> Well-being and health gaps will be narrowed

> Client-oriented, cost-effective and effective services

> Public sector sustainability gap will be reduced by EUR 3 billion by 2029

Integration Health and social

services integrated into client-oriented

wholes

Freedom of choice

Client has a choice among approved service providers

Supply and cost-

effectiveness from

competition

Public, private and NGO providers

Financing the

reform

Simplification of multi-

source funding

Client's service needs as the starting point

More efficient processes through

digitalisation

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New functions of the counties as of 1 January 2019

Government

Decisions on health and social services: nationwide division of responsibilities, division of duties across county borders, policies on service provision, broad-based investments, other measures needed to safeguard availability of services, steering of information management and ICT

18 counties

- Responsibility for organising services

- Responsibility for financial resources

- Determine the service level and contracts on arranging services

Municipalities

5 collaborative catchment areas

Counties

• Health and social services • Rescue services • Duties of the regional councils • Regional development duties and tasks related to

the promotion of enterprising • Environmental healthcare • Planning and steering of land use • Promotion of regional culture and identity • Other statutory services organised on a scale larger

than a municipality that require deliberation

Collaborative catchment areas

• Centralised duties in most demanding services • Streamlining of service structure, investments and services • Development and centres of excellence • Emergency medical service unit • Collaborative tasks and forum • Cooperation agreement

Service providers

• Public, private and third sector service providers

Municipalities

• Promotion of health and well-being • Local democracy and dynamism • Statutory duties – local tasks • General mandate

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12 units with extensive service around the clock (incl. 5 university hospitals

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Legislation being drafted

To be drafted later in 2016-2017:

– other legislation related to the regional government reform

– legislation on freedom of choice and multisource financing

Draft acts prepared in spring 2016:

– Act on Organising Health and Social Services

– Act implementing the organisation act and counties act

– Counties Act (basic legislative act on autonomous regions)

– Act on the Division into Counties

– Act on the Financing of the Counties (central government transfers to the counties)

– new Act on Central Government Transfers to Local Government for Basic Public Services

– amendments to the Income Tax Act and other tax legislation

– legislative amendments to the Election Act, Act on a Candidate's Election Funding, Languages Act and other general legislation on administrative procedure and information law matters

– amendments that concern local government officials, the system of collective agreements for public servants and other employees, and the pension system (staff)

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Key proposals

In the future, there will be three independent public administration actors: central government, counties (autonomous regions) and municipalities.

The highest decision-making body of the county, or the county council, will be directly elected.

The central government will provide the counties with the funding for discharging their duties and providing services.

The central government’s financial steering will ensure that the counties’ finances remain in balance and that they are able to discharge their duties.

In connection with the establishment of the counties, a reform of central government transfers to local government for basic public services will be carried out with the aim of ensuring that the municipalities can manage the basic public services that will remain within their remit.

In issues relating to assets, the aim will be to ensure that the municipalities will be treated equitably while ensuring that the counties will be able to organise their services in appropriate premises.

The transfer-of-business principle will be applied to personnel transfers.

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7

Key proposals

Each county will be responsible for ensuring that the services form integrated packages and that they are provided close to the clients in accordance with the population’s needs.

A county’s services can be provided by public, private and third sector operators. Each county will be responsible for ensuring that clients are provided with efficient service packages as well as service and care chains.

In the future, the client’s freedom of choice will be the main principle in primary services and, where appropriate, it will also be applied in specialised-level health and social services.

A county’s own service provision will be the responsibility of the county’s service utility, whose officeholders will be able to make official decisions and exercise public power.

A county’s service utility will provide residents with public health and social services, also in cases where these services are not otherwise available.

A county will be obliged to corporatise services when it manages health and social service duties in a competitive situation in the market, or when services are within the client’s wide freedom of choice.

Central government steering in health and social services will be strengthened.

The municipalities will no longer organise or finance health services. The municipalities will still have the task of promoting health and well-being.

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A county may only assign a public administrative duty to a party other than a public authority if this has been separately permitted under law

Counties Act The Counties Act will contain provisions on the duties, governance structure, leadership, financial management and decision-making of the counties • county = a public law entity that has autonomy in its region • the service provision of 18 new counties will be launched on 1 January 2019 • the county will be responsible for implementing the residents’ statutory

rights as well as for integrating service packages and ensuring equal access to services

• a county may provide services itself or in cooperation with other counties, or outsource them under a contract to some other service provider, unless otherwise prescribed by law

• a county may only assign a public administrative duty to a party other than a public authority if this has been separately permitted under law.

• a county's service utility is a unit governed by public law that the county establishes by an instrument of corporatisation

• decisions on the administrative regulations of the service utility and the marginal conditions of its operation and finances are made by the county council

The Counties Act will contain provisions on the duties, governance structure, leadership, financial management and decision-making of the counties

The county will be responsible for implementing the residents’ statutory rights as well as for integrating service packages and ensuring equal access to services

A county may provide services

itself or in cooperation

with other counties, or outsource them under a contract to some other service provider, unless otherwise prescribed by law

A county's service utility is a unit governed by public law that the county establishes by an instrument of corporatisation

Decisions on the administrative regulations of the service utility and the marginal conditions of its operation and finances are made by the county council

County =

a public law entity that has autonomy in

its region

the service provision of the

new counties will be launched on 1 January 2019

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§ § §

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Decision-making, operation and resident participation in the county

COUNCIL

County strategy

Every-day operative, administrative

and financial management

COUNTY EXECUTIVE

COUNTY GOVERNOR

COUNTY CORPORATION

Corpo-ratised operation

Service utility

Separate organiser and provider

Residents’ opportunities to exert influence

• Direct election • Right of initiative • Advisory referendum • Discussion and consultation events • Youth council, councils for older people and people with disabilities • Bodies for exerting influence

for minority languages

National service centres

• ICT • Joint procurements • Other support services • Facilities

59-99

members

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Participation and democracy • a county’s highest decision-making power will be exercised by the county council

• county elections will be held simultaneously with municipal elections (from 2021); the first county elections, however, will be on 28 January 2018, in connection with the presidential election

• each county will be a single constituency • the number of members to be decided by the council; however,

smaller counties must have at minimum 59 and larger counties at minimum 99 council members

• county election boards will be established as a new election authority

• the election financing limit will be the same as in the parliamentary elections

• the county council will adopt a county strategy to guide the activities

• a county’s activities, administration and finances will be managed by a county executive

• a county’s residents and service users will have the right to participate and influence their county’s activities (right of initiative, referendum initiative, bodies for exerting influence)

• an advisory referendum covering the whole area of a county may be arranged on a matter that is within the county’s remit

A county’s highest decision-making power will be exercised by the county council

County elections will be held simultaneously with municipal elections (from 2021); the first county elections, however, will be on 28 January 2018, in connection with the presidential election

each county will be a single constituency

the number of council members to be decided by the council; however, smaller counties must have at minimum 59 and larger counties at minimum 99 members

county election boards will be established as a new election authority

the election financing limit will be the same as in the parliamentary elections

the county council will adopt a county strategy to guide the activities

a county’s activities, administration and finances will be managed by a county executive

a county’s residents and service users will have the right to participate and influence their county’s activities (right of initiative, referendum initiative, bodies for exerting influence)

an advisory referendum covering the whole area of a county may be arranged on a matter that is within the county’s remit

59 99

11

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Clients’ language rights

• Language rights will be safeguarded. Clients and patients will have the right to use a national language, i.e. Finnish or Swedish, as well as to be heard and receive documents in administrative matters in Finnish or Swedish.

• Language rights are laid down in the current Language Act, Sámi Language Act and Sign Language Act as well as in the Act on Organising Health and Social Services under preparation.

– According to the Language Act, a public authority must on its own initiative ensure that an individual’s language rights are fulfilled in practice.

– When services are organised, activities must be planned to be compliant with the Language Act.

• In public authorities, the right to use the Sámi language mainly applies to the Sámi homeland in Finland, i.e. the municipalities of Enontekiö, Inari and Utsjoki, and part of Sodankylä municipality.

• The participation of clients and patients must also be safeguarded in situations where a client or patient and personnel do not have a common language, or an individual cannot be understood due to a sensory or speech disability. Such language groups include those that use Finnish and Finnish-Swedish sign language. In these situations, care must be taken to ensure that the individual has sufficient understanding of the matter and its significance, and can express his/her opinion. If it is not possible to provide an interpreter, understanding must be ensured in other ways.

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The Act on Organising Health and Social Services

The Act on Organising Health and Social Services will lay

down the counties’ responsibilities for arranging social and

health services

• The purpose of the act is to promote and maintain the health

and well-being of the population and ensure equal, cost-effective and efficient social and health services

• A county is responsible for ensuring that services are implemented as coordinated service packages and that they are available close to the clients in accordance with the population’s needs.

• Service organisation and provision will be separated. Services

can be provided by public, private or non-profit organisations.

• Municipalities will no longer finance the social and health services. They will still have the duty to promote health and well-being.

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Implementation Act

The Implementation Act will lay down the procedures needed to implement the Counties Act and the Act on Organising Health and Social Services:

- the division into counties

- part term governance

- personnel

- property and assets

- decreasing the level of municipal tax rate

- implementation

- entry into force

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Personnel arrangements (1/2)

some 220 000 people will change employers

A great number of personnel in municipalities and joint municipal authorities will be transferred to the service of the counties

• personnel working in organisations providing

municipal health and social services • personnel who perform mainly health and

social service duties in other areas of municipal administration or in support services

The transfer-of-business principles will be followed, so the personnel retain their current employment terms

• at the time of transfer, the existing rights and obligations of the employees will not change

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Personnel arrangements (2/2)

Regulations governing the counties’ personnel will be effected by expanding the scope of local government employment legislation. • In the future, Local Government

Employers KT will also act as the counties’ employer representative (Local Government and County Employers KT).

• In the new employer

organisation, the counties will have a status corresponding to their employee numbers and financial significance.

Counties’ employer representation arrangements:

The counties and service utilities will be Keva member organisations.

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Asset arrangements (1/2)

The assets required by a county for its duties will be placed at the county’s disposal partly by asset transfers and partly by leasing.

The assets and obligations of the statutory joint municipal authorities and the movable assets of the municipalities will be transferred to the counties (so-called limited demerger model).

The buildings of the municipalities will not be transferred; during the transition period, the counties will lease premises, using a joint lease agreement template.

Asset arrangements will be implemented ensuring that they will not have a revenue impact in the municipalities.

In the course of further preparation, national joint solutions will be sought for developing real estate retained by the municipalities, ensuring that unused real estate will not be a burden on individual municipalities.

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Asset arrangements (2/2)

A joint real estate company to provide professional premises services will be established for the counties, aiming for premises that support the activities, an effective service network, and a high utilisation ratio.

The premises services will have expertise in special premises planning, financing and investment, ensuring that the premises will support the activities and take into account future needs as care technologies and digitalisation advance.

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Steering of the counties’ finances

• Key tools for the financial steering of the counties will be the General Government Fiscal Plan, the State Budget and legislation concerning the counties.

• In the General Government Fiscal Plan, the Government sets targets for general government finances and decides on measures to achieve these targets. The central government spending limits decision is included in the General Government Fiscal Plan.

• Central government steering in health and social services will be strengthened.

• The Government will confirm the strategic objectives every four years. • The Government may decide on the development of the structure of health

and social services as well as large-scale investments and information system services, with binding effect on the counties.

• A county must, as part of its county strategy, prepare a health and social services strategy for the planning and management of its finances and activities.

• The Ministry of Finance may initiate an evaluation procedure if a county’s capacity to organise statutory services is compromised.

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County financing 1

• The central government will finance the activities of the counties. Client and user fees will bring additional revenues to the counties. They may also take out short-term loans.

• The counties will decide independently on the use of their universal financing.

• The counties will receive central government transfers calculated on the basis of their population and their residents’ social and health service needs. The counties will also receive funding for promoting health and well-being.

• In 2019–2023, needs-based funding will be introduced in central government transfers to replace expenditure-based transfers. The amount of financing will then be based on calculated costs rather than actual costs.

• Central government transfers to counties will be reviewed annually, and the allocation grounds will be reassessed at minimum every four years.

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County financing 2

• Universal central government financing

• Client and user

fees

• Short-term loans

The possibility of introducing a county tax will be examined

Determination of c. govmt. transfers

89%

10% 1%

Funds to promote Health and well-being

Needs-based financing

87% Demographic structure and need

1% Foreign languages

1% Population density

Financing based on population

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According to current estimates, municipal income tax rates will be reduced

Taxation

The intention is to reduce municipalities’ revenue to correspond with the costs of the duties transferred from the municipalities to the counties.

Municipal income tax revenues and the municipalities’ share of corporation tax will be reduced. Correspondingly, central government taxation will be increased.

Changes to municipal income tax rates will also be limited in 2020 and 2021.

The municipal income tax, despite its lower level, will continue to be the most significant

source of revenue for the municipalities.

The reform will be implemented in such a way that it has a minimal impact on the overall tax rate for taxpayers.

12.3%

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Transfer of tax revenue from municipalities

Decrease in municipalities’ share of corporation tax

Central government funding to be transferred

Financing for municipalities’ tasks

• In 2020–2021, a municipality may increase its income tax rate by at most 0,5 percentage points a year on average

• This limit may be exceeded in exceptional situations

€17.7 bn Total costs of duties transferred from municipalities to counties is

€11.3 bn

€0.5 bn

€5.9 bn

Local government tax rates will be reduced by 12.3 percentage points in 2019

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Central government transfers to municipalities and calculated impacts on individual municipalities (1/2)

• The transfers of tax revenue and central government transfers combined with significant differences in expenditure will bring about major changes in municipal economies

• These changes will be levelled out by reforming the system of central government transfers for basic public services

– The imbalances caused by the expenditure and revenue transfers will be limited

– The tax revenue based equalisation supplement of central government transfers will be increased and the equalisation deduction reduced

• In addition, the impacts around the time the reform enters into force will be levelled out by equalisation of system change > ensures that in calculated and proportional terms, the balance of the municipal finances will be similar to what it was before the reform

• The new financing model will be introduced gradually, +/- EUR 25 per resident a year

• However, the change will be limited to +/- EUR 100 per resident

The transfers of tax revenue and central government transfers combined with significant differences in expenditure will bring about major changes in municipal economies

These changes will be levelled out by reforming the system of central government transfers for basic public services

• The imbalances caused by the expenditure and revenue transfers will be limited • The tax revenue based equalisation supplement of central government transfers will

be increased and the equalisation deduction reduced

In addition, the impacts around the time the reform enters into force will be levelled out by equalisation of system change > ensures that in calculated and proportional terms, the balance of the municipal finances will be similar to what it was before the reform • The new financing model will be introduced gradually, +/- EUR 25 per resident a

year • However, the change will be limited to +/- EUR 100 per resident during a

transition period of 4 years

+/- EUR 100

+/- EUR 25

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Central government transfers to municipalities and calculated impacts on individual municipalities (2/2) The draft proposal contains the calculation principles and preliminary calculations for individual municipalities of how the reforms will affect municipal economies (Ministry of Finance)

The calculations will be updated later - an estimate produced for 2016 was used here • As the reform enters into force (2019), the

calculations will be partly based on estimates

• To ensure the equitable treatment of the municipalities, the expenditure and revenue transfers required in the financing model and the associated equalisation elements will be based on the actual situation as from 2020.

- These calculations will use the level of 2018 on the basis of average expense outcome data for 2017 and 2018

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A municipality's financial situation after the reform: key role is played by the initial situation Pressures on municipal economies from ageing of the population and morbidity will be essentially reduced

• The reform will facilitate anticipation and long-term financial planning

• For the part of social and health services, pressures to solve the sustainability gap are passed on the the counties

Straightforward assessment of an individual municipality’s position after the reform cannot be given at the time of drafting of the government proposal

• The operating environment will change regardless of the reform

• A reform of central government transfers and a related impact assessment have never before been carried out this far ahead before the reform enters into force

The financial situation of a municipality today also determines its situation in the future

The General Government Fiscal Plan, the local government finance programme, and the Ministry of Finance as part of its official duties will address municipal finances both as a whole and from the perspective of an individual municipality > necessary measures

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All services will be within the remit of

the counties, and the counties will be responsible

for organising them. All financing will pass through the counties to the service

providers.

Integration of health and social services

Service providers must comply with the service packages and chains defined by

the county. Providers will have to contribute to ensuring that integration of services is implemented.

Guidance will be given,

particularly to frequent users of services, and an extensive service

needs assessment and client plan

will be prepared.

The counties will be responsible for ensuring that the services form

integrated packages and are delivered close to

clients in accordance with the population’s needs.

Public service pledge

• Each county’s publicly declared service pledge will inform the residents of how the services will be implemented and whether they are delivered in accordance with the pledge.

• Through the service pledge, it will also be possible for residents to give feedback and make proposals that will improve services in practice.

• The service pledge will not apply more widely to social security.

• The service pledge will not be legally binding.

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Client’s freedom of choice Preparation of legislation on the client’s freedom of choice has not been completed. Government advised on further preparations on

29 June.

Freedom of choice will be the main rule at the primary level and, where appropriate, also in specialised health and social services.

The client may choose a public, private or third sector provider.

The purpose of the reform is to make people’s various service needs the starting point for the Finnish freedom of choice model. Four different freedom of choice instruments are under consideration.

Opportunities for companies of different sizes to provide services will be secured. Differences between the counties in service provision will be taken into consideration.

The drafting of legislation led by the Ministry of Social Affairs and Health is underway. A draft proposal is due to be circulated in November 2016.

County - Responsibility for organising

services - Exercise of public power

- Safety net

Company X

Partnership Z

Organisation Y

Pro

vid

ers

of

free

do

m

of

ch

oic

e

Joint service centres of the counties (premises, financial and HR

administration, procurements, ICT)

Wide freedom of choice, subject to the corporatisation

obligation, operation on market terms.

Health and social care companies of a county

service utility - No exercise of public power

Clients

Co

un

ty's

ow

n

pro

du

ctio

n

Structure of public health and social services

Referral

Limits of wide freedom of

choice

County’s service utility - responsibility for providing

services and exercise of public power in matters pertaining to

individuals - Not within the freedom of choice, not operating in the

market

Service use

Outsourced services

- Provision by the private and the third sector

Procurements

Companies owned

by the service

utility

Referral

Organiser’s steering and

supervision,

guidance by agreements

Service

voucher personal

budget

Service

voucher & personal

budget

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County’s service utility and company

The county may provide the services itself or in cooperation with other counties, or the services may be outsourced.

The service provider may be the county’s service utility, a limited company, corporate entity, association, cooperative, foundation or independent practitioner.

County’s service utility • responsible for the

county's own service provision (not operating on market terms)

• officeholders may make official decisions and exercise public power.

• will also provide residents with health and social services when they are not otherwise available.

• may also provide other services that are part of the county's tasks.

Company owned by a county A county will be obliged to corporatise services when it manages health and social service duties in a competitive situation in the market, or when services are within the client’s freedom of choice.

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Service provision

Each county’s service strategy must take into account how services within the scope of freedom of choice and other health and social services will be coordinated.

A service provider must also contribute to ensuring that service packages are implemented and that service chains function as agreed.

A county's service strategy must specify which part of procure-ments will be subjected to competitive bidding in order to develop new solutions for improving the innovativeness and cost-effectiveness of services.

The act will seek to ensure the safety of the client and patient as well as good, high-quality services. A further aim is to reduce the administrative burden on entrepreneurs.

New Act on the provision of health and social services: right to provide health and social services which the county is responsible for organising as well as private health and social services.

7.10.2016 32

The county corporation in health and social service duties

County council

County executive ----------------------

County governor

County’s health and social services board

Manager responsible for the organisation of health and

social services public servant organisation

County's corporate entities

(other than health and social service

provision)

Procurement of outsourced

services for own

provision

County’s service utility

- Board and manager

The council makes decisions on: objectives,

administrative regulations, investment plans, approval of the

annual financial statements, granting

discharge and other similar statutory issues

Companies of the county’s

own service

provision

Steering and supervision by the organiser

Corporate steering

Decision-making that is part of the council’s duties, such as • the administrative regulations and the service

provision strategy (including the administrative regulations of the service utility and policies on outsourced services)

• adopting a cooperation agreement for health and social services, participating in its preparation, and the policies for the county’s area derived from these

County executive Corporate steering (county’s companies and service utility)

County governor Top public servant of the county, presentation of matters to the county executive, corporate management

Body responsible for organising health and social services: • Within the limits defined by the council in the

administrative regulations, decisions and general policies on the responsibility for organising and provision of services

• Health and social services manager: operative

management of service organisation

Board and director of service utility: • operative and professional management of the

utility's production, organisation of its production activities

• procurement of outsourced services within the limits set by the county for the county's own provision

• professional board and manager (no elected officials)

7.10.2016 33

Client participation

• Each county must take its residents’ views into account when preparing

– its service pledge – a cooperation agreement between counties – a proposal on national targets of the collaborative catchment area

for the Ministry of Social Affairs and Health.

• Participation and influence can be promoted

• In particular, by organising discussion and consultation events and by asking residents about their opinions before making decisions.

• By appointing representatives of service users to county bodies, and by planning and developing services together with service users.

• By organising opportunities to participate in the county’s financial planning, and by supporting the planning and preparation of matters proposed by residents, organisations and other communities on their own initiative.

• Right of initiative, referendum initiative and bodies for exerting influence

34

Service centres

Joint national service centres will

be established for the counties, to which support services required by the

counties will be centralised. In addition, the counties

may establish joint support services with municipalities

or other public sector partners.

Service centres will provide support services for

counties, their subordinate organisations and the service

utilities. The service centres will not provide

services for the counties’ production companies that

operate in the market or private sector actors that

within the scope of the freedom of choice.

Preparations relating to the service centres have not been completed.

At minimum, the nationally organised

support services will include:

1. joint procurement service centre (contract and tendering matters)

2. premises and real estate management service centre

3. service centre for ICT services

4. finance and HR management service centre

35

Digitalisation

Digitalisation will enable the provision of services in completely new ways and more effective processes.

Electronic services will also encourage residents to independently maintain their functional capacity and health.

Basic principle of ICT solutions: client information can be used across the boundaries of organisations and regions.

Each county must ensure that client-related information is transferred efficiently between different providers.

Government policy: strong national steering

Counties’ joint ICT service centre and joint procurements

36

Key factors for a successful reform

Commitment and mutual trust between all actors

Local initiative and consideration for special features of the home county

Cooperation between residents, decision-makers and personnel

Digitalisation, renewal of practices and good leadership

A bold stance in the face of the future

A county

may be large

or small. So are

states.

37

Schedule

Draft proposals on the health and social service reform and establishment of counties circulated for comments in August 2016, bill to the Parliament in December 2016

Draft proposals on the freedom of choice and simplification of multisource financing will be circulated for comments in November 2016, bill submitted to the Parliament in February 2017

Government proposal on the regional government reform in spring 2017

A temporary administration will start preparing the launch of activities from 1 July 2017

First county elections in January 2018 in connection with the presidential election

Organisation of health and social services taken over by the new counties on 1 January 2019

2016 2017 2018 2019

Acts on the freedom of choice and multisource financing will enter into force on 1 January 2019. Potential transition period.