Mixed Economy and Marketisation

[SOURCE: Glanz A and Knapp M (2017) Understanding substantive and theoretical issues in long-term care. Glossary of key terms. From: Social Protection Investment in Long-Term Care Project, HORIZON 2020 - Grant Agreement No 649565. European Union. (The resource is accessible here)]

Some services used by people with long-term care needs are provided by or located within the state (public) sector, some by private (for-profit or third sector) entities, and some by families or through informal community arrangements. The multiplicity of sectors and services is sometimes called the mixed economy of provision. It is characteristic of all long-term care systems in Europe, although the balances between the sectors varies a great deal from country to country. Prevention strategies might be dominated by the state (locally, regionally or nationally), but will still need inputs from employers and local communities (the ‘social capital’ effect). The for-profit and third (non-profit) sectors are major providers of day and residential care in some countries.

Underpinning most formally based provision are the many and various contributions of family carers and volunteers. These are not ‘free’ resources, of course, because they can impose quite high opportunity costs on families.

Distinctions between the sectors are pertinent because providers with different legal forms may behave differently in responding to various incentives. Different governance structures and motivations may affect their modus operandi, patterns of resource dependency, chosen styles of management, ability and willingness to respond to changes in market opportunities, pricing regimes and competition. They might therefore also have divergent costs, ‘casemix’, quality of care and perhaps even user outcomes. Different provider types may also vary with respect to the ways they initiate, cultivate and reinforce trust and reputation, with implications for commissioning.

Each provider of long-term care services could have a number of funding sources, including government through tax revenues, social insurance funds, voluntary (private) insurance companies as well as users and families through out-of-pocket payments. Those providers might also benefit from the inputs of volunteers. Informal care by family members or others is ‘resourced’ by the unpaid inputs of those individuals. This has been called the mixed economy of funding. Different sources of funding come with a host of potentially different conditions, constraints, incentives and opportunities.

Cross-classifying the main funding and provider types generates a matrix of transaction types. These multifarious transaction types remind us of the inherent economic, social and political complexity of most pluralist long-term care systems. Each transaction type has accompanying needs for appropriate legislative frameworks to control, audit and monitor the links between funding and provision. A version of the mixed economy of welfare matrix was first proposed by Judge (1982) and further developed in Judge and Knapp (1985) and used to describe a rapidly changing long-term care system in England by Wistow et al. (1994, 1996).

Against this background, there has been more recent focus on what has been called ‘marketisation’. The term has a number of meanings, each of which reflecting some part of a mixed economy of welfare. For example, Antonnen and Meagher (2013) use the term to refer to a policy change that has ‘two dimensions: whether or not market practices and logics (most notably competition) are used in organising services and whether or not private actors, particularly for-profit companies, are involved in providing service’ (p.16). Marketisation by this definition, refers to a particular sub-set of the various transaction types contained within a broader mixed economy of welfare matrix. Many European countries have seen a move towards greater marketisation of long-term care services for older people and other population groups.

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