The Finnish government has proposed a major change to the way welfare regions receive state funding, a move that reduces allocations to large population centres and shifts emphasis towards assessed service need.
The draft legislation, published by the Ministry of Finance, entered consultation on Monday and forms part of the third phase of reforms agreed in the government programme. The changes would take effect from the start of 2027.
Under the proposal, population size would carry less weight in funding calculations. Greater emphasis would fall on indicators linked to healthcare, social services, and elderly care needs. The government says the aim is to slow divergence between regions with strong finances and those facing structural pressure.
The impact would fall most heavily on densely populated areas. Helsinki, which runs its own social and health services outside the welfare region system, would lose an estimated 102 million euros in funding by 2029. That equals about 143 euros per resident. Over three years the reduction would amount to about 2.9 percent of the city’s projected 2029 funding level of 3.5 billion euros.
The government said Helsinki retains sufficient resources to organise services despite the cut. Western Uusimaa, centred on Espoo, would also face a reduction of about 54 million euros, or 103 euros per resident.
Some regions would gain modestly. Central Ostrobothnia would see an increase of about 21 euros per resident. Overall variation would range from Helsinki at minus 143 euros per person to small gains in sparsely populated areas.
Across all regions, the reform would reduce funding by 66 million euros next year, rising to 225 million euros in 2028 and 390 million euros in 2029. These cuts follow savings already set out in the government programme.
The proposal also limits the role of diagnoses made in private healthcare when calculating funding. Since 2024, private sector diagnoses counted alongside public data, a change that favoured southern regions. In future, only diagnoses linked to publicly funded services such as vouchers would qualify.
The government would also scale back permanent transition equalisation payments, which were designed to smooth the shift from the former municipal system. Helsinki currently receives about 120 million euros each year through this mechanism despite a surplus in its health services. The reform would reduce, but not remove, such payments. Officials said a full removal would threaten the finances of some regions that rely on the adjustment.
The Ministry of Finance said the reform preserves the basic structure of the funding model to maintain predictability. Anna-Kaisa Ikonen, Minister for Local Government and Regional Affairs, said only limited changes would be made to the needs-based model at this stage.
“The regions asked for stability,” Ikonen said. “Future development should better reflect total service need, including remote consultations and maternity clinic visits, but the current data does not yet support that.”
Ikonen said a separate review would examine longer-term options, including alternative needs models and incentives linked to effectiveness.
The proposal also lowers the share of projected service need growth that the state will fund. From 2027, funding would cover 60 percent of estimated growth instead of 80 percent. A temporary uplift applied in recent years would end in 2028. The savings would apply across all regions.
The reform gives the National Institute for Health and Welfare and the Ministry of Finance new powers to correct errors in diagnosis data that influence funding decisions.
The draft also introduces an updated definition of archipelagic welfare regions, linked to reforms of the Archipelago Act. This would increase funding for regions with island geography, including parts of eastern and western Uusimaa.
The legislation would reach parliament in April, with final figures updated once regional need coefficients for 2027 are confirmed in March.
HT