The wide-reaching reform has been a hard fought struggle over a decade and has divided successive governments.
Sipila called the failure of the reform “a major disappointment”.
Sipila has since 2015 headed a coalition made up of his Centre Party, the conservative National Coalition, and the eurosceptic Blue Reform party, a moderate faction spun off from the far-right.
The three parties were unable to agree among themselves on the package, an area Sipila had made one of his top priorities in office.
The proportion of over-65s in the Nordic country, which has a population of 5.4 million, is expected to reach 26 percent by 2030.
Among the reforms being discussed were a centralisation of services into new regional healthcare authorities — which would take over from the current local municipalities — and the use of more private health care providers, a subject of heated debate.
But the coalition partners were unable to agree on issues such as how much the system should be opened up to give patients freedom of choice, among others.
Sipila threw in the towel when it became clear the government would not be able to submit a proposal to parliament before the election scheduled for April 14.
“My government works on a ‘results or resign’ principle. I am a man of principle and in politics you have to carry responsibility,” Sipila told reporters, adding: “I am taking my share of responsibility.”
Trailing in polls
President Sauli Niinisto said he had accepted the government’s resignation and asked it to continue on a caretaker basis until a new government has been appointed.
Politicians in Finland were split on Sipila’s decision to resign so close to the election.
The head of the opposition Social Democrats, Antti Rinne, told public broadcaster YLE he thought it was an odd move.
But a member of the parliamentary committee on health and social affairs, Veronica Rehn-Kivi of the Swedish People’s Party, called it a “victory” for the welfare state and individual citizens.
The Social Democrats have been leading opinion polls in the run-up to the election, with Sipila’s Centre party trailing in third place at around 15 percent.
A programme of austerity cuts and tighter benefits rules during his administration has been unpopular in a country where the welfare state is a cherished national asset.
