Latvia

Background

Healthcare in Latvia was extensively decentralised in the early 1990s, with a view to developing competition. Responsibility for healthcare provision was devolved to municipalities and responsibility for funding was assigned to 32 regional funds. However, fragmenting funding made rationalisation difficult, and strategic spending awkward. Meanwhile, the purchasing power of local funds was small. Funds often found it cheaper to have patients treated in their own catchment area, which deterred inter-fund referrals, precluded competition and prolonged the over capacity of hospitals.

In light of this, financing was recentralised in 1997, and delegated to the newly established State Compulsory Health Insurance Agency (SCHIA).  The SCHIA transfers most of its budget to its 8 regional satellite organisations according to a specific formula. These regional branches then purchase services from local providers. The running of most primary and secondary care remains with municipal authorities. Some private sector providers have also emerged and gained their market share. Despite its name suggesting otherwise, the SCHIA is not financed from health insurance premiums, but from tax revenue collected by the ministry of finance. However, most of its budget comes from an earmarked fraction of the national income tax, which one could interpret as something close to a national health premium.

In response to a funding problem triggered by the banking crisis in the mid-1990s Latvian authorities introduced co-payments. In 1997 it was a flat rate of a 25%, which was too high to have the desired result: patients would either refuse to pay, or be unable to pay. Therefore, the co-payment was lowered to 20%, although it continues to remain one of the highest in the EU.

Recent years

After the lessons learned from its previous reforms, in 2006 Latvia introduced a single primary healthcare mechanism, in which the general practitioner acts as a gatekeeper and fund holder for capitation funds. Moreover, co-payments were eliminated with the goal of making the entire system less confusing for patients and medical staff. However, in order to maintain overall user charges, user fees increased.

Most reforms that were implemented between 2001 and 2006 were targeted towards the overall efficiency and quality of care. The lack of change in governing power facilitated the smooth implementation of reforms during these years. One measure delegated more money towards public health issues such as HIV control and mental health. Another established minimum salaries for doctors. Further reforms increased out-of-pocket payments for medicine, but also boosted the overall pharmaceutical budget.

Current situation

Plans for future reforms are focused on consolidating the changes that have already been introduced and further improving efficiency, access and quality of care. However, some challenges still remain, the most significant of which is the heavy reliance on out-of-pocket payments, making health care services and medications unaffordable for a significant fraction of the population. The 2009 budget cuts mean that the public healthcare budget is restricted in order for the health minister to tackle the current economic recession. The cut risks affecting the quality and accessibility of healthcare, hence some major structural changes will be necessary, including reorganizing healthcare agencies.

Latvia statistics