Latvia

Health systems in transition
Latvia
that engaged in contracting with providers. However, these sickness funds
were never financed through earmarked social insurance contributions; at all
times throughout their short existence they received their finances from state
budgetary sources. Although the change from tax financing to social insurance
financing was discussed, it did not receive enough support and commitment
among the reformers, and the idea was therefore abandoned.
Moreover, it soon became evident that small decentralized sickness funds
had a limited capability to meet efficiency requirements. The main risk areas
were inpatient care and expensive diagnostic examinations. A solution was
therefore sought in the successive merger of sickness funds, eventually resulting
in a single centralized purchaser for the entire country, the SCHIA, with its five
territorial branches (for more information on these developments see Section
2.3 Decentralization and centralization).
The other major reform activity in the area of financing involved the
introduction of OOP payments in the form of patient fees for appointments with
doctors providing statutory services (1996). Shortly afterward co-payments for
specific services were introduced and in subsequent years user charges evolved
into a fairly complex system of patient fees plus co-payments. This coincided
with the development of VHI programmes, which were initially only sold to
cover various combinations of user charges.
According to data reported to the SCHIA (shown in Table 3.2), the main
revenue source for the health care system in 2004 was general taxation at
central and municipal levels, contributing approximately 75%. The second
most significant source, with a contribution of more than 20%, was household
OOP payments for health care in the form of formal user charges and VHI.
Revenue was also contributed from additional charges, such as hotel facilities.
Formal user charges, including OOP payments and payments in the form of
VHI contributed 4.4% of the total revenue (VHI pays for 34% of user charges).
Local governments have very limited financial resources from local government
taxations through the levying of charges for supporting health care; however,
as owners of health care institutions, they are interested in sustaining the
attractiveness and competitiveness of local providers.
However, these figures have to be interpreted with great caution. First,
they do not refer to revenue for total health care, but represent those that are
reported to the SCHIA. These figures therefore exclude the revenue share for
the programmes that are financed through direct budgetary transfers. Second,
the national data presented in Table 3.2 differ from WHO estimates presented
in Table 3.1, Fig. 3.5 and Fig. 3.6, which show OOP payments to have been
approximately 48% in 2004. It should be noted that private expenditure on
It is estimated that approximately 96% of the total health budget is administered through the SCHIA, leaving
only approximately 4% to be allocated through direct budgetary transfers.
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