Latvia

Health systems in transition
Latvia
outpatient care and dental care) and prescription pharmaceuticals. The volume
of territorial (geographical) allocations is based on the size of the respective
populations. Territorial branches are responsible for covering all costs including
patient “cross-border” flows.
Both the Central Office of the SCHIA and the territorial branches plan and
allocate resources for the purchase of respective services, for the most part on
the basis of historical precedent. In addition, the territorial branches allocate
resources for cross-border flows; in fact, mainly to the territorial branch of
the capital, Riga City, where most of the expensive diagnostic and treatment
services are provided.
The volume of the annual health care budget depends on whether a political
decision is made by Parliament to amend the law dealing with the state budget;
this may occur once or twice per year.
3.6 Purchasing and purchaser–provider relations
Historically, the Latvian health system was based on the principles of the
integrated Semashko model of service financing and provision. The health
sector was publicly financed and all levels of service provision were planned
and centralized. The reforms of the 1990s splitting the purchasing and providing
functions aimed to create incentives for more effective management. This was a
2-step process initiated in 1998 and resulting in establishing in 2004 one single
central state purchaser agency.
New payment mechanisms were introduced, together with a series of
changes from an integrated to a decentralized health sector model, including
institutionalizing a purchaser–provider split, changing ownership of provider
institutions, and giving greater autonomy to provider institutions to manage
their budgets.
Although the purchaser–provider split was intended to proceed further and
eventually develop into a social insurance system consisting of autonomous
purchasers that would collect insurance contributions and organize services,
these reforms never materialized. The main reasons for this included the overall
scarcity of financial resources in the health sector, expected administrative
difficulties in rearranging the system of public revenue collection, as well as
the expected increase in administration costs, all of which prevented reformers
from undertaking radical activities.
Following the recent organizational changes, the current model of service
provision is based on contracting between the SCHIA (which acts as a principal
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