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Health systems in transition Latvia These Regulations specify that the HSMTSA is responsible for assessing and approving medical technologies. “Regulations of the Cabinet of Ministers on Establishment, Fulfilment and Maintenance of the Medical Persons Register” (2005) These documents stipulate that all health sector workers must report to the Register within one month following initiation of their professional activities. “Regulations of the Cabinet of Ministers on Reimbursement System of Pharmaceuticals and Medical Devices” (2006) These Regulations redefine the principles of reimbursement, and determine a reference pricing system in pursuit of cost-containment in the pharmaceuticals sector. Policy process and reform implementation A significant part of the Latvian health care reform process of recent years has been organized and driven by a World Bank “Health Reform Project”, agreed between the World Bank and the Latvian Ministry of Welfare in 1998, and involving a loan of US$ 12 million and additional financing of approximately US$ 5.5 million (with cost overruns of approximately US$ 2.5 million). Additional partners in the project have been the Swedish International Development Agency and the SCHIA. The project was intended to support the Government of Latvia to implement a long-term restructuring strategy in the health services sector. It was to be carried out in two phases. Objectives for Phase I included policy reforms, institution building and skills development in health financing, health investment policy, reform of PHC, restructuring of the hospital sector, and the development of effective public health programmes. Phase II was to support a Consolidated Health Investment Programme by directly financing investments in the implementation of health services restructuring, according to a Master Plan. Phase I of the project was completed in 2004. Phase II did not materialize for political reasons. However, the Master Plan was implemented with the use of internal financing, rather than through World Bank financing. The implementation of the Master Plan is discussed in Section 7.2 Future developments. Most of the reforms discussed in the following sections were undertaken either as part of the World Bank project, or were strongly influenced by it. 219
Health systems in transition Latvia Health care financing • Development of a “single pipe” health financing mechanism (as it has been termed by the World Bank). This refers to health care financing centralization that occurred through two simultaneous processes: (a) the gradual dismantling of the regional “sickness funds”, the activities of which were taken over by the SCHIA, which began to operate as a single pooler of funds for health care, together with its territorial branches; and (b) the channelling of nearly all funds for health care through the SCHIA (involving the elimination of direct budget transfers from the Ministry of Health to state agencies and special health programmes). • Introduction of DRG or Price–volume–quality (PVQ) payments for hospital services. Hospitals are currently paid on the basis of a combination of casebased payments by diagnosis group, a per diem payment, and additional payments for medical and surgical interventions. Prospective payments based on DRGs are in the process of being developed. • Introduction of PHC payment systems based on capitation and fund holding. Two pilot PHC models were introduced in parallel: one in Riga, and one in the rest of the country (the “rural” model). The main difference between the two models centred on who the fund holder was for specialists’ payments. In the Riga model, these funds were held by the SCHIA. In the rural model, GPs were fund holders of the full amount of funds designated for specialists, so that with each referral, money followed the patient from the GP to the specialists to cover all specialist services provided. Both models received intense criticism. In the Riga model, as GPs had no control over capitation funds intended for specialist services; they faced the incentive to minimize their work load by referring patients to specialists. The result was that waiting lists for specialist services significantly increased. In the rural model, GPs faced the incentive to provide as many services themselves so as to minimize referrals to specialist services and retain as much as possible of the funds themselves, possibly at the expense of the health of the patient. • As of January 2006, following the “Regulation of the Cabinet of Ministers of 2004 on Organization and Financing of Health Care” and its amendments in 2005, a single PHC payment mechanism was introduced for the entire country. Its development was based on lessons learned from the two pilot projects. According to the new system, the GP is a gatekeeper and fund holder for capitation funds; however, these are much smaller and cover far fewer interventions. In addition, some measures have been introduced by the SCHIA to ensure stability in terms of GP revenue, and to strengthen GP gatekeeping. All procedures that can be carried out at the primary care level are determined by the abovementioned Regulations of 2004. 220
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