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Health systems in transition Latvia Whereas higher-income individuals sometimes make use of voluntary insurance to cover user charges and/or the “purchase” of shorter waiting times, or services in the private sector, this option is not available to low-income people. Another factor that reduces access to services for some groups includes geographical distances from services, including even primary care services, due to geographical imbalances in service distribution throughout the country. For low-income individuals, this imposes the additional costs of transportation. Further, for people with special needs, there are virtually no special provisions facilitating their access to health care services (or services in general). Implementation of the Master Plan (discussed extensively in previous chapters) aims to rationalize the geographical distribution of primary, secondary and emergency facilities throughout the country, and should help to lessen problems of access to services due to geographical barriers. The problems of access due to the financial barriers imposed by poverty and user charges, as well as long waiting times due to budgetary insufficiencies, are more intractable, and require seeking out solutions over both the shorter and longer terms. Economic growth over the longer term will help increase budgetary resources that will ease some of the current financial constraints. Over the shorter term, immediate attention and efforts to resolve the problem of the “leakage” of significant amounts of tax revenue from the Government’s budget would help increase the health care budget (as well as all other budgets). In addition, attention should focus on the reduction of health system inefficiencies as far as possible, since improvements in efficiency (i.e. achieving the same result for a smaller financial outlay) is in effect equivalent to increases in financial resources (this issue is discussed in more detail in the paragraphs that follow). Equity in financing is associated with the concept of vertical equity, interpreted to mean that individuals who differ with respect to income levels should be treated differently, i.e. higher-income people should be expected to pay more than low-income individuals. The more progressive a payment system (such as taxation), the greater the degree of vertical equity. Therefore, a progressive tax system offers the potential for greater vertical equity than proportionate taxation, while OOP payments, which are regressive, provide the least amount of vertical equity. The majority of funds for the health budget come from general tax revenue, which is based on a system of proportionate taxation of personal income and company profits, as well as a series of indirect taxes (VAT, excise taxes, etc.), all of which are by their nature regressive. A limited degree of progressivity may be said to apply to the system of personal taxes, in view of certain deductions per taxpayer and dependants that lower the taxable income; however, on balance 233
Health systems in transition Latvia the overall tax system in Latvia is not particularly progressive, and contains several elements of regressivity. In addition, a significant part of health financing in Latvia comes from OOP payments, which, as noted above, are regressive. Here, too, it should be noted that the degree of regressivity is lowered by the presence of exemptions for vulnerable groups from having to pay user charges for services, as well as the presence of a growing list of reimbursable pharmaceuticals. 8.3 Efficiency of resource allocation in health care The term “allocative efficiency” refers to the notion that society’s resources are being used in such a way that they best satisfy the population’s needs and wants. In the case of the health sector this is interpreted to refer to the idea that the allocation of resources between the various levels and types of care is consistent with what is in society’s best interests. In Latvian health care, there are a number of indications that there is room for improvement in allocative efficiency. At the same time, a number of measures have been taken or are being discussed, that can be expected to lead to the needed improvements in resource allocation. First, there is a very high proportion of resources that are allocated to inpatient care. Some improvements have already been made towards addressing this problem, through the emphasis that has been placed since the beginning of the reforms on the development of primary care and the system of family doctors, so as to shift the focus of care to the primary care level. In addition, the Master Plan, by attempting to rationalize the structure of services, is focusing on reallocating resources so as to optimize service provision in primary, secondary and emergency facilities in accordance with geographical and population distribution needs. Even prior to the Master Plan, results were already visible in the huge reductions of hospital bed numbers, achieved through small hospital closures or conversions to day care or long-term care centres. More is needed in this respect, as day care and long-term care facilities are currently insufficient, and acute hospitals still sometimes cater for low-income or elderly people in need of long-term or home care facilities, although to a lesser extent than in earlier years. Further, there is still strong emphasis on inpatient mental care, as outpatient facilities are not yet sufficiently developed to cover needs; and the available facilities for rehabilitation, palliative care and social care similarly need to be 234
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