Latvia

Health systems in transition
Latvia
earmarked portion of centrally collected income tax (28.4% of personal income
tax revenue) plus a state subsidy financed by general tax revenue.
A process of further “recentralization” was initiated at the end of the decade
and ended in 2004. As part of this process, the eight regional sickness funds were
merged into one single central state agency, the SCHIA, with its five territorial
branches and unified allocation, payment and control mechanisms. The health
care funds were allocated from the central government budget (much like a taxfinanced
health care system) to the SCHIA. Moreover, health budget funds that
were previously allocated from the Ministry of Health directly to certain state
agencies and health programmes began to be channelled through the SCHIA.
In 2004, the earmarked payroll tax for health revenue base (28.4% of personal
income tax revenues) was abandoned. The new system began operating in full
in January 2005.
The gradual centralization of financing was prompted by high levels of
patient dissatisfaction, along with the perception among policy-makers that
a decentralized system operating in Latvia’s relatively small territory and
serving a small population gave rise to excessive inefficiencies in resource
use and allocation. The need to save on public resources through more rational
organization of financing was especially pronounced in view of serious funding
shortfalls in health care relative to health care needs and demands, highlighting
the need to address organizational weaknesses and failures and unnecessarily
complicated payment methods.
In 1997, the local health boards were disbanded. Not all local governments
had a representative responsible for health. This has contributed to weakening
the position of health in the local government agendas, and has had a negative
impact particularly in the area of investment and infrastructure development,
which could have been financed from municipal budgets.
Other centralization tendencies
Centralization tendencies are also evident at the service provider level. For
instance, in the 1990s and at the start of the new millennium, hospital directors
were free to make decisions on wage levels within their hospital. Very often,
however, payments for the purchase of new technologies, or for infrastructure
costs, were given priority over the payment of adequate salaries. Now, minimum
salary levels according to specialties, position, seniority, etc. are established
and regulated by the State.
A special example of centralization is the “Master Plan for the development
of outpatient and inpatient health care service providers”, involving planning at
the central level for the entire country in order to rationalize the distribution of
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