Web-economic-crisis-health-systems-and-health-web

Chapter 6 | The impact of the crisis on the health system and health in Latvia
183
• increasing the elasticity of the labour market by supporting employment
(including training) of the temporarily unemployed;
• facilitating investment, including maintenance of investments in state
financed and supported programmes;
• ensuring the availability of financing for activities related to the restructuring
of the national economy, particularly for programmes co-financed with EU
structural funds under conditions of “frozen” (i.e. severely constrained)
credit resources;
• stabilizing the financial sector: provision of state aid to, and intensified
supervision of, credit institutions in order to strengthen their reliability and
performance; and
• maintaining social security measures to support the socially most vulnerable
groups.
Health care was mentioned explicitly in Latvia's Economic Stablization
and Growth Revival Programme as one of the sectors where cuts to public
administration would be made (Cabinet of Ministers, 2008, p. 3). The health
sector was further singled out in the Letter of Intent signed with the IMF:
“We have approached the World Bank to seek technical assistance on the
comprehensive reforms of the education, civil service, state administration and
the health care systems that we will launch in 2009. Once completed, these
could eventually deliver annual savings of about 2% of GDP, including staff
savings that will commence in 2010” (Government of Latvia, 2008, p. 10).
Between 2008 and 2011, significant budget consolidation measures were
implemented, translating into a cumulative fiscal adjustment of 16.6% of
GDP over that period (Ministry of Finance, 2013a). These measures included
the following.
Cuts in public sector expenditures. This included the health sector and the
Ministry of Health's budget dropped by 12.6% in 2009 (to LVL 503.7 million)
and by 1.5% in 2010 (to LVL 496 million) (Ministry of Health, 2012) along
with a minimum 10% cut in prices and an average 20% cut in the salaries of all
health workers in 2009 (van Ginneken et al., 2012).
Increases in tax rates. In 2009, there were increases in the the rate of VAT
(from 18% to 21% and from 5% to 10% for goods with a reduced tax rate,
including pharmaceuticals and medical devices). In 2011 the VAT rate increased
to 22% (to 12% for goods with a reduced tax rate) and was reduced back to
21% in July 2012 (no change for goods with a reduced tax rate). Excise tax on
alcohol, tobacco and fuel also increased (rates vary depending on the amount
purchased). The personal income tax rate was reduced from 25% to 23% in
2009, increased to 26% in 2010, and then reduced again to 25% in 2011 (and
to 24% as of January 2013) along with an increase in the social insurance tax
from 33.09% to 35.09%.