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Chapter 7
The impact of the crisis on the health
system and health in Lithuania
Gintaras Kacevičius and Marina Karanikolos
Introduction
In 2009, Lithuania faced a deep financial crisis. GDP fell by 15% and
unemployment more than tripled in one year. In response, the government
implemented strict fiscal consolidation measures. Public funding for the
health system was partially protected from large reductions in SHI revenue
thanks to counter-cyclical mechanisms that were in place before the crisis and
strengthened in response to the crisis. Cuts to health services were tailored to
try and increase provider efficiency in the short run. Over a longer period,
however, they could lead to cumulating deficits and, therefore, needed to be
supported by a shift in service provision towards prevention, primary care and
outpatient settings. Through carefully implemented reforms, the health system
was able to lower spending on pharmaceuticals without damaging access, even
under crisis conditions.
1. The nature and magnitude of the financial and
economic crisis
1.1 The origins and immediate effects of the crisis
The financial crisis impacted severely on Lithuania's economy in 2009 when
GDP fell by nearly 15% in comparison to the previous year, and unemployment
increased from 4.4% in 2007 to 18% in 2010 (Fig. 7.1 and Table 7.1). One
of the major reasons that left Lithuania vulnerable to the economic shock was
the expansion of banking sector loans, mostly for real estate, which caused a
property bubble that subsequently collapsed. The large growth in banks' loan
portfolios during the previous five years was unprecedented: between 2003 and
2008 the annual increase in the total Lithuanian commercial banking system's