Health Payment Center

The reform on health care funding was proposed in 1993, the aim of which was to pass over from planning and financing medical institutions in accordance with cost estimate principles during the years of socialism to payment for the job accomplished. The very first task of Ministry of Welfare was to come up with the structures which would have ensured the realization of the reform, as well as which would have paid for the health care services provided by medical institutions.

On 8 December, 1992 the Council of Ministers of the Republic of Latvia in accordance with the regulations Nr. 519 “Concerning the changes in the funding of the health institutions operating under the management of the local authority of the city of Daugavpils” asked Ministry of Welfare to develop and confirm the set of documents needed for the operation of Payment pay office, coordinating the latter with Ministry of Finance. At the meantime, also the regulations issued by the Cabinet of Ministers were signed concerning the establishment of the territorial Payment pay office in the city of Daugavpils and its district.   

The given decision is thus considered to be the very beginning of the reform process, and on 25 March, 1993, the minister of welfare Teodors Enins signed the order concerning the establishment of the Central Payment pay office of the Department of Health of Ministry of Welfare, the task of which was to conduct the system of financial reform of health care managerially and methodologically throughout the whole country.

Thus, the 25 March, 1993 can be viewed as the historical beginning of the formation and development of Health Payment Center.

On 25 March, 1993 upon the establishment of the Central Payment pay office of the Department of Health of Ministry of Welfare, practical work was begun in order to develop evaluation criteria for health care and formation of new principles concerning wages. The proposed strategy was enhancement of health care in the country, as well as provision of both available and qualitative medical care to all residents of the country, without reference to their social position or their dwelling place.

It is essential to point out that the first Health Payment pay office’s brochure was issued by the Health Department of Ministry of Welfare in July 1993, “Reform on health care financing system. Programme and methodology.” In the mentioned brochure, the conception of the reform, as well as the then available documents for its realization were described for the very first time. The present conception supposed to establish and further develop the Payment pay office in the country and turn medical institutions into independent companies till the time the law “Concerning health care tax” comes into force, and alongside with the adoption of the law, to begin compulsory health insurance in the country.

Due to the fact that a part from the income tax was marked for the budgetary funds prescribed for health care at that time, which all ended up at the disposal of local governments of the regions and cities of the Republic, it was not possible to manage without those local governments being involved. Alongside with the establishment of Central Payment pay office by the Health Department of Ministry of Welfare, also the establishment of first Payments pay offices was begun in the regions and largest cities of Latvia. Their task was to further develop the record keeping, data processing and analysis carried out by health care institutions, as well as carry out payments with medical institutions. Among the first cities which began the afore-mentioned activity were Daugavpils and Jelgava cities, Daugavpils, as well as the regions of Limbazi, Riga and Jelgava, which in total encompassed territories with 480 thousands of residents.       

It has to be said that the establishment process of Payment pay offices was rather slow. Among the main reasons were as follows: time-limits for the establishment of Payment pay offices were not clearly determined, lack of understanding and even counteraction among the participators involved in the reform - medical institutions and boards of the country’s regions, boards of the country’s local governments and even doctors themselves, as a consequence in the year of 1994 Payment pay offices encompassed only 62 % from the total population of the Republic. In order to find a solution to the present situation and realize the planned reforms, the document was signed by state minister of health Peteris Apinis in March 1995, which stipulated that till 1 January, 1996 all regions of Latvia had to establish sickness insurance funds.    

Payment pay offices became sickness insurance funds of local governments, but the Central Payment pay office of the Health Department of Ministry of Welfare became the State sickness insurance fund. The State sickness insurance fund was the institution subordinated to Ministry of Welfare. The role of the State sickness insurance fund was exactly to organize the execution of payments with all operating sickness insurance funds, to set up the prices for health care services, criteria for medical evaluation and the methodology of its implementation. The state sickness insurance fund was established to become the real administrator of health care budgetary funds in the country.

In the year 1996, there were 32 territorial sickness insurance funds in the country, the largest part of which were operating as nonprofit making organizations of local governments. Also, there were 3 branch sickness insurance funds – the sickness insurance funds of Ministry of the Interior, as well as sickness insurance funds of Mariners and Railroads.

Indeed, 32 sickness insurance funds was a large number, which caused a lack of uniformity in the structure. The residents were tied down to their territories and thus it was rather difficult to get transferred in order to undergo treatment cure in any other territory (for instance, in Riga). There were payments among the operating funds, which considerably raised the cost for the monitoring of budgetary funds and also encumbered the planning process. In order to optimize the system of health care services and establish one single service structure at the regional level, the process of consolidation of territorial sickness insurance funds was begun in regional sickness insurance funds. The regulations Nr. 360 issued on 21 October, 1997 by the Cabinet of Ministers “Regulations for the establishment and operation of sickness insurance funds” stipulated that one sickness insurance fund can encompass a unitary territory with the amount of residents being not less that 200 thousands. It has to be taken into account that at that time health care budgetary funds were registered in the state budget as a separate programme and thus local governments no longer had any say in the matter.         

In the year 1998, the State sickness insurance fund was reorganized into the State central compulsory health insurance fund of Ministry of Welfare. The statute of the mentioned institution was confirmed by the Cabinet of Ministers on 12 May, 1998, and its task was to provide, from the State capital budget and the special budget of the State, payments for the organization of health care services provided by medical institutions by means of signing agreements with sickness insurance funds, as well as carry out the monitoring and control concerning the implementation of budgetary funds.

In the process of consolidation of sickness insurance funds, local governments had to agree upon which local governments were going to establish one single sickness insurance fund, in which there will be the regional centre, and who will be appointed into the board of the present sickness insurance fund. Personalias and questions concerning mutual collaboration played a big role. At the beginning of 1998, 6 sickness insurance funds were established in the country – nonprofit making organizations of local governments – sickness insurance fund of Daugava, conjoint sickness insurance fund of Latgale, sickness insurance fund of Pieriga, sickness insurance fund of Riga region, sickness insurance fund of middle Latvia and North-Eastern sickness insurance fund. Local governments in the following two territories of Latvia could not agree upon the establishment of sickness insurance funds in accordance with the regulations issued by the Cabinet of Ministers – the sickness insurance fund of Rezekne and the sickness insurance fund of Kuldiga. The agreement of authorization was thus concluded between the afore-mentioned sickness insurance funds and the state central compulsory insurance fund, the agreement of authorization referring to the execution of the minimum of health care services.  

On 3 March, 1999, on the basis on the State budget institution “State compulsory health insurance central fund” was established a nonprofit making organization, State joint-stock company “State compulsory health insurance agency”. Its founder and owner of the capital was the State. Ministry of Welfare was the owner of a part of the State capital. The aim of its operation was left unchanged – to administer the State compulsory health insurance budgetary funds within the framework of state delegated functions.    

In order to find a solution concerning those territories, the local governments of which could not manage to come to an agreement about the establishment of sickness insurance funds in accordance with the regulations issued by the Cabinet of Ministers, the State compulsory health insurance agency (hereinafter referred to as - Agency) began negotiations with the local governments and sickness insurance funds of Rezekne and Kuldiga in order to deal with the present situation and find a solution. As a result of the negotiations, on 29 December, 1999 two branch offices of the Agency were registered in the Enterprise Registry of the Republic of Latvia – “Sickness insurance fund of Kurzeme” and “Sickness insurance fund of Zemgale”. Consequently, the Agency started the year 2000 as a state joint-stock company with two legally sustainable branch offices, alongside with that the volume of the functions realized was considerably increased, as well as the amount of persons working for the Agency was also increased. 

The process of centralization was continued also in the following periods of its development. In the year 2001, the conjoint sickness insurance fund of Latgale joined the Agency, and starting from 1 April, 2001 there was the third branch office named “Sickness insurance fund of Southern Latgale” operating within the structure of the Agency.

Substantial changes in the activity of the Agency were planned to be introduced due to the realization of the health care project of World Bank in Latvia. In the year 2001 an international competition took place concerning the establishment of information system of the management in health care, the responsible institution for which was the Agency which was responsible for the realization of the project at the expense of World Bank. On 1 March, 2002, the Agency signed the agreement concerning the introduction of the information system of the management in health care with Ministry of Welfare and the winner of the competition Limited Liability Company “Fortech and Sem group”. The project on information system of the management supposed to establish the effective information and statistics system of health care in Latvia, which would be based on contemporary and up-to-date information technology database, coming up with a unified registry, classification system, as well as unified registration or accountancy of payments. Thus, the operative preparation and organization of information would be achieved.

On 31 March, 2002, the agreement with the local government’s nonprofit making organization “Sickness insurance fund of Riga Region” concerning the availability of medical services to the residents of the city of Riga was terminated, due to the afore-mentioned sickness insurance fund’s non-fulfilment of its liabilities with the Agency. In order to provide the availability of health care services to the residents of the city of Riga, the Agency established the Riga Department on 1 April, 2002.

Ministry of Health was established right after the 8^th elections of the Parliament (i.e. the 8^th elections of Saeima), the ministry which was legally established on 1 February, 2003, taking out and separating the functions related to health care policy from Ministry of Welfare.

In accordance with the law “Law on public agencies”, the Cabinet of Ministers on 1 October, 2002 issued the regulation Nr. 550 “Concerning the reorganization of the State nonprofit making organization “State compulsory health insurance agency” and the establishment of Health compulsory insurance state agency”.

Health compulsory insurance state agency, as a state institution monitored by Ministry of Health began its activity starting from 1 January, 2003. The branch offices of the Agency were reorganized into territorial departments of the Agency and till 1 July, 2003 the agency comprised four territorial departments – Riga Department, Kurzeme Department, Southern Latgale Department, as well as Northern Latgale Department. Optimizing the activity of the Agency, the management of the Agency made a decision to combine the Southern Latgale Department with Northern Latgale Department, thus establishing the Latgale Department, which began its activity on 1 June, 2003. The administrative center of Latgale Department was established in Daugavpils.

As a result of the afore-mentioned operations in the year 2003 the following sickness insurance funds were operating in the country - sickness insurance fund of Daugava,  sickness insurance fund of Pieriga, sickness insurance fund of middle Latvia, as well as North-eastern sickness insurance fund. The liquidation process of the sickness insurance fund of Pieriga was begun at the end of the year 2003, and starting from January 1, 2004 payments for health care services on the present territory were provided by the Riga Department of the Agency. 

After such reorganizations, the following situation was developed in the country: two different legal structures provided payments for health care services in the country’s regions – territorial departments of the Agency, which are the structural units of the Agency (operating in accordance with the statute of corresponding department and regulations issued by the Agency), and sickness insurance funds – institutions organized by multiple local governments (operating in accordance with the principles of nonprofit making organizations). Sickness insurance funds concluded the agreement with the Agency on provision of minimum health care services to the participators of their sickness insurance funds. Indeed, the system of those times was considered to be extremely complicated, even too complicated. The administration of the health care system had to be made simpler and more comprehensible to the country’s residents. In the year 2004 amendments were introduced into the legislation, and starting from 1 January, 2005 sickness insurance funds of local governments were liquidated.  

In the year 2005 the Agency was operating on the whole territory of the country. Five departments operated as the Agency’s representatives in the regions of the country – Riga Department, Kurzeme Department, Latgale Department, Vidzeme Department, as well as Zemgale Department. On 1 June, 2005 the following was confirmed: “The strategy concerning the average operational period of time for 2005 – 2009 of Health compulsory insurance state agency”, and on 30 June, 2005 the law on compulsory health insurance of the state Agency was signed.  

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