Lithuanian healthcare system financing model: is it outdated?


2022 12 30


When we talk of the Lithuanian healthcare system, there is sure some room for sarcastic comments. The healthcare system is continuously thrashed for being the most corrupt and underfunded area of the public life, which meets the expectations of neither medical staff, nor the patients. In other words, it's far from perfect. And although the funds in the Compulsory Health Insurance Fund (CHIF) keep increasing, it doesn't really help: patients keep sitting in lines to get to the doctor and there’s a constant lack of proper attention to various areas of healthcare. So there’s no wonder that the situation calls for finding a culprit. Could it be the financing model of the Lithuanian healthcare system?

The model, chosen by the majority of states

After the collapse of the Soviet Union, the former socialist states of Central Europe, including the Baltic countries, adapted the experience of the Western European states, creating their own health care systems and picking their financing models, assisted by experts from international organizations. The absolute majority of these countries, with the exception of Latvia, where health care is financed from general taxes, have chosen a social health insurance system, where funds collected from contributions and allocations from the state budget are accumulated in a single fund, and the institution that administers it is responsible for paying for health care services. Two countries – the Czech Republic and Slovakia – have adopted the German model with a system of competing health insurance funds.

The financing model, chosen by Lithuania, turned out to be transparent, ensuring clear accountability, financial sustainability and requiring the least administrative costs, which is why the European Regional Office of the World Health Organization (WHO) keeps offering it to countries just introducing their new health insurance systems. By the way, the number of health insurance funds has been gradually decreasing even in the Czech Republic and Slovakia, while the majority of the population is covered by their countries’ main public fund (for example, the number of funds in Slovakia in 1995 was 13, while currently there are only 3 and 60 per cent of the population is covered by the public fund).

The procedure of payment for healthcare services

Lithuanian healthcare system is not isolated – it has been developed with the assistance of experts from the Organization for Economic Cooperation and Development (OECD), WHO, also by sharing the good experience with health insurance institutions of other countries. Paying for healthcare services, countries apply the method of agreements with healthcare providers, using the same mechanisms for healthcare cost management with the major one being the annual budget caps.

All countries have limited healthcare resources, while the costs keep increasing, mainly due to increasing prices of technology, medicine, also ageing population and people often having more than one chronic disease, so countries (including Lithuania), do their best to use them as efficiently as possible, constantly monitoring the costs and searching for new ways to cover healthcare services.

While improving the payment system, European Union (EU) countries implement various pilot funding projects, but the main payment methods remain the same – capitation fee, fee for service, payment per case, and pay for performance. All of these payment methods without exception are also applied by our own National Health Insurance Fund (NHIF) under the Ministry of Health.

‘On the other hand, we keep searching for ways to connect the payment system not only with the institutional activity, but the value, created for the patient – this involves analysing practical examples in other countries and we’re planning to keep improving the payment methods, used in Lithuania.’ said NHIF Director Gintaras Kacevičius.

The suggestion to cover a part of the healthcare costs from an additional health insurance is not new, but the market share of this type of insurance not only in Lithuania, but also the majority of the EU is small, covering only 1-2 per cent of the healthcare costs. The role of the additional health insurance plan in various European countries has been illustrated by data, provided at OECD’s Health at a glance 2022, stating that, in 2020, it’s gained a substantial role only in Slovenia (13 per cent of all healthcare costs).

The compulsory health insurance system adopted in Lithuania is based on the values and principles of universal coverage, justice and solidarity, agreed upon by all EU states in the conclusions of the EU Council in 2006.

Third largest budget keeps growing

In thirty years, the CHIF budget has grown from 379 million euro in 1997 to 3 billion euro in 2023, which means that it has grown 7 times throughout the entire period. CHIF covers the entire healthcare system in Lithuania, including medicine, medical aids, preventive health programmes, and assistance to Lithuanian citizens that fell ill in other EU countries.

30 years of experience has shown that the Lithuanian compulsory health insurance model ensures consistent growth in the quality and diversity of health care provided to the insurance-covered population, sustainability even in the face of regional or global financial crises, and transparency and efficient administration of CHIF funds.

However, keep in mind that the Lithuanian public sector’s expenditure on health care is one of the lowest in the EU, i.e. we stand among countries that allocate the smallest share from their gross domestic product to healthcare.

On the European scale, Lithuania ranks 19th in terms of the GDP percentage, spent on healthcare. Countries spending on healthcare less than Lithuania (5.5 percent from the GDP) include only Bulgaria (5.4 per cent), Hungary (5.3 per cent), Romania (5 per cent), Poland (4.8 per cent) and Latvia (4.7 per cent). In addition to that, Lithuania stands fifth from the bottom in the EU according to another important indicator – 30 percent of the health system costs are covered by households. WHO recommends to keep this index under 15 per cent, thus the state is constantly looking for ways to reduce this burden on the residents.

The European Commission and WHO state that the health sector is an investment sector that brings not only significant benefits to the quality of life, but also financial returns to the state. Despite the recommendations of authoritative institutions, Lithuania chooses to allocate one of the lowest percentages to healthcare in the entire EU.

‘The current public sector’s spending on healthcare heavily relies on an efficient and rational administration of these funds: making sure that every euro in the budget of the Compulsory Health Insurance Fund is used as purposefully as possible and brings the greatest benefit to the patient, requires quite some effort.’ says NHIF Director Kacevičius.

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The NHIF invites you:

Your questions are welcome by email [email protected] or phone: local (8 5) 232 2222, international +370 5 232 2222