Robert Grundke
OECD Economic Surveys: Latvia 2026
Abstract
Health outcomes remain weak despite improvements since the 2000s, weighing on well-being and exacerbating labour shortages. Weak health outcomes stem from an underfunded public health system and unhealthy lifestyles, particularly among men. Waiting times in the public system are long and covered services are restricted, complicating access to healthcare for households that cannot afford private healthcare. This is particularly problematic for older people, as they often have poorer health and old-age poverty is high. To improve health outcomes, it is key to strengthen the financing and efficiency of the public healthcare system and promote healthier lifestyles. Continuing to digitalise the healthcare sector would help better target public funds to patient needs. This should be combined with further strengthening outpatient care and improving the attractiveness of healthcare professions. Continuing to raise health excise taxes would help reduce behavioural risk factors for preventable diseases.
Weak health outcomes weigh on well-being and exacerbate labour shortages. Although life expectancy has significantly improved since the 2000s, it remains among the lowest across the OECD, particularly for men (Figure 3.1). The number of expected healthy years at birth is the lowest across the EU, according to Eurostat data. This lowers well-being and has severe macro-economic implications, as the economy is suffering from labour shortages, and the population is expected to further decline until 2050. Improving health outcomes would enable experienced workers to work longer and reduce the number of sick leave days, thereby raising labour supply. It would also help to reduce unemployment, as poor health conditions are an important reason for being unemployed (OECD, 2022[1]). OECD calculations for Latvia show that increasing healthy life years by 3.6 years for men and 2.8 years for women on average, and thus allowing to raise employment rates of the older population, would increase GDP per capita by seven percentage points by 2050 compared to a scenario with fixed employment rates of the elderly (André, Gal and Schief, 2024[2]).
Life expectancy at birth, 2023 or latest available year
Source: OECD Health Statistics database.
Weak health outcomes are related to an underfunded public health system and unhealthy lifestyles, particularly among men. Waiting times in the public system are long and covered services are restricted, complicating access to healthcare for households that cannot afford to pay for private healthcare. This is particularly a problem for older people, as they tend to have poorer health status and old-age poverty is high (see Chapter 1). According to the OECD Health Statistics, mortality from treatable causes is among the highest across the OECD, which is related to poor diagnosis as well as late and low-quality treatment (OECD/EU, 2025[3]). Moreover, excessive alcohol and tobacco consumption and unhealthy diets lead to high mortality rates from preventable diseases, which are the highest across the OECD for men, and among the highest for women. To improve health outcomes, it is therefore key to strengthen the financing and efficiency of the public healthcare system and better incentivise healthy lifestyles.
More funding for the public healthcare system is needed to improve access to healthcare and its quality. Public spending on healthcare as a share of GDP, and also as a share of total public expenditure, is among the lowest across the OECD (Figure 3.2) (OECD, 2025[4]). Despite recent nominal spending increases, health spending is expected to remain at about 4.3% of GDP in 2027 according to budget plans. Except for emergency care and general practitioners, public funds are allocated to inpatient and outpatient care providers as quotas per year, limiting the number of patients that can receive health services and leading to long waiting times in the public system. In addition, the range of services covered by public funds is limited, particularly for dental care, physiotherapy and certain outpatient pharmaceuticals (OECD/EU, 2025[3]). At the same time, most healthcare providers also offer services for private payment, which is why many households opt to pay privately to shorten waiting times and receive specific services not covered by public funds. Out-of-pocket-payments as a share of total health expenditure are among the highest across the OECD (Figure 3.3), with out-patient care, dental care and medicines accounting for the largest share (OECD/EU, 2025[3]). Consequently, the private healthcare and health insurance market has grown strongly over the last decade, and about half of the workforce receives duplicative or supplementary health insurance through their employers. However, as poverty rates remain among the highest across the OECD (see Chapter 1), particularly among older people who tend to have poorer health status, many households cannot afford accessing private healthcare or insurance with sufficient coverage, contributing to high inequality in health outcomes and substantial unmet needs in dental and medical care (Figure 3.4) (OECD, 2025[4]). The share of households facing catastrophic out-of-pocket health spending, which is defined as being higher than 40% of annual net household spending, is among the highest across the OECD, and is particularly high among lower-income households.
Public spending for health, % of GDP, 2023 or nearest year
Source: OECD calculations based on OECD Health Statistics database.
Amid multiple spending pressures, more revenue is needed to improve the financing of public healthcare. The public system is mostly tax-financed, while social security contributions of 1% of gross wages are directed to finance healthcare services. Population coverage of public healthcare is universal, but a significant part of the workforce evades, at least partially, personal income taxes and social security contributions, as informality remains high (see Chapter 1). Restricting access to the full set of public healthcare services to formally registered employees and persons that voluntarily pay a defined contribution as well as vulnerable groups such as children, pregnant women, disabled persons and the unemployed, while maintaining free access to basic services including emergency care, as for example done in Poland, could help improve the financial situation of the public health system. It could also raise incentives to formalize work (see Chapter 1). In addition, health insurance contributions should be extended to retirees subject to an income threshold. Moreover, the requirement to deregister as a resident when living and working abroad for more than three months should be better enforced, for example by making consular services abroad dependent on a deregistration certificate. Currently, about 255,000 Latvian nationals, or about one fifth of the workforce, are living abroad, and many of them remain entitled to receive free public healthcare services as they are still registered in Latvia (Semyonova, 2025[5]).
Health expenditure by type of financing, % of total, 2024 or latest available year
Source: OECD Health Statistics database.
There is also room to slightly increase social security contributions for healthcare. Currently, employers already pay voluntary health insurance for about half of the workforce. This benefit is exempt from income tax and social security contributions up to EUR 750 per year. Assuming an average price of EUR 300 per year, based on market research of existing insurance offers, and an average gross wage of EUR 1800, these fringe benefit payments would be equivalent to the cost of raising social security contributions by about 1.4 percentage points. An alternative to raising social security contributions could be to raise the income threshold until which social security contributions have to be paid or raise the solidarity tax on higher incomes to finance public healthcare (see Chapter 1). Moreover, the government should consider phasing out the labour tax exemption of employer-provided health insurance to raise revenue for public healthcare.
Share of people aged 15 and over rating their own health as good or very good, by income quintile, 2024 or latest available year
Note: There are variations in categories used in survey questions across countries. This difference in response categories may introduce a comparative bias to a more positive self-assessment of health in those countries that use an asymmetrical scale (Australia, Canada, Chile, New Zealand and the United States).
Source: OECD Health Statistics database.
Better targeting public funds to patient needs could improve access to healthcare and health outcomes. Except for emergency care and general practitioners, public funds are distributed to healthcare providers as patient quotas at the start of each year, limiting the number of patients that can receive publicly funded healthcare. The allocation of quotas is based on the use of quotas in the last year and considers region-specific demographic changes but does not take into account more detailed data on healthcare needs of the population, for example demand by specialist, examination, treatment type or region. This ex-ante quota system helps to limit spending, as public health systems with universal coverage often suffer from recurrent overspending and require ex-post adjustments (OECD, 2024[6]). However, the allocation of patient quotas should be improved by better using patient data to identify the most urgent needs. So far, the e-health system includes mostly data on patients funded by the public system (see below), which is a problem, as patients with urgent treatment needs facing long waiting lines are likely to switch to private healthcare. Healthcare providers should be required to also include data on privately funded patients in the e-health system. This should be combined with strengthening primary care to better manage the flow of patients to specialists and inpatient care as well as other measures to use existing resources more efficiently (see below). Expanding the use of means testing, which is already applied to reducing co-payments for medicines, could also help to allocate public resources where they are needed the most.
Improving the attractiveness of healthcare professions and facilitating skilled migration are key for raising access to healthcare and its quality. The low number of practicing doctors and nurses hampers access to healthcare services and reduces treatment quality (Figure 3.5) (Schlenker, 2024[7]). This is mainly due to relatively low wages paid under the public funding system as well as difficult working conditions. Allocated quota payments per patient in the public funding system are based on outdated nominal values which are not linked to inflation. As a result, these payments do not cover real costs for many specialists and for inpatient care. Many healthcare providers are thus hesitant to provide public healthcare, which strongly limits supply, particularly in more remote regions outside Riga. Recent reforms have increased wages for doctors and nurses and introduced wage top-ups for family doctors and specialists in remote regions, which is welcome. However, improving the attractiveness of healthcare professions requires regularly updating public funding quotas per patient more generally to better reflect the real cost of service provision, as done in many OECD countries (OECD, 2024[6]).
Note: Panel B does not include physician assistants, healthcare assistants, practice assistant or nursing aides, which exist in some countries. There are 2,568 physician assistants in Latvia, equivalent to about 1.4 per 1,000 inhabitants, whose tasks can be similar to those performed by nurses.
Source: OECD Health Statistics database.
A recent reform has broadened the job profile of nurses and introduced a new career, which will raise attractiveness of the profession and allow to reduce workload of doctors. Moreover, rising wages and the increase in subsidised study places for medicine conditional on practicing in rural areas have contributed to an increase in the number of medical students and will likely reduce doctor shortages in rural regions in the future (OECD/EU, 2025[3]). However, given that a large share of doctors and nurses will retire during the next few years and since educating students takes time, the government should also consider facilitating skilled immigration of health professionals. Simplifying and accelerating recognition procedures for foreign qualifications and lowering language and other restrictions upon entry, while requiring passing language exams after a certain time period, could help to reduce labour shortages in the health sector. Continuing to improve wages and working conditions remains key to reduce high outmigration of young Latvian doctors to other EU countries or the United Kingdom.
Measures to raise spending efficiency, including through digitalization of the healthcare system, hold large potential to obtain better health outcomes with existing resources. According to OECD calculations, life expectancy could be increased by about 7% if the allocation of existing resources in the healthcare system is improved to match the allocation in best performing countries (Figure 3.6).
Latvia has significantly accelerated the digitalization of its healthcare system in recent years, consolidating a fragmented IT system and introducing the e-health system, which all healthcare providers and patients can access. The recently introduced mandatory submission of laboratory test results for publicly and privately funded patients to the e-health system allows to avoid the duplication of laboratory tests, the cost of which has strongly increased lately. Moreover, the introduction of mandatory submissions of hospital discharge summaries to the e-health system provides direct access for outpatient care units to patient records, ensuring continuity of care and reducing duplications of examinations and laboratory tests.
Potential gains in life expectancy if resource allocation is improved to best performing countries, in %
Note: Estimates based on a non-parametric technique to explain healthcare outcomes, as proxied by life expectancy at birth, by inputs used, such as health expenditure, and a composite indicator that captures effects of the socio-economic environment and life-style factors. The estimates refer to potential gains in output efficiency while keeping inputs constant.
Source: Dutu and Sicari (2020) and updates.
However, room for further improvements remains. Public investment in ICT equipment, databases and software in the health sector, per 100,000 inhabitants, is only a third of neighboring Estonia or Lithuania, and less than a sixth of the EU average, and should be increased (OECD/EU, 2025[3]). Many health databases remain fragmented and efforts to integrate them should be accelerated. Moreover, not all patient records from outpatient care units are submitted to the e-health system, as digitalizing analogue patient records takes time and labour shortages in the sector are high. This is particularly a problem for privately funded patients. Strengthening the requirement for healthcare providers to submit all patient records to the e-health system, including for privately paying patients, and better enforcing this requirement is key for enabling the national health service to use this data to improve the allocation of public funds (see above). It would also help detect fraud in the use of public funds (Spundina, 2026[8]). Making public funding dependent on the submission of patient records, similar to the hospital discharge summaries, could help increase coverage in the e-health system.
Further strengthening outpatient care could improve access to healthcare, treatment quality and spending efficiency. Although health spending is already focused more on outpatient care than in other OECD countries (Figure 3.7), there is room to expand the supply of outpatient care in remote areas. More than half of all general practitioners are located in the metropolitan area of Riga, and the supply of primary care and specialists strongly declines with distance from the capital (OECD/EU, 2025[3]). High mortality rates from treatable diseases are related to poor or late diagnosis as well as low treatment quality in regional hospitals (see below). Cancer screening rates are low. In addition, hospital admission rates for asthma and chronic obstructive pulmonary diseases, which are better treated in outpatient care, are high, leading to spending inefficiencies. Improving access to primary and secondary care, for example by further expanding telemedicine in remote areas, could help to detect diseases earlier and improve treatment quality and spending efficiency (Keelara, Sutherland and Almyranti, 2025[9]). This should be combined with raising incentive payments for general practitioners to conduct cancer screenings and monitor other risk factors. Supporting the establishment of health centers, where general practitioners and specialists are working together at the same location, could help attract doctors to more remote areas and improve treatment quality, as such centers improve access for patients to healthcare services and facilitate knowledge exchange (Baxter et al., 2018[10]). These centers can also reduce average administrative costs.
Health expenditure by type of service, 2024 or latest
Note: In patient care refers to curative-rehabilitative care in inpatient and day care settings. Outpatient care includes home care and ancillary services.
Source: OECD Health Statistics.
There is also room to reduce waiting lines and raise efficiency in the public system by improving the allocation of patients to appointments. Many patients register at several specialists to increase their chances of getting an appointment but cancel their appointment late or not at all, so that the time slot cannot be filled by another patient. Limited access to publicly funded outpatient care also leads to overcrowding of emergency units in hospitals. To reduce the number of unattended appointments and waiting lines, the government plans to introduce an e-referral system, where a referral by a general practitioner is directly linked to a specific specialist or inpatient care provider, and no other appointment can be made based on this referral without cancellation of the first appointment. This is welcome and should be combined with introducing a fee for not cancelling unattended appointments, as planned for example in France. To reduce visits of general practitioners for less serious issues and reduce waiting lines, self-declaration of shorter sick leave periods could be facilitated and renewal periods for prescriptions related to chronic diseases extended, as done for example in Portugal.
A reform is needed to improve treatment quality in the inpatient sector. Despite some improvements since 2013, 30-day mortality rates following hospital admission for heart attack and ischaemic stroke remain the highest in the EU (OECD, 2025[4]). Particularly in smaller hospitals outside the capital, treatment quality is weak, as low patient numbers undergoing more complex treatment imply little practice for healthcare personnel (OECD/EU, 2025[3]). Thus, many patients, who can afford it, prefer receiving treatment at the two bigger hospitals in Riga, which account for 40% of all hospitalized patients. This reinforces under-utilization of capacities in local hospitals. Despite a reduction of hospital beds per 1000 inhabitants to the EU average in recent years, the number of public hospitals remains at 41 (State Audit Office, 2025[11]). A 2016 review of the hospital sector had recommended to consolidate the number of hospitals to 20. Centralizing more complex treatments and surgeries at bigger regional hospitals would allow for greater specialization and more practice of doctors and thus higher treatment quality. It would raise efficiency due to returns to scale, as fixed costs for specific medical equipment are high. At the same time, the closure of some local hospitals could free healthcare professionals to reduce labor shortages at the remaining hospitals. However, to ensure access to emergency care and some other less complex services in the regions, some local hospitals could be transformed into outpatient care facilities with an emergency unit or into long-term care facilities. Technological advancements have widened the range of surgeries that can be done within a day, avoiding the need for overnight stays in hospitals, for example in eye surgery. Also, the treatment of chronic diseases can be managed by outpatient care facilities. Latvia should use data on patient records and healthcare demand in the e-health system and other data on treatment quality, hospital operations and the supply of outpatient care to update its hospital development plan with a view to further consolidate the hospital sector. A consolidation should take into account geographical coverage and patient needs as well as the need for resilience, as some degree of spare capacity in the inpatient sector is essential for managing a surge in health demand during a crisis.
There is room to improve access to pharmaceuticals by strengthening competition in the pharmacy and wholesale market. Payments for medicines represent about one third of the high out-of-pocket payments (Figure 3.3) (OECD/EU, 2025[3]). Although public reimbursement rates for prescription medicines are relatively low, a major cost driver are high prices, which surpass price levels in neighboring Baltic countries. To reduce prices, the government requires doctors since 2020 to specify the active substance of the medicine instead of the brand name in all publicly funded prescriptions, and only the cheapest option on the market is reimbursed. This has strongly increased the share of generics in total drug use, lowered average prices and decreased out-of-pocket-payments for medicines (Figure 3.8). To further reduce price markups, which for comparable products still remain higher than in other Baltic countries, the government has introduced fixed mark-ups for prescription medicines in 2025. This should be combined with reducing regulatory restrictions in the pharmacy market, which according to the OECD PMR Indicator are much higher than the OECD average. In particular, restrictions on the location, the minimum distance between pharmacies and the number of pharmacies allowed in a specific area should be abolished to strengthen competition, raise access to medicines and lower prices. According to the OECD PMR Indicator, more than half of OECD countries do not have such restrictions. Moreover, strengthening competition enforcement could help reduce prices in the wholesale market (as discussed in the previous OECD Economic Survey of Latvia).
Further strengthening centralised procurement could also significantly lower prices and improve access to medicines. Centralised procurement of pharmaceuticals has been found to significantly reduce costs compared to local procurement, for example by 60% in Italy (Fazekas and Blum, 2021[12]; Baldi and Vannoni, 2015[13]). Although reimbursed medicinal products offered in pharmacies are subject to a centralised reference pricing system, many local public hospitals still procure certain medicines or medical equipment on their own. The government has introduced a centralised online procurement platform for hospitals, which is welcome, but the range of included products and services remains limited and should be extended. In addition, the allocation of public funds to hospitals should be made conditional on using the centralised procurement platform to lower costs for medical equipment and medicines. Joint procurement should also be strengthened across national borders. The three Baltic countries are relatively small markets without many returns to scale, which explains relatively high price levels and restricted supply for certain complex and expensive medicines. Efforts to support the exchange of e-prescriptions across borders and foster international purchasing of medicines to exploit price differential and improve access to medicines are welcome. In addition, Baltic countries should expand their cooperation beyond joint procurement of vaccines and jointly purchase more complex and expensive medicines. In addition, efforts to introduce joint procurement at the EU level, for example through an EU-wide electronic procurement platform for medicines and medical devices with equal and transparent conditions for all member states, could be strengthened.
Share of generics in the total pharmaceutical market, %, 2024 or latest available year
Note: For Chile, France, Slovenia and the United Kingdom data cover only the community pharmaceutical market. For Austria, Denmark, Germany, Greece, Luxembourg, the Netherlands, New Zealand and Spain data cover the sub-market in which a third party payer reimburses medicines.
Source: OECD Health Statistics.
Strengthening preventive measures to reduce behavioural risk factors is key for improving health outcomes and raising the efficiency of the healthcare system. Mortality due to preventable diseases is among the highest across the OECD, particularly for men (Figure 3.9). This is due to behavioural risk factors, such as high consumption of alcohol and tobacco as well as low physical activity and unhealthy diets that lead to a high share of the population suffering from obesity (Figure 3.10) (OECD/EU, 2025[3]). High air pollution is another important risk factor (see Chapter 2). The incidence of cardiovascular diseases is 25% higher than the EU average, and it is the leading cause of preventable mortality in Latvia. Other main causes are alcohol-related diseases, lung cancer and stroke as well as road accidents.
Given the constrained fiscal situation, taxing unhealthy behaviour more should be a key strategy to reduce behavioural risk factors and improve health outcomes. As alcohol consumption and smoking are more widespread among lower-income groups, making alcohol and tobacco consumption less affordable has large potential to reduce the incidence of these unhealthy behaviours (OECD/EU, 2025[3]). This should be combined with expanding basic income support, as poverty rates are high (see Chapter 1). Excise taxes for alcohol and tobacco have been raised during the last years, but tax rates have not been adjusted for wage increases or inflation. Consequently, the affordability of alcohol and cigarettes has not changed since 2013. One major obstacle to raising excise taxes is cross-border shopping, which is facilitated by the relatively small size of the country. However, as excise tax rates on alcohol still remain lower than in other Baltic countries, there is room to raise rates quicker than currently planned to close the gap compared to Baltic neighbours (OECD, 2024[14]). In addition, excise tax rates should be linked to inflation and real income growth to prevent future improvements in affordability. In addition, the government should coordinate with its Baltic neighbours to jointly raise excise taxes on alcohol and tobacco more strongly to disincentivise unhealthy behaviour. This should be combined with strengthening efforts to combat smuggling and illegal sales of alcohol and tobacco. Higher excise tax rates should also apply to new tobacco products, such as heated tobacco products or e-cigarettes.
Mortality from preventable causes, persons aged less than 75 years, rate per 100 000 inhabitants (standardised rates), 2023 or latest available year
Note: Rates are standardised to the 2015 OECD population to control for differences in age structures across countries and over time.
OECD Health Statistics, based on the WHO Mortality Database.
Annual consumption of pure alcohol in litres, per person, aged 15 years old and over, 2024 or latest available year
Source: OECD Health Statistics database.
Taxation should be combined with further regulatory and other measures to reduce the consumption of alcohol and tobacco. Restricting advertisement and the availability of alcohol and tobacco in shops have been shown to significantly reduce their consumption (Sherk et al., 2018[15]; OECD, 2021[16]). In Latvia, several restrictions on the advertisement and sale of alcoholic beverages already apply: retail sale hours for alcohol have been recently reduced, and price and discount advertising for alcoholic beverages is prohibited in print and online media as well as in cinemas and shops. Alcohol advertisement is banned in educational and healthcare institutions, public transport, outdoor advertising, and on the cover pages of books, magazines and newspapers. The minimum legal age for purchasing tobacco has been increased to 20 years of age. However, advertisement of beer and wine on television and radio is still possible and should be banned, as done in other Baltic countries. The ban of advertisement of alcohol and tobacco should also be extended to print and social media, as done for example in Lithuania, and to sport sponsoring, as in France, Spain, Norway and Türkiye. In addition, mandatory labelling on health risks should be introduced on alcohol products, similar to regulation concerning tobacco products, as is the case in Lithuania and 11 other OECD countries (OECD, 2021[16]). Raising awareness through outreach and media campaigns can also help change personal habits and unhealthy behaviour.
Preventive measures should be strengthened to reduce high obesity rates, which increase the risk for diseases like diabetes, cardiovascular diseases and cancer (OECD, 2019[17]). Latvians eat much less fruits and vegetables and engage in less physical activity than their peers in other EU countries, which contributes to relatively high obesity rates (OECD/EU, 2025[3]). Although this is partly related to high poverty rates and financial constraints of many households (see Chapter 1), there is room for strengthening the promotion of healthy diets and physical activity. Introducing restrictions on food marketing to children, mandatory front-of-pack labelling on food products and restaurant menus, and strengthening work- and school-based food programmes would help better inform consumers and change consumption habits (OECD, 2019[17]). In addition, the relative price of healthy diets should be decreased. Although a tax on non-alcoholic sweetened beverages has been introduced, its level should be further increased to reduce the risk of obesity. It should also be expanded to apply to added sugar and sugar substitutes used in all food and beverage items. In addition to sugar, Latvia should consider introducing excise taxes on salt and fat, as for example done in Hungary. This should be combined with increasing minimum income benefits (see Chapter 1).
Moreover, spending for preventive measures is low in Latvia compared to other OECD countries, including for private health insurance, which in many cases does not include programmes to support physical activity or nutrition counselling (OECD/EU, 2025[3]). Introducing physical activity programmes and nutrition counselling in the coverage of public health insurance, which could be prescribed by general practitioners to patients in high risk groups, as for example done in the Netherlands or Sweden, could help improve health outcomes and make health spending more efficient (OECD/WHO, 2023[18]). The government could also mandate private health insurers to include such programmes in the coverage of their insurance products. Introducing performance payments for general practitioners to improve preventive measures, as for example done in Estonia, could strengthen prevention and chronic disease management.
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