Study: Labor taxes no longer sufficient to fund Estonia's healthcare budget (6)

Photo: Postimees/Scanpix
7/7/2016 8:23 AM
Source: BNS
Category: News

A study carried out by a working group formed by the Estonian Ministry of Social Affairs showed that the budget of the Health Insurance Fund will run at a constant deficit in the coming years.

Demographic changes will seriously affect the fund if no policy changes are made, the working group, which included representatives of the Ministry of Social Affairs and the Finance Ministry, said in its report.

The group concluded that health insurance expenditures couldn't rely solely on employment-related tax revenue in the future.

One way to make up for the impact of structural population change could be to top up the budget of the Health Insurance Fund to cover the revenue shortfall. In this case, the government, based on demographics and other parameters, would compute the sum needed to maintain funding at the level of 2014, for instance.

Another option could be to cover healthcare expenses related to children and pensioners directly from the state budget, for instance by paying the amount of the average pension into the fund’s budget for pensioners. Unlike average wages and salaries, pensions are not directly affected by the cyclical nature of the economy, which would ensure greater stability, the group said, noting that a similar system worked well in Lithuania.

Moving additional funds from the state budget to health insurance would worsen the government's budget position. Thus sources of additional revenue are needed. One option here could be to raise or introduce new taxes related to health behavior, such as tobacco and alcohol excise or taxes on harmful beverages and foods.

An alternative could be to raise or introduce other taxes. The group said that raising taxes that affected health behavior could be somewhat justified in terms of political economy, but also said that a tax on sweets or soft drinks might entail a high administrative burden while not bringing in the desired revenue.

The group suggested that the Ministry of Social Affairs work out a plan by December to gradually increase the income base of health insurance. It also advised the government to task the Finance Ministry with a study on the possibilities of levying a tax on harmful products.

Editor: Dario Cavegn

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