From Iceland — Down To The Bone: The Healthcare System, Post-Austerity

Down To The Bone: The Healthcare System, Post-Austerity

Published December 9, 2014

Down To The Bone: The Healthcare System, Post-Austerity
Gabríel Benjamin
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Following the economic collapse of 2008, the Icelandic State’s debts skyrocketed, reaching 126% of the country’s GDP in 2011. At the same time, State revenue sources ground to a halt, and property devalued. The consumer price index shows price levels on consumer goods increased by a whopping 18.6% from 2008 to 2009, and strict capital controls were put in place to stop funds from funnelling out of the country. In a desperate attempt to avoid national bankruptcy, the State underwent hefty austerity measures, and called in the IMF.

Although these facts are readily available, a myth persists to this day that Iceland simply let its banks fail, jailed those responsible for the collapse and took a moral stance that the rest of Europe should aspire to. Take for instance a Guardian interview with healthcare specialist Dr. David Stuckler, where he claims that “recessions can hurt, but austerity kills,” before going on to praise the Icelandic State for taking the necessary steps to protect its people. He cites research showing that more than five million US citizens had lost access to healthcare, and 10,000 British families had been pushed into homelessness following housing benefit cuts, whereas Iceland suffered “no noticeable impact on suicide rates or other health problems.”

David’s estimation is, unfortunately, overly optimistic. In fact, Iceland’s already strained healthcare system underwent several bloody budget cuts in the aftermath of the 2008 collapse. In the years preceding the crash, the healthcare system, and LSH in particular, had suffered numerous cost-cutting procedures, leaving it with little fat to trim when the State implemented its emergency procedures.

Emergency measures

Looking simply at the amount of ISK on LSH’s budget shows that half a billion extra ISK went towards the hospital’s budget in 2009, compared to 2007. However, due to the severely deflated ISK, this actually amounted to a hefty reduction in funds, going from the equivalent of $520 million in 2007 to the equivalent of $274 million in 2009, as can be seen in the following charts.

The emergency measures included lowering or freezing hospital staff wages, delaying repairs and maintenance, and cutting the equivalent of 400-500 full-time positions at LSH. Ögmundur Jónason, of the Left-Green party, served as Minister of Health in the aftermath of the collapse, and oversaw the aforementioned austerity measures. Ögmundur tells me that these measures were meant as a short-term fix, and that the budget was supposed to be drastically improved once the economy stabilised.


“People realised at the time that the State had very little funds to work with,” he says, “and that we were doing the best we could with what we had. We had no choice but to downsize.” In an effort to shield the welfare system, Ögmundur says the government tried to focus on cutting other programmes, such as infrastructure investments by 85%, and road administration by 50%.

Ögmundur says he regrets that his government wasn’t able to do more, and is convinced that the healthcare sector shouldered too much of the burden. He also expresses anger towards the current government, which he says is not doing enough to revitalise the vulnerable aspects of Icelandic welfare society while toying with ideas of further privatisation.

No privatisation

Taking over from Ögmundur, Kristján Þór Júlíusson assumed the position of Minister of Healthcare on behalf of the Independence Party in 2013. Kristján tells me that by the time he took office, the healthcare sector had undergone cuts to the amount of 30 billion ISK.

kristján þór

When asked to assess his predecessor’s work, Kristján declined to comment, stating that he is not interested in finding fault with those who came before him. “It’s easy to sit on a high horse and criticise the decisions of others,” he tells me, “and things could always have been prioritised differently.” He also insists that the Icelandic healthcare system will not be privatised on his watch, although he says he’s open to private enterprises operating in service of the public sector.

Catching up

Kristján notes that nations who operate a similar healthcare system to Iceland, spend on average 1.8-4% of their healthcare budget on medical equipment, whereas only 0.6% of LSH’s budget was used for that purpose in 2013. To stem the tide, Kristján Þór’s ministry has laid out a four-year budget of medical equipment maintenance amounting to 5.5 billion ISK for LSH and 800 million for Akureyri Hospital. “We envision that we can catch up to where we should be after four years,” he says.

His ministry also runs a project called Betri heilbrigðisþjónusta 2013-2017 (“A Better Healthcare Service 2013-2017”), which has the aim of streamlining the healthcare sector, for instance by directing patients more efficiently between hospitals, healthcare clinics and independent healthcare operators.

Following loud protests inside and outside of Alþingi in response to the government’s 2015 budget proposal, the second draft of the bill included an additional billion ISK for LSH’s budget, 250 million to healthcare clinics and 150 million for the Icelandic Health Insurance institute to further subsidise prescription drugs. If passed in its proposed form, it will mark the greatest amount of ISK allocated to the hospital, ever, which could in turn reinforce some of the healthcare system’s infrastructure.

This article is a part of our feature on the country’s healthcare system, Squeezing Blood From A Turnip: Iceland’s Universal Healthcare At Risk. You may be interested in also reading:

Landspítali careIceland’s Healthcare System: How Does It Work?

A broad view of the country’s healthcare system and how it has changed through the years.


LSH May Day MaydayMay Day Mayday: Iceland’s Ongoing Doctor Strike

An in-depth account of the doctor strike, and what might happen if it isn’t resolved soon.


Páll Matthíasson by Hörður SveinssonIceland’s University Hospital: The Director Speaks

University Hospital director Páll Matthíasson, on how his hospital has weathered the storm of austerity measures, how it compares to our neighbouring countries, and what the future looks like.


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