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Health financing and Public Finance Management: did we get closer to bridging the divide?

By Brendan Kwesiga
on December 12, 2019

Public Finance Management (PFM) refers to the set of arrangements concerning revenue mobilization, resource allocation, expenditure and accountability for public funds. These arrangements exist to enable government to meet fiscal policy goals including pursuing equity and fostering growth and development. The greater role of public resources in health financing towards Universal Health Coverage (UHC) has created a great need to bring together the two worlds of health financing and PFM, with each field representing specialized areas of practice.

The Swiss town of Montreux offered the perfect backdrop to the World Health Organization’s 4th Meeting of the Collaborative Agenda on Fiscal Space, Public Financial Management and Health Financing held from 12-14 November 2019. Participants represented various actors including governments, development partners, implementing agencies and civil society representing practitioners in the areas of both health financing and PFM.

Building on the momentum generated by the three previous meetings on this collaborative agenda and the declaration from the UN High Level Meeting on Universal Health Coverage in September 2019, this meeting sought to take a more granular approach towards PFM and health financing issues  to inform country level action.

In this blog, the authors reflect on some of the areas discussed during the meeting that challenged some of their previously held biases, misconceptions and assumptions.

Revisiting the Concept of Fiscal Space

Dr Sanjeev Gupta, a former IMF staffer now with the Center of Global Development, presented the evolution of the concept of fiscal space. From the ideas first presented by Peter S Heller  and later used specifically for the health sector by  Ajay Tandon and  Cheryl Cashin, Dr Gupta stressed that fiscal space is a whole-of-economy concept. In other words, one economy has one fiscal space which is not specific to health or even a health program. As such labels like “fiscal space for health” or “fiscal space for disease X or Y” may undermine meaningful discussions between the health and public finance actors. Instead they should be framed as concerns about “budgetary space for health from within the available fiscal space”.

Hélène Barroy from the World Health Organization and her colleagues then highlighted the potential role for the health sector given these considerations. The evidence presented suggested more effort should go to areas where the health sector has influence. Emphasis should be on improving efficiency and being able to demonstrate these improvements to attract additional budgetary resources.

A Focus on Budget Execution

Based on a presentation by Moritz Piatti-Funfkirchen (World Bank), the meeting then learned that execution of health budgets remains a major gap – even when compared to other sectors. The factors contributing to poor budget execution include poor planning (e.g. revenue forecasting), cash flow constraints, and excessive controls in execution systems. The latter issue was of particular concern to the actors present.

The evidence presented built a compelling case for moving away from the extreme of excessive control towards a balance between control and flexibility to meet service delivery and accountability goals. In the context of the health sector, there are usually a small number of high value transactions and a large number of small value transactions. The latter insight is particularly relevant for improving health service delivery at facility level, providing an opportunity for more flexibility. This flexibility has to be coupled with strengthening information systems and building health facility financial management capacity so that health managers are given the autonomy to “manage”.

Intergovernmental fiscal transfers were identified as an important lever that could be used to address reduction in autonomy, particularly in settings where fiscal decentralization has created PFM rigidities which can compromise budget execution for the health sector.

Managing transitioning from development assistance for health

The starting point is that transition is largely a positive development: it means that a country is advancing, at least in economic terms. This offers an opportunity for greater investment in health.

Nevertheless, transition is often incorrectly framed as simply a replacement of external with domestic financing. Instead, the focus should be on ensuring that effective service coverage is sustained from a whole-system perspective.

Development partners and countries undergoing transition need to plan better to avert severe challenges in the health system’s ability to provide critical services and serve key population groups as has been observed with early experiences from countries undergoing transition. As countries develop transition reform and investment strategies, they should explore, among other things, cross-programmatic efficiencies moving beyond health program specific investments to the broader health system.  

A divide that never existed?

Reflections from this meeting highlight that although PFM and health financing are often framed as separate areas of practice, there are more commonalities between them than differences.  The collaborative agenda on PFM and health financing needs to focus on how countries can optimize PFM processes to make these processes more responsive to health sector needs so as to ensure a more effective and efficient health service delivery.

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