okore a. okorafor health economics unit, university of cape town, south africa

Inaugural Conference of the African Health Economics and Policy Association (AfHEA)Accra - Ghana, 10th - 12th March 2009

Equitable Financing of Primary Health Care under a Fiscal Federal System:

Swimming Against the Tide?

Okore A. Okorafor

Health Economics Unit, University of Cape Town, South Africa


Background

Equity a major focus of health policy in post-apartheid South Africa Equitable distribution of financial resources (geographic)

Major shifts in resource distribution experienced between 1996 and 1996 - Centrally controlled allocation process

Slow-down in progress towards equitable distribution from 1996 Adoption of a fiscal federal system - provincial autonomy in

determining allocations to health services


Objective

What is the implication of fiscal federalism on equity in health care financing? Case - PHC

Process of intergovernmental transfers Criteria for the size of transfers Intergovernmental arrangements and behaviour of sub-national

governments Community involvement Stakeholder influences / interests


Methods

Qualitative Analysis Document reviews Interviews with government officials

Quantitative Trend in health spending (Equity) Deprivation index as proxy for level of “need” for health care Regression analysis used to assess relationship between expenditure

and health care needs


Theoretical predictions for fiscal federalism and equity

Fiscal federalism: government system with different levels of government, each with fiscal authority and functions

Why fiscal federalism: Efficiency and welfare gains – assigning responsibility for each type of

public expenditure to the level of government that most closely represents the beneficiaries of these outlays

Democracy – greater representation of the community in decision making processes. Result of evolution towards a more democratic society


Theoretical predictions for fiscal federalism and equity

Context: SNG is tasked with the responsibility for providing and financing the service (exclusively or jointly with other level of government)

Greater SNG autonomy in determining allocation to service creates greater scope for inequities Size of SNG own revenue relative to expenditure budget Nature and mix of transfers to SNG (Specific/General purpose) Differences in local preferences Constitutional provisions

Differences in SNG capacity


Theoretical predictions & International Evidence

Equity best achieved if there is significant influence on resource distribution from the centre

Australia: PHC is responsibility of states and territories States and Territories generate ~ 40% of expenditure budget Transfers for health sector to states and territories in the form of SPGs Commonwealth has substantial influence in amount of resources allocated

to each state/territory


International Experience

Canada PHC responsibility of provinces Provinces generate most of expenditure requirements National legislation ensures that quality and quantity of services provided

in each province is comparable India

PHC responsibility of state States generate about 30% of budget expenditure Transfers for health to states in form of general purpose grants States have full autonomy in determining recurrent budget for PHC

Inequities in distribution of PHC resources


International Experience

Nigeria Local governments responsible for PHC LGs dependent on transfers from centre – GP grants Lack of accountability to state or federal government LGs have full autonomy in determining PHC expenditure

Inequities in distribution of PHC resources


Primary Health Care

PHC approach Equity, Sustainability Acceptability Efficiency Active participation of the community that is being served

(decentralisation) Delivery through a district health system (decentralisation)

Parallels with fiscal federalism


Results from the South Africa Case

Slow-down in progress towards equitable financing in health sector due to Provincial autonomy Lack of capacity to cope with the pace of reallocations

Provinces have maintained autonomy in decision making around the financing of health and PHC (except for few health programmes that are funded through SPG)

Inequity in distribution of PHC allocations; but trend since 2000 shows shifts towards a more equitable distribution.


Province Ranking % change in per capita PHC 2001/02 – 2007/08

Limpopo 9 88.0%

Eastern Cape 8 75.3%

KwaZulu Natal 7 33.5%

Mpumalanga 6 132.4%

North West 5 17.7%

Free State 4 66.7%

Gauteng 3 -22.7%

Northern Cape 2 91.1%

Western Cape 1 -4.45%


How?

Overwhelming political support for equity at all levels of government. No single unit can be credited with movement towards equity

Economic growth – increasing health budget

Key constraints Lack of absorptive capacity in areas of greater need Historical approach to budgeting Inter-agency relations Efficiency concerns becoming more pronounced!!


Conclusion

Trend in decentralisation within health systems PHC approach also subscribes to a district health system – decentralisation PHC approach subscribes to equity and universal coverage

Possible trade-off between decentralisation and equity. Possible trade-off between efficiency and equity

Challenge 1: Enough autonomy for SNGs to respond to the preferences and needs of communities, but sufficient central influence to ensure that people are not disadvantaged based on location.

Challenge 2: Develop sufficient capacity of all areas to effectively utilise resources allocated to them


Acknowledgement

Thanks to International Development Research Centre (IDRC), Canada for the funds that supported this research project.

okore a. okorafor health economics unit, university of cape town, south africa

Documents