In plenty and in time of needThe political economy of allocating public resources to health in Barbados

Jamila Headley (BA, MPH), PhD Student, University of Oxford

Priorities 2010, April 23-25, Boston MA

Objectives

To make the case for more public health research on the allocation of public resources to health

To discuss general trends in health expenditure in Barbados from 1974 to present

To describe the nature of the budgetary process, especially as it relates to health

To consider how public expenditure on health is affected in times of economic crisis

To consider the implications for changes in the overall size of the health budget for priority setting

Priority Setting and the Public Budget

Governments must divide scarce financial resources between health, education, the building of roads etc.

At the national level, this is done through the public budgetary process

The process determines both the overall size of the health budget and often how these resources will be distributed at the macro-level

Yet the study of public budgets, and the overall allocation of public resources for health, has been largely neglected in the field of public health

Why the neglect?

It is thought to go beyond the technical remit of public health

Budgeting is incremental, relatively predictable and therefore not very interesting.

Incremental theories of budgeting

Rose to prominence in the early 1960s Charles Lindblom (1959), Aaron Wildavsky (1964) and

Richard Fenno (1966) The most influential descriptive and explanatory theory of

public budgeting

Budgets display a high degree of stability over time Each year’s budget varies only marginally from the previous

year’s Generally the budget increases slightly year after year

Main ideasMain ideas

BackgroundBackground

What are budgets?What are budgets?A mechanism for allocating scarce resourcesA historical recordA plan for the futureThe result of a political process

A mechanism for allocating scarce resourcesA historical recordA plan for the futureThe result of a political process

What do they tell us?What do they tell us?How government will generate revenue and how much government will spendWhat government’s priorities areNational consensus about the role of governmentA whole lot about the distribution and dynamics of power

How government will generate revenue and how much government will spendWhat government’s priorities areNational consensus about the role of governmentA whole lot about the distribution and dynamics of power

Why are they important?Why are they important?

They redistribute wealthThey have fiscal and economic consequencesThey allow citizens to hold government accountableFinancial resources are critical to implementation

They redistribute wealthThey have fiscal and economic consequencesThey allow citizens to hold government accountableFinancial resources are critical to implementation

Source: Wildavsky A. The Politics of the Budgetary Process. Boston: Little, Brown; 1964.

Budgets are “the most operational expression of national priorities in the public sector”

Aaron Wildavsky (1964) “The Politics of the Budgetary Process”

Barbados: A brief background

Only 166 square miles (430 square km)

Population: 285,000 Former British colony, which

gained independence in 1966 GDP per capita $13,003 USD

(2007) HDI rank 37 Life expectancy of 74 years IMR of 11 per 1,000 live births Small island developing state

The data

Yearly ‘Approved Estimates’ records from the MoF Components used to compute health spending are

consistent All data has been adjusted for inflation and population

growth, where appropriate. Interviews with key actors in the process Non-participant observation of the budgetary process

over a 2 year period

MoH, Heads of Agencies, HPUMoH, Heads of Agencies, HPU

Each agency/service area prepares their

budget

Internal consultations with Minister, PS and

HPU

Each agency/service area prepares their

budget

Internal consultations with Minister, PS and

HPU

Central Bank, MoFCentral Bank, MoF

Targets are set for deficit and inflation

Level of revenue estimated and total

expenditure recommended

Targets are set for deficit and inflation

Level of revenue estimated and total

expenditure recommended

Prime Minister, Cabinet, MoF

Prime Minister, Cabinet, MoF

Ceilings are set for each ministry/area based on Cabinets

prioritiesPolicies for revenue generation devisedMoF advises health ministry of ceiling

Ceilings are set for each ministry/area based on Cabinets

prioritiesPolicies for revenue generation devisedMoF advises health ministry of ceiling

Prime Minister, Parliament, Senate

Prime Minister, Parliament, Senate

Estimates are debated

Any changes are made and vote is taken to approve

estimates

Estimates are debated

Any changes are made and vote is taken to approve

estimates

MoF, MoH, Heads of Agencies

MoF, MoH, Heads of Agencies

Consultations to finalize health budget

Any ceiling overruns and defended and

considered

Consultations to finalize health budget

Any ceiling overruns and defended and

consideredThe Budget: Actors & Process

Political and socio-economic

environment

Domestic interest groups

International actors (e.g. WB, IMF, IADB)

General trends in public spending, 1974-2010

Government revenue as a percentage of GDP has gradually increased (from 20-34%)

Government expenditure has more than tripled

Spending is usually pro-cyclical (i.e. very responsive to changes in revenue)

Signs of a counter-cyclical response to the current economic crisis

Two main parties are both generally fiscally conservative

Public resource allocation to health, 1974-2010

Real public spending on health has doubled since 1974

Per capita expenditure on health increased from $273 to $543 USD.

Generally incremental, but with sharp decreases and increases at several points

Health funding was relatively stagnant from 1974 to 1986

Changes in government revenues does not fully account for fluctuations

Fluctuating priority for health

The percentage of GGE allocated to health gives us an idea of priority status

Percentage of GGE for health has ranged between 8.9 and 15.9%

Priority for health has been quite dynamic over the study period

Since 1996 there has been a general trend of public divestment from health

Key factors affecting public resources for health

Elections Political ideology/development model Other priorities

Economic growth Recessions IMF austerity programs

Economic factorsEconomic factors

Political FactorsPolitical Factors

Risky elections and priority for health

Public resources for health in

difficult economic times

Public resources for health in

difficult economic times

Resources for health in times of economic crisis

A tale of four recessions

Some observations

The findings of the effects of economic recessions on public resources for health are mixed

In 2 cases priority for health was protected or augmented

In the remaining cases, the priority status of health was reduced considerably

The occurrence of general elections (1991), and IMF intervention (1982-83) might hold some explanatory power

The relationship between the macroeconomic environment and public financing for health is not clear-cut

IMF austerity program (late 1991-1993)

High government spending leading up to the 1991 elections against a backdrop of global recessionary conditions, resulted in depleted foreign reserves and BOP problems.

CauseCause

FeaturesFeatures Expenditure reduction – 8% cut in wages across the entire public sector, lay-offs

of over 2000 public sector employees Increased taxation - surtax between 1.5-4% on income, increased consumption

taxes and levies

Effects of the health sectorEffects of the health sector 21% decline in real public expenditure on health over the duration of the

program The percentage of government expenditure allocated to health was reduced by

2.13%

Contrasting concerns in the current crisis(Based on observation of the budgetary process and interviews)

Size of deficit Containing inflation Level of Foreign reserves Political support Unemployment/job

creation Stimulating economic

growth

At least maintaining the budget at the previous year’s level

Providing health care in the face of increasing demand

Protecting the size of the health workforce

Maintaining and improving quality of care

Ministry of Finance Ministry of Health

In this clash of concerns, the Ministry of Finance generally comes out on top

Implications for the public health sector

More stringent enforcement of budget ceilings Programs funded by foreign sources are protected,

causing others to disproportionately bear the brunt of cuts.

There is a resultant squeeze on capital expenditure and goods and services

Unpredictability in actual month-to-month disbursement of funds

However, personal emoluments are generally safe-guarded.

Preserving priority for health in the hard times

1. The role and power of choice by policy makers

2. Use of evidence in decision-making and opportunities for improved efficiency, effectiveness and equity in the health system

3. Addressing the impact of IMF stabilization programs on the health system

Concluding thoughts

Public financing for health is extremely vulnerable in times of crisis

The WHO is encouraging countries to protect health spending in the wake of this global economic crisis

In Barbados, and other developing countries, I do not believe that the task WHO has set before us is an impossible one.

Thank you!