Decentralization of Health Systems in Latin America

1. Decentralization of Health Systems in Latin America Thomas Bossert, Ph.D. March 2001 Harvard School of Public Health

2. Objectives of Decentralization • Equity • Efficiency • Quality • Financial Soundness • Local Choice and Accountability • Improve Working Conditions

3. Objectives of Decentralization (2) • For each objective there are good reasons and evidence both in favor and against decentralization • For instance: Many centralized systems are highly inequitable (e.g. Paris) but many decentralized systems can also be inequitable when rich localities spend more than poor localities

4. Warning ! • There is a lot of bad information out there! • Simplistic assumptions of economists • Anecdotal stories of “my decentralization” • Data that doesn’t prove anything • Beware of ideological advocates and detractors.

5. What kind of decentralization could achieve these objectives? • Usual typology: • Deconcentration -- to districts of MOH • Devolution -- to states or municipalities • Delegation -- to semi-autonomous agencies • Privatization

6. “Decision Space Approach” • Principal Agent Theory – how can the “principal” shape local choice of “agents” so that the choices will improve the services (CEO of company as “principal” and line managers as “agents”) • Decision Space – map of rules • Incentives – matching grants, technical assistance

9. Decentralization Experiences in LAC • Classic Unitary Cases: Chile, Colombia, Bolivia • Decentralization in Federal Systems: Brazil, Venezuela, Mexico • Several new initiatives: Nicaragua, Paraguay, Argentina, others?

10. LAC HSRI Study: Data for Decision Making Project • Three major LAC unitary country experiences with decentralization: Chile, Colombia, Bolivia • All cases of “devolution” to municipalities • All had more than three years of decentralization

11. General Trend of Decision Space • Decision Space narrows over time • Trend is toward: • moderate choice on allocation of expenditures and on contracting services and short termstaff • wide choice on community participation

12. General Trend of Decision Space (2) • narrow choice on salaries and civil service permanent staffing • narrow choice on service delivery choices

14. Equity Objective • Data on Chile and Colombia show some interesting ways of promoting equity of expenditures • Major mechanisms are formula driven intergovernmental transfers to municipalities and an equity fund for own source revenues

15. Expenditure Gap in Colombia

16. Colombia Earmarking • Intergovernmental transfers allocated according to a formula based in part on per capita assignments • Funds are “forced” to be assigned to health and to some specific programs in health

18. Colombian Allocation to Prevention and Promotion • Increases from 2.6 pesos per capita in 1994 to 5.8 pesos in 1997 • Gap between wealthiest and poorest declines from 1.4 times to 1.1 times

19. Expenditure Gap in Chile

20. Narrowing Gap in Chile

21. Chilean Equalization Fund

22. Human Resources Decisions • Salaries in Chile • narrow gap between poorest and richest municipalities (Gini of 0.17) • rural salaries higher than urban salaries • Contract Staff in Colombia • poorer and “certified” municipalities were more likely to hire contract staff

23. Quantitative Findings on Other Performance Variables • Equity of utilization -- no strong relationships with decentralization • Efficiency (utilization/expenditures) -- no strong relationships • Quality -- no adequate indicators to evaluate (but PHR study of immunizations in Colombia shows decline)

24. Bolivia Qualitative Case Studies • found that decentralization is perceived to work better when the local authorities -- especially the mayors -- know and respect the laws and regulations of decentralization and take their own initiatives in the health sector • suggests a formal training program by the Ministry of Health to be held after each election period for all local officials.

25. Bolivia Case Studies (2) • Bolivia study also suggested that effective decentralization may also depend on good relations among the mayor, local health providers and the local community. • On-going training programs that encourage consensus building and conflict resolution at the community level may improve the effectiveness of decentralization.

26. Nicaragua Project - ARCH • Budgetary Analysis shows disparities of per capita expenditures among SILAIS and more limited local control than expected. • Percentage range for allocation to hospitals, PHC and offices • Opening dialogue among MINSA, SILAIS, mayors, donors for pilots and policy

27. Conclusions • “Decision Space” can be a means of shaping local choice and it can change over time • Moderate choice over budgets and narrow choice over service norms and priority programs seems prudent • Few systems allow much local choice over salaries and permanent employees but some allow short term contracting

28. Conclusions (2) • There are powerful financial mechanisms that can be used to improve equity: • formula based intergovernmental transfers • earmarked percentage distributions • equalization funds • Decentralization implies changes at center as well as local level -- both are needed for effectiveness

29. Conclusions (3) • Training programs for new local authorities are probably important • Conflict resolution training in communities is also probably a useful means of improving local effectiveness