DESK REVIEWS | 02.02.05. Budget allocation

DESK REVIEW | 02.02.05. Budget allocation

The National Fund for Health (Fundo Nacional de Saúde) transfers the budget to the federal government (Ministry of Health), states and municipalities, according to the Pluriannual Plan, Law of Budgetary Guidelines and the Annual Budget Law. It is considered a decentralized system in which each level of government can decide how the money will be spent. The amount of money to be transferred to each level is set by law (Brazilian Ministry of Health, 2019m; International Budget Partnership, 2018). In theory, the budget should not be dispersed through geographical areas as there is transfer according to the three levels of governance in Brazil. However, as each level is responsible for managing and setting priorities for spending the budget, it is not rare to find geographical areas with different levels of investment depending on regional or local management.

References:

Brazilian Ministry of Health. (2019m). Sobre o FNS. http://portalfns.saude.gov.br/sobre-o-fns

International Budget Partnership. (2018). Defining and managing budget programs in the Health Sector: The Brazilian Experience. https://www.internationalbudget.org/wp-content/uploads/case-study-health-budget-programs-in-brazil-ibp-2018.pdf

For each financial year, the Financial Secretary decides on the allocation of health budgets for the Hospital Authority and the Department of Health, the two main bodies in charge of public healthcare services. After receiving the budget allocated, they decide about their own internal budget allocation. According to the 2019-2020 Budget, the estimated recurrent government expenditure on public healthcare services was increased by 10.9% reaching the amount of $80.6 billion in 2019-2020 and accounting for 18.3% of the total recurrent government expenditure (The 2019-20 Budget, 2019a). The Government increased the recurrent financial provision for Hospital Authority by 8% to $68.8 billion and Department of Health by 27.9% to $13,301 million. The Government also committed to sustain the development of public healthcare with the establishment of $10 billion public healthcare stabilisation fund (Hospital Authority, 2019c; The 2019-20 Budget, 2019b).

For Hospital Authority, the health budget is further dispersed through the 7 clusters responsible for different geographical areas (including Hong Kong East, Hong Kong West, Kowloon Central, Kowloon East, Kowloon West, New Territories East, and New Territories West) by considering the population growth, demographic changes, incidence of chronic illness, healthcare service utilisation pattern, and organisation of services of each cluster and hospital (The Government of the Hong Kong SAR, 2017). Within each cluster, the budgets are further dispersed through programme areas in response to the service needs of each cluster.

References:

Hospital Authority. (2019c). Hospital Authority welcomes budget allocation for 2019-20.

The 2019-20 Budget. (2019a). Budget Speech.

The 2019-20 Budget. (2019b). Estimates – DEPARTMENT OF HEALTH.

The Government of the Hong Kong SAR. (2017). LCQ13: Resource allocation of Hospital Authority [Press release]. Retrieved from https://www.info.gov.hk/gia/general/201712/13/P2017121300666.htm

As mentioned above, the health budgets are a total of central budget and state budgets. Most of the programmes visualised in the central budget for health get to be implemented by the states/Union Territories (UTs). A good example is the National Health Mission, which has several components: the national rural health mission, the national urban health mission, a communicable diseases programme, a non-communicable disease programme, and infrastructure maintenance are the major ones. States have the flexibility to plan and implement state specific action plans and need to draw up their respective Project Implementation Plans (PIP) (MoHFW, 2020), which spell out the key strategies, activities undertaken, budgetary requirements and key health outputs and outcomes. The funds flow from the Central Government to the states/UTs, as described above.

Previously, funds for various schemes initiated by the central government were directly transferred to the implementing agencies in states, bypassing treasuries of state governments. Since March 2014, funds are being released first to the treasuries of sub-national (State) governments, which are then responsible for transferring the funds to the implementing agencies (Choudhury, and Mohanty, 2018).

References:

Choudhury, M., & Mohanty, R. K. (2018). Utilisation, Fund Flows and Public Financial Management under the National Health Mission. New Delhi. Available from https://www.nipfp.org.in/media/medialibrary/2018/05/WP_2018_227.pdf

Ministry of Health and Family Welfare (MoHFW). (2020). Programme Implementation Plan. National Health Mission. Available from http://pip.nhm.gov.in/.

As outlined above, most health care spending is allocated to hospital care, with only 20 per cent of funds allocated at primary care level. This creates considerable inequity in access to health. Treatment for complex illnesses, such as diabetes, hypertension, or cancer are covered by the health budget; however, many adult vaccinations and screening tests needed to establish the prevalence of these illnesses at primary care level are not (Claramita et al., 2017, p.21). In addition, limited availability of data causes difficulties in detailed understanding of budget allocation in primary and secondary care settings (Claramita et al., 2017, p.21).

The combination of central government and district level financing leads to a complex and fragmented system. By Law (law number 26/2009), local governments (province, district, and city) have to allocate at least 10 per cent of their regional budget to health. According to the Ministry of Health, regions slightly underspend, allocating on average 9.37 per cent (2012). However, according to 2012 data, some provinces have spent up to 16 per cent of their budget on health. At district/city levels almost half (42.2%) allocated more than 10 per cent of their budget for health (Ministry of Health Republic of Indonesia, 2015b, pp.29-30). This leads to considerable variation in health expenditure between districts causing considerable inequities (World Bank, 2016b, p.5). We are unable to identify how local governments allocate their spending on health.

Despite the considerable share of out-of-pocket expenditure, voluntary health insurance uptake has been relatively consistent between 2010 and 2017, at 3-4% of current health expenditure. Meanwhile, the proportion of household out-of-pocket expenditure has been declining, amounting to 34% of current health expenditure in 2017. This may be an indicator that government schemes including the National Health Insurance introduced in 2014 are starting to reduce out-of-pocket expenditure.

References:

Claramita, M., Syah, N. A., Ekawati, F. M., Hilman, O., & Kusnanto, H. (2017). Primary Health Care Systems (PRIMASYS): Comprehensive case study from Indonesia. World Health Organization. https://www.who.int/alliance-hpsr/projects/AHPSR-PRIMASYS-Indonesia-comprehensive.pdf

Mahendradhata, Y., Trisnantoro, L., Listyadewi, S., Soewondo, P., MArthias, T., Harimurti, P., & Prawira, J. (2017). The Republic of Indonesia Health System Review (Vol. 7, Issue 1). https://apps.who.int/iris/bitstream/handle/10665/254716/9789290225164-eng.pdf

Ministry of Health Republic of Indonesia. (2015b). National Strategy: Management of Alzheimer and Other Dementia Diseases: Towards Healthy and Productive Older Persons. Ministry of Health Republic of Indonesia.

World Bank. (2016b). Indonesia Health Financing System assessment: spend more, spend right & spend better. http://documents.worldbank.org/curated/en/453091479269158106/pdf/110298-REVISED-PUBLIC-HFSA-Nov17-LowRes.pdf

The National Government will periodically release funds to the county governments. The amount of funding per county depends on several factors: population, poverty index, land area, basic equal share, and fiscal responsibility. The release of funds from the national government will depend on whether a county has prepared an integrated development plan with the Commission on Revenue Allocation setting the payment formula (Government of Kenya, 2016).

Before the disbursement process, the Ministry of Finance sets 3-year budget ceilings for each sector rather than each sector submitting a budget request based on actual needs. This is done through the Budget Review and Outlook Paper or the County Budget Review and Outlook Paper which is released in September and must be approved by the Cabinet and legislative assembly at each level of government (Ministry of Health, 2016b). The Ministry of Health (MoH) then disburses the funds through the county health Management Boards in each County (Nyakundi et al., 2011) and this depends on the population, poverty levels, land share etc.

The process of budget allocation to the specific sectors in counties is the same as at the national level where the county communicates to the various sectors the budget ceilings. National and county health departments determine how their budget is distributed to programs, but they are not allowed by the law to transfer funds between approved projects and recurrent allocations. They can shape the allocations in an efficient way while prioritizing cost-effective and efficient programmes (Ministry of Health, 2016b). Although, it is important to note that each county department of health decides using their own criteria or formula on how health services should be distributed. There is little information on how finances for health services should be distributed within specific departments. Each county department of health decides using their own criteria or formula on how health services should be distributed (Otieno, 2016). However, ministries and departments are required to prioritize allocations towards the achievement of “Big Four Plan”. The sector working groups then conduct a thorough review of the proposed budgets to ensure that they are not only directed towards improving productivity but also in achieving the “Big Four Plan” agenda. This is done by establishing resources required for different programmes and projects and the level of provision are within the ceilings provided by the sector working groups (Republic of Kenya, 2018a).

References:

Government of Kenya, E. of the K. N. (2016). Kenyan Healthcare Sector. Kenyan Healthcare Sector, 86.

Ministry of Health. (2016b). National and county health budget analysis FY 2016/17. Nairobi, Kenya. http://www.healthpolicyplus.com/ns/pubs/6138-6239_FINALNationalandCountyHealthBudgetAnalysis.pdf

Nyakundi, C. K., Teti, C., Akimala, H., Njoya, E., Brucker, M., Nderitu, R., & Changwony, J. (2011). Health Financing in Kenya: The case of RH/FP. Nairobi, Kenya. https://silo.tips/download/kenya-health-financing-in-t-h-e-c-a-s-e-o-f-r-h-f-p

Otieno, M. (2016). Resource allocation to health sector at the county level and implications for equity, a case study of Baringo county. University of Nairobi. http://erepository.uonbi.ac.ke/handle/11295/98703

Republic of Kenya. (2018a). Guidelines for the preparation of the medium-term budget for the period 2019/20 -2021/22. Nairobi, Kenya.

In Mexico, health budgets are dispersed at the state level through state-level representations of each health or social security institution. The Ministry of Health has a State Health Minister in each state who oversees the priorities, negotiates part of the budget, plans, and implements the local development of priority health programmes and is also responsible for their correct implementation. As state level budgets are based on target populations, programmes and priority strategies, budgets are allocated and dispersed according to these definitions. For some Federal programmes, the budget comes directly form the Ministry of Finance through targeted budgets, specific Operation Regulations (Reglas de Operación) which include evaluation indicators.

When Departments reprioritise budgets to allocate to the establishment of a new service, need or requirement, the allocation process often requires that the funds are taken away from somewhere else (instead of additional funding becoming available) (EMERALD, 2017). Where major programme changes are required, Departments will engage Treasury, Cabinet, and then Parliament (according to set budget cycle deadlines) for the reprioritisation of funds, plans and allocations (see section on budget process, as well as (EMERALD, 2017) p.36, and 02.02.04.04).

References:

EMERALD. (2017). Moving towards Universal Health Coverage for Mental Disorders in South Africa.

The Ministry of Health works with large budgetary actions within a unique program. This strategy makes shifting resources between various programme areas easier to the Ministry of Health to manage (International Budget Partnership, 2018).

References:

International Budget Partnership. (2018). Defining and managing budget programs in the Health Sector: The Brazilian Experience. https://www.internationalbudget.org/wp-content/uploads/case-study-health-budget-programs-in-brazil-ibp-2018.pdf

The Ministry of Health and Family Welfare (MoHFW) oversees two departments: the Department of Health and Family Welfare and the Department of Health Research. When the Union Budget has been presented to Parliament, the Standing Committees of the Parliament scrutinise each Ministry’s Demand for Grants in detail. This document lays out the various priorities of the government in the form of estimated expenditures under various line items or programme areas. The MoHFW also presents its Demand for Grants for scrutiny to the Standing Committee. For example, the observations and recommendations of the Committee when scrutinising the 2018-19 Demands for Grants was that the government health expenditure (at 1.35% of GDP) (NHSRC, 2021) may not meet the goals of the National Health Policy that envisages a health expenditure of 2.5% of GDP by central and state governments by 2025. The feedback also mentioned that attention is needed to be paid to the wide gap between demands of the Department and allocation made as well as delays in transfer of funds and scaling down on various health initiatives and programmes due to the reduced budgetary allocation (Kala, Mann, & Tiwari, 2019).

When the Demands for Grants are passed, they are then consolidated into an Appropriation Bill and then subsequently the Finance bill is also taken up for consolidation. A similar process takes place at the State/UT level, where state legislative assemblies and state departments of health are responsible for preparing the estimates for different budget heads under the departments’ Demand for Grants.

References:

Kala, M., Mann, G., & Tiwari, S. (2019). OVERSEEING PUBLIC FUNDS.

National Health System Resource Centre (NHSRC). (2021). National Health Accounts-Estimates for India: 2017-2018. Ministry of Health and Family Welfare, Government of India. Available from: https://nhsrcindia.org/sites/default/files/2021-11/National%20Health%20Accounts-%202017-18.pdf

In Indonesia, there are two pooling mechanisms that allocate and disperse health budgets across the country. First, central government funds are pooled and then transferred to provincial and district governments. Second, the BPJS pools social insurance funds (Mahendradhata et al., 2017, p.87).

Pooling of central government funds means that the State Revenue and Expenditure Budget (APBN) determines allocation of funds centrally. For health funds, this allocation is decided by the Ministry of National Development Planning of the Republic of Indonesia (BAPPENAS) in consultation with the Ministry of Heath and the Ministry of Finance. The final allocation of funds needs to be approved by the national parliament (DPR). The budget allocation is based on:

  1. ‘Historical budgets,
  2. Proposal by ministries,
  3. Calculation of local needs according to population size’ (Mahendradhata et al., 2017, p.87).

It is noteworthy that non-technical and political considerations by the House of Representatives (DPR) that influence the indicate budget levels, play a role as well. (Mahendradhata et al., 2017, p.87).

The Ministry of Health distributes the health budget to central-level departments and health agencies as well as to provincial and district governments. The fund allocation includes:

  1. Dana dekon (de-concentration fund) is allocated to provincial health offices to manage health functions in its districts and to ‘build capacity of [district health offices] in national priority programmes’.
  2. Tugas perbantuan (assisting task fund) is given to district health offices for spending related to carrying out assisting/operational tasks around the puskesmas.
  3. Dana alokasi khusus (special allocation fund) is ‘allocated […] to local governments and earmarked for specific health infrastructure construction such as […] puskesmas, sub-puskesmas, and district hospitals’. For health, this fund can used for financing primary health care, referrals to secondary and tertiary care, and pharmacy services (including generics procurement) (Mahendradhata et al., 2017, p.88).

In addition to central resources mechanism, provincial and district government also prepare plans and budget proposals (bottom-up approach). Local government’s revenue and expenditure budget (APBD) is divided into indirect expenditure (salaries of civil servants in health facilities) and direct expenditure (operations of health services and programmes and allowances of health services staff). However, indirect expenditure can take up more than 80% of the total budget allocation, which may limit funding for operational expenditure (Mahendradhata et al., 2017, pp.88-89).

The second mechanism represents the distribution of social insurance funds through the BPJS. All social insurance contributions of the population, including government funds, are pooled into a single trust fund (Dana Amanat). ‘The allocation of revenue from central government to the BPJS is based on the number of members entitled to have their contribution paid by the government (PBI members), and the agreed premium to be paid by the government’. ‘The PBI contribution is then allocated to districts based on the number of PBI members in each district’ (Mahendradhata et al., 2017, p.88).

References:

Mahendradhata, Y., Trisnantoro, L., Listyadewi, S., Soewondo, P., MArthias, T., Harimurti, P., & Prawira, J. (2017). The Republic of Indonesia Health System Review (Vol. 7, Issue 1). https://apps.who.int/iris/bitstream/handle/10665/254716/9789290225164-eng.pdf

Please refer to 02.02.05.01.

Budget allocations across programme areas continue to be based on historical budgeting processes (i.e., funding cycles continue to allocate funds to programmes funded the previous cycle/historically) (EMERALD, 2017). Unless a budget bid is tabled to lodge an investment case, budget allocations will follow historical trends (EMERALD, 2017).

References:

EMERALD. (2017). Moving towards Universal Health Coverage for Mental Disorders in South Africa.