Fiscal Devolution Reform and Subnational Health Financing: Review of International Experience and Lessons for India

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1 Fiscal Devolution Reform and Subnational Health Financing: Review of International Experience and Lessons for India Dr. Anit N. Mukherjee Policy Fellow, Center for Global Development Washington D.C. WHO Symposium on Health Financing for UHC Montreux, November

2 Key questions framing the review of country experiences How does fiscal devolution reform create opportunities for restructuring health financing? How does it change functions between federal and subnational governments? How does devolution affect delivery of services? How can the health sector engage proactively with the devolution process? What are the lessons and implications for India? 2

3 14th Finance Commission Devolution Reform 14 th Finance Commission increased tax devolution to states from 32% to 42% the biggest ever increase in India s fiscal history What is the Finance Commission? Constitutional body, non-political comprised of technical experts Determines the sharing of tax revenue between federal and state govts, and among states (vertical + horizontal devolution) Recommendations binding on govt and implemented over 5-year period (e.g., 2015/16 to 2019/20) Variable Devolution Formula Weights 13 th FC 14 th FC Population (1971) Population (2011) Fiscal Capacity/Income Distance Area Forest Cover Fiscal Discipline Total

4 Opportunity to increase health expenditure Opportunity to realign roles and responsibilities Opportunity to implement new ideas to improve health outcomes 4

5 India in comparison to Brazil, China and Mexico 5

6 Impact of Fiscal Reform on Health Financing Federal Stewardship Brazil Constitutional mandate for health in 1988 with strong devolution both Federal-State and State-Municipality Sistema Unico de Saude (SUS) under Federal stewardship Delivery through State-level public and private health systems with strong pacts for primary health care China Central government directives determine health policy following fiscal devolution reform in 1994 Attained universal coverage by 2012 with massive expansion of insurance from 1996 onwards Provinces, prefectures and counties act as agents to implement policies, but large unfunded mandates 6

7 Legal mandates and strong accountability crowds in subnational health finance Brazil Constitutional Amendment 29/2000 to increase subnational spending Mandated 12 and 15 percent of budgetary allocation for state and municipalities However, spending mandates are contrary to devolution objective of greater state flexibility Mexico Almost 90 percent of total state revenues come from federal transfers Health Law 2003 specified federal and state sharing of Seguro Popular premium Federal-to-State transfers are earmarked, constitutes over 80 percent of total SP expenditure China No legal mandate but strong accountability of local policymakers to Central directives 40 percent of allocation for health financing reform of 2009 contributed by Central govt Significant unfunded mandate at the county level that are responsible for insurance pool 7

8 Federal-State Compacts enhance coordination and improve outcomes Brazil Basic Care Pact : Federal and state governments agree on delivery and financing arrangements for primary care States have different capacities, some innovate (Sao Paulo in hospital care) while others require federal technical support Family Health Program and Community Agents Health Program complement state basic care China Responsibility compacts between Central and provincial governments to expand universal coverage from 2009 Enrolment target set at 90 percent fixing accountability on provincial and local officials Delegation of responsibility complemented by subsidies for poorer provinces and prefectures Mexico Earmarked Seguro Popular funds devolved on the basis of state level enrolment Allocations and service level performance monitored by federal government 8

9 Data and evaluation are critical for benchmarking subnational performance Brazil DataSUS is one of the most comprehensive health MIS globally Highly disaggregated and timely input on utilization, performance and financing Facilitates monitoring, reporting and projecting financial needs Mexico Extensive MIS on utilization, performance and payments managed by the National Institute of Social Sciences (INSS) CONEVAL: Federal agency evaluating all federal and state social programs Ministry of Health has own agency to monitor quality of health services China Significant expansion in surveillance and data following SARS Can be leveraged for setting and monitoring subnational UHC performance 9

10 So what are the lessons for India? Initial research indicates that States are spending more on health....but within more or less the same framework Many states are announcing health insurance schemes.....without evidence based benefits package or financing projections Health sector not leveraging transformative processes Universal digital ID and authentication Financial inclusion and digital financial services Mobile technology and delivery of public services Women s empowerment through direct benefit transfers 10

11 Aadhaar: Beyond unique digital IDs Aadhaar Jan Dhan Mobile ~1.2 Bn Enrolments 300 M New Bank Accounts 350 M Smartphones 1+ Billion Authentications / month 500+ M unique ids 340 M e-kyc in 3 years 75 M Unique IDs > 21 M e-sign in 24 months 500 M Accounts Linked to Aadhaar 2.0 Billion Transactions Worth 9.2 Billion USD in 3 years 4.8 M DigiLocker users 6.9 B Uploaded Docs 1+ Billion Mobile Phone numbers 30 Million Mobile Txns in Sep 2017 ~800 Million USD transacted a month CC BY-ND 4.0 EkStep Foundation, 2017 Source: UIDAI, NPCI, TRAI Website, Conversations with NPCI, emudhra, Deity officials 11

12 TIME TO CHANGE THE NARRATIVE 12

13 THANK YOU 13