How can fiscally federal governments work towards equity when delivering public health? Exploring this question, in the South African context, is ‘Primary Healthcare Spending’ by Okore A. Okorafor (www.uctpress.co.za).
The South African fiscal system is based on a revenue-sharing model, with the national government collecting most of the revenue and the lower levels of government being responsible for implementing most of the services, the author informs. This results in a fiscal gap, because the revenue generated by provinces and local municipalities is less than the expenditure budget they require to deliver on the functions they are responsible for, he adds.
Vertical and horizontal imbalances
For starters, fiscal imbalance can be vertical or horizontal, as the book elaborates. ‘Vertical imbalance’ is the mismatch (funding gap) of expenditure responsibility and revenue generating capacity (e.g. central governments usually have higher revenue-generating capacity compared to their expenditure needs, while the reverse is the case for sub-national governments).
And ‘horizontal imbalance’ is a case of government units within the same tier of government (say, provincial governments) having different revenue-raising capacity and therefore different abilities to fulfil similar expenditure responsibilities.
Sharing of tax revenues
Revenue-sharing arrangements are usually geared towards correcting vertical imbalances, the author elucidates. “Sharing of tax revenues can be on a tax-by-tax basis, with different coefficients of distribution among levels of government for each tax or on the entire pool of central government tax revenues.”
He finds that tax-by-tax sharing is practised in countries such as Argentina, Brazil, Hungary, and Russia. In his view, however, a major disadvantage of such sharing is that it provides an incentive for tax administration at central government to concentrate its collection and enforcement on the taxes that are not shared or are shared to a lesser degree.
“The fiscal shortfall is addressed through financial transfers from the national government to the lower levels of government. Theses transfers are in the form of specific-purpose grants and general-purpose grants, referred to in South Africa as conditional grants and equitable-shares grants respectively,” the author observes.
Looking at the practices across the world, Okorafor notices the recent phenomenon of performance-based grant systems which create additional incentive for SNGs (Sub-national Governments) to increase their performance in specific areas. “Essentially, this system operates such that SNGs are ‘contracted’ to perform specific tasks with defined criteria for assessing their performance.”
Distressed by research findings that the provinces with greater need for additional PHC (Primary Healthcare) resources have lower PHC expenditure per capita than provinces that have less need, Okorafor calls for an assessment of needs based on the communities’ perception of need, rather than through a centrally-imposed, uniform approach of resource allocation, especially in heterogeneous societies. What is required, he says, is broad policy guideline on equity from the centre, leaving lower levels of government the room to manoeuvre within the boundaries of the policy to meet the specific needs of the communities they serve.
A section on ‘need-based resource allocation’ speaks of the most widely used indicators in measuring relative need for health services, such as population size, demographic composition, levels of ill-health (mortality and morbidity), and socio-economic status. “In some cases, countries have also taken into consideration the difference in the cost of providing health services in different areas…”
Recommended study for public health planners and researchers.