Decentralization

and its Effects

Health Sector in Philippines

Shivraj Singh Negi (HS07H022)

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Index.
Decentralization........................................................................ 3
Decentralization in the context of Health Care ....................... 4
Background and History of Decentralization .......................... 6
Health Policy Under Decentralization ..................................... 9
Health Benefits After Decentralization...................................10
Health Expenditures ...........................................................................................................................10
Local Initiatives in Health Services and Financing ........................................................................... 11

Health Care and Intergovernmental Fiscal Challenges .......... 11

Health Care Personal and Civil Service Management ............ 12
Service Delivery Mechanisms .................................................. 13
Drug and Health Care Quality at Local Level ...................................................................................14
Health Information Systems .............................................................................................................. 15

New Role for Central Ministries .............................................. 15

Conclusion ................................................................................18
Bibliography .............................................................................19

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Decentralization

Decentralization has captured tremendous attention in last two decades as it has been at
the centre instrument of policy change in many developed and developing countries. It
has been adopted as a major point of governance reform agenda by many international
institutions including World Bank. As centralized state lost its legitimacy and was proved
incapable of solving development challenges by itself, decentralization was widely
believed to promise a wide range of benefits.

It is seen as a way of

1. Increasing local control over resources and increasing accountability.

2. Increasing role and participation of local communities in governance, based on
principles of participation, transparency and accountability.
3. Reducing central authority by fragmenting central control and introducing checks
and balances.
4. Strengthening local levels of governance with greater capability to provide public
services.
5. New paradigm of local economic development.
6. Promoting innovation and experimentation and adaptation of different schemes to
reflect local realities.

There are different ways in which these objectives can be completed and this gives rise to
different kind of decentralization activities. They are broadly classified into three
categories.

1. Political Decentralization: Devolution of power to elected local governments as

a distinct set of state actors.
2. Administrative Decentralization: It includes de-concentration, divestment and
delegation. Transferring authority over service delivery and functions from central
to non-elected levels of government, agencies or field offices of central
government agencies.
3. Fiscal Decentralization: Resource allocation to sub-national and local levels of
governance.

The last two decades have seen different countries experiment with the concept in
various ways, with each bringing decentralization in different forms and to various
extents (in terms of devolution of authority and power). It was seen as a panacea for a

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wide variety of problems. The experiences have been varying and the entire process has
not been smooth in anywhere. There are certain key lessons to be drawn from the
experience of decentralization worldwide.

First being the fact that decentralization has to be recognized as a political process. It
interacts with the core of polity and society, redistributes power, reorganizes resource
control structures, introduces accountability in public delivery services and empowers the
weak in the process. The political dynamic of such a process requires a sophisticated
handling, instead of being wished away. If these dynamics are not taken care of then the
process may end up creating another layer of government inefficiency and capture of
localized power by local elites.

Second, decentralization is not a one-shot vaccination against all ills of governance, but it
is a pedallic process (like cycling) and requires constant reforms and a committed
government. It does not mean withdrawal of state or lessening of role of the state. For
decentralization to succeed we need state to play more proactive role in guiding the
process, supporting it with appropriate reforms and technical expertise and inputs.

Third, there are no set formulas or procedures or best practices guide for guiding the
overall process of decentralization. Since the process is in nascent stage in various
countries, the literature is also very limited. This puts a premium on adapting and
improvising the process to suit the specific conditions in every country.

Decentralization in the context of Health Care

Many countries who have introduced decentralization have also decentralized some or all
of public health care functions from central to lower levels of governments. In many
cases, the national government provides monetary and fiscal support to local
governments and these local governments then assume the direct responsibility for
providing health care goods and services, and operate health care facilities in their
jurisdiction.

The driving reason for decentralization is to improve the well-being of people by

empowering local voters to change the quality and quantity of the public health services
that they receive from their local authorities.

As explained earlier, the health decentralization is a very recent phenomenon, and thus
there is no established ‘best practices guide’ or a perfect universal framework which can

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be executed anywhere. The process has been plagued by many problems in developing
economies. In many developing nations, the traditional health system is highly
centralized, and this was evident in the manner in which Health for All programs were
executed in various countries. It was mostly a top down centre designed program which
was difficult to manage by highly ineffective health ministries. This program was prime
focus for World Health Organization also for many years. Even now most of the
approaches focusing on health challenges, including Millennium Development Goals of
United Nations and World Bank sponsored Poverty Reduction Strategy Papers in
developing countries assume a strong central role for ministries of health.

The debate around the issue of decentralization in health sector has developed around
the appropriate design of the decentralization model. The debate is divided into two
camps, with each having different perceptions about the ability of local governments to
handle a more decentralized structure.

Supporters believe that decentralization combined with systematic citizen involvement in

setting goals, execution and functioning, financing, monitoring and other functions can
lead to positive outcomes. It will also require people to obtain the skills, material support
and authority needed to offer high-quality services. Decentralization will further enable
people to secure information, financing, bargaining power and also give health ministries
a chance to change their objectives and redefine their roles. They will have a chance to
become more realistic in their targets and offer expertise that suits them the best.

Opponents however claim that a badly designed decentralization process will commit
both tactical and strategic errors. In short run it will cause staff opposition (from
centralized bureaucracies, who will see their power reduced), breakdown of deployment
and other personal mechanisms, mismatches between health care funding and spending
requirements, ambiguity in responsibilities and premature delegation of functions. This
can lead to leading to deteriorating service quality, disruptions in reporting,
accountability, and quality control. The costs may also rise. It may happen that as central
administrative units are downsized, they may no longer be cost effective and neither
technically efficient. Many of these transitional problems may be difficult to correct. As
we will see in the discussion about Philippines, the existence of such dangers should not
be overlooked. The process of decentralization needs careful introduction, management
and guidance by central governments. The more specialized and technical services and
responsibilities for specialized services, medical supplies, and basic education and
training should continue to remain in the hands of health ministries.

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The overriding rationale for decentralization should be improved effectiveness and
efficiency. But underlying and sometimes driving reason is political. Due to this the
reforms are often launched without a sector-specific analysis prior to their launch. This
happened in Philippines as well. The design and the timing of the process depends much
on the pre-existing conditions of the society. In the case of Philippines we see that health
ministry was not prepared to assume and define the new role of a specialized system
manager rather than being the main provider. At the same time, faltering levels of health
indicators meant that health systems needed significant changes in health policy.
Improvements in infant survival rates and other health status indicators in the 1980s were
beginning to plateau, indicating decreasing returns from health expenditures that were
higher than in other developing countries in terms of gross domestic product (GDP).

The focus of this paper will be on the effect of decentralization on health sector in
Philippines. It will take a look into effects of decentralization on different aspects of the
health system. It will look into some of the problems and how they were handled and
what lessons can be drawn from this experience for other countries. The role of central
ministry especially in functions like monitoring and controlling communicable diseases,
setting standards and assuring quality for devolved health services and pharmaceuticals,
ensuring access of the poor to health services, and sustaining health financing will be
looked into.

Background and History of Decentralization

Philippines is an archipelago of 7000 islands with a population of 76 million. Per capita

GDP is US $ 1050 and literacy rate is 95% for both men and women. 59% of population
lives in urban areas. Socio-economic development has lagged behind other regional
countries, in spite of universal education and democratic political system. Though women
are equally well educated, their wages are only half that of men.

Under Marcos regime in 1970s and 1980s, Philippines was highly centralized. After the fall
of the Marcos regime, democracy was restored in 1986 and decentralization was seen as a
method for redemocratization of society and polity. Philippines ratified a new
Constitution in 1987 and further articulated strong decentralist provisions in the Local
Government Code (LGC) of 1991. It was passed in 1991, and aimed at devolution in service
delivery, responsibilities and functions throughout Philippines. It was hoped that given
the wide geographical variations, local authorities can provide these services better,

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taking into account local needs and preferences. Also it will bring more accountability
into system as people can hold locally elected officials accountable for their actions. It will
also increase participation and reduce alienation among population groups outside
Manila. Thus decentralization was supposed to bring efficiency, equity and effectiveness
into the system.

A number of sectors were decentralized, health being one of them. The process met
resistance from Department of Health initially, as it anticipated loss of control, authority
and employment. It was also skeptical about the benefits of decentralization and
concerned about lack of institutional capacity at local level.

Before decentralization, the central government provided health care services through a
centralized hierarchal system of national, provincial and district hospitals, and primary
health care facilities. Department of Health (DOH) was responsible for centralized
planning, spending and decision-making. LGC devolved fiscal responsibilities to local
governments starting in 1993. It devolved significant amount of public services and
functions to local governments from DOH and other central agencies. Funds allocated in
the form of unconditional block grants, called Internal Revenue Allotments (IRAs), were
significantly increased. Funds allocated depended upon population (50%), land area
(25%) and rest divided equally among all local governments. The funds allocated were
unrelated to either actual expenses or capacity of local governments to carry out their
tasks or raise their own resources; neither did they have any other conditions attached.

This structure of fund allocation had two major flaws

1. Allocation for health expenditure out of total IRA allocation, other than staff
wages, was entirely left to local governments. Also, there were no assurances that
central level public health care initiatives would be carried out by the local
governments.
2. IRA allocation was independent of capability of local government, it created losers
and winners among local governments as some were more capable than others to
finance and manage devolved health care services. To overcome this DOH
included a clause in its rules and regulations that allowed an agreement to be
established with local governments “to cover technical, financial, and other forms
of assistance, compliance of local governments to DOH guidelines, standards and
criteria, augmentation of local health services and facilities, and such other
concerns that pertain to the enhancement of local health services and facilities”.
This was an attempt to provide support with the initial transition of health services

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 from the central to the local levels and for continued support for its vertical
programs. For example, to support the immunization program, the DOH provides
vaccines and, in return, the local governments provide personnel, facilities, the
cold chain, needles and syringes.

After LGC, large amount of DOH funds were transferred to IRA and all publicly provided
health care functions below the regional level of the DOH, including provincial and
district health offices, construction, operation and maintenance of provincial and district
hospitals, purchase of drugs and medicines, operation of the primary health care system
through rural health units and Barangay health stations (primary health care facilities),
operation of field health services, and operation of 5-bed health infirmaries were devolved
to the local governments.

This led to an imbalance as provinces were assigned provincial hospitals, which was the
largest expenditure category of devolved health services, whereas cities (having large
populations) received large IRA revenues but had little health care services devolved (as
large hospitals in city remained under direct central control). Overall, however, there
was no assurance that services previously provided by the central system under DOH
would actually be delivered under the devolved system.

Decentralization was also affected by a large number of factors beyond the control of
government, most significant being Asian Financial Crisis of 1997. After crisis, national
government invoked “an unmanageable public sector deficit”—a provision under the
Local Government Code of 1991 that allowed a 10 percent cut in the Internal Revenue
Allotment (IRA) distributed to lower levels of government. As IRA was the largest source
of funds for local governments, the reduction led to a drop in local health spending. The
uneven regional growth aggravated the situation further. Unstable political conditions led
to frequent administrative and political changes in Ministry of Health, disrupting policy
priorities and the ministry’s momentum in adapting to a decentralized setting.

Persistent rural insurgencies and weak policing have made it difficult for both the private
sector to pursue investments and the public sector to reach out to the poor. Weak
governance in the Philippines, including corruption in key branches of government, has
also led to loss of revenues and waste of limited resources. However, the proliferation of
nongovernmental organizations (NGOs) and other civil society groups has been a major
positive development. They work side by side with key national agencies in agrarian
reform, health advocacy, local capacity building, livelihood projects, community
mobilization, and governance reform.

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Health Policy Under Decentralization

After passing an enabling legislation, mandating decentralization of health services

authority and powers of local governments were significantly enhanced. Later laws
further articulated, directly supported, or affected the decentralization of health services.
These laws included the Magna Carta for Public Health Workers of 1992, the Barangay
Health Workers’ Benefit and Incentives Act of 1995, and the National Health Insurance
Act of 1995.

Basic and primary health care services were assigned to Barangays (villages) in the
Philippines. Primary level health facilities are assigned to cities and municipalities.
Secondary-level hospitals were assigned to provinces in the Philippines. Tertiary-level and
specialty hospitals, on the other hand, are mainly the responsibility of the central
government, the central heath ministry.

Central government continues to provide certain public goods such as health research
and development, and merit goods such as maternal, childcare, and family planning
services. Local governments are involved in and sometimes co-finance these programs.

Implementation in the Philippines occurred in Big Bang fashion. It completed the transfer
of 45,896 health personnel, along with hospitals, clinics, and other facilities, in 1993, two
years after passing the Local Government Code. The Big Bang approach has its merits and
disadvantages. Often, the laws and regulations governing decentralization were
inconsistent with other laws, especially civil service rules. This limited the ability of local
governments to right size inherited health bureaucracies and anticipate personnel
matters. Moreover, administrative preparation was inadequate. Many local officials in the
Philippines were unaware of the precise nature and extent of their new expenditure
responsibilities and powers, and the central Department of Health (DOH) was slow to
transform itself structurally and operationally. Lack of personnel severely hampered the
Local Government Assistance and Monitoring Service, created to troubleshoot transition
problems, and the service lacked clout, as different DOH divisions managed public health
programs as before. With DOH looking uncertain, many local governments seemed to
adopt a wait and watch strategy, apparently hoping that the agency would be blamed for
the breakdown in the public health system and be forced to recentralize health functions.

Local governance mechanisms to promote transparency, accountability, and participation

were also introduced. This, of course, complicated the transition, as local governments
initially had to adopt these mechanisms on their own without much guidance or

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experience, leading to delays, perfunctory compliance, or failure to convene the
mandated consultative bodies.

Health Benefits After Decentralization

There were sustained favorable trends in overall health status after decentralization. Gaps
in health status across regions continued to close during the 1990s. Following the 1997
Asian financial crisis, however, the disparity widened. The favorable trend in overall
health status was arguably due partly to progress in health outputs and service coverage.
For example, the proportion of births attended by trained health workers, and of the
population with access to clean water source and sanitation services, rose in the 1985–
2000 period.

Health Expenditures
Average annual health expenditure, as percentage of GDP was 3.5 percent in the
Philippines. In per capita terms, however, total health spending fell from US$41 in 1997 to
US$30 in 2001 (World Bank 2004). Asia’s financial crisis led to a steep decline in 1998 of 24
percent. The public sector share of total health expenditures rose from 43 percent in 1997
to 45 percent in 2001. Philippines saw a shift in financial burden. The annual share of local
governments in public health expenditures climbed up from less than 5 percent before
1992 to 12.5 percent in 1993. By 2001, the local share reached 20.9 percent, exceeding the
16.6 percent share of the national government. Moreover, personal curative health care
services constitute the bulk of public expenditures for health in the Philippines, and,
ominously, a growing portion of the health outlays of local governments as well. Also,
despite the reorganization of the social insurance programme in 1995 to include insurance
for the indigent population, insurance coverage of the poor for basic health care was
extremely low.

In light of these financing and spending patterns, it is doubtful that decentralization has
widened access by the poor to quality health care. A national client survey confirmed that
Filipinos in general were more satisfied with private hospitals and clinics than with
government health facilities. The low regard for public health services prevailed even
among the poor, an indication that the public health system does not serve its target
clients well. Because of the inferior quality of public health services, the poor continue to
self-finance their access to private health services. Private sources, including direct out-

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of-pocket payments, accounted for an annual average share of 57 percent of total health
expenditures in the Philippines from 1991–2001.

Local Initiatives in Health Services and Financing

Committed local government showed considerable innovation and resourcefulness in
pursuing health objectives, improving health service delivery, financing and management.
However, the large number of local government units (over 1,600 in number) made it
much more labour-intensive to educate local leaders and officials and promote a
commitment to reproductive health among them.

To encourage community participation in the health sector, local health boards were
established at the local government unit level. Several local governments used this
mechanism to successfully involve the community in local health matters. Local
government units that had functioning health boards had more consultations with the
community, more fundraising activities, additional health initiatives and higher per
capita health expenditures than others. However, for various reasons, few local
government units promoted community participation by establishing local health boards.
Central agencies, often in partnership with NGOs, documented, disseminated, and
advocated best practices in local public services through the media, educational trips for
local officials, and various training programs. Despite these initiatives, however, the speed
of innovative practices has been limited, and the overall level and quality of local health
services have barely improved.

Health Care and Intergovernmental Fiscal Challenges

The intergovernmental fiscal system must usually address horizontal as well as vertical
equity, key relationships between levels of government and jurisdictions, and incentives
for collaboration. Weaknesses in the design of a country’s fiscal system have important
consequences for the delivery of health services.

In the Philippines, the primary fiscal vehicle supporting decentralization is the Internal
Revenue Allotment (IRA). As noted, most local governments depend heavily on this
source, as do devolved health services. Department of Health also created the Local
Government Assistance and Monitoring Service to manage transition problems, and to
provide financial assistance to local governments unable to maintain health services
because of inadequate resources. It also implemented a conditional matching grant
program, the Comprehensive Health Care Agreements, intended to secure local funding

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for devolved functions and core public health programs. This reflected an important part
of the country’s strategy of using incentives and disincentives to achieve national
objectives in a decentralized system.

However, the relationship between service delivery and financing arrangements entailed
significant weaknesses. For example, devolution of public facilities led to fragmentation of
the hospital referral system. Under the new regime, each hospital or clinic primarily
serves the constituency of a local government. Several provinces therefore reduced
budget appropriations to urban hospitals and channeled resources to less-well-off
municipalities, in the process raising the average cost of urban services. Instead of co-
financing these facilities with the provinces, many cities opted to refurbish their own
clinics or build enclave hospitals. Further, weak monitoring of local compliance with
Comprehensive Health Care Agreements did not help ensure financing of the devolved
services.

Government hospitals in Philippines collect user fees and impose up to a 30 percent

markup on drugs. However, cost recovery rates remain low because of the inordinate
volume of charity and subsidized patients. The unintended result of low cost-recovery
rates is that many hospitals are poorly maintained, understaffed, and ill-equipped.

Health Care Personal and Civil Service Management

The Philippines health workforce, both public and private, is composed predominantly of
women, with the exception of physicians. Local governments find it difficult to hire
physicians, nurses, and medical technicians, who are in great demand in foreign markets.
Staff anxiety and opposition were major problems during the transition to
decentralization in Philippines. It can affect the quality and quantity of personnel
available. There was also a loss of career path for Health Workers. Since prior to
devolution, a municipal health worker could follow a path that led to provincial, regional
and even central positions. In addition, integration of services at the local level meant
that frontline workers were now expected to provide a broader range of reproductive as
well as other health services, such as malaria and tuberculosis care, thereby expanding
their workload. Coupled with problems such as the non-availability of supplies and non-
payment of travel allowances, their ability to meet the reproductive health needs of the
population they served was strained.

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To appease devolved workers, the central Department of Health pushed for the Magna
Carta for Health Workers in 1992. Among other features, this law provides for higher
compensation and extra benefits and allowances to all health workers, including those
devolved to local governments, and requires the latter to pay the additional
compensation.

This unfunded mandate would have demoralized other staff and made some rural
physicians the highest-paid local public employees, earning more than mayors, which
they considered unacceptable. As a stopgap measure, the Department of Health
instituted the Doctor to the Barrios Program, which supplied temporary, contractual, and
better paid doctors to remote areas. In May 1993 the program began to deploy physicians
to 271 municipalities lacking doctors, and by December 2003, 198 of these municipalities
had received doctors. They receive an attractive package of salary and benefits for serving
two years, and some also receive honoraria and material support, such as free board and
lodging, from local governments. To supplement the local health force, the Barangay
Health Workers’ Benefit and Incentives Act of 1995 provided for training volunteer
workers and providing minimal incentives to convince them to join Barangay health
stations. However, these workers do not effectively cater to the health needs of the
population.

Service Delivery Mechanisms

Health programs need well designed institutional arrangements to ensure that parties in
the service delivery process have the understanding, ability, and incentives to fulfill their
roles. Coordination is necessary for effectiveness. Prior to decentralization the services
were broken into primary, secondary and tertiary levels, with lowest levels being handled
by local governments.

Each rural health unit was responsible for 3-4 Barangay health stations set up to serve
surrounding villages, staffed by a trained midwife and several locally recruited volunteer
health workers. The district level provided the primary referral infrastructure while
secondary referral facilities were located at the provincial and city levels. District health
teams supervised rural health units and Barangay health stations, and a national training
plan provided in-service training to health staff at all levels.

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A major unintended consequence of devolution was the disruption of the technical
linkages between the rural health units at the municipal level and the primary and
secondary referral facilities at the district and provincial levels.

Disruptions could also occur if the municipal government disagreed with the provincial
government. The absence of powerful central mechanisms to influence local government
to invest in priority programs was also a major handicap for service delivery at the local
level. "Comprehensive Health Care Agreements" were intended to provide an opportunity
for the DOH and local government units to negotiate priority health investments on an
annual basis. However, these agreements were rendered ineffective because they did not
include incentives or punitive measures to ensure local government complied with the
agreements. Another major flaw in the Comprehensive Health Care Agreements was that
they were between the province and the DOH, yet the producer of the deliverables was
the municipality. Provinces were expected to negotiate performance agreements with
their municipalities, but this often did not happen.

Drug and Health Care Quality at Local Level

The supply and quality of drugs at the local level have become a concern owing to limited
funds, deficient drug management systems, and loopholes in procurement rules. Each
local government manages its own system of drug procurement, inventory, dispensing,
and financing. The quality of locally procured drugs is generally poor, the purchase price
is often higher than in private pharmacies, stock shortages are frequent, and irrational
drug use occurs. A principal reason is that local therapeutic committees are not
constituted, not functioning, or not well trained in modern drug management. Local drug
procurement is also corrupt in many places: bids are rigged, qualified bidders are “pre-
identified,” and bidders connive.

Moreover, the supply chain extends only to urban centers; poor outlying municipalities
rely on itinerant drug peddlers who arrive infrequently. To ensure drug quality in all
public health facilities, the central health ministry has adopted drug formularies and
drawn up an essential drug list. It advocates and promotes generic drugs. However, these
regulatory measures have not ensured the overall quality of drugs, owing to weak
information campaigns and enforcement mechanisms.

Quality of care received attention as an issue in the Philippines during the early 1990s.
Before devolution, the quality of health services suffered from a number of problems,
including lack of integration of the constellation of services, difficulties in follow-up due

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to inaccessibility of health services and limited outreach to men and adolescents.
Following devolution, there were reports of further weakening of quality of care due to
disruption of the referral chain, under-funding particularly of preventive care and priority
programs, low morale of the health force, chronic lack of equipment and drugs at the
facility level and poor quality certification of health facilities in both public and private
sectors.

In addition, focus group discussions conducted by the DOH showed that patient
satisfaction was low due to unavailability of essential drugs, negative provider attitudes
towards patients and lack of privacy at health facilities.

Health Information Systems

Decentralization has fragmented the health information system and undermined

coordination among various sectors, and thus effective and efficient control of
communicable diseases. Sub-national governments are unaware of their roles, and, more
critically, lack the incentives and technical capacity to assume those roles. Sub-national
governments need support for activities from collecting health information to providing
further inputs to performing overall health planning to actually implementing programs.

The central health ministry relies on local governments to report information voluntarily.
This has resulted in erratic or delayed submission and poor-quality data. The devolved
staff members who were responsible for such data under the old regime now supply
information on health expenditures and input indicators to provincial and lower-level
elected officials, who are less concerned with outputs and outcome indicators.

New Role for Central Ministries

Decentralization is not a one way street, and the roles don’t change one way only. As the
local governance gets transformed the centre also has to redefine its role in the new
setup. In Philippines it led to increasing local participation in planning, delivering and
financing leading to more appropriate and better-targeted health services. Volunteers
supplement limited local financial and technical resources. citizenship and trust in local
government have deepened. The resulting efficiency gains and social capital support the
decentralization of health services.

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But fiscal and issues of technical capability needs to be addressed. Poor policy design,
especially in intergovernmental fiscal transfer system has led to poor budgetary planning
and investment. If local governments have good idea of their fiscal power and resources
and access to technical inputs then they can use the information on local needs, and
proximity and direct accountability to beneficiaries, more effectively.

The policy response in Philippines was, however more stop-gap and reactive. Immediate
measures were taken to solve existing problems, without taking any long term
perspective. This was especially true for worker’s problems and fiscal issues.

Central agencies should concentrate on activities that go beyond the direct provision of
preventive and curative services, focusing on core public health functions, responding to
overall imperatives, and preventing potential failures. These efforts include not only tasks
related to pharmaceuticals and communicable diseases but also workforce training,
recruitment, pay and benefits, and supervision. Other core public health functions
include ensuring that the poor have access to affordable care, overcoming micronutrient
shortfalls, creating sustainable funding arrangements, acting as a source of ideas and best
practices from the provinces, and providing technical assistance on a selective basis.
Ministry of Health should build consensus on national health objectives and standards,
and coordinate rather than require local governments and civil society groups to meet
these goals. Instead of relying on sometimes heavy-handed regulation, the ministry
should align incentives to elicit the cooperation and participation of all sectors. Rather
than impose high standards, the ministry should perhaps promote them through
advocacy and by strengthening local governance mechanisms.

It should push for greater consistency among goals, programs, and policies of different
national agencies to support local governments. Subnational governments have little
incentive to pursue core public health functions because they cannot fully capture the
returns, and because some functions are difficult to perform well because of limited
resources or lack of scale economies. The impacts of core public health functions are also
hard to measure: gauging the effects of strong disease surveillance and reporting system is
difficult, while the direct distribution and use of drugs by infected patients has obvious
benefits.

To address the various decentralization problems, Department of Health formulated a

comprehensive decentralization strategy called the Health Sector Reform Agenda
(HSRA). The HSRA noted a slight resurgence of certain diseases and persistent inequities
in service access. It redefined itself as a health leader, enabler, and capacity builder,

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administering only certain services. It would primarily be responsible for setting national
health policy and regulations and strengthening regulatory agencies, promote
innovations and standards in health services, push for greater fiscal autonomy of
hospitals, secure funds for public health programs, and promote universal Insurance
coverage. IT bought all its interventions under one HSRA framework in all provinces.

Other than redefining new role for centre, local institutional capacity also needs to be
built. In Philippines, all local governments were not uniformly situated in terms of their
technical and managerial capacity both to effectively deliver services and manage the
funding of health care in their jurisdictions. As a result, the larger and economically
better-off local governments were better able to cope with the increased demands
imposed by devolution, while poorer local governments with low institutional capacity
were overwhelmed by the additional demands that devolution imposed on them. This
lack of capacity-building prior to devolution created differing levels of health service
delivery between different local government units and adversely affecting health equity.
Studies of public health programs indicated that the fragmentation of local health
networks and difficulties in managing centrally run public health programs might have
rendered funds for public health less effective.

Five years after the implementation of devolution, gains in health outcomes at the
national level remained unexceptional and in many cases had stagnated. Health gains
were not distributed evenly either, and large differentials in patterns of mortality and
morbidity existed between provinces as well as between urban and rural residents. Wide
differentials also prevailed between socio-economic groups, with the health status of the
poor and the less educated comparing unfavourably with that of the non-poor and better
educated

In 1998, the DOH conducted a detailed health sector analysis to look at both the
unfinished agenda of devolution as well as pre-devolution issues in the health sector that
had not been tackled by devolution. In particular lessons emerging from innovative and
good practices of local government units that had more successfully adapted to
devolution were closely examined.

The revenue allocation formula is being adjusted to accommodate the differential share
of costs of devolved functions assumed by different local government units; incentives in
the form of matching grants to local governments are being put in place to promote
priority health programs; local government units are being interlinked with central
financial and technical support to form local health networks to reverse the

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fragmentation of services; and information on how health boards can function effectively
is being shared among local government units to encourage more of them to involve local
communities in health care decision-making.

Reformers are also looking at a number of issues beyond devolution that have adversely
affected the performance of the health sector, including reforming the financing of health
services particularly through expanding the social insurance programs and increasing the
coverage of indigents under the program; improving the quality of health care by
strengthening accreditation and certification mechanisms as well as building community
demand for higher quality services and rationalizing hospital management, financing and
distribution to better serve the needs of the population.

Conclusion

Decentralization should be introduced as a part of larger set of health sector reforms. It

should not be seen as a panacea for health services. It is a political process with important
political, social and economic implications. Its targets can be improving efficiency,
effectiveness and equity, but to achieve them it should be initiated with a sector-specific
analysis and analytical work on its socio-economic implications.

Such analysis will reveal what parts and processes to be decentralized and to what extent.
It will also reveal the appropriate fiscal and administrative decentralization structure. It is
also necessary that a strong guidance is provided, along with continuous monitoring so
that implementation actually achieves the intended benefits.

A strong centre is necessary not only for guiding and monitoring but also for balancing
authority and responsibility, so as to ensure that national health priorities and local
health needs are in consonance. Also, sudden and extreme decentralization, like the ‘Big
Bang’ model in Philippines will only end up disrupting traditional chains of referral,
without providing any reliable option to local governments. Often local levels lack
capacity to handle new responsibilities, and may not deliver to the expected level even
after decentralization. So decentralization should be bought in a phased manner, with
concurrent capacity building process at all levels. The process requires significant time
and commitment from central government.

The process should be introduced, in a manner that is in line with the spirit of process i.e.
participations and consultation from local population and other stakeholders. It should

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not be forced ‘centrally’. The process should be continuous, ‘pedallic’ in nature with
constant re-adjustments to process in face of new challenges. It is only a mean towards an
end, and should be accompanied by quality improvements.

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Diokno, B. (August 2003). Decentralization in the Philippines After Ten Years? What Have We
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Hall Hill, A. M. (2006). Regional Development Dynamics and Decentralization in the Philippines:
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