Health Systems & Reform ISSN: 2328-8604 (Print) 2328-8620 (Online) Journal homepage: http://www.tandfonline.com/loi/khsr20 Assessing Fiscal Space for Health in the SDG Era: A Different Story Hélène Barroy, Joseph Kutzin, Ajay Tandon, Christoph Kurowski, Geir Lie, Michael Borowitz, Susan Sparkes & Elina Dale To cite this article: Hélène Barroy, Joseph Kutzin, Ajay Tandon, Christoph Kurowski, Geir Lie, Michael Borowitz, Susan Sparkes & Elina Dale (2018) Assessing Fiscal Space for Health in the SDG Era: A Different Story, Health Systems & Reform, 4:1, 4-7, DOI: 10.1080/23288604.2017.1395503 To link to this article: https://doi.org/10.1080/23288604.2017.1395503 © 2018 The Author(s). Published with license by Taylor & Francis© Hélène Barroy, Joseph Kutzin, Ajay Tandon, Christoph Kurowski, Geir Lie, Michael Borowitz, Susan Sparkes, and Elina Dale Accepted author version posted online: 06 Nov 2017. Published online: 06 Nov 2017. Submit your article to this journal Article views: 725 View related articles View Crossmark data Citing articles: 1 View citing articles Full Terms & Conditions of access and use can be found at http://www.tandfonline.com/action/journalInformation?journalCode=khsr20 Health Systems & Reform, 4(1):4–7, 2018 Published with license by Taylor & Francis ISSN: 2328-8604 print / 2328-8620 online DOI: 10.1080/23288604.2017.1395503 Commentary Assessing Fiscal Space for Health in the SDG Era: A Different Story el H ene Barroy1,*, Joseph Kutzin1, Ajay Tandon2, Christoph Kurowski2, Geir Lie3, Michael Borowitz3, Susan Sparkes1 and Elina Dale1 1 Department of Health Systems Governance and Financing, World Health Organization, Geneva, Switzerland 2 Health, Nutrition and Population Global Practice, World Bank, Washington, DC, USA 3 Strategy, Investment and Impact Division, The Global Fund, Vernier, Switzerland CONTENTS Abstract—Initially defined for overall public purposes, the concept Lessons from Fiscal Space for Health Assessments of fiscal space was subsequently developed and adapted for the Toward the SDG: Aligning Fiscal Space for Health Assessments health sector. In this context, it has been applied in research and References policy in over 50 low- and middle-income countries over the past ten years. Building on this vast experience and against the backdrop of shifts in the global health financing landscape in the Sustainable Development Goals (SDG) era, the commentary highlights key lessons and challenges in the approach to assessing potential fiscal space for health. In looking forward, the authors recommend that future fiscal space for health analyses primarily focus on domestic sources, with specific attention to potential expansion from the improved use and performance of public resources. Embedding assessments in national health planning and budgeting processes, with due consideration of the political economy dynamics, will provide a way to inform and impact allocative decisions more effectively. The concept of fiscal space emerged in the late 1990s as part of broader discussions between countries and international financial institutions about the capacity to increase public spending—sometimes deemed necessary for a variety of “meritorious” purposes—but doing so in a fiscally sustain- able manner that did not threaten government solvency.1 Ini- Keywords: fiscal space, health financing, sustainable development goals, tially developed and defined for overall public purposes,2 universal health coverage Heller subsequently adapted the concept of fiscal space for Received 12 June 2017; revised 11 October 2017; accepted 14 October 2017. *Correspondence to: H elene Barroy; Email: barroyh@who.int the health sector in the early 2000s against the backdrop of Ó 2018 H elene Barroy, Joseph Kutzin, Ajay Tandon, Christoph Kurowski, international pressure for more public spending on health to Geir Lie, Michael Borowitz, Susan Sparkes, and Elina Dale. meet the Millennium Development Goals in low- and mid- This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http:// dle-income countries (LMICs).3 Building on the Interna- creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commer- tional Monetary Fund’s work and Heller’s initial definition, cial re-use, distribution, and reproduction in any medium, provided the origi- nal work is properly cited, and is not altered, transformed, or built upon in in 2010 the World Bank outlined a framework for assessing any way. fiscal space for health from five potential sources: conducive 4 Barroy et al.: Fiscal Space for Health and the SDGs 5 macroeconomic conditions; reprioritization of health within demonstrated that fiscal space for health is not only a mat- the government budget; earmarked income and consumption ter of generating additional revenue but, in many settings, taxes directed toward the health sector; better efficiency of also a matter of more effective and efficient use of existing existing health expenditure; and external aid.4 This frame- resources—through, for example, refined allocations, better work has been applied in more than 50 LMICs to inform the budget execution, and strategic purchasing of health serv- development and implementation of health financing ices. Studies that recognized that improving the use of reforms. The authors of this commentary have now come existing funds as one of the most effective and realistic together to tease out lessons and challenges in the approach options to expand public financing for the health sector in to assess fiscal space for health against the backdrop of some the short to medium term led to constructive policy dia- changes in health financing facing LMICs in the Sustainable logue with finance authorities.5 Development Goals (SDGs) era. This commentary builds on However, the policy impact of fiscal space assessments our collective expertise in carrying out and discussing fiscal depended by and large on the approach and process used by ana- space for health assessments with policy makers across a lysts, with experience suggesting a series of potential pitfalls. wide range of countries. It also draws on a recently published First, little consistency and lack of rigor in the methods and met- World Health Organization global review of fiscal space for rics used to quantify the scope of expected change in public health assessments in LMICs.5 spending for health often undermined the policy utility of such assessments. For example, studies that simply used international health spending targets (e.g., 5% of gross domestic product or LESSONS FROM FISCAL SPACE FOR HEALTH the 15% health share in the government budget as per the Abuja ASSESSMENTS Declaration) to justify increases in fiscal space for health without Fiscal space for health assessments generally helped to clear links to reform processes and outcomes had limited policy strengthen health financing dialogue in at least three ways. traction. As evidenced elsewhere,8,9 reaching spending targets First, some assessments contributed to anchoring calls for through fiscal space for health expansion is not an end in itself additional resources within the reality of macrofiscal con- and certainly does not guarantee progress toward UHC. texts, ensuring that policy commitments were commensu- In addition, the treatment of efficiency improvements, as a rate with potential resource envelopes. In some countries, possible source of fiscal space for health expansion, was sub- the recognition of macrofiscal realities was important in ject to high variability across studies, often with little atten- readjusting planned reforms to align with these constraints. tion to positioning findings within the broader health policy In light of this, improving macroeconomic knowledge and dialogue.5 Although efficiency gains are increasingly recog- awareness of key health counterparts contributed to more nized as a major source of “untapped fiscal space,”10,11 effective health financing policy dialogue within countries. action on public financial management issues as a means to Second, assessments often prompted a cautionary view of realize such gains has received little attention in fiscal space earmarked taxes as a source of revenue for the sector and assessments. Analyzing key bottlenecks at critical stages in rather focused on the importance of general public revenues budget formulation and execution is not only useful from a for expanding coverage. In line with recent evidence,6,7 health sector perspective but can provide a solid basis for dis- despite their growing prevalence, potential gains from ear- cussions of fiscal space expansion with finance authorities.10 marked income, payroll, or consumption taxes—including for Explicit consideration of the political feasibility of recom- the purpose of introducing or expanding social health insur- mendations—whether they pertained to changes in budget ance—were found limited in comparison with other sources prioritization, modified allocations of resources within the of fiscal space for health. By putting earmarked mechanisms sector, or options for new revenues—has also been uneven in the broader fiscal context, fiscal space for health assess- across studies, limiting the potential influence of assessments ments urged policy makers to broaden their narrow focus on policy decisions.12 More broadly, assessments should not beyond one revenue stream and to consider earmarked mecha- be carried out as one-off studies but as regular updates that nisms as one component of overall domestic resource mobili- build the capacity and provide entry points for ministries of zation strategies toward universal health coverage (UHC). health and other relevant stakeholders to engage and dialogue Third, assessments also helped in some countries to shift with ministries of finance. This will require aligning assess- the focus of health financing policy dialogue toward a bet- ments with the budget process and timeline and embedding ter use of existing resources. Concurrently examining new assessments in multiyear budgeting exercises to impact allo- revenue sources and the use of existing money, studies cation decisions more effectively. 6 Health Systems & Reform, Vol. 4 (2018), No. 1 TOWARD THE SDG: ALIGNING FISCAL SPACE public spending for health, fiscal space expansion derives, FOR HEALTH ASSESSMENTS more directly, from states’ abilities to transform economic gains into increased public revenues. As highlighted in the Since the inception of the concept of fiscal space for health a Addis Ababa Action Agenda,20 tax collection efforts—and decade ago, the health financing landscape in LMICs has therefore in-depth assessment of fiscal policies as a core changed. Since the start of the SDG era, the growth of devel- opment assistance for health has slowed;13 moreover, more attribute of future fiscal space for health studies—will be critical to support and inform progress toward UHC in the than 30 LMICs are expected to lose access to major sources SDG era. In particular, this renewed focus will be funda- of concessionary financing over the next decade as they sur- mental where the translation of “growth dividends” into pass macroeconomic eligibility thresholds.14 The adoption of increases in public revenues and budgetary shares is not the SDG has also been associated with a greater recognition automatic.21 Fiscal interventions (e.g., change in tax rate of the importance of “ensuring significant mobilization of and base, exemption and subsidy policy, compliance policy, resources,” first and foremost from domestic resources and and fight against tax fraud and tax evasion) are likely to with a specific target on the budget share dedicated to constitute an essential part of future studies and associated “essential services,” including health (target 1.A.2). It also promoted greater attention to UHC (target 3.8)—ensuring that dialogue.22,23 The Addis Ababa Action Agenda, as well as other global collaborative efforts,24 also calls on countries everyone has access to quality health care when needed, with- out suffering undue financial hardship in the process of doing to draw on all sources to finance the SDG agenda, including the investment capacity of the private sector. Future analy- so.6,15,16 This embrace of UHC as a global objective provides ses need to capture these options more systematically, as an opportunity to pursue the other disease-related and health complementary sources to public funds. targets more coherently, as well as those associated with In the context of UHC and SDG, fiscal space assessments improved financial protection and poverty reduction.17 must also consider the challenge of meeting overall health sys- Considering these changes, refocusing fiscal space for tem goals.25 In the past, assessments have sometimes narrowly health assessments toward domestic sources is needed as focused on sector-specific inputs (e.g., personnel, medicines), part of an overall assessment of a country’s capacity to programs/activities (e.g., immunization), or diseases (e.g., progressively move away from external financing for health.14,18,19 Though countries are encouraged to explore HIV/AIDS). By taking a system-wide approach, future fiscal space for health assessments are likely to be better positioned options to leverage private sector resources, in general and aligned with overall health planning and budgeting exer- domestic sources of fiscal space for health should be under- cises. Policy options to increase critical investments in sectors stood as various policy options to be explored on the public that benefit health, such as education and agriculture, should revenue and expenditure sides to create or expand the mar- also be part of the dialogue around fiscal space. gin for the health sector to maneuver through sustainable In looking forward, we believe that fiscal space for health public financing. As part of these assessments, key techni- assessments should: (1) give greater emphasis to domestic cal questions to be addressed within the domestic fiscal sources, looking at both revenue and expenditure policy space should include the following: options; (2) pay specific attention to improving the effective-  How to overcome technical and political barriers to ness and efficiency of public funds to make space for new increase the domestic budget share for health? health expenditures within the existing budget envelope; (3)  What space could be generated through better public refine and use consistent analytical methods and metrics to financial management of existing resources and a quantify the expected scope of change in fiscal space for greater alignment of budgetary allocations with sector health with clear links to reform processes and outcomes; (4) needs and priorities? expand the scope of assessments to look more comprehen-  What incentives are needed for the public allocation and sively at funding options within and beyond the health sector; expenditure management systems to effectively expand (5) embed assessments in national health planning and budg- the sector’s financing capacity and performance? eting processes with due consideration of the political econ- omy dynamics; and (6) combine assessments with capacity Related to this, analysts working in this field should building and technical assistance activities to facilitate policy increasingly pay attention to public revenues as a primary dialogue between ministries of health and finance, in helping driver for fiscal space for health expansion. Though growth health stakeholders recognize and navigate macrofiscal in national income is likely the most important driver of constraints. Barroy et al.: Fiscal Space for Health and the SDGs 7 DISCLOSURE OF POTENTIAL CONFLICTS health financing. Geneva (Switzerland): World Health Organi- OF INTEREST zation; 2017. 12. Roberts M, Hsiao W, Berman P, Reich M. Getting health The authors declare that they have no conflicts of interest. reform right: a guide to improving performance and equity. New York (NY): Oxford University Press; 2004. 13. Dieleman J, Schneider MT, Haakenstad A, Singh L, Sadat N, Birger M, Reynolds A, Templin T, Hamavid H, Chapin A, ACKNOWLEDGMENTS et al. Development assistance for health: past trends, associa- The authors thank Agn es Soucat and Tim Evans for their tions, and the future of international financial flows for health. Lancet. 2017;387(10037):2536-2544. overall support for the production of this commentary. We 14. Kurowski C, Tandon A, Alkenbrack S, Hate PA. 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