By Cai Ordinario, March 20, 2020; Business Mirror

Insufficient health budgets prevent local government units (LGUs) from improving health services in their respective localities according to a study released by the state-owned think tank Philippine Institute for Development Studies (PIDS).

In a study, titled Fiscal Decentralization and Health Service Delivery: An Assessment, PIDS Supervising Research Specialist Janet S. Cuenca said this is due to the mismatch between the cost of devolution and the Internal Revenue Allotment (IRA) of LGUs.

“The findings of the DID [difference-in-differences] analysis suggest that greater health decentralization has negative impact on access to hospital inpatient services and access to sanitation [toilet]. It contradicts the hypothesis of the study that expects greater health decentralization to result in better health services,” Cuenca said.

While the lack of budget was addressed by the Department of Health (DOH) by extending health expenditure decentralization ratio (HEDR), Cuenca found that this further weakened health devolution.

The study found that items such as hospital bed capacity per 10,000 population for the control group, or those with lower HEDR, registered a 5-percent reduction while for the treatment group that had higher HEDR, the decline was larger at 9 percent.

The study also found that there was no assurance that higher real per- capita LGU income would increase access to hospital inpatient services.

Cuenca explained that this could be explained by the fact that even if LGUs incomes increase, the additional funds are automatically poured into improving hospitals, as well as water and sanitation services.

“Higher real per-capita income does not necessarily mean more funding for hospital services, especially when LGUs have HFEP [Health Facilities Enhancement Program] to depend on,” Cuenca said.

“It does not necessarily imply better access to safe water and sanitation because of competing health spending priorities of the LGUs,” she added.

Cuenca said it is important for the government to review and revise the IRA distribution formula to address the mismatch between the cost of devolved services such as health.

She said having sufficient resources has been a long-standing issue for LGUs and it becomes even more crucial with the Mandanas ruling which is expected to take effect in 2022.

Earlier, the National Economic and Development Authority (Neda) said LGUs should improve their absorptive capacity to ensure that they will be able to spend the funds allotted to them.

Socioeconomic Planning Secretary Ernesto M. Pernia said this is essential in light of the Supreme Court’s decision to grant the Mandanas petition. The decision will be effective in 2022.

Pernia said this is a “risk” especially if LGUs are not able to address their absorptive capacity. He said about 50 percent, or P300 billion, of all government revenues will be given to LGUs starting 2022.

He said efforts to improve absorptive capacity can be done by addressing barriers to entry, particularly of investors who are not from these provinces, cities and municipalities.

The Neda chief said allowing barriers to entry to exist is simply a “formula for non-development.