Since decentralisation in Indonesia, there has been a mismatch between spending responsibilities at the local level and local governments’ abilities to effectively manage resources. This research investigates the relationship between institutional arrangements for public expenditure management (PEM) and inequalities in health outcomes in selected districts of Bengkulu province. This study aims primarily to identify factors contributing to efficiency determinants and to differences in health outcome attainment. In doing so, it explains the role of the central government and the own-source capacity of district-level governments in financing health resources.
Using the new institutional economics (NIE) perspective as a guideline, this research differs from previous work by focusing on the inefficiency of the district-level health sector, which has been associated with weak PEM systems, in order to explain the significant disparity in health outcome attainment within a country. Mixed-methods research procedures were adopted: quantitative and qualitative data were collected concurrently. The quantitative study used secondary data from datasets of government institutions. A correlational analysis was applied to assess the relation between public health expenditure and other determinants with health outcomes at the provincial level. The qualitative study used primary data from in-depth face-to-face interviews with 20 key actors involved in health budgeting in four district governments in Bengkulu.
This study reveals that changes in public health expenditure as a percentage of gross regional domestic product (GRDP) and real public health expenditure per capita and other determinants have been important factors behind observed declines in infant and child mortality and increases in life expectancy in the province. Other determinants of health outcomes comprise real GRDP per capita, the percentage of population participation in managed care, the percentage of delivering mothers assisted by health personnel, the ratio of midwives per 100,000 population, and the female literacy rate. The role of central government in financing health resources in the districts studied is also prominent. These districts rely heavily on the central government and have limited financial capacity. Consequently, district governments have difficulty performing their functions in the health sector because of frequently insufficient or reduced public health spending in the central budget.
This study also finds that the inability of institutional arrangements to adopt PEM principles has undermined the efficiency of government intervention in the health sector at the district level. Weak institutional arrangements in PEM have had harmful effects on the size, allocation, and use of public health expenditure, and have contributed to inequalities in health outcomes in Bengkulu province. Such weaknesses include the absence of constructive political engagement; a lack of policy clarity, consistency, affordability, and predictability; and low levels of transparency, comprehensiveness, integration, and accountability. District governments also face severe inefficiencies in PEM, owing to delays in budget approvals. The introduction of market-based practices in the PEM of the district governments studied has not prevented potential opportunistic political behaviour. Policymakers have therefore failed to reduce or eliminate the costs of negotiating and enforcing political agreements in allocating public resources, since the budget can be viewed as a contract.
These findings reinforce criticism that the applicability of the PEM technique is country-specific. Proper institutional arrangements that address an Indonesia-specific context are required for the success of PEM. The findings support the view that using hierarchies as an alternative mode of governance is more appropriate than relying on markets, which cannot reduce transaction costs. The results-oriented nature of the PEM approach makes it difficult to implement, owing to serious measurement problems in the health service.
© 2015 Yefriza