Performance Budgeting in Health: Outline of key issues

Ronnie Downes

Deputy Head - Budgeting and Public Expenditures, Public Governance & Territorial Development

OECD

4th Meeting of OECD Joint DELSA/GOV Network on Fiscal Sustainability of Health Systems

17 February 2015

What is “Performance Budgeting?”

• “Using information about the performance and results of programmes in the processes of budgeting and resource allocation”

• Performance and results – can these be measured?

• Using this information – for what?

• Using this information – how?

• Does it work? – international examples

Performance budgeting: the theory

• Traditional, “old-fashioned” approach to budgeting

– Financial focus: only half of the equation of budgeting

– Focus on “line items”, % increase or decrease in allocations

• Modern approach – show performance and impact

– What are we buying for what we are spending? Full picture

– Encourages debate on evidence, rationale for allocations

– Better engagement by policy stakeholders

• Link to broader OECD themes – trust; inclusiveness

Budgeting within fiscal objectives

OECD Recommendation on Budgetary Governance

Quality, integrity &

independent audit

Performance, Evaluation &

VFM

Comprehensive budget

accounting

Effective budget

execution

Alignment with medium-term strategic plans and priorities

Performance, evaluation &

VFM

Transparency, openness & accessibility

Participative, Inclusive

& Realistic Debate

Fiscal Risks & Sustainability

Capital budgeting framework

Some approaches to Performance Budgeting

• PRESENTATIONAL APPROACH – Show outputs, performance indicators separately from the budget

document – Easy – but effective?

• PERFORMANCE-INFORMED BUDGETING – Include performance metrics within the budget document – Involves re-structuring of budget document – more engaging?

• PERFORMANCE-BASED BUDGETING – More direct linkage between results and resources; contractual

models – Involves extensive re-working of budget lines – is it worth it?

• also: MANAGERIAL PERFORMANCE APPROACH – Focus on managerial impacts and changes in organisational behaviour – Less emphasis on link to budget allocation

Performance information is used for a variety of purposes

0% 20% 40% 60%

Other

For eliminating programmes

For developing mngt reform proposals

Not used

To reduce spending

For setting allocations for programmes

For proposing new areas of spending

For setting allocations for Line…

For strategic planning/prioritisation

To increase spending

2007 2011

When performance objectives are not met?

1 1.5 2 2.5 3 3.5 4 4.5 5

Pay cut for head of programme/organisation

Programme transferred to other…

Negative consequences for leaders' evaluations

Programme eliminated

More staff assigned to programme/organisation

New leadership brought in

Budget freezes

Budget increases

More training provided to staff assigned

Budget decreases

More intense monitoring in the future

Poor performance made public

No consequences

2007 2011

Never Occasionally Always

Some perennial problems

• Quality, relevance and objectivity of performance information

• What’s the proper response to Poor Performance? – More resources, or fewer?

• “Gaming” of performance targets – An issue where the target corresponds weakly to the public

service objective – “Outcomes” are better targets than “outputs” – but harder

• Engagement – by public administration - central & line ministries – by political leaders – by citizens and parliamentarians

European “pioneers” – case of the Netherlands

• Link to fixed multi-year spending ceilings

• Detailed performance targets, monitoring, reporting

– Key Objectives agreed as part of coalition agreement

• Experience of recent years: “information overload” • Too much data

• Too “industrial-scale”, “mechanistic”, “technocratic”

• Not used by parliamentarians or by public

• Not useful in identifying savings quickly

• Now: has moved towards a more streamlined approach

Recent European reforms: improving engagement

• Performance data should not be an internal, bureaucratic concern

• It could – and should – excite the interest of parliamentarians and the public

– Quality of debate, clearer political messages

– Emphasise continuum of policy-making: resources, activities, outputs, impacts

– Grounded in government-wide plans, strategies

• Examples: Austria, Ireland

– Convergence towards “performance-informed” model

US approach: Agency Priority Goals

• GPRA Modernization Act 2010

– Inspired in part by UK experience: PSAs

• Emphasis is primarily MANAGERIAL not BUDGETING

– Identification of Agency Priority Goals and Goal-Leaders

– Move to quarterly reporting

– Government-wide Performance Improvement Council and dedicated website

• Successful in creating internal ‘ownership’ and commitment to performance targets

Performance Budgeting for Health: Issues to Consider

• Purpose / Primary Focus? – accountability (parliamentary, budget, managerial); public

• Targets? – financial sustainability; lifespan / healthspan; waiting times; accessibility; satisfaction

• Standardised International Health Indicators? for use in national performance budgeting frameworks – Selected from “constellation” of existing indicators – e.g. Health at a Glance

• How to generate clearer messages for policymakers? • Link to institutional, open government reforms • Useful focus of future work?