Aligning public financial management and health financing
Health financing working paper No. 4
In recent years, many countries have committed to universal health coverage (UHC) as a national policy priority. Since public funds are the cornerstone of sustainable financing for UHC in most countries, the public financial management (PFM) system – the institutions, policies and processes that govern the use of public funds – plays a key role.
A strong PFM system can ensure higher and more predictable budget allocations, reduced fragmentation in revenue streams and funding flows, timely budget execution, and better financial accountability and transparency. But the health sector faces some specific challenges that require more flexibility than PFM systems sometimes offer, including the ability to direct funds to where interventions and services are needed and ensure equity while creating incentives for efficiency and quality. PFM systems do not always align with these health financing objectives. Even when PFM reforms support health financing objectives, misalignments can occur due to operational issues or challenges in implementing PFM improvements.
“Aligning public financial management and health financing: sustaining progress toward universal health coverage” outlines areas where the PFM system and PFM rules are crucial for the effective implementation of health financing policy in support of UHC and offers guidance for improving alignment. Many of the steps toward improving alignment between the PFM system and health financing policy are considered good PFM practices in general. But specific measures may be called for to address the particular needs of health budgeting. The main objective is to support productive dialogue between health and finance authorities of finance to better harmonize the PFM system with health financing policy and thereby achieve UHC goals according to principles of good public-sector management.
The paper was commissioned by World Health Organization (WHO) and jointly prepared by Results for Development Institute (R4D) and WHO under the auspices of WHO’s Department of Health Systems Governance and Financing, Health Financing Unit. It is part of the Collaborative Agenda on Fiscal Space, Public Financial Management and Health Financing Policy.