The route of expenditures and decision making in the Health Sector in Peru

The Public Health Sector in Peru primarily serves the poor. Its performance, as measured by health status outcomes, has been positive in some areas such as immunization coverage, reduction of infant mortality, and increases in institutional baby deliveries. However, there are still problems that need to be addressed such as maternal mortality and cross-sectoral issues such as full equity and risk protection. But from a budgetary perspective, there is no clear correlation between the amount of money allocated and health outcomes. This is explained by the fact that there is no established causality between inputs and results and that the processes in expending public monies are cumbersome, not transparent, inefficient, and full of loopholes that have created perverse incentives. The main objective of the study was to gain a clear understanding of the logic and sequence of budget flows and to discover bottlenecks throughout the process that can impede the adequate use of limited resources. In addition, the study reviews the relationship between flows and expenditures, on the one hand, and the flows and decision-making process on the other hand. In as much as possible, the study follows Public Expenditure Tracking Survey (PETS) Methodology and applies it to one health cluster in Metropolitan Lima. The study was exploratory but results were promising and the implementation of a survey gave us enough information to firmly state that “it is not only a question of how much money the sector is assigned, but also of how and when the resources reach the frontline providers”. The analysis of frontline providers and intermediate-level agencies in this study identified institutional bottlenecks and possible perverse incentives that reduce positive budget incidence. Constraints and perverse incentives are present in the salary structure, the use of fee collection and petty cash management, procurement rules, and elsewhere. The current context in Peru, where a Results-Based Budget is being piloted, provides an opportunity to incorporate adjustments in the management processes.