A critical assessment of the implications of devolution on fiscal space for health at county level in Kenya

Sufficient public expenditure on health (PHE) is critical to the attainment of universal health coverage (UHC). Fiscal space for health is the capability of a government to assign more resources to PHE without affecting its financial and economic position. Decentralisation arrangements have implications for PHE and therefore for fiscal space for health. This thesis critically assessed the implications of decentralisation on fiscal space for health at subnational (county government) level in Kenya and its implications on the attainment of UHC. A convergent parallel mixed methods design was used informed by a conceptual framework that guided the collection, analysis and integration of the results. Qualitative data were collected using a multiple case study approach with a focus on fiscal arrangements and changes in the government-citizen relationship. The units of analysis were 3 purposively selected counties. Data collection was through document reviews, interviews with key informants and focus group discussions. Data analysis was using a thematic analysis method. Quantitative data were from panel data regression analysis of secondary data of PHE of all 47 county governments spanning three financial years (FY 2014/15 to FY 2016/17). The integration of mixed methods arms was performed through a narrative weaving approach. Fiscal space for health was limited across all the case study counties evidenced by unchanging levels of per capita PHE and county government health expenditure as a proportion of total county government expenditure over time. There is overlap and poor coordination in performance of functions and challenges in revenue assignments, with potentially constricting effects on fiscal space for health. PHE was also potentially discouraged by inappropriate public finance arrangements and low capacity for planning and budgeting e.g. fixed ratios on development and recurrent spending. Well designed and implemented conditional grants potentially encouraged growth in PHE but their effect was blunted by those that were poorly designed and implemented. Narrowly defined and poorly applied mechanisms for social accountability potentially discouraged PHE. Significant and contextual challenges in the application of electoral accountability were observed with unclear implications on PHE. the determinants of per capita public health expenditure at county level in Kenya are per capita total conditional grant, per capita share of equitable revenue and per capita conditional grant. From the random effects model there is the strongest evidence that a 1% change in per capita total conditional grant results in a 0.09% (p <0.001, 95% CI 0.04% – 0.14%) change on per capita public health expenditure by county governments; and that a 1% change in per capita equitable share results in a 0.68% (p<0.001, 95% CI 0.45% - 0.92%) change in per capita public health expenditure by county governments. Decentralisation, mediated through fiscal arrangements and changes in the government-citizen relationship, has not increased fiscal space for health at decentralised level in Kenya. Better-functioning organisations and institutional arrangements that support these two mediators may expand fiscal space for health at this level. The design and operationalisation of vertical transfers and of conditional grants is critical. Strengthening of accountability mechanisms through a move to strategic social accountability may also contribute to increased fiscal space for health.