This presentation was made by Ronnie Downes, OECD, at the 4th meeting of the Joint DELSA/GOV-SBO Network on Fiscal Sustainability of Health Systems, held in Paris on 16-17 February 2015.

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

13. 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?