Conclusions: the Dynamics of Social Service Reforms 1

This is the semi-final DRAFT of the final chapter of Kaufman and Nelson, eds., Crucial Needs, Weak Incentives: The Politics of Health and Education Reform in Latin America, Wilson Center Press and Johns Hopkins University Press, forthcoming autumn 2004. The book includes twelve case studies of major sector reforms, and comparative essays examining the politics of reform in each of the two sectors.

Chapter 16

Conclusions: The Dynamics of Social Service Reforms[1]

Robert R. Kaufman and Joan M. Nelson

In Chapters 3 and 9, we focused on the actors and institutions that shaped cross-national patterns of reform of health and education services. One point to emerge from these chapters was the difficulty that reformers faced in maneuvering around strong opposition from a variety of stakeholders within the existing systems – including teachers and health workers' unions, patronage politicians, and in the case of the health sector, private insurers and providers. Indeed, the cases provided considerable evidence to support the conventional wisdom that there is an asymmetry of power between well-organized groups who stand to lose from the reform process, and prospective “winners” who face serious collective action problems.

At the same time, however, it was also clear that changes were occurring in many countries, and that some of these involved quite substantial reorganizations of financing and lines of accountability within the social sectors. In part, not surprisingly, these reforms tended to be most extensive in countries where stakeholder groups -- particularly, the providers' unions -- were relatively weak. But this dimension of interest group politics tells only part of the story in any of the countries we have examined. Reforms were shaped as well by the broader international context, by links between social service reforms and broader goals and issues, and by political contingencies and strategies that sometimes opened new windows of opportunity for policy changes.

In this concluding chapter, we take a step back from the specificities of the health and education sectors and examine the processes through which reforms have been shaped and implemented. Reform in any aspect of public policy is never just a single event, and social service reforms tend to be particularly long-drawn-out processes, played out in multiple arenas and involving different challenges at each stage. We distinguish analytically between four phases. In the first phase, reforms become part of a policy agenda; decision makers begin to seriously consider the need to fix perceived problems in the social sectors. The second is an initiation phase in which a concrete proposal is designed and advanced as a proposal of the executive branch. A third is formal authorization, either through legislation or decree. The fourth is an implementation phase, which engages additional actors and interests, and may take years to unfold. The distinction among these phases, although somewhat artificial, offers a more dynamic view of the factors that shape reform over time. A reform may die, or become so watered down as to be pointless, at any point in this process.

Highlighted below are several general observations that we will elaborate more fully in the rest of this conclusion.

Regarding how reforms move onto government agendas: Although it is impossible to map a direct link between specific reforms and either globalization or democratization, general trends toward more open polities and more globalized economies created a new context in which reforms moved onto the political agenda of debate in most countries of the region. Sector specialists had advocated reforms for decades, but democratization and exposure to international markets tended to increase the political salience of these issues for government decision-makers. External agencies like the World Bank often encouraged and supported reforms, although they were seldom the primary initiators of successful efforts.
Top government officials, presidents and their closest associates generally regarded social sector reforms as less urgent than other policy goals and political objectives. Yet their sustained support was often pivotal throughout the reform process. Whether or not they backed such reforms depended on whether and how they were linked to these other goals. Top-level support for health or education reform was generally strongest when presidential decision-makers felt it would advance the pursuit of other objectives; reforms were generally trimmed down or shelved when they were seen to jeopardize these other goals.
Regarding the design phase: Officials within the executive bureaucracy predominated in the design phases of reform. Specific proposals were generally designed from the top, by reform or “change” teams within or among the ministries. Stakeholders were consulted early in only a few cases, and broader public debate was even more rare. In that respect, social sector reforms resembled earlier first-generation reforms.
Regarding authorization: Officials within the executive bureaucracy and stakeholder groups were also the main actors in the authorization phases of reform. With few exceptions (most notably, both sector reforms in Colombia and the education reform in Argentina), party politicians and congressional politics played little part in reshaping the reform initiatives coming from the executive branch. The narrow array of actors reflected collective action problems faced by prospective beneficiaries of reform: as with first-generation reforms, the costs of social sector reforms were prompt, clear, and concentrated on well-organized interests, while gains were usually delayed, uncertain, and diffused across much of the public. The top-down approach may also reflect the relative lack of traditions of citizen involvement in public policy-making.
Implementation is normally by far the longest phase in the reform process, and involves the broadest set of actors. It is profoundly "political" and -- perhaps more than in first-generation reforms – carrying out social service reform is riddled with risks that can abort, delay, or fundamentally distort the reformers’ intent. Sustaining the momentum of reform during this phase depended not only on the emergence of new stakeholders, a well-established point in the literature, but also on continuing support from national policy elites.
Different kinds of reforms entail markedly different political challenges. Not surprisingly, measures that generate prompt, visible, and widespread benefits attract support; measures that impose costs (in terms of income, status, security, or convenience) on providers provoke resistance; so do measures that reallocate significant resources. Less obviously, value judgments affect the politics of reforms. Measures perceived as increasing equity or quality are likely to attract support and inhibit opposition; measures viewed as mainly concerned with efficiency are often regarded as undesirable by providers and the public. Integrated and comprehensive reform programs usually prompt more opposition than narrower measures. These generalizations help to explain why some kinds of reforms are much more frequently launched and carried through than other types of measures.

Politically Non-controversial versus Contentious Reforms

The last point above cuts across all phases of reform, and we will examine it before we turn directly to each phase in the political process. In both the health and education sectors, the reforms that came onto the political agenda in the l990s encompassed a wide array of policies, programs, and actions. Distinctions among these programs are important, because they generate very different patterns of benefits and costs that affect political support and opposition. While some kinds of measures are extremely contentious, others may be relatively non-controversial or actually popular. Stated more precisely, reforms vary with respect to:

The extent, speed and transparency of benefits to users. “Transparency” means the degree to which users – parents of school children, patients in hospitals or clinics – recognize the connection between specific reforms and improvement in the services they receive. Equity-oriented measures are usually more transparent in this sense than reforms focused on efficiency.
The costs – monetary and non-monetary – imposed on vested sector interests.
Perceived financial and other costs or benefits for agencies and interests outside of the sector, including ministries of finance and political parties or leaders.

Some reforms, like extension of services or creation of new programs, generate quick benefits to users. Others, such as restructuring the national ministry or decentralizing authority, may initially have little impact on students or patients, or may even cause administrative confusion that delays or impairs service. Still others, for example, creating healthcare payers’ organizations, may have little discernable effect on services in the short run, but nonetheless create new stakeholders that will defend the reform.

Whether or not they generate rapid and transparent users’ benefits, some reforms, like expanded services, impose few costs. Vested interests object to measures that reduce their control over resources including funds and personnel, threaten their security or independence, or alter established status, relationships, and standard operating procedures. Most reforms do shift control and change procedures to some degree, but often can be bundled with “sweeteners” that partly compensate the losers.

Reforms also impinge to different degrees on agencies and interests outside of the sector. Expensive measures require the approval or co-operation of the Ministry of Finance; reforms that alter patronage patterns may have to be approved by the Ministry of Interior or by party leaders; state and local politicians and officials are keenly interested in programs that shift responsibility or alter financing patterns among levels of government.

Goals, values, and politics

In addition to their varied costs and benefits, proposed social service reforms trigger value judgments. Social values such as individual self-reliance versus solidarity, equity, the responsibilities of the state to its citizens, and religious or secular orientations are built into and reflected by education and health systems. Proposed changes are defended and attacked not only for their expected impact on material, professional, organizational and status interests, but also for their perceived effects on social values. In particular, we posit that support and opposition to specific reforms is shaped, in addition to the costs and benefits noted above, by public and stakeholder perceptions of dominant goals – especially the balance between equity and efficiency goals.

In practice, efficiency and equity objectives are intertwined in many kinds of reforms, as we discussed in Chapter 2. Targeting expenditures on primary schools or clinics, for example, is motivated by equity concerns. However, targeting may also increase efficiency, since modest expenditures canyield larger improvements in health or education at primary levels than in universities or specialized hospitals. Nonetheless, certain measures are largely driven by equity goals: for instance, Costa Rica's primary health care teams, EBAIS, were introduced earliest in the poorest districts of the country. Other measures may have mixed goals but offer unusually obvious and quick improvements in equity; for example, the subsidized insurance component of the Colombian health reforms which rapidly expanded access to medical care for the poor. Other measures are (or appear to be) mainly aimed at increased efficiency. One example is the unsuccessful effort to introduce competition among the Argentine unions’ health services (although one intended effect of that reform would have been to permit workers to escape poor-quality programs and seek better ones). Reforms promoting hospital autonomy and associated changes in funding principles are also generally viewed as efficiency-focused.

What is key to political responses are perceptions and interpretations of goals and values, rather than reformers’ intentions or the probable or actual effects of reforms under way. Measures that are viewed as equity-oriented tend to attract support in principle by politicians and much of the public – though that support may be counterbalanced if the measures entail shifts in resources away from vocal interest groups. Or politicians may simply view such measures as less high-priority than other issues. In contrast, social service reforms that focus mainly on efficiency tend to be viewed with indifference or hostility by service providers and other vested interests. Perhaps more important, much of the public (including intended beneficiaries), oppose efficiency reforms because they assume cost-cutting means reduced quality or quantity. Some incentives intended to increase efficiency, like altered payment mechanisms for doctors, also tend to be perceived as “privatization,” – interpreted as gains for the few, at the expense of the public, prompting wide resistance.

It is striking that most of the aborted or stalled initiatives described in the health section of this volume were directed mainly to efficiency goals. These included the effort to introduce competition among union-based health organizations (obras sociales) in Argentina; the even less effective attempt to reform PAMI (the Argentine organization providing health and other services to the elderly); several of the proposed innovations in health care that were removed from Mexico’s l995 social security law; and the very slow-moving efforts to increase hospital autonomy in Costa Rica and in the Argentine provinces.Decentralization reforms in the education sector were more likely to include important equity components, in the form of funding formulae designed to increase funds allocated to poorer districts and regions. In Argentina, however, the initial attempt to decentralize secondary education was widely regarded as motivated mainly by fiscal concerns, and it quickly encountered strong opposition from both unions and a public sympathetic to the unions. Moreover, "quality" reforms related to use of testing or merit criteria to assess the performance of teachers or schools gained little political traction in any of the countries.

Categories of reform: a spectrum

The array of reforms listed below reflects the points discussed above. The list moves from measures that are relatively non-controversial in political terms, to those that are most contentious. In general, reforms provoke less controversy if they generate prompt and visible benefits to users, do not require providers to make painful adjustments nor impose significant costs on other important stakeholders, and/or are perceived as improving equity. Note that “easy” reforms are by no means insignificant; they can make important contributions to improved services. Conversely, “hard” reforms do not necessarily produce big improvements in performance.

Expanding capacity and improving existing facilities and materials (school libraries, equipment for clinics) are easy and popular, benefiting users, providers and their unions, contractors, and politicians. Building schools, clinics and hospitals is especially appealing to politicians, since a one-time outlay creates a visible and durable benefit; in contrast, expanding staff and ensuring supplies require on-going expenditures. The main constraint is cost, and the fiscal implications of large and rapid spending increases. Especially in small countries, external aid may temporarily ease funding difficulties. Somewhat harder (because they often entail obvious reallocations of funds), but still relatively non-controversial, are expansions and improvements targeted to under-served areas or groups. Costa Rica’s EBAIS primary health care teams fit this description.
Add-on programs (targeted or universal) that do not demand change in existing programs are also relatively easy, especially if funding is provided by external sources. Examples include early childhood (pre-kindergarten) education, and “categorical” or “vertical” initiatives in health like immunization campaigns or campaigns focused on specific diseases. Social Funds[2] established in many countries also fit this description. Such programs avoid major changes in the core of the system. Usually they can be handled through ministerial decrees, rather than through more controversial and difficult legislation.
Creating new organizations is somewhat more difficult but has been a prominent feature of reforms in several countries, even when the new entities imply some changes in modes of operation of established parts of the system. Examples include the new healthcare purchasing organizations (quasi HMOs) in Colombia and, on a limited scale, Peru; or the broadly representative National Health Council created to provide policy guidance to Colombia’s Ministry of Health. Often, however, establishing the new structures turns out to be easier than integrating their operations with those of established organizations: form is comparatively easy; function is harder.
Changes in rules governing financial flows among different levels of government can be intensely controversial, but once authorized can be put into effect fairly rapidly. Examples: Brazil’s restructuring of federal funding for education channeled to states and municipalities (FUNDEF); and Brazil’s health care finance.

Changes in structure and function within the administrative core of the system – reforms requiring substantial changes in the standard operating procedures of established ministries, schools and hospitals -- are much more difficult politically. They entail shifts in control over staff and budget, and changes in working relations and relative status. They are also likely to be, or appear to be focused mainly on efficiency objectives (though some are also promoted as ways to deepen democracy). Such changes can take many forms. Among the more common are: