Decentralization and recentralization: effects on the health systems in Lao PDR

In Lao PDR, lack of skilled manpower and financial resources in the central government, plus the policy urging local authorities to be self-sufficient and self-reliant caused the central government to decentralize all sectors to the provincial level in 1987. After 1987, the provinces took over all responsibilities such as planning, financing and provision of health services, only informing the Ministry of Health (MOH) about their activities. Because of economic differences between the 18 provinces, health services became unequal between the richer and poorer provinces. Some provinces generated high revenues, leading to over spending. The decentralized system had some negative impacts on the health service. The technical and planning functions managed from the ministry level became separated from management and financial decision making at the local level, and the ministry lost influence on the direction of health policy. Salaries from the local government were often delayed. Because health budgets were not allocated centrally by the Ministry of Health, there were no mechanisms by which health resources could be distributed preferentially to poorer areas with greater need. However, donors continued to support health programs through the Ministry of Health, sending drugs, vaccines, and other supplies to the provinces. The implementation of decentralization faced many difficulties due to the lack of experienced staff and insufficient training required for practicing decentralization. Similar problems in other sectors, such as agriculture, education, and communication, caused the central government to retake control from the provinces in 1992. During the recentralization period, utilization of health facilities increased. The Ministry of Health set rules and established regulations to strengthen the health system. A cost-recovery system was introduced to obtain additional funds, and conditions in the provinces gradually improved. The unique situation of decentralization followed by recentralization provides an excellent opportunity for study. We reviewed documents relating to these periods and interviewed officials at all levels who were concerned with the process.