Unintended consequences of expenditure targets on resource allocation in health systems

In recent decades, several countries have reformed their health care systems leading to the devolution of power to a lower governance level and, subsequently, to re-centralisation. Due to the ambiguous results of these policies and the start of the financial crisis of 2008, a wide number of national governments implemented cutback initiatives aimed at controlling health expenditure. The literature shows that the introduction of such initiatives may have produced unintended consequences on health systems' performance. In order to better understand the power relations and the resulting decision-making processes between national governments and local authorities, it is important to focus on the effects of such expenditure control mechanisms on the inputs of the health systems, i.e. the production factors. This research aims at investigating the effects of a cutback initiative intended to control personnel costs in a federal Beveridge health system through the analysis of resource allocation at the devolved level. The paper is based on a quantitative analysis of data resulting from the financial statements published by the 21 Italian regional health systems from 2012 to 2017. The results show that, although the Italian regional health systems managed to reduce personnel costs - i.e. hitting the target - the control of the total cost dynamic was not fully addressed. Overall, the initiative implemented by the national government had the effect of limiting the decision-making autonomy of regional authorities, pushing them toward shifting resource allocation from personnel to the purchase of services.