Capacity and Commitment: How Decentralization inBrazil Impacts Health Policy

Sandra Chapman OsterkatzDepartment of Political Science

University of North Carolina at Chapel Hill303 Hamilton Hall, CB 3265

Chapel Hill, NC 27516chapman@email.unc.edu

August 24, 2011

For delivery at the 2011 Congress of the American PoliticalScience Association, Seattle, September 1-4, 2011

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Abstract

In the first decade after the transition to democracy, Brazil shifted from a highly central-ized contributory health system that served only formal sector workers to a decentralizeduniversal system in which subnational governments bore nearly full responsibility for theprovision of health services. This paper explores the changes that decentralization hascreated in the distributive nature of Brazil’s health system. I use comparative historicalanalysis to trace the development of Brazilian health policy along these four dimensions(decentralization, ideological commitment, and fiscal and administrative capacity) andexplore their impact on the distributive nature of the health system in two subnationalcasesBahia and Sao Paulo. For health policies to be equity-enhancing—favoring the poorand traditionally disadvantaged societal groups—several conditions are necessary. An ide-ological commitment to equity must exist on the part of those responsible for health policyand the fiscal and administrative capacity to develop and execute equitable policies is alsonecessary. The depth and type of decentralization set the bounds of what is possible andcommitment and capacity are determining factors for health policy and outcomes. Overthe course of the democratic period, national commitment and capacity have increased.For Brazil, enhancing equity in health will require increasing the capacity of subnationalgovernments and ensuring that political actors at all levels are committed to the nationalhealth system (SUS).

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Introduction

In the first decade after the transition to democracy, Brazil shifted from a highly central-ized contributory health system that served only formal sector workers to a decentralizeduniversal system in which subnational governments bore nearly full responsibility for theprovision of health services. Two decades of authoritarian rule had convinced reformersthat decentralizing health care would be more democratic and would improve outcomesfor Brazil’s millions of poor people. This paper explores the changes that decentralizationhas created in the distributive nature of Brazil’s health system. For health policies to beequity-enhancing—favoring the poor and traditionally disadvantaged societal groups—several conditions are necessary. An ideological commitment to equity must exist on thepart of those responsible for health policy and the fiscal and administrative capacity todevelop and execute equitable policies is also necessary. The depth and type of decentral-ization set the bounds of what is possible and commitment and capacity are determiningfactors for health policy and outcomes.

I use comparative historical analysis to trace the development of Brazilian health pol-icy along these four dimensions (decentralization, ideological commitment, and fiscal andadministrative capacity) and explore their impact on the distributive nature of the healthsystem in two statesBahia and Sao Paulo1. The observations are based on field researchand semi-structured interviews conducted in Bahia, Sao Paulo, and Brasılia during 2011.

The health system in Brazil has become increasingly equitable over time because ofan increased commitment to addressing the health needs of the majority of the popula-tion and because of increasing financial and administrative capacity. Progress has beenslowed by inconsistency in the level of commitment at the center and by great variationin both commitment and capacity at subnational levels. In large part because of the au-tonomous status of Brazilian states and municipalities and the increasingly decentralizednature of health care provision and management over time, inequality has remained highin access to services, quality of care, and health outcomes2. The timing and sequencingof decentralization and state reform have played an important role in the development ofthe Sistema Unica de Saude (Unified Health System, SUS), which makes a comparativehistorical approach particularly useful.

In the first section, I situate this study in the broader literature on decentralization,inequality, and health policy. Then, I outline how the four dimensions together impacthealth policy. In the third section I present case studies of the development of the SUS atthe national level and in the states of Bahia and Sao Paulo, followed by a discussion andconcluding with a summary of my findings and discussion of the implications for future

1This paper is a preliminary part of a broader dissertation project that looks at the role of capacityand commitment on health policy in two countries with decentralized health systems: Spain and Brazil.A quantitative statistical component will eventually be incorporated into this study of Brazil using dataon all of the municipalities in these two states to test the relationships of capacity and commitment toequity in the health system under decentralization.

2Health outcomes, in particular, are subject to many factors other than government policy, but as wewill see, the ability of very poor areas to drastically improve health outcomes for the worst off shows theimportance of assessing outcomes in relation to policy.

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research.

Literature Review

The question of the impact of health care decentralization on equity is an important one,yet the distributive impact of policy decentralization has still not received much attentionin either the political science literature on decentralization or the literature on the welfarestate. The development economics literature has treated the issue of distributional out-comes under decentralization more fully, but rarely takes account of the politics of publicpolicies. In this section I review the literature that should generate expectations aboutthe relationship between decentralization, commitment, capacity, and distributional out-comes. While I explicitly lay out my theory in the following section, I highlight where theexisting literature connects with my argument.

A large body of scholarship building on power resources theory and the logic of in-dustrialism has repeatedly found links between political variables like the governmentpresence and mobilizational strength of subordinate groups (labor, women, the poor),as well as centralization of political power, to be negatively associated with poverty andinequality in advanced industrial countries (see Rueda and Pontusson 2000; Huber andStephens 2001; Swank 2002; Bradley et al 2003; Iversen 2005). These relationships havealso been found in Latin America and the Caribbean (Huber, et al 2006). I thereforeexpect left-of-center ideology to be associated with more equitable health policies.

A common finding of the comparative political economy literature is that federalismis related to higher inequality (Linz and Stepan 2000; Beramendi and Anderson 2008;Obinger, Liebfried, and Castles 2005; Weir, Orloff, and Skocpol 1988). There is a morerecent literature on fiscal federalism within comparative politics that tries to tease outthe political implications of the economic theories, particularly relating to subnationalborrowing and hard vs. soft budget constraints (for example Rodden 2006; Rodden, Es-keland, and Litvack 2003; Filippov, Ordeshook, and Svetsova 2003; De Figueiredo andWeingast 2005). These works offer insight into the fiscal constraints faced by subnationalgovernments under different institutional arrangements. Although most of the social wel-fare literature has remained focused on cross-national comparisons, these findings suggestthat if subnational governments have power and ideology matters for distributional out-comes, then we should expect to see that increasing decentralization will produce greatervariation in outcomes—higher inequality. The challenge in the Brazilian context, as inmost other Latin American countries, is that the baseline was highly unequal. The storytold here is that the previous health system was uniformly un-egalitarian. Under decen-tralization and democracy the tide has lifted all boats, but the institutional design of thehealth system has left space for vast variation in the distributive nature of subnationalhealth care.

While attention to decentralization in Latin America has expanded greatly in the pastfew decades, it has looked primarily at the causes of decentralization or its relationshipwith democracy (Giraudy 2010; Gervasoni 2010; Montero and Samuels 2004; Montero2001b; Cornelius, Eisenstadt, and Hindley 1999; Diamond and Tsalik 1999; Eaton 2001;

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Gibson 2004 and Samuels and Mainwaring 2004 on federalism; Manor 1999) or otheraspects of governance (Falleti 2005, 2010 and Montero 2001a on the intergovernmentalbalance of power). Many of these studies address some of the distributional challengescaused by decentralization in Brazil, as we will see in the next section. Ultimately varia-tions in subnational democracy are likely to be strongly related to distributional outcomesbecause of the historically un-egalitarian nature of authoritarianism in the Latin Ameri-can context, but I do not address this relationship here.

In the economics literature there is a history of scholarship on decentralization anddistributive outcomes. There has long been a tension between arguments in favor of decen-tralization based on local preferences and efficiency3 and concerns about the capacity forcentral governments to address issues of equity under decentralization (Musgrave 1959;Prudhomme 1995). During the nineties the momentum of the Washington Consensusbrought a great deal of international attention to bear on experiments in policy decen-tralization in Latin America. These case studies, often undertaken with the support ofinternational financial or aid institutions, show that whether decentralization improvesthe plight of the poor depends on a vast array of factors such as the reason for decen-tralization, the fiscal arrangements that accompany policy devolution, and the capacityof subnational actors (For example Shankar and Shah 2001; Kim, Hong and Ha 2003;Kanbur and Zhang 2002; Zhang 2006).

A recent assessment of health decentralization from the European Observatory onHealth Systems and Policies supports the findings from other policy areas (Saltman, etal 2011). While a small number of local policy successes have been noted4 in general theexperiences have produced greater disparity in health services and often a general wors-ening of quality and efficiency (Angeles, et al 1999; Bossert and Beauvais 2002; Fiedlerand Suazo 2002; Blas and Limbambala 2001; Bossert, et al 2000; 2003). In these coun-tries, health care decentralization was only found to improve equity, quality, and efficiencywhen subnational units had high levels of bureaucratic capacity and adequate resources.Of particular interest for Brazil (given that the intergovernmental balance of authority inhealth policy remains in flux), outcomes were substantially improved when the scope ofdecision-making at the subnational level was restricted, particularly by spending require-ments, accountability mechanisms, and management oversight from the center.

What all these studies ignore is the role of politics—particularly ideology and par-tisanship across the pertinent levels of government. Many of the impediments to equityin the SUS are similar to those described for other countries, which suggests fruitfulground for further cross-national comparison. However most of these case studies focuson developing countries that are either very poor or very small and in all cases involved

3There are the classics of Tiebout (1956) and Oates (1972) that discuss both fiscal arrangements andpublic goods provision. More recently, economists have suggested that the loss of redistributive powerat the center is mediated by the equity-enhancing impact of hard budget constraints on incentives forefficient public spending (Akai and Sakata 2005, 3; McKinnon 1997; Qian and Weingast 1997).

4In fact, the only case reviewed here that reported improvements in equity and efficiency from decen-tralization was the case of Kerala, where the drive for decentralization came from a group committed tocitizen participation and redistribution. As in other cases, the shortcomings had to do with limitationsof local capacity (Elamon, et al 2004).

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substantial involvement of international organizations. Because Brazil is neither small norpoor and has had virtually no international involvement in the process of health reform, itrepresents an excellent case for expanding our understanding of the potential distributiveconsequences of health care decentralization.

Few of these studies offer general theories of the distributional impact of policy decen-tralization. Akin, et al suggest that decentralization may decrease incentives for publicgoods provision and test the theory in the case of health policy in Uganda, finding thatlocal expenditures shifted away from public health goods such as vaccinations, healtheducation, prevention, and maternal and child health when policy control was devolved(2001: 1). Although their focus is not on equity, these are the kinds of health policies thathave the biggest impact on the poor. As we will see, this shift has taken place in someparts of Brazil as well. My theory suggests that the tendency for the local public sector toproduce private rather than public health goods is most likely to be overcome successfullywhen local commitment and capacity are combined with national policies that promoteaccountability and resource conditionality based on pro-poor goals.

None of these studies make an explicit argument about political ideology in relationto distributive outcomes under decentralization, despite the fact that politicians have dif-ferent distributive priorities and are the actors that design and implement public policies.Part of the explanation for this is likely that much of the research on policy decentral-ization has come from international financial institutions, which do not generally collectdata on ideology and partisanship (Huber, et al 2006: 945). In the case of Brazil, thereis also a great deal of ambivalence about the role of ideology in determining outcomes.The fluidity of party affiliation among elected officials, weakness of party discipline, per-sistence of unprogrammatic parties, and history of clientelism have lent themselves to acertain skepticism regarding the role of ideology, particularly at the subnational level.

Recent research by Natasha Borges Sugiyama presents powerful empirical evidence forthe importance of left-of-center ideology in spreading the Programa Saude da Famılia atthe subnational level in Brazil (2007). This program is perhaps the most clearly equity-enhancing element of Brazilian health policy, since it focuses on basic care, prevention,and community health education, as well as being given priority for implementation inthe poorest neighborhoods. Telma Menicucci has also made a similar argument aboutthe context of health reform in the nineties, framing the growing role of private healthcare not as a failure of the SUS because of fiscal constraints, but as the direct result of alack of political will to break with legacies of the previous system (Menicucci 2006: 74).Finally, in a study of the Programa Bolsa Famılia in Salvador and Sao Paulo, RenataBichir finds that the same factors I argue matter for the distributive nature of healthreform—commitment and capacity—are crucial for the implementation of social assis-tance programs under decentralization. Her research also shows that the ability of thecentral government to entice municipalities to follow its objectives has strengthened sinceLula first took office, which is also consistent with my argument about shifts in the in-tergovernmental balance of power in health care (Bichir 2011).

Finally, while the importance of administrative and fiscal capacity for effective pol-icy implementation are rarely questioned, their distributive impact has not often been

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studied. Most of the quantitative measures used in the cross-national literature are ei-ther rough proxies or are based on data that rarely exists at the subnational level5. Thecase of corruption is indicative because it is commonly used as a proxy for capacity, butthe relationship between corruption and bureaucratic capacity is not at all clear (Schildeand Tubin 2009). This is neatly summed up by the old Brazilian adage about politicianswho “rouba mas faz” (steal but get things done). Overall, capacity measures are highlycontested and scholars like Steven van de Walle claim that good measures of quality ofpublic administration simply do not exist (2005, 2)6.

This study, therefore, contributes in several important ways. First, it presents a gen-eral theory of the conditions under which decentralization can be paired with pro-pooroutcomes in a given policy area. Second, it introduces the critical variable of political ide-ology into the existing explanations of equity under health care decentralization. Third, itoffers a detailed comparative historical study of health policy through a multilevel lens forBrazil as a whole and two important states—Bahia and Sao Paulo. Fourth, it expands theuniverse of cases for which the distributive impact of decentralization has been studiedto include a large country with a powerful economy not under the influence of interna-tional organizations. Finally, it expands the welfare states literature on social policy andinequality to the subnational sphere with a complex case where reform has brought bothregressive and progressive distributional forces to bear on the health system.

Conceptualization and General Model

While this paper focuses on health policy at the federal, state, and local level in Brazil,the theory is applicable more generally. Over time, the ideological commitment of theactors who are responsible for implementing social policies, tempered by their fiscal andadministrative capacity, will have a significant impact on the distributive nature of thesepolicies. The level of decentralization of political and administrative responsibility for thepolicy, the institutions of government, and the policy’s finances determine the territoriallevels at which commitment and capacity will be most salient.

Equity-Enhancing Health Policy

The norm in the quantitative literature on the health system in Brazil is to assess eitheraccess to services or sets of outcome indicators, usually indices composed of a large

5The European Central Bank uses four indicators: corruption, red tape, quality of the judiciary, andextent of the black market (van de Walle 2005). The World Bank governance indicators include a largenumber of economic outcome measures, as well as subjective scores on other dimensions.

6In Brazil, few studies of subnational capacity have been undertaken because of the difficulty ofobtaining acceptable indicators (Interview Arretche 2011). While statistical analysis has not yet beenincorporated into this study, with support from the Centro de Estudos do Metropole in Sao Paulo I amcompiling a dataset on measures of local administrative capacity that will allow additional testing ofthis hypothesis. These variables include the level of schooling of local public servants, the proportion ofpublic servants hired through meritocratic civil service exams concursos, and in the case of health policy,the institutionalization and implementation of local health councils (conselhos).

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number of measures such as infant mortality, life expectancy, etc. These indices are partof the basis if the Pactos pela Saude (Health Pacts) that are negotiated between the threedifferent spheres of government and were instituted by the Lula administration in 2006.At the current stage of this study, I focus almost exclusively on qualitative assessmentsof the distributional nature of health policies, rather than individual health outcomes.

One reason for focusing on health policies instead of health outcomes is that assessingthe relationship between policies and social outcomes like health inequality is usuallyindirect. The number of other factors that contribute to health outcomes is also quite high.In particular, economic development, inflation, unemployment and changes in povertyand income inequality have a fairly immediate impact on the health of the poor, notto mention the role of culture and education levels. I therefore limit the scope of thesecase studies to focus primarily on the distributional nature of policies, rather than healthoutcomes.

What is an equity-enhancing health policy? For the purposes of this study, equity-enhancing health policies are those that are targeted to the poor and most vulnerablesocial groups either explicitly or through their epidemiological profile7. For example, the1990 enabling legislation that regulates the SUS specifically requires a focus on equity.Likewise, the Programa Saude da Famiıia (Family Health Program, PSF) prioritizes theimplementation of health teams in the poorest and most underserved neighborhoods(Goldbaum, et al 2005; Marques and Mendes 2003). These are explicitly equity-enhancingcomponents of policy.

Highly complex and curative services are disproportionately used by higher incomegroups, so programs or policies that prioritize basic care will be more equity-enhancing8.At the same time, the poor face problems of access at all levels of health need, so effortsto ensure that hospitals and clinics are available in low-income communities will alsohave a pro-poor impact. The least educated users of the health system are the mostin need of health education and preventive health efforts. As in most countries, chronichealth problems like obesity, tobacco, and alcohol abuse are more concentrated amongthe poor. Both because well off individuals already have ample access in Brazil to privatehealth services and because of the political importance of a broad user base to ensurestable support for public social services, efforts to expand the universality of the SUS willultimately be equity-enhancing as well. For example, financing under the PSF is higher athigher population coverage levels (Borges Sugiyama 2007: 170). Finally, how policies arefinanced matters for their distributive impact. More redistributive financing of policieswill make them more equitable, all else held equal.

7In Brazilian health policy circles there is a tradition of thinking of issues of access and outcomesin a holistic manner, addressing complex problems of socio-economic status, race, gender, labor marketparticipation, transportation, housing, education, and culture. For empirical purposes, this approachleaves us with an over-determined dependent variable—if everything causes health outcomes and is partof the definition of what it means to be healthy, then teasing out causes and effects will be difficult.

8However, as we will see in the case of Sao Paulo under the Plano de Atendimento a Saude doMunicıpio de Sao Paulo (Sao Paulo Municipal Health Plan, PAS), it is certainly possible to institutebasic care services that are not especially equity-enhancing.

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Decentralization

Decentralization is still very much an umbrella term that applies to many different rela-tionships of authority and autonomy and scholars of territorial relations continue to usedifferent frameworks to differentiate them. One of the stumbling blocks for cross-nationalcomparison is that decentralization often varies across policy areas within a country, soin the case of Brazil the central government plays a limited role in transportation andhousing policy in states and municipalities, while in health and education strict nationalguidelines and requirements temper subnational autonomy (Arretche 2010).

In the case of health policy in Brazil, the relevant dimensions of decentralizationare: electoral competition for government office, the distribution of political control overhealth policy, the administrative responsibility for health policy and services under theSUS, and the role of subnational governments in financing the health system. These canbe thought of roughly as institutional, political, administrative, and fiscal dimensions ofauthority over health care9. Institutional decentralization is residual in this study becauseI begin the case studies after the commencement of competitive elections at all levels ofgovernment.

The distribution of territorial responsibility in a particular policy area determines thescope of its distributive impact and the territorial salience of the other dimensions, capac-ity and commitment10. For example, the Bolsa Famılia cash transfer program for poorfamilies is politically controlled by the central government, bypassing state governmentsaltogether and using municipalities to administer the program within clearly defined pa-rameters. While the capacity and commitment levels of municipal governments do matterat the margins for this social assistance program11, the capacity and commitment of thecentral government, which has decision-making and implementation authority, is by farthe most relevant.

Capacity and Commitment

Capacity refers to the ability of a government to realize its policy goals. It includes admin-istrative capacity and an adequate financial resource base, which can be attained eitherthrough own source revenues or central government transfers. In Brazil, while the tax

9For Hooghe, et al (2010), simple administrative responsibility does not represent a sufficiently strongform of autonomy to be classified under the Policy Scope dimension, so what I call “political decentral-ization is the only one that is comparable to their Policy Scope dimension. For Falleti (2005; 2010), theAdministrative Decentralization dimension collapses both political and administrative control of policies,as I conceive of them here. For cross-national comparisons, both of these typologies are useful, but forthe case of health care in Brazil, it is important to conceptualize political and administrative control ofhealth policy as distinct forms of authority.

10For a simplified visual representation of this process, see Figure I.11In order to limit graft, municipal governments are expected to sign families up for the program with

almost no resources from the center. The poorest municipalities often do not have the basic infrastructureto go out and find the neediest families. Researchers at IPEA estimate that as many as two millionqualifying families are not receiving the benefit either because they are too poor to find the program orthe municipality is too poor to find them (Interview Soares 2009). In principle, this is precisely the needthat Dilma’s Brasil sem Miseria program is designed to address.

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burden overall is fairly regressive (Bresser Pereira 2009), central government funds arethe least so because they come from the entire territory and include income taxes. Statetransfers to municipalities from the sales tax are proportionate to the municipal sourceof the funds, so they have little progressive redistributive impact (Arretche 2010). Mu-nicipal sources are the least progressive and stay in the municipality of origin. Therefore,the ratio of transfers from higher levels of government to own source municipal revenuescan tell us how generally redistributive the finances of the policy are. This is importantboth for making comparisons over time regarding the mix of revenue sources for healthcare and understanding the challenges facing poor regions.

Commitment refers to the strength of policymakers’ ideological commitment to equity-enhancing health policy—one that is financed progressively and is aimed at decreasinginequalities in access to quality services and in health outcomes—and to redistribution ingeneral. Commitment is best measured by the ideological orientation of the governmenttowards the needs of the poor and towards redistribution. At each level of governmentwith policy responsibilities, equity-enhancing health reforms are more likely under left-of-center political leadership. In Brazil, where a quarter of national deputies change partiesevery electoral cycle, very few parties and politicians meet this criteria. The Partido dosTrabalhadores (Worker’s Party, PT)is the only consistently committed party across timeand at all levels of government due to its internal structure and unique history. PT can-didates must have a history of social activism and, if elected, have to give a large share oftheir salary to the party (Hunter 2009). Though not committed to an overall redistribu-tive agenda, prior to joining the opposition in 2002 the Partido da Social DemocraciaBrasileira (Social Democracy Party, PSDB) at the national level can also be consideredmoderately committed to equity-enhancing policies in health.

Both commitment and capacity are necessary conditions for equity-enhancing policyoutcomes, but on their own, they are each insufficient. Without capacity, commitment isimpotent and without commitment, capacity will not be applied to a progressive distri-butional agenda. During the 1990s, the city of Sao Paulo enjoyed a high level of adminis-trative capacity and, relative to other municipalities, fairly high fiscal capacity. But thecity chose to implement a market-based basic health scheme based on subsidizing privatedoctors (the PAS), passing up the federal transfers that would have come with adoptionof the more progressive PSF (Borges Sugiyama 2007). The city produced a basic healthprogram that was more expensive per capita than the PSF (Capistrano Filho 1999: 97),did not meet the needs of most of its citizens, and was generally considered a policyfailure, despite the high capacity of the municipal government.

On the opposite end of the spectrum, the current Wagner (PT) government at thestate level in Bahia has a Health Secretariat composed of ideologically committed civilservants focused on equity and improving the plight of the poor through health policy.However, after five years in government health officials express deep frustration at theslow pace of change in the state, which they attribute to a historic lack of administrativecapacity at the state and local level (Interviews Benigno 2011; de Brito 2011). Capacityis being improved because of the administration’s commitment and Bahia is spending alarger percent of its revenue on health care than any other state, but results are slow in

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the face of an historic deficit in both capacity and commitment by previous governments.While an ideological commitment to the poor may produce changes in capacity overtime12, capacity will be fixed at any particular moment and those with a redistributiveagenda must conduct policy within the confines of their capacity

Since the 1988 constitution there has been variation at all three levels of governmenton all the components of these dimensions, except for institutional decentralization. Fig-ure I and II give a visual representation and condensed timeline for the model and federalcase, respectively.

The Distribution of Territorial Responsibilities for Health

Care in Brazil

Health care is the most decentralized social policy in Brazil (Montero 2000: 72). In 1988with the promulgation of the democratic constitution, health (not just health care) wasenshrined as a universal social right and an obligation of the state (Art. 196). An in-fluential movement had formed during the eighties called the Movimento Sanitarista,led by progressive doctors and leftist academics with roots in the ABC region of SaoPaulo (Gomes 2011). Decentralization under the 1988 constitution took place as partof a democratic response to the authoritarian experience, which impacted the reform ofhealth policy as well. This progressive movement supported decentralization of healthcare in large part because they felt the private health sector had captured the centralizedhealth bureaucracy under the previous regime (Arretche 2004: 167). The constitution,however, left the actual design of the health system to enabling legislation that wouldnot follow for several years. Sandwiched between military rule and the powerful wave ofneoliberal reform and economic crisis that swept Latin America in the early nineties, thepassage of a constitution with far-reaching progressive citizenship rights took advantageof a unique historical moment. Decentralization is the constitutional component of theSUS that has advanced the farthest since 1988. This is primarily because it was one of theonly components over which the goals of the progressive Sanitaristas and the neoliberalsin government coincided.

There were several important consequences of moving forward with institutional de-centralization and granting subnational autonomy in social policy without fully elabo-rating the health system. First, the 1989 presidential election was won by a neoliberal,Fernando Collor de Mello, which left the implementation of the system in the handsof an administration that was not committed to equity-enhancing reforms. Second, theSanitarista movement dissipated quickly after 1988 (Borges Sugiyama 2007: 131). Themovement had not been strongly connected to more lasting national social movementsand lacked a strong mass base in civil society to sustain it after the transition (Gomes2011). The unions, which could have provided such a base, focused primarily on issues ofhealth rights on the job and did not take up the call to defend the universalistic project of

12This still requires that capacity building is a priority and those committed to such policies spendenough time in office.

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the SUS (Menicucci 2006: 76). Finally, subnational governments gained fiscal and policyautonomy without the presence of accountability mechanisms designed to ensure manage-ment capacity or quality of services and access. The Sanitaristas expected most financingto come from the central government and that constitutional requirements of universality,preference for preventive care and public provision, and community participation (Art.198) would constrain territorial divergence in outcomes. The SUS that has emerged aftertwo decades is still a far cry from this ideal, despite the guarantees of the constitution.

The first round of enabling legislation passed in 1990 (Lei Organica de Saude), but wasnot taken up by the executive until 1992 (Menicucci 2006: 75). While the constant tinker-ing since then has prevented consolidation of certain aspects of the system, as layers ofbureaucracy have been added and removed and new procedures and policy tools created,the general trend has been toward clearer norms and guidelines for health management.The SUS is organized fairly specifically through national organic laws and regulations setforth by the Ministry of Health (Normas Operacionais Basicas). However, it took severalyears for the roles and responsibilities of the three levels to coalesce and some aspectsof the distribution of responsibilities continue to change over time. The case of Brazil isparticularly complex because very few exclusive responsibilities exist at any level. Statesdo not have juridical control over municipalities, which are autonomous entities (C1988Art. 18), and social policy and financing responsibilities are shared between all three lev-els. While not all subnational governments do what they “should,” there is less confusionabout the territorial distribution of responsibilities today than in the past.

Despite the role of municipal and state governments in social policy, their autonomyis not as great as it may seem. In social policy, as in other areas, there are few func-tional limits on the scope of action of the central government. The history of statismand presidential politics in Brazil often produces strong executives capable of recentral-izing policy control. Health care has been no exception. Subnational units in Brazil havegreat responsibility and autonomy in health policy13, but the center has an overarchingresponsibility for defining the system itself, which gives it a special role in determiningthe distributional nature of the policies. Social policy has become more highly centralizedunder both Cardoso and Lula (Melo 2008: 174).

While state and local governments have important input into the development of na-tional health policy through the various intergovernmental mechanisms (the Conselhos,Commisoes Intergestores Tripartitos e Bipartitos, CONASEMS, CONASS, Conferenciasde Saude, etc), individual states and municipalities do not have political authority overthe basic parameters of health policy within their jurisdictions. Subnational units cannotoverride the basic provisions of national health law, so for example they cannot formallylimit access to services or abolish the private health sector in their territory. Representa-tives to the national congress have been considered “ambassadors” of the states becauseof the history of powerful ties to elite state level politics, which induces legislators to keep

13Brazilianists often disagree about the extent to which subnational governments have political controlover the SUS. Some argue it is a completely centralized policy since national health law is binding onsubnational units, while others argue that the innovation shown by subnational governments in socialpolicy proves that they do, in fact, have authority over health policy.

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the interests of the states and their own future careers front and center while serving inthe national congress (Samuels 2003). It could therefore be argued that the congress is anoutlet for subnational interests. However, the 1988 constitution gave significant powersto the executive and as the case studies here will show, while the national congress hassignificant legislative authority, there is great latitude in social policy for unilateral actionon the part of the national ministries. Federal deputies are directly elected rather thanformally chosen by subnational governments, so as democratic politics shifts subnationalpower relations over time, the relationship of the national congress to the states maychange.

At the same time, subnational governments have broad latitude regarding how theyfulfill their obligations under national law. They can create new programs and run clinicsand hospitals themselves or contract services through private providers. For example,the PSF was created and diffused by municipalities with support from the national min-istry of health beginning in 1994 (Borges Sugiyama 2007: 4). Once it became a nationalprogram, municipalities still decided which neighborhoods would receive PSF teams andnew facilities. States are responsible for training municipal health administrators andhave autonomy to determine how and when full devolution takes place, and revoke itif necessary. They can also initiate new programs and build new facilities at their owndiscretion. While subnational units have to comply with spending requirements for healthand education, they are not constitutionally bound to follow the programs developed atthe center. As a result, since the mid-nineties the central government has primarily usedincentives and conditionalities to entice subnational cooperation (Arretche 2004). We willsee the problems produced by this autonomy in the cases of Bahia and Sao Paulo.

Because of the autonomy of municipalities and the incipient institutionalization ofoversight of the SUS, accountability is still a serious problem. For example, state andfederal regulators took over management of health services in two municipalities of Riode Janeiro in 2009 (Folha de Sao Paulo 2/12/2009) and the state of Bahia revoked gestaoplena14 for a municipality that year as well. But officials confirmed that this process waspolitically sensitive to intergovernmental power relations and that it would be nearly im-possible to hold a large municipality like a state capital accountable for major failures. Inaddition, municipalities are now fully responsible for basic health care, but when they failto provide services, state financed hospitals end up treating those patients. Since the cityof Salvador, the capital of Bahia, has the worst health indicators in the country and oneof the least functional municipal health systems, this lack of vertical accountability is asignificant barrier for achieving equitable outcomes in health across the national territory.

The most significant constraint on the autonomy of subnational units is that they arerequired to spend a certain amount of their budget on health care and only a certainportion of revenue can be spent on personnel. The personnel limits were part of the statereform of 1995. Constitutional Amendment 29 in 2000 set specific percentages of revenuethat states and municipalities had to spend on health, which by 2004 reached 12 per centfor the former and 15 for the latter (Arretche 2010). There is no comparable requirement

14Full management, the term for states and municipalities responsible for all health provision in theirterritory.

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for the central government, which is one of the major outstanding political challengesfacing the SUS.

Because the constitution created concurrent competencies in social policy, the policy-making authority of subnational governments in health is actually quite high, even thoughtheir political control over the SUS and other national programs is low. Municipalities arealmost universally responsible for the provision of basic health services. Medium and highcomplexity services are provided by the state or municipality, depending on whether ornot a given municipality has assumed gesto plena. Overall, the model of decentralizationhas profoundly impacted the development of health policy both by empowering statesand municipalities to produce innovations eventually adopted at the center (the PSF inparticular) and by creating numerous veto points for policy production and implementa-tion.

The Politics of Health Care From 1988-2011

In this section I provide a case study of the politics of the SUS since democratization,focusing on the major dimensions of interest—decentralization, commitment and capacity.The constitutional design of the SUS, promising universal access and public provision,lent itself to progressive improvements in health care. However, variations in commitmentand capacity have had a clear impact on the distributional character of the SUS.

Fiscal and Administrative Capacity

Economic crisis in the eighties contributed to growing pressures for a return to democracyin Brazil. The central government lacked the fiscal capacity to finance subnational allies(Lopreato 2000) and the transition process produced territorial tensions as subnationalunits demanded resources without responsibilities and the center attempted to shift sig-nificant policy responsibilities downward. In the immediate aftermath of the transition itwas subnational governments that came out ahead in fiscal terms, although this does notnecessarily imply that the fortunes of equity-enhancing social policies were improved. Inaddition to substantial new transfers, the states gained political control over the ICMSvalue added tax. Municipalities gained massive new transfers. In neither case were con-crete new responsibilities devolved immediately (Samuels and Mainwaring 2004; Lopreato2000; Montero 2000: 64).

Beginning with NOB 1993, municipalities were incentivized to take on the highestlevel of responsibilities despite the fact that accountability and oversight mechanismswere still incredibly weak. At the height of the influence of the Washington Consensusin Latin America, neoliberal pressures for state cutbacks and market-oriented reformsencouraged decentralization. In addition, central government officials knew that the re-sources to fully implement the SUS could not be mustered (Interview Bresser Pereira2011). This rapid decentralization—primarily from the center to the municipalities—decreased the capacity of the central government to address the serious distributionalchallenges facing the country (Montero 2000: 59). Decentralization of health care under

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these conditions was decidedly un-equity-enhancing (Weyland 1996). For the first decadeof the SUS, pro-poor developments in health policy took place primarily at the subna-tional level and were limited in scope.

In the context of decentralization, the diverse levels of ideological commitment andgenerally low capacity of subnational units became more salient for social policies. Signifi-cant variation in the size of subnational tax bases, administrative capacity, and ideologicalcommitment to equity-enhancing health policy will generally lend themselves to greaterregional inequality. Federal transfers were skewed towards the poorer states in the northand northeast (Serra and Afonso 1999). This might have been equity enhancing if thesegovernments had been committed to pro-poor policies, but at the time they were not.

While governors lost influence during the nineties under a powerful national executivewho tightened the public purse strings (Samuels and Mainwaring 2004; Lopreato 2000;Montero 2000: 59), health policy remained highly decentralized at the municipal level.Enabling rules for the functioning of the SUS were produced consistently over the courseof the decade, but NOB 1996, tied to the general state reform of 1995 (including the LeiCamata, which restricted subnational payroll spending to 60 per cent of revenue15, wasparticularly important in producing norms that were objective, binding, and delineatedclearly the responsibilities of each level (Duarte de Araujo 2010: 83).

These reforms forced states and municipalities to make investments in human re-sources and increased administrative and managerial capacity in health care, though theextent of reform varied greatly. Ongoing economic crisis, austerity, and stabilization ef-forts sapped fiscal resources for social policy from all levels of government for most ofthe decade, slowing implementation of the SUS. In addition, the state reforms producedincreases in administrative capacity and public finances only slowly. While not surprising,it means that major improvements in the quality and accessibility of health services didnot appear during the first full decade after the creation of the SUS (Montero 2000: 72).

Fiscal capacity for health policy at the subnational level improved beginning in the2000s because of economic growth and the contribution that the Lei de Responsabili-dade Fiscal made to macroeconomic stability (Serra and Afonso 2007). ConstitutionalAmendment 29 stabilized subnational health spending to a certain extent. Overall, thenational tax burden has increased steadily since the transition, as has the portion of thisthat winds up in the hands of municipal governments. The push-pull between governorsand the center in the immediate aftermath of the constitution is reflected in a major lossof revenue from the center to the states (as a portion of total government revenue) by1991, which was then ameloriated in subsequent years by a shift from states towards bothmunicipalities and the center by 2005 (Afonso and Mereilles 2006).

Following the NOBs from 1991, 1993, and 1996, the Serra health ministry promulgatedthe 2001 Norma Operacional da Assistencia a Saude, which increased the responsibili-ties of municipalities, particularly in the realm of basic care, and further specified norms

15This law has had quite mixed impacts. In small municipalities in Bahia, the budget is small and theserestrictions make it almost impossible to hire qualified health professionals (Interview Benigno 2011). InSao Paulo, support for the shift of health provision to the private-not profit sector was partly due topressures to cut the per cent of revenue going to salaries (Sano and Abrucio 2008: 72).

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for oversight and management at the state and municipal levels (NOAS SUS 01/2001;Duarte de Araujo 2010). Because only a small percentage of municipalities had taken onfull health management and many wound up with no hospitals at all due to problems ofscale, the NOAS promoted the creation of health regions for the coordination of serviceprovision (Teixera 2008: 863). In 2005 the Ministry of Health developed a unified setof health outcome indicators that would be used for all states and municipalities to setgoals and measure results (Portaria 21, 2005). The first Health Ministry under Lula spentseveral years developing the design of the first Pacto pela Saude, which was implementedin 2006 and reaffirmed a political commitment to the SUS. The new system created aninstitutional framework for generating intergovernmental agreements based on specificgoals for health outcomes in each territory.

While it is still too early to evaluate results, national health officials and observerssuggest that a new decree promulgated in July 2011 could bring about major improve-ments in the SUS. Decree 7508 fleshes out important elements of the original healthlaw from 1990. The first draft was written by Sanitarista lawyer Lenir Santos, but ele-ments of the decree originated as far back as the Temporao ministry under Lula. Perhapsmost importantly, the decree introduces the Contratos Organizativos da Acao Publica(Public Health Sector Organizing Contracts), which make the health pacts negotiatedbetween each level of government legally binding (Carvalho 2011). Until now they havebeen “gentleman’s agreements,” and national health officials believe that this change willbe a substantial one for ensuring accountability (Interview Oliveira 2011). Some of themost extreme inequality in the Brazilian health system stems from lack of accountabilityfor subnational governments that do not meet their obligations in health care (InterviewPinto 2011)16.

Commitment at the Center

For health policy at the national level, the ideological commitment of national executivesand their health ministers are of primary importance for policy development. Brazil’spresidential system gives a great deal of initiative to the national executive and ministershave great power over the policies that are produced in their respective areas. Whileduring the transition the legislative process was dominant, afterward executive initiativebecame central for health policy (Arretche 2004: 156). For equity-enhancing health pol-icy, the composition of the national congress is less important than whether the presidentappoints an influential minister committed to such goals.

As can be seen clearly in Figure II, the Collor and Franco governments were bereft ofcoherent leadership in the Ministry of Health. The defining characteristic of their termswas the passage of the enabling legislation that created the SUS in 1990 (which involvedthe national congress to a much greater extent than later regulation) and the initiation ofdecentralization to the municipalities. These were conservative presidents whose Ministers

16This decree takes a roundabout approach to accomplishing some of the goals of the Lei de Respons-abilidade Sanitaria that was abandoned under the more conservative Health Ministry of Saraiva at theend of Lula’s first term.

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of Health had strong ties to the private medical community and who were not committedto the progressive goals of the SUS as it had been articulated in the constitution.

Commitment to equity-enhancing reforms in health care by the executive branch wasfairly strong under Cardoso, especially in comparison to the parties of the right, but thiswas not because of an overall commitment to redistribution. The general ideology of thePSDB during this period has been the subject of some debate17 and the party’s alliancewith the right wing PFL had an ideological impact on many aspects of governance after1994. What the party had was an ideological commitment to capable management ofpublic affairs. Technocratic governance, the appointment of several committed Ministersof Health, and the cost effectiveness of promoting prevention and basic care combined toimprove the distributive nature of health policy under the PSDB.

Macroeconomic crisis and state reform dominated the attention of Cardoso’s first ad-ministration. To paraphrase one ministerial chefe de gabinete, “Fernando Henrique alwayscared about redistribution, he just cared about the economy more.” In health care, theprograms that were the most redistributive were also the least expensive and the mostefficient from a neoclassical economic perspective, which explains why there is little con-tradiction between the economically liberal orientation of the government and its equity-enhancing commitment to health care during this period18. However, Borges Sugiyamashows clearly that implementation of the PSF, the most equity-enhancing component ofBrazilian health policy, was statistically significantly higher in municipalities governed bythe left (2007: 75). While the Cardoso administration chose to support expansion of thePSF, the program was developed and primarily diffused by local left-of-center (mostlyPT) politicians throughout the nineties.

So while the PSDB has solidified its position as a center-right19 party after a decade inthe opposition, for the Ministry of Health in the nineties the partisan label was not espe-cially meaningful20. Two of Cardoso’s health ministers were particularly important—AdibJatene (January1, 1995-November 6, 1996) and Jose Serra (March 31, 1998-February 20,2002). Unlike several health ministers under both Cardoso and Lula, these two actuallyspent enough time in their posts to have an institutional impact. Turnover in most min-istries in Brazil is quite high and in the context of a national process of defining the SUS,this lack of continuity has made the process slower and less cohesive. The longest servingMinisters of Health under both presidents were those appointed at the beginning of their

17Coppedge codes the PSDB as secular center left from 1990-1994 (Coppedge 1997) and Huber andStephens (2008) continue this coding through 2001. However, Borges Sugiyama considers the PSDB tobe a centrist party during this period, with exceptions for particular politicians that were farther left(2007: 61, 112). In a history of the ideological development of the PSDB, Celso Roma argues that theshift to the right took place beginning in 1994 (2002: 71). Just as the PT moved towards the center oncein power and as a function of the politics of legislative alliances in the national congress, the PSDB,which had been a slightly left-of-center party, did the same.

18In fact, there was substantial disagreement within the Sanitarista movement about whether or notto support the PSF at the outset precisely because the more radical branch believed it was a “programapobre para pobre, a poor program for poor people (Borges Sugiyama 2007: 157).

19Categorizing right parties in Brazil is always a challenge because of the direita envergonhada—theaversion these parties have to being seen as right wing (Power and Zucco 2009).

20For an excellent in depth discussion of the ideological evolution of the PSDB see Roma 2002.

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second terms, who served all the way through.Adib Jatene developed the NOB 1996, which represented a major inflection point in

the development of the SUS, though it was not implemented until 1998. Many transfersbecame automatic based on objective criteria and the distribution of responsibilities wasclarified. This norm set the stage for municipalities to be held accountable for qualityand access to services in their territory. Jatene also supported and strongly defended thecreation of the CPMF, a tax on financial transactions destined for health care and dis-cussed in more detail below (Arretche 2004: 175). His dismissal as Minister of Health wasdirectly tied to what the administration perceived as incompatibility between his agendain health care and the economic orientation of the government (Menicucci 2006: 78). Fi-nally, and perhaps most important for distributive concerns, NOB 1996 paved the wayfor the PSF to become a model for universal basic care coverage and begin to shift Brazilaway from a traditional curative model of care (Duarte de Araujo 2010: 89; Goldbaum, etal 2005: 91). After leaving the ministry he remained deeply engaged in reform efforts. As Idiscuss in the case study of Sao Paulo, he struggled unsuccessfully to convince municipalleaders to adopt the PSF and eventually helped state leaders implement the programin neighboring communities when the city of Sao Paulo refused (Borges Sugiyama 2007;Capistrano Filho 1999: 90).

The context of decentralization and macroeconomic crisis discussed at the start of thissection is part of the reason that a committed national health minister like Adib Jatenewould be less successful imposing his preferences for progressive improvements in thehealth system than later minister Jose Serra. Although Serra’s position as a well-knownparty leader with national political aspirations made his tenure unique, his Ministry ofHeath was also embedded in a different structural context than Jatene’s had been. By1998 when Serra became Minister of Health, financial incentives for the implementationof the PSF were in place, oversight mechanisms were better institutionalized, and ongoinghealth reforms were taking place under a strong national executive who had been suc-cessful maneuvering against subnational leaders (Affonso 1997: 25). But Serra was alsoa very strong health minister (Arretche 2004: 156) who spent twice as long in office asmost previous ministers had. He implemented important policies to control drug prices,expand the PSF, and solidify the dominance of the public sector in provision of trans-plants. Perhaps most importantly, his ministry was integral in developing and passingConstitutional Amendment 29, which guaranteed spending on health by states and mu-nicipalities.

Although the Cardoso government was not broadly committed to redistribution, thecombination of several committed and effective ministers with the successes in macroe-conomic stability, debt containment, and state management reforms ensured progressiveadvances in health policy during his tenure. It was in the mid-nineties that the salienceof commitment levels at the center began to slowly increase, as the central governmentlearned that simply writing a health system into law would not guarantee its implemen-tation across subnational units and began to incentivize compliance by tying funds forprograms like the PSF to conditionalities (Gomes 2009: 665).

Differences between Cardoso and Lula in the health realm were smaller than some

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would have expected. For Lula, inconsistency in the commitment of his health ministers, astrong focus on social assistance (rather than health care), and the presence of constraintson fiscal capacity in his second term made his impact on health policy less progressivethan might have been expected. These findings are consistent with general perceptionsof social policy continuity between the two administrations (Melo 2008: 162).

Still, the PT in government was unquestionably more committed to progressive healthpolicy than the PSDB had been. The party had spent years in opposition fine-tuning aprogressive policy platform and planning for the eventuality of a national presidentialwin. Its leaders were ideologically committed to the goals of the SUS and had been partof the movements that defended it during the transition. Despite the fact that the SUSwas not Lula’s primary policy focus and none of his health ministers were as politicallyinfluential as Serra, his administration hit the ground running and implemented a numberof reforms. Perhaps most important, his administrations mainstreamed a commitment toequity and inversion of distributional goals across the board in social policy. The successesin poverty alleviation under the PT have clear ramifications for health outcomes, if nothealth policy directly.

During the first six months of Lula’s presidency a great deal of political energy wasspent reorganizing the Ministry of Health in order to integratean increased focus on basiccare, advances in science and technology, and democratic management (Teixera and Paim2005). Attention to prevention began very slowly in the nineties and made a significantleap under the Lula (Interview de Brito 2011). During his first term important strides weremade in increased access to dental services, mobile urgent care, and access to governmentsubsidized pharmacies (Menicucci 2011). More important for equity, the number of PSFhealth teams increased by 57 per cent (Freitas 2007), the per capita financing for basiccare services was increased 50 per cent, mental health facilities were expanded in an effortto de-hospitalize the treatment of mental illness, drug cost control measures were put inplace, special programs were instituted targeting HIV/AIDS, women’s health, childrenand adolescents, black and indigenous populations, and the elderly (Menicucci 2011).Management reforms were also undertaken that simplified the fiscal transfer process andreinforced efforts begun under the Cardoso governments for results-based evaluation withthe first Pacto pela Saude in 2006.

The Ministers of Health under Lula were not as successful at tackling major problemsin the SUS both because health was not Lula’s primary focus and because the Ministrywas given to the PMDB for several periods as part of the PT’s alliance strategy. HumbertoCosta was a dedicated petista and was in office for 30 months, longer than any subsequentministers. Costa is considered to have continued the creeping process of consolidating andimproving the health system (Carvalho 2005), but was removed from his post withoutsuccessfully achieving the passage of the Lei de Responsabilidade Sanitaria, which wouldhave been an important reform. Costa’s replacement, Jose Saraiva Felipe from the PMDB,chose not to pursue the legislation. Agenor Alvares served for one year (2006-2007) andwas replaced by Jose Gomes Temporao in an effort to secure PMDB support for thesecond round of his upcoming re-election bid (Folha de Sao Paulo 12/03/2006). UnderTemporao, health policy was reframed to focus on social causes of health outcomes and

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pinpointing quality of life issues such as alcohol abuse, unsafe abortion, smoking, obesity,and economic development (Menicucci 2011). Temporao served for a full three and a halfyears before being replaced at the beginning of 2011 by Alexandre Padilha under the newDilma administration. Some health officials in Brasılia perceive Dilma to be fully com-mitted to the SUS in a way that represents a significant break with the past (InterviewOliveira 2011), but only time will tell.

Commitment of Social Actors

Until now we have only discussed the ideological commitment of government actors. How-ever, Brazil has a long history of high levels of civic engagement and associationalism andthis has impacted formal political institutions. In the health realm, this has played outin several important ways. While scholars have generally argued that the influence ofthe Sanitarista movement quickly waned after the transition, I argue that the movementremained influential in an indirect manner that has still proven relevant for progressivehealth policy outcomes. Social movements have also been important for pressuring policymakers at distinct points in the development of the SUS.

First, as in many other countries the realm of public health was profoundly trans-formed during the sixties and seventies in Brazil (Nunes 1998). Over the next few decadespublications, professional associations, and medical school training in saude coletiva (col-lective health) developed. In Brazil, the Sanitarista movement, which was not a mono-lithic organization, was deeply committed to health and health care as components ofan inversion of social priorities towards those at the bottom of the socio-economic scale.There are few areas of medical training in Brazil that have not been influenced by theexperience of thousands of health professionals who became dedicated to redistributivehealth policy during the transition to democracy. Because of a history of unique consul-tative and participatory institutions21 that were expanded and consolidated over the pasttwo decades, a number of formal avenues exist through which these Sanitarista academicsand doctors influence health policy directly. In the Conselhos, Conferencias, Comissoes,secretariats, and ministries, the Sanitaristas remain involved in pushing the health sys-tem in a more progressive direction.

Second, the Sanitarista movement has had an important impact on the system fortraining doctors. Activist academics and health practitioners recognize this as a strategicarea for efforts to make the health system more equitable, as we will see in the casestudies. At the national level health reformers were successful in pushing for changes toregulation of the national medical school curriculum in 2001. Individual medical schoolsthen had to use a participatory community process to come up with a new curriculum(Interview Pinto 2011). As we will see in the case of Bahia, this reform has created op-portunities for tackling entrenched ideologies preferencing specialized and curative careand refocusing medical training on more redistributive models.

21The conselhos, for example, first appeared in the 1930s even though they were vigorously revivedand transformed during the democratic period.

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Finally, in the mid-nineties when the Cardoso administration was clearly oriented to-ward neoliberal economic policy, the Movimento SOS SUS grew up to protest the neglectof financing for the health system. This movement pushed for what became Amendment29, which spent seven years passing through congress and received its final push for pas-sage under the determined advocacy of Jose Serra in 2000. Municipal actors, throughmayors associations and the local Conselhos, were part of the core of this movement,while the governors were largely opposed (Menicucci 2006: 78-79). This difference can beattributed to the role of municipalities as the front door for the health system, while thelegislation required spending on the part of governors on a policy in which their role wasnot especially visible.

General Lack of Fiscal Capacity

There is widespread agreement that one of the principal problems for the SUS is lack ofresources. Article 55 of the Atos das Disposicoes Transitorias of the 1988 constitutionwould have destined 30 per cent of social security funds to health care, but this trans-fer has not been implemented (Gomes 2011: Weyland 1996). In the early nineties thefacilities and personnel of the old INAMPS health system were decentralized to statesand municipalities without accompanying funding and the CPMF (a national tax onfinancial transfers) was instituted in 1997 in part to compensate for the lack of social se-curity transfers for health. Minister Jatene pushed for earmarked transfers for health care(Folha de Sao Paulo, 3/12/2010), but the CPMF was modified in 1999 (ConstitutionalAmendment 21) to cover pensions and welfare as well, which caused more than half theresources to be siphoned away from health care (Folha de Sao Paulo, 12/06/2007). Othersources of funding for health were diverted once the CPMF came along, so in the endthere were few new resources (Carvalho 2005). The tax expired in 2007, despite warningsfrom Temporao that the loss of revenue for health would have immediate consequencesfor national investments and transfers to subnational governments. The tax had beenintended as a stopgap measure, with Jatene assuming that a reform of Amendment 29to fix federal contributions for health was imminent (Folha de Sao Paulo, 11/30/2007).

From 1995 to 2007 the share of the public sector in health spending dropped 20 percent (Carvalho 2008) and public spending has now dropped below 50 per cent of totalhealth spending. While decreases in extreme poverty and hunger clearly have implicationsfor health equity, the intense focus on social transfers left funding for basic health expan-sion on less stable ground (Afonso 2006). Concretely, as a percent of federal spending,health care and sanitation lost ground to social assistance (Melo 2008: 172). A Lei de Re-sponsabilidade Sanitaria was proposed in 2004 by Minister of Health Costa. Following themodel of the Lei de Responsabilidade Fiscal of 2000, this law would have set out specificspending requirements for all three levels of government and set political and criminalconsequences for failing to fulfill these responsibilities. But Costa was replaced by Saraivafrom the PMDB in 2005, who scrapped the project, saying it would keep people fromwanting to assume public office (Folha de Sao Paulo 7/14/2005).

Many of the major planned projects in the health realm during Lula’s second term

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had to be scrapped because of the government’s inability to renew the CPMF (Menicucci2011). When the CPMF ended, the government turned to a renewed attempt to passenabling legislation for Amendment 29 in hopes of fixing resources for health care at thenational level (Teixera 2008). The legislative battle has been drawn out and has carriedover to the Dilma government, with a permanent replacement for the CPMF still notinstituted and no requirement that a specific per cent of federal revenue be spent onhealth care. The issue of federal financing has therefore remained unresolved.

For this study, the most significant result of underfunding from the center is thatmunicipalities have born the brunt of funding new demands and expansion of healthservices. Municipalities are unequivocally and inescapably responsible for the provisionof health services in their territories, even in those cases where the state governmentmanages complex care and builds the hospitals. State governments are not particularlyvisible entities (Samuels and Mainwaring 2004). Municipalities are the first stop for cit-izen dissatisfaction with services and so face constant political pressure to improve andexpand access and quality. The result is that most municipalities are spending more thanthe required 15 per cent of revenues and when central and state transfers are insuffi-cient, come up with the extra funds themselves. In fact, the majority were already incompliance when the requirements first went into effect (BNDES 2002). The municipalshare of total public health spending has increased from 21.7 per cent in 2000 to 29.6per cent in 2008 (PROADESS 2011). The poorest municipalities are the least equippedto generate these extra funds and these sources of revenue are the most regressive, whichmakes underfunding from the center a serious problem for the distributive nature of thehealth system.

Subnational Case Studies

Bahia

The state of Bahia is in the northeast region and is the most developed of the poor north-eastern states with a GDP per capita of nearly 7000 reais (ranked 19th out of 27 states in2005)22. About a quarter of its 14 million people live in the state capital of Salvador andnearly 80 per cent of the population identifies as Afro-Brazilian. From the late seventieson the state was controlled by the Magalhaes family in what was known nationally as“carlismo” (after Antonio Carlos Magalhaes), a classic example of the regional familyoligarchies that have historically dominated many northeastern and northern states. InBahia, weak fiscal capacity during the nineties was combined with traditionally weakadministrative capacity and very low commitment to either redistribution more generallyor to an equitable and accessible public health system.

The result was that the early experiments in basic health provision were supportedby the national Ministry of Health and international aid organizations in some small mu-nicipalities, but without institutional support from the state of Bahia. The expansion ofthe PSF in small, rural Bahian municipalities has produced an incredible drop in infant

22Table II presents descriptive statistics for the case studies.

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mortality and other basic health indicators across the state, but the coverage rate of thePSF is the lowest in the region. In all interviews, health officials and academics agreedthat the PSF had been more successful in smaller municipalities than in larger ones23.However, 70 per cent of doctors are based in the capital city, leaving rural areas and smalltowns underserved (Interview de Brito 2011). In the most populous city, Salvador, reformis still lacking.

Overall, Bahia is a case that historically combined low capacity and low commitment,but has seen dramatically increased commitment since the election of a PT governor—Jacques Wagner—in 2007. Capacity has increased some at the state level and is tricklingdown to local level as many municipalities take advantage of the health managementtrainings and other services offered by the state health secretariat. Some of the tradi-tional obstacles to expanding the public health system—like a highly organized and largeprivate medical community—are, paradoxically, less problematic in Bahia because of thevery history of poverty and underdevelopment that has hindered it in other ways.

In Bahia, one third of the states’ resources for health care come from the Fundo Na-cional de Saude (National Health Fund at the Ministry of Health) and two thirds comefrom the state budget, funded by the sales tax and vehicle tax (Interview Reis 2011).All Bahian municipalities are responsible for basic health services and 62 of the 417 havenegotiated responsibilities for medium and high complexity services (MACS) like hospi-tals, up from 32 in 2006 (Interview Benigno 2011). The state provides medium and highcomplexity health services for all municipalities that do not have gestao plena.

In 1993 the INAMPS contracts with private providers were shifted to the nationalMinistry of Health, where they stayed for a full decade. The state leaders at the timedid not request the management of health competencies until 2003 because health policywas not seen as a priority (Interview Souza 2011). The state government was won by thePT in 2007 after more than three decades of conservative rule and has begun to makesubstantial investments in administrative capacity. Although Bahian health officials saythe SUS is politically contested in the sense that there is ideological disagreement amongpoliticians regarding the system, they see no real organized opposition to the existingmodel because political opposition to the PT has disintegrated. Though the Wagner gov-ernment in Bahia has formed alliances with parties of the right, health officials still seethe PT as more committed at both at the state and national level (Interview de Brito2011). From 2007-2011 health spending in Bahia doubled, five new state hospitals havebeen built, the state health secretariat is now staffed by a professional technical corprather than by “politicos,” and spending by the executive and legislative branches is nowtracked online and available to the public.

At the medical school of the Universidade Federal da Bahia (Federal University ofBahia, UFBa), which had a history of having an ideologically conservative orientation,the reform of the medical school curriculum (passed by Lula at the national level in

23Paraphrasing Peter Spink, expert in municipal policy innovation at the FGV, “In a small munici-pality, one committed and capable person can make a very large difference. In large cities, it takes muchgreater commitment and capacity to achieve the same results because the systems are exponentially morecomplex.”

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2001) began in 2004. Professor Lorene Pinto, now the first woman President of the UFBamedical school, was in charge of compiling the results of the participatory process thatgenerated suggestions from the academic community and the public for the new curricu-lum. The eventual changes, fully implemented beginning in 2011, included refocusing thecurriculum towards primary care rather than specialized care, producing more generalpractitioners, and getting medical students out into the communities that they wouldeventually be serving (Interview Pinto 2011). In Bahia hospital administration and fi-nancing is highly decentralized to individual hospitals (Interview dos Reis 2011), so theorientation of doctors and those with training as health officials and administrators hasthe capacity to influence institutional design as well as the care received by patients.

In Bahia, the private medical sector is weaker than in states like Sao Paulo becauseof lower levels of economic development and weak demand for private health services.There is less organized opposition to the SUS in Bahia than in Sao Paulo, for instance,because in most municipalities the SUS is the only game in town, so regardless of politicalideology the mayors support the SUS, as it allows them to take credit for new facilitiesand expanded services. In addition, for private hospitals and clinics, the SUS is often theirbiggest—and sometimes only—client, so opposing the SUS is not in their best interest.

Salvador

At the municipal level in Brazil, mayors are the primary political figures for determininglocal policy. In Bahia, carlismo was strong in the capital, as well as at the state level.The city of Salvador is a clear case of the potential negative consequences of decentralizedsocial policy in a non-hierarchical territorial system with low accountability. Salvador hasamong the highest levels of health inequality in Brazil (Interview Benigno 2011) and hasnever had more than a 20 per cent of its population covered by the PSF. The chronicshortage of basic care services means gatekeeping has essentially not taken place andhospitals are overrun with patients who have no where else to go. In theory, small mu-nicipalities should contract with larger municipalities for services they do not have thescale to provide. However, there has traditionally been no enforcement or oversight of thisprocess and no costs to municipalities who free ride on large municipalities with manyhospitals and specialized care facilities.

Rather than directly providing or managing municipal hospitals and clinics, Salvadorsubcontracts almost all of these services with private providers. When these private hos-pitals get more users than they have been paid for (those from outlying municipalitiesand those seeking primary care), or simply are not paid for several months, they shuttheir doors and crisis ensues. The city blames the federal government for not transferringadequate funds and the federal government reminds the city that it is responsible for itsown contracts and for ensuring that services it provides to neighboring municipalities areproperly arranged. The three-way responsibilities for health policy allow different levelsto scapegoat each other to the public, who do not understand the complex distributionof policy responsibilities.

Except for the one term government of progressive centrist Lidice de Mata, the city

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of Salvador has never had a left government. De Mata was a member of the oppositionPMDB in the early stages of democratic opening and was mayor of Salvador for thePSDB from 1993-1996, before joining the socialist party in 1997. The mayor of Salvadorfrom 1997-2004 was Antonio Imbassahy from the PSDB. Health officials from his admin-istration did not perceive him to be committed to social programs and recounted bothhis skepticism of the PSF and their impression that they had been encouraged to insti-tute PSF teams in certain neighborhoods based on political criteria (Borges Sugiyama2007: 149). The current mayor Joao Henrique Carneiro has been in power since 2005 andchanged parties twice during this time, switching from the PDT to the PMDB in 2007and to the PP in 2011. Beginning with problems during his electoral campaign, Carneiro’sadministration has been fraught with problems of mismanagement and the city’s financesare in constant disarray24.

Salvador was one of the last state capitals to apply for gestao plena in 2005 during theambitious tenure of municipal health secretary Luis Eugenio de Souza. After watchinghealth policy ignored for years by the state and municipal governments, de Souza felt thebest possibilities for improvement in the city lay with taking matters into their own hands,despite the problems of historically low capacity and commitment in city government (In-terview Souza 2011). Souza’s team faced what turned out to be an insurmountable barrierto the transformation of the health system in Salvador—lack of administrative capacityand lack of commitment by the government. There was no history of filling the municipalsecretariat with health professionals, which was a challenge for the state and city (evenonce they were committed to doing so) because of the existence of only two medicalschools to train public health officials (Interview Pinto 2011).

Souza tried to enforce regulation, expand the technical corp working at the secretariat,and improve the salaries of functionaries to attract more qualified personnel25. But theprivate health sector in Salvador had existed on patronage and clientelism during carlismoand resisted enhanced efforts of oversight and quality control. Despite central governmentreforms under Lula that generated resources for improving local capacity, Souza felt theSalvador health secretariat had fallen on hard times. The small number of committedpublic servants were overwhelmed by low morale and lack of support from the mayor(Interview Souza 2011).

Ultimately, Salvador represents a case of almost complete lack of both commitmentand capacity at the municipal level and is a clear example of how commitment in a limited

24A limited set of examples include being cut off by Petrobras in 2005 for not paying municipal bills(Folha de Sao Paulo 12/1/2005), a state of emergency declared by Carneiro in the health sector in 2008(Folha de Sao Paulo 05/29/2008, and a 2 million reais fine in 2009 for illegal logging in the Mata Atlantica(Folha de Sao Paulo 08/16/2009).

25Despite the reputation in the welfare states literature of Latin American public servants as an elitegroup that often fights redistributive cuts to public pensions, in poor or small municipalities the abilityto hire capable public servants, particularly with federal limits on personnel spending, is a major obstacleto managing public services. Poor municipalities have poor governments and the retention of qualifiedpersonnel is a serious challenge to developing and maintaining administrative capacity. Paraphrasingone Bahian state health official, “you can’t have a mayor who makes nothing and then incentivizedoctors to come to your municipality by offering them salaries three times as high as the mayor. That isunsustainable” (Interview Benigno 2011).

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sector of government can by stymied both by lack of support and lack of capacity.

Sao Paulo State

Politics in the state of Sao Paulo are dominated by the city of Sao Paulo, although itis one of the largest states in Brazil with 645 municipalities. The state has an industrialbase and has experienced rapid economic growth in recent years. Inequality levels arelower than in Brazil on average (IBGE 2011) and the lack of a history of slavery, as inthe northeast, eliminates one of the major sources of stratification. The state governmenthas had a high level of administrative and fiscal capacity throughout this period. SaoPaulo state has never had a government of the left but has not faced the challenges ofadministrative and fiscal capacity that Bahia has. The lack of ideological commitment isreflected in Sao Paulo’s status as the state where the most experimentation with privatepartnerships in health provision has taken place (Sano and Abrucio 2008). At the sametime, combining central government commitment and progress in health policy develop-ment with a high level of state capacity has allowed access and quality to improve slowlyover time. Whereas Bahia is experiencing a slow improvement in the distributive profileof the health system because of an ideologically committed state government hamperedby low capacity, Sao Paulo has experienced the same results for the opposite reason.

During the national democratic transition the state was governed by Orestes Quercia,leader of the dominant conservative branch within the PMDB (Roma 2002). He was fol-lowed by the unaffiliated Luiz Antonio Fleury Filho from 1991-1995 and then by MarioCovas for two terms from 1996 until his death in 2001. Covas, one of the founding membersof the PSDB, instituted broad liberal reforms—cutting public sector employment and pri-vatizing state owned enterprises—and management reform in the vein of that institutedat the national level. In 2001 his vice-governor Geraldo Alckmin, another founding mem-ber of the party, took his place and was re-elected in 2002. Conservative DEM ClaudioLembo briefly governed when Alckmin stepped down to run for president and was re-placed by Jose Serra in 2007. Like Alckmin, Serra stepped down to run for president in2010 and was replaced by Alberto Goldman briefly before Alckmin was elected for a thirdterm in office.

The state’s approach to health policy has been driven by an economically liberalorientation prioritizing the private sector. However, when the mayor of the city of SaoPaulo refused federal funds for the PSF in order to continue with a market-based mu-nicipal basic health plan (PAS) in 1996, national Minister of Health Jatene convincedthe Sao Paulo state health secretariat to start PSF neighborhood health teams in out-lying municipalities of the larger Sao Paulo metropolitan area (Capistrano Filho 1999:90; Borges Sugiyama 2007: 158). Still, the most important developments in health policyhave been the use of the polemical private providers (technically private non-profits), theOrganizacoes Sociais de Saude (Health Care Social Organizations, OS).

The OS were articulated as part of the state reforms at the national level and concep-tualized by Luiz Carlos Bresser Pereira as a way to reduce costs and improve the qualityof services by separating provision from financing and oversight (Interview Bresser Pereira

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2011)26. In the decade and a half since they were introduced, Sao Paulo state has beenthe most ambitious in experimenting with the use of OS in the health sector. In 2008there were 16 in the state, while the next closest had three and most had none (Sano andAbrucio 2008: 69). Perception of outcomes under the OS are widely divergent becauseof the intense ideological debate that has surrounded their use. Sano and Abrucio findthat the OS did not improve efficiency or the burden of bureaucracy as hoped (2008:64), and that the citizen participation in oversight envisioned by Bresser Pereira nevermaterialized, since the preferences of the Conselhos were ignored by state government(77). However, costs are certainly lower and a World Bank assessment suggests that therehave been noticeable improvements in service delivery (2008). As we will see in the cityof Sao Paulo, the use of the OS in the PSF has introduced new complexities into thisdebate.

In 2011 the state government implemented a reform that has been demanded nation-ally but must be implemented at the subnational level because of the decentralized natureof the SUS: to charge private health insurance plans when their clients use public hospi-tals. One of the biggest complaints about equity in the SUS is that most Brazilians usethe public sector for complex, expensive hospital care even when they have private healthplans that cover other kinds of services. Historically, private health plans have never beencharged for the universal services provided by the SUS, causing what amounts to an enor-mous cost-shifting from the private to the public sector. This reform should plug this holein the system and generate substantial revenues for the health system in Sao Paulo. Crit-ics worry that hospitals may now prioritize care for patients with private plans, a commonproblem throughout Brazil—particularly in private hospitals with SUS contracts (knownas the “dupla porta” or “separate entrance” forced on those without private insurance)(Folha de Sao Paulo, 08/03/2011).

Other municipalities of Sao Paulo state, particularly in the ABC region in the case ofhealth care, have long innovated in social policy. Sao Paulo state housed some of the ear-liest municipal experiments with minimum income programs, for example (Bichir 2011:28). As in the case of Bahia, outside the large and complex capital cities, there are capa-ble and committed municipal governments that have improved the distributive impact ofthe SUS in their territory. A good example is the health policy activism of Celso Daniel,PT mayor of Santo Andre before he was assassinated in 200227.

Sao Paulo City

The city of Sao Paulo is the sixth largest in the world and the municipality is home to11.2 million inhabitants. Approximately one fifth of the municipal health institutions are

26The idea behind the OS, for Bresser Pereira, was that employment that could be done well by theprivate sector should not be done by public civil servants with sheltered contracts, while being paid highsalaries financed by tax payers. In contrast to the neoliberal view that many have of the OS, BresserPereira argues that they reduce elite antagonism toward the welfare state, giving the state more roomto fulfill the social commitments of the constitution (Interview 2011).

27Daniel’s widow, Miriam Belchior, was also a part of this reformist group in the ABC region and isnow Minister of Planning under Dilma.

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public, while the rest are private (IBGE 2011). The city’s leaders exert great influenceover national politics and the city thrives on a highly globalized finance sector. State andcity government have been dominated by the founding club of the PSDB for the past twodecades, with many members cycling between the two.

In the immediate post-transition period the city was governed by a PT mayor, LuizaErundina from 1989-1993 whose health policy included expanding the services of thehealth posts and increasing access to the poorer peripheral zones of the city. Erundina wasconsidered a strong left leader and instituted progressive participatory housing policies,but these were discontinued after her successor, Eduardo Suplicy, lost to Paulo Malufin the subsequent elections. Maluf had been governor of the state and mayor of the cityunder the military regime and served one term from 1993-1997 for the right wing PP.Celso Pitta served from 1997 to 2001 but his tenure in office and later political life wereplagued by corruption, scandal, and legal problems, with little left to show for his timeas mayor. Pitta was succeeded by Marta Suplicy of the PT, whose work on health careand other social policies is discussed below. In 2005 Jose Serra was elected mayor but leftoffice in 2006 to run for governor and turned the city over to his vice, Gilberto Kassab,who went on to win re-election and is the current mayor of Sao Paulo. Although currentlyunaffiliated, Kassab was previously a member of the PL, then the PFL, and most recentlythe DEMs before leaving the party in 2011.

Paulo Maluf had created a municipal basic health scheme based on market principlesbeginning in 1995 and he and Pitta had maintained this program even when it meantrejecting federal funding for the PSF (Borges Sugiyama 2007: 171). The PAS was moreexpensive than the PSF and less effective (Capistrano Filho 1999: 97), but it was not untilMarta Suplicy’s arrival that Sao Paulo implemented the PSF and scrapped the PAS. TheSao Paulo model of the PSF integrated the OS as service providers, so it was not thepublic provision model of basic care that the PSF represented elsewhere (Goldbaum, etal 2005: 91; Elias, et al 2006: 634). The PSF represents 45 per cent of the basic healthservices in the city and produces better outcomes than the other programs (Elias, et al2006: 637). However, a study by Schattan and Pedroso assesses the distribution of healthfacilities in Sao Paulo by socio-economic status and find a significant level of inequality,with wealthier neighborhoods having preferential access to the public sector. While thisinequality diminished over the course of the nineties, it was still substantial at the turnof the century (2002: 141).

In Brazil, some of the most innovative local social programs have arisen in the mostdeveloped states (Bichir 2011). In the case of Sao Paulo, this means that in a largeand complex municipality, many municipal programs and services already existed whennational programs arrived on the scene. Paradoxically, these challenges of coordinationin high capacity cities may make diffusion of a promising national policy more difficultthan if the municipality were a blank slate in that arena, as was the case in Salvador.Despite these difficulties, in both Sao Paulo state and city, Renata Bichir finds that thecentral government under the PT was able to incentivize compliance with its hallmarkprograms even under opposition governments (2011: 29), although in health care thiscoverage has been very low. This suggests an increase in the salience of commitment at

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the central level, as Cardoso, then Lula, and now Dilma have developed institutional toolsto achieve their policy goals at the subnational level, even under parties of the opposition.The immediate, substantive policy changes that took place in health and social assistancewhen Marta Suplicy took office also sustain the argument that the differences betweenthe PT and other parties can be significant, even under unlikely circumstances.

Discussion

Summary

The study offers a framework for thinking about the impact of decentralization on thedistributive nature of social policies. Clearly, the relationship is a contingent one. Whilewe cannot say that decentralization will have this or that specific effect, we can look at aclear set of indicators and know what to expect: the nature of decentralization, the levelof commitment to equity at each level, and the level of fiscal and administrative capacitywill result in social policies with different profiles. If a highly capable and committedcentral government has full control over the politics and administration of social policy,the distributive profile of policy outcomes will be more equity-enhancing. If subnationalgovernments have some control over the policies, they can moderate or enhance theirdistributive profile, which will create greater dispersion in outcomes across the territory.The greater their control, the greater the dispersion will be.

In Brazil, both central government commitment and capacity have increased overtime. Administrative capacity was historically fairly high and fiscal capacity was rela-tively low throughout the nineties, increasing steadily after mid-decade, first because ofmacroeconomic stability, then growth and a steadily increasing tax burden. The salienceof the center is complex. Major responsibilities for health care were removed from thehands of the national government and given to states and, primarily, municipalities. Butformal political control over health policy and the content of decentralization itself liesin the hands of the central government. Decentralization was federally induced, so thecentral government has been salient for health policy in Brazil according to its own pref-erences for policy outcomes.

None of the administrations in Brasılia since 1988 have been interested in hands-onmanagement of local health care. In the early years, the focus of the center was on de-centralization of health care responsibilities and unburdening the central government ofan expensive constitutional obligation that it was ideologically opposed to. Municipalgovernments spent several years just getting their heads around the new responsibilities.The first Cardoso government continued the decentralizing trend as part of overall statereforms and public sector down-sizing, but restricted the functional scope of decentral-ization by forcing fiscal discipline on state governments. Committed Minister of HealthAdib Jatene supported and won increased financing for health care. At the same time, thefirst innovative and equity-enhancing experiments in social policy were coalescing at themunicipal level—including the Programa Saude da Familia. As expected, these policiesemerged and took root in places that had high levels of commitment and capacity.

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During Cardoso’s second term the center was quite salient for health policy, increas-ingly capable after reforming the state and attaining macroeconomic stability, and moder-ately committed to pro-poor improvements. In line with a conception of federally induceddecentralization, Amendment 29 forced subnational units to spend specific portions oftheir revenue on health policy without making the same stringent demands of the cen-ter. Most municipalities were already on track to fulfill these obligations, but governorsopposed the legislation because it substantially increased their fiscal responsibility forprograms that were hard for them to take credit for. Minister of Health Serra expandedcentral support for the PSF and worked to consolidate the institutional foundation of theSUS.

The salience of the center for health policy increased under Lula, as did commitmentand capacity. The PT is ideologically committed to redistribution and despite alliancepolitics, the internal structure of the party has ensured that progressive goals remain apriority in government. The Ministry of Health was reorganized to mainstream basic andpreventive care and the PT took a page from Cardoso in using policy fiscal carrots andsticks to implement its policy agenda. Resources were increasingly tied to conditionali-ties, which represented authority at the center, even when it was used to consolidate adecentralized health system. This process has culminated in the creation of the PactosPela Saude in 2006 as a framework for organizing the SUS based on annual goals forhealth care and outcomes, requiring that subnational governments engage in multileveldeliberative processes of goal-setting and health planning. Dilma has continued this pro-cess of centrally induced accountability by making the health pacts legally binding.

The case studies of Bahia and Sao Paulo show the challenges to equitable outcomesunder decentralization. Both the state of Bahia and the city of Salvador historicallylacked both commitment and capacity. International organizations with the support ofthe central government assisted local implementation of the PSF in the late nineties. Theleft took power at the state level for the first time in 2007 and with a team of capable,committed technocrats in the state health secretariat, improvements in capacity haveslowly gotten underway, while visible improvements in the health system lag farther be-hind. The city of Salvador has never had a municipal government strongly committed toequity-enhancing health reform. When a municipal health secretary attempted reformsin the mid-2000s, his team was faced with lack of support from the mayor and cripplinglack of capacity, despite federal incentives. The result is that the city has highly unequalhealth outcomes and minimal implementation of national health policies.

Sao Paulo, on the other hand, has high levels of fiscal and administrative capacity andextensive health infrastructure under the leadership of state and municipal officials whohave traditionally not had a pro-poor orientation. Local innovation in Sao Paulo in thenineties produced a basic health program (PAS) that favored private health providersand were largely considered ineffective. It was not until the one term government ofMarta Suplicy of the PT that the city began to implement the PSF, as well as otherequity-enhancing reforms in social policy. In contrast, ideologically committed leaders inthe ABC region outside Sao Paulo innovated with progressive health policies based on amodel of public provision and have more equitable local health systems.

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Conclusion

In the previous section I summarized a general theory about the relationship betweendecentralization and redistributive social policy, using the case of the SUS in Brazil withillustration from the states of Bahia and Sao Paulo and their capital cities. In closing, Ibriefly discuss the implications of this study for broader debates about decentralizationand reflect on the future of the SUS.

Brazil is an excellent case for exploring the contrasting expectations of those who seedecentralization as a glass half full versus those who see it as a glass half empty. Decen-tralization did indeed create the opportunity for municipalities with high levels of civicengagement, committed public officials, and sufficient administrative and financial re-sources to implement innovative policies. The PT was able to win the presidency in largepart because it had the opportunity to establish itself and gain experience in governmentat the municipal level. Both Cardoso and Lula drew on successful subnational experi-ences to develop the national social programs that have become models internationally.When the national government has consistently failed to tackle major problems with thesystem—such as the de facto public subsidies to private insurance plans—decentralizationmade it possible for the state of Sao Paulo in 2011 to close this loophole independently.But decentralization has also allowed for municipalities like Salvador to neglect healthpolicy without being held accountable and has diminished the capacity of the center toimplement redistributive health policies.

Ultimately, only a central government can implement equity-enhancing policy reformsacross the national territory. Therefore, when subnational governments fail to prioritizesocial policies for the poor, such policies will only be implemented if those governmentsare sidestepped or incentivized to change their behavior. In Bahia during the nineties,the state government was uninterested in pro-poor health programs, so it was the centralgovernment with international partners that helped small and rural municipalities im-plement community health programs. From the mid-nineties on the central governmenthas attached conditionalities to transfers for health and incentivized equity-enhancingprograms with additional funding. Since federal requirements for minimum spending lev-els were instituted, inequality in health financing across Brazil has sharply diminished(Arretche 2010). This study therefore affirms the findings of other case studies of healthdecentralization—that equitable results are most likely when central government regula-tions limit the scope of policy autonomy of subnational units.

What are the prospects, then, for the SUS? The formal territorial division of responsi-bilities in health is settled and has been for some time, which narrows the scope of possiblereforms. As former minister Luiz Carlos Bresser Pereira explains, while exclusive centralgovernment financing of health care would be the most equitable, this option was neverconsidered because the decentralized nature of the SUS—decided early on in the consti-tution and enabling legislation of 1990—made it impossible (Interview 2011). While theconditions necessary for pro-poor health reform—commitment and capacity—have beensteadily increasing at the central level, tough questions for the SUS have not been tackled.Financing has become more regressive over time, municipalities are stretched thin, andthe center has still not made a commitment to increasing its share in health spending.

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Private health spending now outstrips public and the relationship between the public andthe private sector creates structural problems for the SUS that will have to be addressed.In particular, the fact that the most expensive treatments are almost exclusively providedby the SUS with no reimbursement from private health plans is unsustainable. Finally,the understanding of what “universal” means is still not a settled question and the courtshave been increasingly forcing the government to cover procedures and services it hasdenied to patients.

While serious challenges clearly exist for the SUS, there are many indicators thatthe system will become even more equitable over time. This study shows a steady im-provement in commitment and capacity at the national level over the democratic period.Economic growth in Brazil has been strong and increased funding for health is not apolitically or structurally insurmountable problem. The inclusion of broad social citizen-ship rights in the constitution of 1988 has given legal recourse over time to demandsfor expanded social programs. Most Brazilians know that they have the right to healthcare and that the state is responsible for ensuring universal access. The PSF has finallybeen institutionalized as the core program for extending coverage and organizing accessto care. Health policy makers have consistently shown a holistic understanding of healthand a preventive approach to care, which bodes well for the sustainability of the system.For Brazil, enhancing equity in health will require increasing the capacity of subnationalgovernments and ensuring that political actors at all levels are committed to the SUS.

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41

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43

Fernando Collor 1990-1992

PRN

Itamar Franco 1992-1994

PMDB

Fernando Henrique Cardoso

1995-2002PSDB

Luiz Inácio Lula da Silva

2003-2010PT

Dilma Rousseff 2011-present

PT

Enabling legislation decentralizes responsibility for health services to municipalities▪ Lei 8080 1990▪ Lei 8142 1990▪ NOB 1991▪ NOB 1993

National reforms stabilize the economy, increase administrative capacity, and reduce the autonomy of governors▪ Plano Real 1994▪ State Management Reform

1995▪ Lei Camata 1995▪ NOB 1996

Improved finances for subnational provision of health care, increased administrative capacity▪ CPMF tax for health 1997▪ Lei de Responsabilidade Fiscal

2000▪ Amendment 29 2000▪ NOAS 2001

Institutionalization of results-based planning, mechanisms of accountability▪ Portaria 21 2005▪ Pacto Pela Saúde 2006▪ Decree 7508 2011

Alceni Guerra (3/15/90-1/23/92)José Goldemberg (1/23/92-2/12/92)

Adib Jatene (2/12/92-10/2/92)

Jamil Haddad (10/8/92-8/18/93)

Saulo Moreira (8/19/93-8/30/93)Henrique Santillo (8/30/93-1/1/95)

Adib Jatene (1/1/95-11/6/96)

José Carlos Seixas (11/6/96-12/13/96)

Carlos Albuquerque

(12/13/96-3/31/98)José Serra

(3/31/98-2/20/02)

Barjas Negri (2/21/02-12/31/02)Humberto Costa (1/1/03-6/8/05)José Saraiva

(6/8/05-3/31/06)Agenor Álvares

(3/31/06-3/16/07)José Temporão

(3/16/07-12/31/10)

Alexandre Padilha (1/1/10-present)

National Executive

Minister of Health Inflection Points

Com

mitm

ent

Figure II: Timeline for Brazilian Federal Commitment and Capacity

Source: Author's Elaboration

Cap

acity

44