Several proposals are being considered to correct for the mismatch in the allocations of revenues and devolved expenditure responsibilities across local government units (LGUs). In many LGUs, the mismatch has led to reductions in the level of health services under devolution. While compensating LGUs for their cost of devolved health functions (CDHFs) might improve their fiscal status, this may not lead to improvements in the efficiency and equity of health service provision under devolution. The real problem, however, is not simply a mismatch in the distributions of the CDHF and the internal revenue shares. The larger problem concerns the inherent inefficiencies and inequities in the devolved health services and facilities arising from redistributive politics before devolution. Much of the inefficiencies and inequities may persist under devolution since the DOH was largely concerned with the preservation of the existing hospital referral system when it assigned devolved health functions to LGUs. Some serious problems have since risen: for example, the joint use of devolved health facilities and unequal access of DOH-retained hospitals. These problems undermine the objectives of the decentralization and are likely to persist unless some form of central transfers - more suitable than the internal revenue shares - are devised and a reorientation of the management of the DOH-retained functions and programs is undertaken.
