In the 1996 general elections the PP won a simple majority as the PSOE struggled with corruption and the emerging scandal of the party leadership’s use of paramili- taries in a dirty war against ETA. While the PP had run in coalition with the Uni´on del Pueblo Navarro (UPN, Navarrese People’s Union) and thePartido Aragon´es (PA, Aragonese Party)—both center-right regional parties—in the end it was forced to
attain support from CiU, the PNV, and Coalici´on Canaria (CC, Canary Coalition). The reliance on minority nationalist parties, despite campaign promises to avoid such a situation, fundamentally influenced and constrained the policies of the first PP government. While the ideological preferences of the PP, CiU, and the PNV were not as sharply divergent on economic issues as had been true in the previous legislature, strongly centralizing forces were present in the Spanish executive for the first time since the democratic transition and the differences in visions for the reference community were enormous. Yet as it turned out, the PP’s vision of a centralized Spain was not as salient for its leaders as other dimensions of its policy preferences. As we shall see, the Catalans continued to exact preferential autonomous financing within the common regime, while the PNV used its leverage to negotiate greater authority over its foral regime.
The first Health Minister appointed by Jos´e Mar´ıa Aznar, the new Spanish pres- ident, was Romay Beccar´ıa, who had been the head of health services for Franco. In addition to the PP’s ideological opposition to public health expansion, Spain’s project to join the euro required significant fiscal maneuvering and even stricter efforts at cost containment. The PP did not have enough legislative backing in 1996 to push through its plans to privatize the health system and by 2000, when it attained an absolute majority, the economy was booming and the SNS was thoroughly entrenched.
Still, in 1997 the PP led a successful campaign for fiscal reform. In September of 1996 the CPFF pacted a new AC finance scheme, as it had done every five years. The ACs would continue to receive 15 per cent of the IRPF collected in their territory, plus another 15 per cent over which they would have some normative authority—they could modify the rate of that 15 per cent by 20 per cent and they could control deductions. This second 15 per cent was related to the devolution of education competencies in the tenv´ıa lenta ACs and so was not applied at exactly the same time everywhere.
For the first time a portion of personal income taxes, property taxes, and a series of less important taxes were devolved to the ACs with normative authority over the base and rate (MSC Anexo III 2003: 219)23. Poor ACs again objected, though those controlled by the PP were not quite as vocal this time. Previously, only Extremadura had been willing to go head to head with its own party at the central level and the other two had been controlled by the PP. This time, Andalusia and Castilla la Mancha, both socialist ACs, opted out of the new financing scheme, as well.
A section of these reforms, aimed at the decentralization and liberalization of the health sector, did not pass Congress, largely due to the pressure of national trade unions and healthcare workers. Still, the 1997 reforms included important changes in the administration of health and social service centers, which enabled them to bypass the rules of the public Social Security Administration (Puig-Junoy and Rovira 2003; Lopez-Casasnovas, et al. 2004). New public hospitals received the freedom of self-government outside the common administrative legal regime regulating state-run hospitals. These changes opened the doors to a greater heterogeneity in the administration, labor relations, and ordering of public services in the affected centers. The new financing model drifted even further from measures of health need, while appeasing regional elected officials by ensuring that each AC got an extra one-off injection of funding (Ru´ız-Huerta and L´opez 1997: 19). Since 1999, pre-existing public hospitals could negotiate a quasi-independent status as well.
These reforms were opposed by the PSOE and also by the trade unions in the medical field, due to concerns of the personnel about working conditions, wages and
23The tinkering done by the ACs to date has mostly been limited to differing income tax deduc-
tions, which has marginally changed the effective rate paid by those living in different ACs (Dur´an
the preservation of collective bargaining victories, and contracts negotiated and pro- tected within the common administrative regime (Lopez-Casasnovas 1998; Lopez- Casasnovas, et al. 2004). The focus of health policy in the 1990s was clearly oriented toward cost containment (Puig-Junoy y Rovira 2003), yet under the PP it also took on an ideological component in favor of private provision. While the system was too established to be dismantled, an absolute majority was not necessary for substantial changes, as nationalist ACs were often in favor of loosening central regulations and decentralizing responsibilities.
In 2000 the PP won an absolute majority, allowing it to eliminate coalition agree- ments with minority nationalists. For the final phase of health devolution instituted in late 2001, the major regional players did not have a stake in the reform, regardless of their coalition status—they already had devolved health competences and did not stand to lose financially by having other ACs take on health care. The foral regimes have little riding on fiscal decisions made between the center and other ACs.
In late 2001 the PP’s congress hurriedly passed legislation for the devolution of health competences in the ten remaining ACs. In July of 2001 the PP had passed a new system of financing for the ACs, which they proceeded to tie to acceptance of health decentralization24. If the ACs wanted the new money that came with the new fiscal arrangements, they had to take health care. With several ACs successfully boycotting each of the past two financing accords, the PP was determined to have as many ACs as possible under the same fiscal roof. The PSOE sued over the man- handling, but was ultimately unable to prevent it. This did not save the PP from costly bargaining with each individual AC to get their consent—even those governed by the PP. Once again the poor ACs stood firmly against both the fiscal reform and the devolution of health policy responsibilities. Even some middle-income ACs felt
better served by the centralized system—Cantabria and La Rioja were the last to sign and for months had opposed the transfer, despite being governed by the party that initiated the reform.
The new financing system was a significant shift from what had existed for the seven early decentralizers, prior to 2001. The financing of health care was shifted from general taxation at the center to the general AC budgets. In order to finance this new expenditure, a series of taxes were ceded. The ACs were given 33 per cent of the IRPF (with some normative control as in the previous cycle), 40 per cent of some specific consumption taxes (alcohol, tobacco, and petrol were the most important), 35 per cent of the Value Added Tax (VAT), and 100 per cent of electricity and some transportation taxes. In the case of the indirect taxes, only the funds were ceded and full normative control remained with the center.
AC finances were therefore made up of taxes and fees levied directly by the ACs, fully “ceded” taxes that were normatively enabled at the center, but collected (or not25) and spent by the ACs (the property tax, inheritance and donation taxes, taxes
on gambling), and taxes collected by the center but whose revenues were destined to the ACs (part of the VAT, IRPF, and taxes on alcohol and electricity). In some cases of fully ceded taxes, ACs still had the center collect the taxes for them through special agreements. In the case of the centrally controlled taxes, for the portion normatively controlled by the ACs, for example the 20 per cent variation permitted in the portion of the IRPF going to the ACs, the center applied AC rates in collection and then turned over the revenue. In theory, the ACs may levy taxes if they do not violate central law or double tax the same base of a central tax. Yet the caveats to these taxes leave ample room for judicial challenge and ex-post changes in central legislation to nullify taxes it does not want the ACs levying, as we shall see. In addition, the
central tax base is comprehensive so few areas are untaxed.
The decentralization of health took place without resolving any of the longstanding distortions in health expenditure and without an institutional program to assist those ACs with more limited capacity. The central PP placed high-ranking health personnel in permanent contract positions just before devolution, hamstringing ACs hoping to reverse the cutbacks in INSALUD under PP rule. Socialist ACs found that INSALUD had been operating in a manner not to their ideological liking, with reliance on overtime and short-term contract employment, as well as private contracting out, rather than the creation of stable full time positions within the public sector. After the transfer, the ACs across the board discovered that the waiting lists and infrastructure projects were in worse shape than they had expected26. As we shall see, fiscal crisis in the health system, which had been covered up within INSALUD but marginally understood for years, came to light after devolution and produced a crisis of health debt among the ACs that has still not been resolved. The crisis of financing did not begin with the governance of the PP, by any means.
What drove the PP to push for devolution of health competencies? The core of conservative identity in Spain has been a commitment to centralization and devolving health required a nasty set of battles within the party, as well as with the opposition. The most important reason was ideology regarding social policy. In its first term the PP had attempted a substantive reform to health care with a plan to turn all hospitals into foundations with institutional decentralization and self-governance along market principles. The reform met with massive opposition from health care workers and unions and the decision to decentralize health care to the ACs was linked directly to the failure of this reform—with the Director of INSALUD stating that the reform would be tabled and instead the government would decentralize health and allow
the ACs to make their own decisions27. The PSOE centrally had agreed to the
decentralization of health, conditional upon the set up of funds to compensate for the needs of poorer ACs and clear that its affiliates were not obliged to follow along. Regardless, the five ACs governed by the PSOE in 2001, as well as several governed by the PP, all tried to reject the transfer.
Active un-commitment to equity may have been a driving factor behind the 2001 reform, but it was not the only important reason. The PP as a party is ideologically opposed to asymmetry. It has always wanted as little regional variation as possible in order to dilute the special status of the nationalist ACs. While the party cannot do away with the foral regimes or undo the asymmetry that existed previously, it used its control of the central government to try to level the playing field—increasing the authority of v´ıa lenta ACs while limiting access to new competences for the historic ACs28. Paradoxically for the PP, eliminating asymmetry meant increasing devolution
to the rest, whether they wanted it or not. After 2001, all Spanish ACs had the same overall policy scope (not just in health).
The PP did not prioritize distributive outcomes in its reforms, so ceded normative authority over the income tax and a higher portion of its revenues without compen- satory funds. It did create a set of transfers to guarantee health financing in the first few years after the reform if own source revenues did not meet the formula laid out for minimum service provision, but this was not a significant transfer of resources and the disbursements did not have a redistributive criterion. TheFondo de Suficien- cia (sufficiency fund) took the place of the Participaci´on en los Ingresos del Estado
(PIE, Participation in State Revenue) and continued its function as the catch-all fund for ensuring the financing of transferred responsibilities, but only beyond where own
27The Lancet 10/28/2000 “Spanish government reverses hospital independence ruling.”
sources covered what the formulas said was “needed.” If the collection of ceded taxes covered the formula, transfers would not be forthcoming. If poor ACs had high rev- enues in a particular year, they would get no extra help despite the deeper health and wealth hole they were trying to climb out of. Two thirds of central transfers would come from ceded taxes and one third from the sufficiency fund.
These financing schemes were designed to ensure that no AC ended up with less money than in previous years—the so-called status quo guarantee that has dominated AC finance reform across governments of the left and the right. And for the Sufficiency Fund, this meant that when rich ACs with high growth collected more taxes than what their formula called for, they had to pay into the fund. This has generally been true for Madrid and Baleares. The AC finance formulas are progressive, overall—they combine per capita financing with some conditions for the aging of the population, insularity, and low population density, which are all things that make social provision more expensive, particularly health care. The less dense ACs also tend to be poorer and older, as young people move to urban centers with greater opportunity.
Yet there is nothing equity-enhancing about the original financing framework that set the foundation of the status quo, which has been untouchable. In addition, until 2009 there has never been any attempt to ensure that in practice the distribution of the various funds produced similar funding levels per capita and ACs can (and do) top off their central funds. The result has been highly unequal health spending per capita across ACs, though the differences were harder to measure within INSALUD. AC health spending data become available in 1995 and Figure 4.4 shows variation in per capita financing across the case study ACs, with Madrid and Catalonia for contrast. One can see clearly the increased divergence after 2002, as well as the poor performance of Madrid and Catalonia in relative terms. In December of 2001 the PP also approved the General Law of Budgetary Stability, imposing on all levels of
Figure 4.4: Health Spending in a Subset of ACs
public administration what has been called “the zero deficit rule.” Criticisms arose from the opposition and the health sector, arguing that the EU’s 1997 Stability Pact only required that public debt remain below three per cent of GDP. Critics also pointed out that health care in Spain had historically been under-funded at all levels, creating a situation in which increases in spending had been financed with a high level of borrowing for years (Garcia-Mil´a 2003). The new law meant that increased health spending could only come from cuts in other public services, from increases in those taxes controlled by the ACs and municipalities, or from an increase in regional GDP above and beyond the increase in Spain as a whole (Puig-Junoy and Rovira 2003).
While the Ministry of Health had not been the primary actor in these major political reforms around health, the conflicts took their toll and the Minister who had
Under the administration of Ana Pastor, a professional health administrator, the third major piece of health legislation after the primary care reform and creation of the SNS was passed. The Ley de Cohesi´on y Calidad del SNS (SNS Quality and Cohesion Law) marks the shift of the Ministry away from a policy-making role to one of coordination among 17 independent health services. Pastor opted not to make radical conservative reforms to the SNS, despite pressure from other members of the cabinet in that direction29, which would only have been possible with the
absolute majority the PP had at that particular moment in time. But after16 years of development, the costs of radical retrenchment were high. In an EU context where national health systems were common and universal coverage was the norm, what was politically feasible or even desirable for many center-right actors had shifted.
While in some ways the new law made few substantive changes (Rey del Castillo 2003), at the time the primary opposition had to do with two issues related to ter- ritorial relations. One was that new services were to be included with no central guarantee of financing since the law included an update of the basic central cartera de servicios (list of covered services) and had added vaguely worded requirements for coverage of dental care and mental health (Ley 16/2003). Opposition was strongest from minority nationalists, while the non-nationalist left was most concerned with the financing proposals30. A number of coordinated oversight institutions were created,
including research and public health centers.
In contrast to concerns in nationalist ACs about the center overstepping its bounds, one change may have weakened the role of the center in health policy making. Before the reform, the CISNS had equal representation of central and AC represen- tatives. Because a strong planning and oversight role was never given to the center
29El Pa´ıs 11/21/2002 “Ana Pastor reivindica que el Gobierno ‘lleve las riendas’ de la Sanidad.” 30El Pa´ıs 2/14/2003 “Pastor estudia aportar nuevos fondos para consensuar la ley de sanidad.”
even under the 1986 health law31, this reform further inhibited the already minimal
capacity of the center to either plan or enforce the important areas of basic legisla- tion and standards that were within its purview. Under the 2003 reform, the CISNS only has one representative of the center—the Minister of Health. Prominent health economists and health system managers argued that the reform left the central gov- ernment with no role at all32. In its favor, the law created mechanisms for centralized