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CHAPTER 9

Public Health Finance

Learning Objectives

To describe how public health programs are financed

To compare the allocation of health resources to medical care and public health

To explain the role of federal federalism in funding

To discuss variations in public health funding

To identify most important public health financial management skills

Overview

Role of finance: plan for, acquire, and use resources to maximize efficiency and value of the organization

Significant achievements can be credited to the public health however, like most public services, are provided within a constrained environment

As the scarcity of financial resources increases, the role of public health finance increases in importance

Sources Of Public Health Funds

Programs are financed through a combination of federal, state, and local governmental appropriations and, especially at the local level, from local taxes, fees and other sources such as Medicaid and Medicare

Financing public health at different levels is grounded in the theory of fiscal federalism

Despite critical role public health, health resources of the U.S. are disproportionally allocated to the provision of medical care vs. promotion of health

Federal spending accounts for about 13% of total public health expenditures, while state and local spending covers the remaining 87%

Federal Funding Mechanisms (1 of 2)

Federal funds are distributed through the agency system

Each agency is responsible to manage distribution of funds utilized for public health services, including ensuring funds are used for the purposes stated in the enabling legislation and in a prudent manner

Program funds are distributed to recipients through federal grants (awards), which use funds that are allocated from general revenues

Federal Funding Mechanisms (2 of 2)

Federal awards typically specify a time period, called the period of availability, during which the recipient may use the funds

Most grants have a term of 1 year (although some may have a longer lifespan), and the recipient must use the grant funds within that time frame

Expiration of funds is a consequence of the federal budget process

Types of Federal Grants

Categorical grants: Main source of federal aid to state and local governments for public health services

Project basis: awarded competitively; most common form

Formula basis: awarded on the basis of a precise formula specified in legislation

Block grants: funding awarded to state or local governments with general provisions as to the way the grant is to be spent

Federal Pass-Through Grants

Permits certain recipients to act as pass-through entities, which allows provision of funds

Example: Women, Infants, and Children (WIC) program; funds are granted to states (and similar governmental jurisdictions), but then further allocated

Federal government monitors the federal aid provided to any recipient and requires pass-through entities to monitor the aid they pass on

Federal Funding Amounts (1 of 2)

Primary federal agencies involved: U.S. Department of Agriculture, Health Resources and Services Administration (HRSA), and the Centers for Disease Control and Prevention (CDC)

HRSA distributes ~90% of funding to states and territories, public and private healthcare providers, and health professions training programs

75% of the CDC’s budget is distributed to states, localities, and other public and private partners to support services and programs

Table 9.3: Uses of CDC Funding

Federal Funding Amounts (2 of 2)

Both HRSA and CDC annual federal funding to state and local public health entities in 2017 was approximately $16.3 billion.

Funding not allocated based on priority goals for reducing disease and injury rates

No linkage to Healthy People 2020 initiative

No linkage to programs that have demonstrated effectiveness in reducing disease

Funding at State and Local Levels (1 of 2)

Public health responsibilities:

Fulfill core public health functions such as diagnosing and investigating health threats, informing and educating the public, mobilizing community partnerships, protecting against natural and manmade disasters, and enforcing state health laws

Provide information on the community’s health and the availability of essential public health services

Table 9.4: State Public Health Expenditures by Category

Table 9.1: State Health Department Funding Sources

Table 9.2: Local Health Department Revenue Sources

Funding at State and Local Levels (2 of 2)

Work collaboratively with multiple stakeholders who influence public health at the community level to design appropriate programs and interventions

Deal with complex, poorly understood problems by acting as “policy laboratories” to take advantage of states and localities closer to people and problems

Three types of organizational structures for state public health departments:

Stand alone

Umbrella

Mixed function

Table 9.5: Sample of Frequent Activities and Services Provided Directly by LHDs

Table 9.6: Sample of Frequent Activities and Services Provided by LHDs through Contracts with Other Organizations

Geographic Variations in Public Health Funding

Median per capita funding: $41

Range: under $6 to over $100

Communities that spend more on public health have shown lower levels of medical care spending

Suggests the availability of public health resources in a community reduces the need for medical care in that community by limiting disease and injury

Variations exist in financing through use of taxation

By measuring spending in specific programs, such as tobacco control, obesity prevention, and communicable disease control, policymakers and public health officials will be able to identify exactly how funding is being used and value of investment

Table 9.7: Selected Public Health Finance Competencies and Knowledge Levels

Financial Activities

Skills: planning, establishing policies to control operation, oversee daily financial activities

Analytical skills: information has to be presented in a format to facilitate analysis/interpretation/decisions

Access to data: National Association of County and City Health Officials (NACCHO) recently launched the Public Health Uniform Data System (PHUDS) to improve the availability of valid and reliable public health financial data

Grants Management (1 of 3)

Balancing act: ensuring program staff latitude to accomplish the grant’s purpose without violating any of the funding agency’s requirements

Study the terms and conditions

Hold project initiation briefing on responsibilities

Review compliance requirements

Grants Management (2 of 3)

Good financial control:

Meets generally accepted accounting principles

Has a system of controls to ensure cost allocation

Complies with cost management requirements

Has a reporting system

Has regular audits

Grants Management (3 of 3)

Issues and solutions:

Individuals who bend the rules or commit outright fraud or larceny

Organizational and personal conflicts of interest

Have written policies that prohibit employees from personal gain

Monitor performance, progress, and completion

Future Outlook

Building a vision to set a future course of action for financing and management of resources in public health could benefit from a critical analysis of the past

Overreliance on traditional public health funding methods is not sustainable

Population health models consistently show the marginal influence of medical care on improving health status when compared to other determinants

For innovation to be successful, public health managers must have finance skills

Public health must evolve into a 21st century enterprise capable of long-term sustainability

Discussion Questions (1 of 2)

What is the definition of public health finance?

Describe fiscal federalism.

Discuss the role of federal agencies in the distribution of federal funding.

Discuss the purpose of the Prevention and Public Health Fund.

Describe how public health services are funded at the state and local levels.

Describe the variability of public health funding at the state and local levels.

Discussion Questions (2 of 2)

List the most common activities of local public health agencies.

What is the role of financial management in public health agencies?

Describe the selection of public health financial management competencies.

What are some critical steps in the grant management process?