Health care and fiscal federalism: Paradoxes of recent reform in Italy

Legislative decree n. 68/2011, implementing law n. 42/2009 on fiscal federalism, defines standard costs and standard financial needs in the Italian health sector and introduces significant innovations with respect to the previous resources allocation system of Essential Levels of Assistance (LEA) among regions, in force from the nineties. By downgrading the weighted capitation formula the resources allocation will now depend only on two criteria: the age groups of the population and the identification of some benchmark regions. The first criteria aims to relieve the Italian North-South conflict regarding the weights used in the capitation formula; the second has no influence on resources allocation given that the overall fund is determined exogenously. However, the new rules contain important ambiguities: if the estimated financial needs were lower than the overall financing fund, the new resources allocation process could produce benefits in favor of some regions with more contained weighted per capita expenditure. The paper sustains that the new system of resources distribution is based on an approximate methodology, without the capacity to appropriately address financial needs and inefficiencies. As a result, it appears to be riskier, the more standard costs and standard financial needs become the reference point used to calculate the full financing of health care expenditure.