The decision to cut PhilHealth’s government subsidy to zero, as approved by the Bicameral Conference Committee on the national budget, has drawn criticism from health advocates and the paying public. The Php74-billion budget reduction was made to supposedly teach the agency a lesson for not spending its money properly and accumulating around Php600 billion in reserve funds from unspent budgets in previous years.
President Marcos Jr supported the move, citing PhilHealth’s sufficient funds for the coming year. He argued that the slashed allotment could instead be used for other services. PhilHealth accepted this pronouncement. In a video statement, President and CEO Mandy Ledesma said that the agency will continue to cover the people’s health benefits with or without government support, noting PhilHealth’s strong and sufficient financial position with Php281 billion in reserves, Php150 billion in “surplus” funds, and a Php489-billion investment portfolio.
PhilHealth was already facing scrutiny before the zero-subsidy proposal. The Department of Finance (DOF) directed the agency to return Php89.9 billion in reportedly unutilized subsidies to the Bureau of the Treasury, of which Php60 billion has reportedly been remitted. However, the return of the remaining balance was aborted upon a Supreme Court temporary restraining order pushed by civil society groups deeming the DOF memo as unlawful. Further criticism arose over PhilHealth’s memorandum of agreement with Tingog Partylist (represented by House Speaker Martin Romualdez’s wife Yedda), and the Development Bank of the Philippines for its rural health financing program, as well as its controversial Php138-million anniversary budget.
These controversies highlight concerns about PhilHealth’s effectiveness in fulfilling its mandate to provide health insurance services for the public. Furthermore, questions on the public health system thrust of being overly reliant on insurance-based financing rather than direct service delivery are being raised.
The state is right to call attention to PhilHealth’s huge savings, especially while many Filipinos are heavily burdened with the rising costs of healthcare. But is defunding PhilHealth the right solution? Will it solve the chronic issues of inaccessible and unaffordable healthcare?
Depleting the pool
PhilHealth’s pool of funds come from direct and indirect contributions. Direct contributions come from the premiums paid by formal workers in the public and private sectors, as well as overseas Filipino workers (OFWs). Indirect contributions are provided through government subsidies covering the premiums of senior citizens, indigent Filipinos, and other sponsored members. With the subsidy cut, PhilHealth’s funding for next year will only rely on continuous direct contributions and its reserve funds.
The national subsidy to PhilHealth, as mandated by the Universal Health Care (UHC) Law, is sourced from various channels such as: sin tax collections, the national share of income from the Philippine Amusement and Gaming Corporation (PAGCOR), the Charity Fund (net of Documentary Stamp Tax Payments), and mandatory contributions from the Philippine Charity Sweepstakes Office (PCSO). In 2022, over Php79 billion in sin tax collections were allocated to PhilHealth, which was reflected in the 2024 General Appropriations Act (GAA).
It is no surprise that the agency’s substantial savings come from spending less on benefit packages than it receives in contributions. From 2020 to 2023, PhilHealth’s total contributions amounted to Php732.5 billion, with Php447.7 billion from direct premiums and Php284.8 billion from government subsidies for indirect contributors. However, during the same period, the agency paid out only Php436.1 billion in claims — Php229.4 billion for direct contributors and Php206.7 billion for indirect contributors. This means PhilHealth used just 60% of its total contributions to cover health benefit claims, leaving nearly Php300 billion in unused funds.
Saving profit over saving lives
As an insurance agency, PhilHealth is legally required to set aside a portion of its accumulated revenues, not needed for current expenditures, as reserve funds. However, these reserve funds should not exceed the agency’s two-year actuarially-estimated program expenditures. It remains unclear whether the reported Php600 billion in reserve funds exceeds this ceiling, but what is clear is that PhilHealth has prioritized saving its funds over saving lives. Also, this huge accumulated reserve stems from the agency’s delays in expanding and improving the scope of its health benefit packages.
From 2020 to 2023, there was little change in Filipinos’ household out-of-pocket (OOP) share of healthcare costs. In 2020, OOP accounted for 44.6% of current health expenditure (CHE) decreasing negligibly to 44.4% in 2023. Meanwhile, PhilHealth’s share of the CHE dropped from 14.6% in 2020 to 10.2% in 2023. The agency’s reserve funds grew significantly over this period, from Php140.9 billion in 2020 to Php463.7 billion in 2023. Yet even with that much money, the agency still pushed for an increase of the premium rate contribution to five percent.
Since the UHC Law was enacted, PhilHealth’s subsidies and premiums have risen substantially. However, one of its main targets — reducing the OOP share and making the agency the primary contributor to health expenditures — remains unmet.
Is defunding PhilHealth the solution?
Abruptly defunding the insurance agency will not address the growing problems of health financing, especially without concrete steps from the government to resolve them. It is high time for the government to realize that the health needs of Filipinos cannot be provided by a highly commercialized health insurance system. As long as the insurance-reliant health financing framework remains, ordinary Filipinos will continue to bear the burden of rising healthcare expenses.
It is undeniable that many poor and low-income Filipinos rely on PhilHealth’s meager support, and giving it zero subsidy will inadvertently hinder access to health services. It will also place more pressure on ordinary Filipino employees who are mandated by the law to pay their premium contributions as the main source of the pooled funds.
The government is constitutionally obligated to protect and promote Filipinos’ right to health. Its unilateral decision to redirect the provisioned health budget to “other departments” is not only misguided, but also violates this duty. These funds, collected from the hard-earned money of the people, should be returned to them through a greatly expanded public health system that will truly serve their needs.
