Ten things about the P90 B PhilHealth excess funds and unprogrammed appropriations

The Supreme Court issued last Tuesday a temporary restraining order (TRO) directing the Philippine Health Insurance Corp. (PHIC or PhilHealth) not to transfer the remaining P29.9 billion out of P89.9 billion in excess funds for 2024 to the National Treasury. It is time to revisit some facts about this fund and related issues.

First, that P90 billion is not from PhilHealth members’ premium payments. Members’ yearly contributions from 2021 to 2023 ranged from P106 billion to P158 billion, while benefits claimed ranged from P85 billion to P153 billion over the same period. So members’ contributions are intact and not diverted to other sectors in unprogrammed appropriations (UA).

Second, that P90 billion is derived from a portion of remittances from PAGCOR and PCSO, and a portion of tax revenues from alcohol and tobacco. On average, this amounts to P80 billion per year from 2021 to 2023, accumulating yearly. Thus, these are funds from bettors and gamblers, as well as from drinkers, smokers and vapers of legal tobacco products, since illicit and smuggled tobacco and alcohol do not pay taxes.

Third, the UA was created because programmed appropriations are already numerous. The regular and funded expenditures are so high that current and projected revenues will not be able to keep up, leading to a huge yearly budget deficit (revenues lower than expenditures) and substantial annual borrowing. From January to September 2024, interest payments alone for our public debt amounted to P583.3 billion, and the budget deficit reached P970.2 billion. At these rates, the full-year 2024 interest payment may reach P875 billion, and the budget deficit may reach or exceed P1.44 trillion.

Fourth, UAs are not primarily “pork barrel” for legislators. Out of the P731 billion in UA for 2024, the potential Congressional pork barrel fund would be P225 billion allocated for strengthening assistance for government infrastructure and social programs. The remaining P506 billion is designated for foreign-assisted projects (FAPs), Philippine counterpart funds, and social programs for health and education, among others.

Fifth, the Philippines’ out-of-pocket expenditures (OOPE) for healthcare of $91 per capita in 2021 were actually higher than those of Vietnam at $69, Cambodia at $67, Indonesia at $42, India at $37 and Thailand at $33. Valued in purchasing power parity (PPP) for 2021, Philippine OOPE per capita of $219 was higher than those in Vietnam at $215, Cambodia at $198, Indonesia at $131, India at $117 and Thailand at $88 (Source: WB, World Development Indicators 2024 Database).

Sixth, LGUs and NGOs also have pork allocations in the annual budget. The annual budget for departments and agencies incorporates input from local government units (LGUs) through the various regional development councils. Civil society organizations and non-government organizations (NGOs) also contribute through consultations. For instance, the Alternative Budget Initiative (ABI) network of NGOs, through its health cluster, is consulted yearly by the DOH, usually in early February.

Since it is almost impossible for these consulted groups – LGUs and NGOs – not to introduce their own political and sectoral interests in formulating the annual budget, it is safe to assume they have their insertions in the proposed budget yearly.

Seventh, a 100 percent universal health care coverage for the entire population is an illusion. Very rich countries like Singapore and South Korea had UHC service coverage indexes (SCI) in 2021 of only 89 and Japan had 83 – not 100. China’s UHC-HCI was 81, Malaysia 76, Vietnam 68 and the Philippines 58 (same source, WB-WDI 2024).

Eighth, if the Department of Finance (DOF) and the economic team were to borrow an additional P90 billion to fund important items in the UA, at a six percent average interest rate for government 10-year bonds, that would mean P5.4 billion per year in interest payments alone, in addition to yearly principal amortization.

Ninth, the reduction of indirect contributors entitled to PhilHealth coverage from 21.1 million to 10.6 million in 2025 did not come from the Department of Budget and Management (DBM) or DOF but from PhilHealth itself. This is because their share from “sin taxes” has declined due to a significant decline in tobacco excise tax revenue – from P176 billion in 2021 to P160 billion in 2022, P135 billion in 2023 and projected to be around P122 billion in 2024. High tobacco smuggling and illicit trade explain this trend.

Tenth, health groups and agencies that demonize tobacco and alcohol products as “unhealthy and harmful” should not rely on tax revenues from tobacco and alcohol. They appear to double-talk when they demonize a product while benefiting from higher tax revenues generated by more smokers and drinkers.

So, the DOF and economic team are correct to consider utilizing PhilHealth’s idle funds to finance important expenditures without resorting to additional borrowing. Those opposing this move are misguided. Fiscal realism should prevail over a narrow healthcare focus. I hope that the Supreme Court will reconsider and ultimately lift its TRO against the release of the remaining P29.9 billion to the National Treasury.