Prudent

In the bad old days, when fiscal discipline was lax, it was usual practice for many government agencies to pad their budget, leave positions unfilled and cut back on the services they were supposed to deliver. At the end of the year, as Christmas approached, these agencies declared “savings” and distributed this as “performance bonus” to their employees.

That might seem like looting the public treasury for private gain. The practice was cloaked under the convenient cover of “fiscal autonomy.” But the old rules allowed it and the employees celebrated it.

This is no longer accepted practice. Government enacted policies to prohibit this practice. All savings at the end of the year was sent back to the National Treasury to help mitigate our chronic deficits.

This might have taken away some of the Christmas cheer that public employees have gotten used to. But it is a vastly more prudent way to handle public monies.

Recently, Finance Secretary Ralph Recto, government’s designated Scrooge, decided the excess funds of PhilHealth and the PDIC should be moved back to the treasury and used to fund welfare programs. These programs might have otherwise been funded by borrowing – adding to our outstanding debt and forcing government to pay additional interest expenses on them.

Understandably, Recto’s decision sparked controversy. Some went as far as to argue that this was unconstitutional because it violated Congress’ power of the purse. Others raised the unwarranted specter that could reduce the services delivered especially by PhilHealth.

Much of the criticism is unfounded.

The P90 billion removed from PhilHealth, for instance, did not come from members’ contributions. The agency receives, in addition to contributions from members, a share of revenues from PAGCOR and PCSO. On top of those, earnings from excise taxes on sin products like tobacco and alcohol were earmarked for PhilHealth’s coffers.

PhilHealth has poor absorptive capacity for the funds channeled to it. Instead of using the funds for its intended beneficiaries, the excess monies were invested in the money market. The unused funds generated more unused funds. Heretofore, there were no limits to how much agencies can go on and on fattening their unused funds.

In the meantime, government has had to borrow from the financial markets to cover yawning deficits. A large part of the deficits are due to subsidies extended to needy families as well as cover the expenses incurred fighting the pandemic that recently visited us.

The chronic budget deficits we incur is the result of inflated expectations for unlimited benefits from government coupled with a strong public resistance to additional taxation. We have such articulate leftist/populist groups that regularly demand government subsidize fuel costs by subsidizing oil purchases, offset electricity prices by more subsidies and bring down the price of agricultural products through even more subsidies.

This is a formula for additional indebtedness. Over the past years, government debt has ballooned because of the public appetite for unlimited subsidies, coupled with public reluctance to pay more taxes.

Recall the factors that brought us to the debilitating debt crisis of the early 80s. Much of the debt was incurred because the Marcos I government tried to buy popularity by subsidizing the oil everyone consumed through the Oil Price Stabilization Fund and the electricity everyone consumed through Napocor subsidies. Rice prices were subsidized through the National Food Authority. Consumers paid hardly anything for the water they consumed, distributed through government-owned utilities.

Of course, there were bad investments in poorly conceived industrial projects and a lot of corruption. But these did not entirely explain why we fell into a debt crisis.

The excess funds removed from the PDIC is less controversial. The PDIC operates much like any other insurance company does. It collects premium payments from banks in exchange for insuring their depositors. If no bank failures happen, PDIC gets to keep all the premium payments. Because of relentless BSP policing, there have been negligible bank failures over the past few years.

The decision of the finance secretary to remove PhilHealth’s excess funds was justified as “efficient.” It helps reduce our dependence on borrowing. It also helped spur improvements in the benefits PhilHealth extends.

PhilHealth recently announced a series of benefits upgrades. The number of generic drugs available for outpatient treatments will be increased from 21 to 53. These drugs will include medication for common maladies such as hypertension, nerve pain and epileptic seizures.

PhilHealth will almost double the benefits from strokes and pneumonia, with coverage of up to P76,000. Even more remarkable, the agency is now increasing by nearly 1,000 percent the coverage treatment for breast cancer. By year’s end, the agency will include chemotherapy for lung, liver, ovarian and prostate cancers. These are ailments that have proven financially calamitous for many Filipino families.

With all the new benefits enumerated above, the PhilHealth will surely improve its absorptive capacity. There is even better news. The additional benefits will be extended without having to raise members’ contributions. Small wage earners will surely appreciate this.

In sum, the secretary of finance’s decision of relieve PhilHealth of its excess funds harms no one. It will help break government’s seemingly hopeless slide towards a debt crisis and all that implies for our national economy. It spurs PhilHealth to improve its benefits package without resorting to increasing contributions.

There are, to be sure, many more areas where the Department of Finance may undertake efficiency measures.