A STUDY OF THE SPONSORED PROGRAM NATIONAL HEALTH INSURANCE PROGRAM (PHILIPPINES)

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1 PUBLIC EXPENDITURE TRACKING SURVEY A STUDY OF THE SPONSORED PROGRAM NATIONAL HEALTH INSURANCE PROGRAM (PHILIPPINES) ACTION FOR ECONOMIC REFORMS DECEMBER 2013 A PROJECT SUPPORTED BY US-AID IN COOPERATION WITH RESULTS FOR DEVELOPMENT (R4D) AND THE Bandung Institute of Governance Studies (BIGS) Page 0

2 Table of Contents Acronyms 2 Acknowledgements. 3 Introduction. 4 Study Objectives and Methodology. 9 PETS Results. 13 A. Budget Tracking at the National Level.. 13 B. Funding Flow from Fund Source to PhilHealth 15 C. Funding flow on Reimbursement of Claims. 18 D. Survey of Beneficiaries. 23 Summary of Findings. 29 Recommendations. 31 References.. 33 Page 1

3 Acronyms AER AHA COA DBM DOF DOH DSWD FY GAA GOCC HCP HSRA IRR LGU LHIO MCP MDGs MDR NBB NCA NDHS NHIC NHIP NHTS-PR NSCB PCB PETS PRO RA RHU SARO SP TB Action for Economic Reforms Aquino Health Agenda Commission on Audit Department of Budget and Management Department of Finance Department of Health Department of Social Welfare and Development Fiscal Year General Appropriations Act Government-Owned and Controlled Corporation Health Care Provider Health Sector Reform Agenda Implementing Rules and Regulations Local Government Unit Local Health Insurance Office Maternity Care Package Millennium Development Goals Membership Data Record No Balance Billing Notice of Cash Allocation National Demographic and Health Survey National Health Insurance Corporation National Health Insurance Program National Household Targeting System for Poverty Reduction National Statistical Coordination Board Primary Care Benefit Public Expenditure Tracking Survey Philhealth Regional Office Republic Act Rural Health Unit Special Allotment Release Order Sponsored Program Tuberculosis Page 2

4 Acknowledgements This study is part of a three-year project of Action for Economic Reforms (AER) in cooperation with Results for Development Institute (R4D) and the Bandung Institute of Governance Studies (BIGS). AER would like to express its deepest appreciation to all those who contributed to and supported the preparation and completion of this research. We acknowledge the valuable contribution of colleagues from R4D and BIGS who accompanied us in this project, providing guidance and encouragement at every step of the way. We, likewise, acknowledge the input and comments of peers from partner organizations in different Southeast Asian countries who were part of this cooperation project. We note the animated discussions among colleagues and peers during the learning and sharing sessions that were organized under this project. The AER project team is grateful to the pool of consultants and advisors who offered valuable time and insights in developing the research design and in enriching the analysis. We acknowledge the assistance extended by Social Watch Philippines (SWP) and the Philippine Rural Reconstruction Movement (PRRM) in facilitating links with key national agencies and local government units. We are, likewise, thankful to the survey team who diligently reviewed relevant documents, conducted the interviews, and processed the data. The project team is especially grateful to the United States Agency for International Development (USAID) for its generous assistance extended to civil society organizations and its support to budget transparency and development initiatives in this part of the world. Finally, we express our deep gratitude to PhilHealth, the Department of Health, the Department of Finance, the City Governments of Paranaque, and the Municipal Governments of Baao, Camarines Sur, Sta. Rosa, Nueva Ecija, and Angono, Rizal. This research would not have been possible without the cooperation and assistance extended by these agencies to the project team. The AER Project Team Rene R. Raya, Ma. Luz R. Anigan and Caridad Janet R. Carandang Page 3

5 Introduction The Philippines continues to face serious challenges in improving the health situation of Filipinos, particularly the poorest among them. As of 2011, the prevalence of underweight children under 5 years of age stood at 20.2%, while under-five and infant mortality rates were recorded at 30 and 22 deaths per 1,000 live births, respectively. Maternal mortality remains high at deaths per 100,000 (2010) while deaths associated with tuberculosis stood at 27.6 deaths per 100,000 population (2009). The latest Philippine MDG assessment noted that the country will likely miss the MDG health targets on hunger and nutrition, maternal mortality and infectious diseases, particularly tuberculosis. (NSCB, 2013) Poverty remains pervasive especially in rural communities and urban slums with consequent impact on the health situation of the poor. As of 2012, 25.2% of Filipinos were living below the poverty threshold of P52 per day or about US$1.25/day (NSCB, 2013). New vulnerabilities in health emerged as a result of series of disasters that badly hit most areas of the country in recent years. Inequities in health access and outcomes persist and are most apparent by economic status, educational level and geographical location. The latest National Demographic and Health Survey (NDHS, 2008) shows that under-five mortality rates are significantly higher in rural areas (nearly twice compared to urban areas) and among the poorest income quintile (more than 3 times compared to the richest quintile). The incidence of death of children whose mothers have no education is more than 7 times compared to those whose mothers have attended college. Similarly, the risks associated with pregnancy and childbirth are much higher among poor women. The poorest 20% are six times more likely to deliver at home and are 14 times more likely to be attended by traditional birth attendants compared to the richest 20%. The Nationwide Tuberculosis Prevalence Survey (TFDI, 2007) also noted that the lowest income groups are 1.4 times more likely to be positive for tuberculosis compared to the highest income groups. By geographical location, richer regions of the country such as the National Capital Region and the nearby regions of Central Luzon and Calabarzon have the highest number and most advanced health facilities. In comparison, the poorer regions, specifically Muslim Mindanao and Eastern Visayas, have far lesser health facilities and with fewer available health services. It is against this backdrop that the current administration of President Aquino responded to the challenge by formulating and implementing its agenda for the health sector. The (President) Aquino Health Agenda (AHA) is directed towards ensuring the achievement of Universal Health Care through better health outcomes, sustained health financing and responsive health system focusing especially on the poor and disadvantaged groups. It builds on the previous health reform strategies Health Sector Reform Agenda (HSRA) in 1999, and FOURmula One (F1) for Health in The health reform currently being implemented by the current administration shall: 1) strengthen the National Health Insurance Program (NHIP) to enhance financial risk protection especially among the poor; 2) improved access to quality hospitals and health care facilities, and; 3) attaining health-related MDGs, focusing on reducing maternal and child mortality, morbidity and mortality from TB and malaria, and the prevalence of HIV/AIDS, in addition to being prepared for emerging disease trends, and prevention and control of non-communicable diseases. The goal of universal healthcare is to provide efficient, accessible, equitable, and adequately funded health services to an informed and empowered citizenry. Thus, every Filipino, regardless of their socio-economic status, is able to get the preventive care and treatment needed with the same level of quality without discrimination. To realize this goal, health facilities and services must be accessible geographically with sufficient number of facilities and qualified health staff. Page 4

6 Health financing provides the biggest challenge in achieving universal health care. The enactment of Republic Act (more popularly known as the Sin Tax Law) in December 2012 is, therefore, seen as a major breakthrough as it offers a great opportunity of having more resources available for health care from increased taxes on tobacco and alcohol. The law allocates a significant share of the incremental revenue for universal health care, specifically to fund and expand health insurance for the poor, to improve health facilities and to attain health MDGs. In 2012 and 2013, a little over Php 12 billion was allocated to the Philippine Health Insurance Corporation (PhilHealth) to support the government s Sponsored Program which caters to the poorest 20% Filipinos. By 2014, the allocation increased substantially to Php billion 1 to expand PhilHealth s Sponsored Program to cover the next 20% poorest Filipinos and other marginalized and vulnerable sectors of society such as persons with disabilities, and survivors of conflicts and disasters. This study is designed to tract the funds generated from the Sin Taxes and ensure the transparency, feasibility, effectiveness and social desirability of the expanded coverage of PhilHealth s Sponsored Program and, thus, guarantee prompt, effective and free delivery of health services to the poorest Filipino households. The Policy Environment for Universal Health Care Article XIII of the 1987 Constitution of the Republic of the Philippines declares that the State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. Priority for the needs of the underprivileged, sick, elderly, disabled, women and children shall be recognized. Likewise, it shall be the policy of the State to provide free medical care to paupers. The National Health Insurance Program. In 1995, Republic Act 7875 or the National Health Insurance Act was adopted by the Philippine Government and subsequently amended by Republic Act The law established the National Health Insurance Program (NHIP) as a mandatory health insurance program of the government designed to provide universal health insurance coverage for Filipino citizens. The law designates the Philippine Health Insurance Corporation (PhilHealth) to implement the program with the following objectives: a. provide all citizens of the Philippines with the mechanism to gain financial access to health services; b. establish the NHIP to serve as the means to help the people pay for health care services; and c. prioritize and accelerate the provision of health services to all Filipinos, especially that segment of the population who cannot afford these services. The NHIP covers the following beneficiaries: employed members in the government and private sectors; individually paying members; retirees under the Lifetime member program; members of the Overseas Workers Program and indigent members covered by the Sponsored program. Also included as beneficiaries are these members dependents children below 21 years old and parents over 60 years old. The Aquino Health Agenda. In December 2010, the new administration under President Aquino launched the Aquino Health Agenda: Achieving Universal Health Care for All Filipinos" designed to improve, streamline and scale up reforms in the health sector with deliberate focus on the poor to 1 PhilHealth s budget for the Sponsored Program is expected to further increase as taxes continue to increase annually. Page 5

7 ensure that nobody is left behind as the implementation of health reforms moves forward. The initiative seeks to address inequities in health outcomes by ensuring that all Filipinos, especially those belonging to the lowest two income quintiles, have equitable access to quality health care. It is designed to strengthen the National Health Insurance Program by improving financial risk protection of the poorest. The success of this initiative shall be measured by the progress made in preventing premature deaths, reduce maternal and newborn deaths, controlling both communicable and noncommunicable diseases, improvements in access to quality health facilities and services and increasing NHIP benefit delivery rate, prioritizing the poor and the marginalized. In August 2011, the Department of Health came out with the implementation roadmap of the Aquino Health Agenda which identified three phases: 1) launching phase (August 2010-December 2011); 2) Scale-up phase ( ); and, 3) sustainability phase ( ). Target outputs were set for each phase and for each year with the following highlights: - Implementation of No Balance Billing policy for indigent families - Expansion of the outpatient primary care benefits - Increase coverage of the Sponsored Program - Upgrading of rural health units and district, provincial, and DOH-retained hospitals - Attainment of all MDG health goals The Sin Tax Law. Republic Act or the Sin Tax Law, signed into law on December 20, 2012 by President Aquino, is designed as both a revenue and health measure. The law allocates a significant portion of the incremental revenue generated from increased excise taxes on tobacco and alcohol to fund the government s universal healthcare agenda, while curbing the incidence of cigarette smoking especially among poor and young Filipinos. The Department of Finance projected that in the first year of implementation, the government expects to collect P34 billion in incremental revenue from excise taxes on cigarette and alcohol products. Of this amount, about 80% is earmark for universal health care and health facilities enhancement. The bulk of the fund is allocated to fund PhilHealth s Sponsored Program. In terms of health objectives, the Department of Health projects a substantial reduction of tobacco consumption in the Philippines which currently causes the deaths of 87,600 Filipinos annually. The Implementing Rules and Regulation (IRR) of the Sin Tax Law was approved and signed on 18 January 2014 by the heads of the five concerned agencies, including the Department of Health and PhilHealth. Under the IRR, the Department of Health was tasked to identify the annual funding requirements for financial risk protection, health programs, medical assistance and health facilities enhancement. The department is also required to submit a list of projects and programs to be implemented for the universal health care program, including funding requirements and guidelines for prioritization. The New PhilHealth Law, The National Health Insurance Act of 2013 (Republic Act 10606). The Philippine Health Insurance Corporation (PhilHealth) was established on February 14, 1995 as a Government-Owned and Controlled Corporation (GOCC) to administrate the National Health Insurance Program (NHIP). The law was amended in 2013 to incorporate the key strategies of the Aquino Health Agenda. NHIP is the compulsory health insurance program of the government that provides universal health insurance coverage and ensures affordable, acceptable, available and accessible health care services for all citizens of the Philippines (IRR of R.A ). 2 2 Discussions in this section on Philhealth are based on the Implementing Rules and Regulations of R.A Page 6

8 PhilHealth s primary purpose is to ensure that all Filipinos, especially those who cannot afford the cost of health care, are given real financial risk protection. Its key functions are: Enrol all Filipino citizens covered under the NHIP; Coordinate with the other government agencies, specifically DOH, DSWD and LGUs for the enrollment and coverage of eligible indigents, sponsored members and those members in the informal economy; Establish a system of accreditation of health facilities and health personnel; Establish an efficient premium collection mechanism, and maintain an updated membership and contribution database; Conduct information campaigns on the principles of the Program to the public and private accredited health care providers. PhilHealth draws its funds from three main sources: 1) premiums collected from its paying members 2) proceeds from its investments 3) allocation from the national government as enacted under the General Appropriations Act (GAA) to fund its NHTS-PR Sponsored Program There are currently five membership types/programs under the NHIP. These are: 1. Sponsored Program 2. Individually Paying Program 3. Employed Sector Program 4. Overseas Workers Program 5. Lifetime Member Program A Sponsored Member is one whose contribution is being paid by the national or local government, or by a private entity according to the rules as prescribed by the Corporation. Currently, the Sponsored Program aims to cover indigents belonging to the lowest 40% (Quintiles 1 and 2) of the Philippine population, including: 1. Families listed under the National Household Targeting System for Poverty Reduction (NHTS PR) of the Department of Social Welfare and Development (DSWD); and 2. Families identified as poor by the sponsoring Local Government Units (LGUs). PhilHealth members and their dependents are entitled to the following minimum services. a. In-patient care: 1. Room and board; 2. Services of health care professionals; 3. Diagnostic, laboratory, and other medical examination services; 4. Use of surgical or medical equipment and facilities; 5. Prescription drugs and biologicals, subject to the limitations of the Act; and, 6. Health Education. b. Out-patient medical and surgical care: 1. Services of health care professionals; 2. Diagnostic, laboratory and other medical services; 3. Personal preventive services; 4. Prescription drugs and biologicals, subject to the limitations of the Act; and, 5. Health Education. c. Emergency and transfer services; d. Health Education Packages; and, e. Such other health care services that the Corporation and the DOH shall determine to be appropriate and cost-effective. Page 7

9 A specific provision of the new PhilHealth law provides for No Balance Billing (NBB) for indigent confined in public health facilities. This means that no other fee or expense shall be charged to indigent in public health care institutions subject to the guidelines issued by the PhilHealth. Local government units (LGUs) play an important role in the NHIP because they serve as the frontline agency in providing health care services to indigent families. Along this line, LGUs are enjoined to: 1. Develop policies and plans appropriate to their locality and consistent with the implementation of the national government s health agenda 2. Mobilize and utilize local resources, PhilHealth reimbursements, user-fees, capitation fund, and other resources to organize and sustain the local health delivery system; 3. Improve the capacity of local hospitals and other public health facilities to deliver services; and 4. Establish partnership with the private sector for effective delivery of health service packages Membership, Accreditation and Benefits. In the 2012 Statistics and Charts by PhilHealth (December 31, 2012), it was reported that there is a total of M registered members, M dependents and M combined. The sponsored program on the other hand has 8.29 M registered members, M dependents and 36.68M combined. This can be broken down into 3.69 registered members, dependents and combined under Regular & DOH and 4.61 registered members, dependents and 20.43M combined under NHTS-PR. 3 It was also reported that there is a total of 632 level 1 hospitals (312 private and 320 government), 675 level 2 hospitals (417 private and 258 government), 252 level 3 (206 private and 46 government) hospitals and 111 level 4 hospitals (67 private and 44 government) which are PhilHealth-accredited. Philhealth s annual report for 2012 noted that a total of 1,670 Rural Health Units (RHUs) and health centers were accredited as Primary Care Benefit (PCB) Package providers. While around 1,476 were accredited as Maternity Care Package (MCP) providers and 1,201 were accredited as TB-DOTS package providers. In addition, among the Local Government Units (LGUs) across the country, only 17% do not have a PCB provider while 55% of LGUs do not have an accredited MCP provider. In terms of benefit payments, Philhealth reported that it paid Php 47.2 billion to an estimated 4.8 million claims. Nearly half (45%) of the total number of claims for the year which amounted to 20.2 billion pesos were paid to the formal sector (Private and Government employed) followed by 24% of claims amounting to 9.6 million which were paid to the individually paying sector while 19% of claims totaling 12 billion were from the sponsored program. The Philhealth annual report for 2012 emphasized that more than a third of the total paid claims for the sponsored program were paid through the No Balance Billing Policy. The same report noted that 60% of the total claims were paid through the Case Rate Payment System. The top three medical case rates paid were for Pneumonia I, Newborn Care Package and Acute Gastroenteritis while the top three surgical case rates paid were for Hemodialysis, Normal Spontaneous Delivery Package and Caesarian section. 3 All data on membership, accreditation and benefit payments are based on the latest Statistics and Charts of PhilHealth for Page 8

10 Study Objectives and Methodology This study will focus on tracking funds generated from the incremental revenue on excise taxes collected from tobacco and alcohol products under the Sin Tax Law, and appropriated for the national government s Sponsored Program that is administered by PhilHealth. The study aims to improve public spending and service delivery in the health sector by ensuring the effectiveness, feasibility and desirability of the expanded program for universal health care in addressing the health needs of poor Filipino families. Specific Objectives 1. Develop appropriate instruments for tracking utilization of funds allocated in accordance with the General Appropriations Act and the Sin Tax Law; 2. Identify a narrow set of health care services based on stakeholders preference to be financed by the incremental allocation for financial risk protection; 3. Recommend specific measures to ensure transparency, effectiveness and social desirability of the health protection and insurance for the poor. The study will seek to identify problems, issues, gaps, bottlenecks and risks in the funding flow and their impact on health services for the poor. One output of this study are recommended indicators and template instruments that can be used for continuing expenditure and performance monitoring of Philhealth s Sponsored Program. Project Methodology Background Research. A review of literature was conducted on the current and previous legislations related to excise taxes on tobacco and alcohol, on the National Health Insurance Program, on PhilHealth and on Universal Health Care. Additional background information were gathered from interviews of key informants, and from available studies and documents obtained from the Department of Health, PhilHealth and the National Economic Development Authority. The results of the background research enabled the project team to improve the PETS research design, finalize the set of indicators that will be monitored and draft the research instruments. Pretest. Preliminary instruments were drafted for hospitals/health facilities and for beneficiaries of Philhealth s Sponsored Program. A pretest was conducted to test the appropriateness and sensitivity of the PETS instruments. The pretest was started in the last week of September 2012 and was completed by mid October 2012, covering both urban and rural provincial areas. The result of the pretest was instrumental in firming up the research design and in finalizing the survey instruments as discussed below. The pretest also highlighted the problems related to data availability and access. These were partly addressed during the actual survey. The pretest survey noted the need to obtain the formal and strong endorsement of relevant health agencies and executive offices to facilitate data access. Strategic contacts and partners within the local government units were also necessary to ensure access to relevant information at the local level. Finalization of the survey instruments. The survey instruments were revised several times based on the background research, the results of the pretest and the discussions of the project team with the consultants. It was finalized after the interviews and focused group discussions with Philhealth officers and with local government officials. The following instruments were used for the tracking survey: Page 9

11 PETS Instruments 1. Health Facility Information Sheet 2. Questionnaire for SP Beneficiaries The final versions of the questionnaires were more focused, with sharper questions and with clear targeted respondents. For health facilities, the survey focused on the funding and claims processing of service packages specifically for SP beneficiaries. For beneficiaries, the focus was on indigent families those belonging to the poorest 20% of the population as identified through the National Household Targeting System for Poverty Reduction (NHTS-PR) of the Department of Social Work and Development (DSWD). The inclusion of SP beneficiaries of this PETS study is crucial because of the particular funding mechanism adopted by the national government to provide financial risk protection for the poor. Funds generated from Sin Taxes are transferred and allocated to finance the enrollment of identified indigent families in all cities and municipalities across the country. Allocated funds for enrollment are deemed spent or used once the target beneficiaries are enrolled as proven by their inclusion in the list of NHTS-PR/PhilHealth-SP beneficiaries; knowledge of enrolment/membership by the beneficiaries; and possession of PhilHealth ID cards and the Member Data Record (MDR). Thus, the final validation of the expenditure is made through verification of such enrolment of the target beneficiaries. The survey went further to assess the quality of such membership and the actual usage of benefits available to beneficiaries. Additional instruments were also developed to guide the data gathering and interviews of key informants from the Department of Health, Philhealth and Local Government Units. Formal links was established with Philhealth prior to the start of the survey. Interviews were made with several officers and a meeting/focused group discussion was held with key officers from the planning office and data center. A comprehensive list of data required for the study was discussed and submitted to Philhealth. Actual Conduct of PETS The tracking exercise was done at the national and local levels. At the national level, funds were tracked from the funding source to PhilHealth and how these funds flowed down to the health facilities and to the actual beneficiaries. The tracking exercise at the national level started in October 2012 and took more time than originally expected. This is because of the difficultly of obtaining the needed information for the tracking exercise. Most of the critical information was obtained only by July The required data was completed only by December At the local level, four local areas were selected for the tracking exercise one city and 3 municipalities, covering both urban and rural areas. Two are located in the Greater Metro Manila area and the other two are in provincial areas. The local areas were selected purposively based on the following criteria: Mix of highly urbanized and predominantly rural areas Significant number of Philhealth Sponsored Program beneficiaries Presence of local partners Willingness of LGU officials to conduct the study and provide the needed information Two to four barangays (villages) were selected per local area. All health facilities were covered and 50 respondents were selected in each of the target local areas. The preparation for the actual survey Page 10

12 was done by the second week of November 2012 which entailed negotiations with the target LGUs and the preparations of the survey package: Courtesy calls and orientation meetings with LGU officials Identification and training of the local facilitators and surveyors Production and distribution of surveyors kits, manuals and questionnaires Endorsement letters and courtesy calls to village officials Logistical arrangements The actual survey started in December and was completed by the first week of February. The following areas were covered : 1. Paranaque City, Metro Manila 2. Angono, Rizal (Greater manila Area) 3. Sta. Rosa, Nueva Ecija 4. Baao, Camarines Sur Number of health facilities covered by the survey = 25 Number of respondent-beneficiaries covered by the survey = 217 A major limitation of the PETS study is the incomplete data obtained from health facilities during the time allotted for the field work. Health facilities were not able to fill up the survey information sheet because of the lack of authority from their respective supervising agencies. Instead, information were gathered through interviews of LGU officials, health facility personnel and Philhealth staff assigned in the health facilities. The data gap was partly covered through the information gathered from the survey of beneficiaries, specifically on enrollment, membership status and usage of health facilities. Data processing. The project team processed the data culled from interviews and available documents from national agencies, local government units and local health facilities. Survey data from completed questionnaires for individual beneficiaries were processed as soon as the questionnaires were checked and validated. An encoding program using the Census and Survey Processing System (CSPro) was used for this purpose. Statistical tables were generated using SPSS, a software package for statistical analysis. The encoding was started in late January 2013 and was completed by end of February Challenges and Limitations The PETS study happened at about the same time the Sin Tax Law was enacted, signed and implemented. As such, the study is seen as important and timely because it can support the implementation during its earliest stage. At the same time, there are disadvantages because of the confusion and changes associated with the transition and implementation of a new law. In addition, there were changes at the top management level of Philhealth with the resignation of its former President in January These developments affected the agency s data management and reporting system. Negotiations with LGUs for the conduct of the study had been very challenging, particularly given the sensitivity of government agencies over budget and financial matters. The project team had to look for influential allies and credible local partners who can facilitate links with the target local areas. But even then, negotiations with the LGUs for the conduct of the study took more time than expected and not all needed data were made available to the project team. Another factor that affected the study was the local elections scheduled in May While the survey was conducted Page 11

13 several months ahead of the elections, informal campaigning had started as early as the last quarter of As mentioned earlier, health facilities did not fill up the information sheet because of the lack of authority to do so. Moreover, hospital personnel shared that most of the data requested by the team were not available due to poor data management and lack of system of data consolidation and reporting. Most data are in raw forms and annotated in logbooks which cannot be publicly divulged even to the concerned patients and family members themselves. Page 12

14 PETS Results A. Budget Tracking at the National Level Since the start of the new administration under President Aquino, the total National Budget of the Philippines has been increasing at a higher rate than in previous years. For the period 2011 to 2014, the total budget increased at an average rate of 15% per year. The same trend is observed for the budget of the health sector which grew at a much faster rate compared to most other sectors and to the overall national budget. In 2014, the health sector budget was allocated Php 83.7 billion from Php 51.1 billion in the previous year, or an unprecedented increase of 40% in a single year (See Table 1). Bulk of this increase is earmarked for the national government s Sponsored Program which provides financial risk health protection for indigent families. Table 1. Budget Figures in Billions of Pesos ( ) Total National Budget 1, , , ,608.5 Total Health Budget Sponsored Program Budget Source: General Appropriations Act, The graph below presents the relative magnitude of the increments of the total national budget, the health sector budget and the budget allocation for the Sponsored Program. Using 2011 as the base year (Index=1.00), it will be noted that the allocation for PhilHealth s Sponsored Program has been increasing at a geometric pace especially for years 2012 and During the 4-year period, budget allocation for the Sponsored Program grew ten times faster compared to the total national budget. For years 2012 and 2013, the national government allocated a little over Php 12 billion to scale up the enrolment coverage of indigent families. In 2014, the huge increase was based on the projected incremental revenue that is expected to be raised for the first year of the implementation of the Sin Tax law. Figure 1. Budget Index (Base Year 2011) Index 2011= Budget Increments National Budget Year Source: Basic data culled from General Appropriations Act, Sponsored Program Total Health Page 13

15 The huge increase in the health budget and allocation for the Sponsored Program is part of the commitment of the Aquino government to achieve universal health care. This commitment has been given a strong boost with the enactment of the Sin Tax law which allocates a significant portion of the incremental revenue from excise taxes on tobacco and alcohol products for universal health care, specifically to finance the Sponsored Program administered by PhilHealth. The Sin Tax law and its Implementing Rules and Regulations (IRR) allocate an estimated 15% of the incremental revenue from excise taxes on tobacco and alcohol products for tobacco-producing provinces and for tobacco farmers. Of the balance (of about 85%), 80% is earmarked for universal health care, specifically for financial risk protection for the poor (Sponsored Program), for health awareness, and for strengthening of preventive health programs towards attainment of health MDGs. Under the IRR, the Department of Health was tasked to identify the annual funding requirements for financial risk protection, health programs, medical assistance and health facilities enhancement. The department shall submit at the beginning of the year a list of projects and programs to be implemented for the universal health care program Adequate funds shall be allocated to enroll and continuously cover as PhilHealth members families belonging to the first and second income quintiles (Q1 and Q2) based on the list as provided by the DSWD in consultation with PhilHealth. The list shall contain families who have not been identified as poor by the NHTS-PR but are within the estimated maximum number of families that are part of Q1 and Q2. Actual excise tax collections for the first year of implementation of the Sin Tax law have exceeded previous estimates as computed by the Department of Finance (DOF). As a result of higher tax collection, the DOF now expects to generate incremental revenues of P36.34 billion from the sin tax collections throughout % higher than the target of P33.96 billion set in 2012 (DOF). As mentioned, this provided a big boost for the Aquino Administration to accelerate its program on universal health care. Table 2 presents the premium contributions corresponding to the target number of family beneficiaries for the Sponsored Program using the NHTS-PR listing. From 4.61 million in 2012, the number of beneficiaries increased to and 5.06 million in For 2014, the target number of beneficiaries increased by nearly three times given the allocation of Php billion to cover the premium contributions of million families. Table 2. Target Number of Families and Premium Contributions for Enrollment of NHTS-PR Beneficiaries Target number of Families (in millions) 4.61 M 5.06 M M Premium Contributions (in B 15.82B billions of Pesos) B Allocation from the national government (in billions of Pesos) 12.03B 12.63B B Sources: General Appropriations Act, ; PhilHealth Annual Report 2012 Table 3 shows the breakdown of the allocation for the premium contributions of poor families under the Sponsored Program for For this particular year, the government is targeting not only those identified as poor, but also those belonging to the next poorest 20% of families which is sometimes classified as the near poor. Also included are former combatants of the Muslim rebel groups. Page 14

16 Table 3. Department of Health 2014 Budget Subsidy for the Poor Target Beneficiaries Classification 2,400 DSWD poor Core families ,145 Other families in the list ,377 Total ,522 DSWD Near Poor Core families 2.4 5,778 Other families in the list 2.1 4,995 Total ,773 Former Combatants and Former combatants thru PAMANA MILF fund MILF Bangsa Moro Total Grand Total ,337 Source: Department of Health (DOH) and Department of Social Welfare and Development (DSWD) The national government under the Aquino Administration has appropriated increasing amounts to the health sector to fulfill its commitment of achieving universal health care with particular emphasis on the poorest Filipino families. It passed the Sin Tax law that is both a revenue and health measure, and which provided for the much needed investment to provide financial risk protection for the poor. This study will track whether these appropriated funds that is flowed into the pipeline and spent for what they are intended for. B. Funding Flow from Fund Source to PhilHealth Philhealth sources of funds The main sources of funds of Philhealth are the 1) National government for the annual premium of enrolled sponsored members under the NHTS-PR list as legislated under the General Appropriations Act (GAA); 2) Local government and other donors for the annual premium of their enrolled sponsored member; and the 3) Philhealth members premium payments, including those employers who share or cover partially the premium payments of their employees. Philhealth also earns from interest income such as Treasury bonds, time/special savings deposits, savings and current deposits and other interest incomes. Philhealth sources of funds: Premium contributions for Sponsored Program (SP) National Government subsidy to SP of NHTS-PR Congress SP Local government units for SP Premium contributions for the Regular Programs Private sector Government sector Individually Paying program Overseas Workers Other Interest Income Accreditation fees Fines and Penalties Rent Income Gains on Foreign Exchange Gains on disposal of assets Income from grants and donations Dividend income Miscellaneous income Page 15

17 Interest Income Treasury Bonds Time/Special savings deposits Savings and Current Deposits Source: COA Audited Report on Philhealth, 2012 Figure 2. Flow of Resources In Philhealth Other Income (From interests, fees and investments) Premium Payments of Members (EMPLOYERS & INDIVIDUALS) LGU Budget/ Donors Allocation for Premium of Indigents Nat l Govt-DOH Budget Allocation for Premium of Indigents: NHTS-PR (As Legislated under the GAA) PHILHEALTH National Office For purposes of this study, only the allocation for the national government s Sponsored Program which provides for the premium payments of indigents shall be covered and tracked. This is indicated in the shaded boxes in Figure 2. As mentioned in the previous section, the national government allocates a budget for the said subsidy for the particular fiscal year based on the DSWD s NHTS-PR list of poor families as beneficiaries of the Sponsored Program. The said budget is allocated under the budget of the Department of Health and is found in the annual General Appropriations Act (GAA). Release of Funds The release of said subsidy is guided by the relevant provisions in the GAA. To facilitate the release of said subsidy, Philhealth is tasked to undertake the following: a. Secures from DSWD the NHTS-PR list of qualified indigent households and ensures that all eligible indigents are enrolled in the NHIP. This is done in coordination with the DOH, DSWD, and the LGUs. b. In coordination with the DOH, requests the Department of Budget for the release of the Special Allotment Release Order (SARO) and Notice of Cash Allocation (NCA). c. Submits to DBM pertinent reports and financial statements such as i. Certification through its Chief Accountant, of the amount of applicable premium and includes corresponding number of qualified enrollees and period of coverage ii. Certification that Philhealth assumes full responsibility for the veracity and accuracy of the collections incorporated in the Philhealth financial statements including the list of NHTS indigents Page 16

18 In accordance with the relevant GAA provision, and in compliance with DBM requirements, the subsidy is released to Philhealth through the Bureau of Treasury of the Philippines which deposits the funds into the government servicing banks so Philhealth can then claim the subsidy by depositing the corresponding check into its own national account. In 2012 the national government allocated a budget of Php billion to cover said subsidy for an estimated 4.61 million families as discussed in the previous section. While processing for the requirements for the release of allocated funds, PhilHealth started the enrolment of the SP beneficiaries based on the DSWD NHTS-PR listing of indigent families. Identification Cards and the Membership Data Records (MDR) were distributed accordingly. These were checked through the survey conducted by the AER team in selected local areas as discussed in the next section. On December 21, 2012, the joint circular of DOH, DBM and Philhealth was issued to provide guidelines on the release of the subsidy in compliance with the GAA FY 2012 provision. On December 27, 2012, pertinent documents were submitted by Philhealth to facilitate the release of the subsidy, including the list of indigents under the NHTS-PR of DSWD.. Based on the released documents, the provision for the full national government subsidy on the health insurance premium of indigent families enrolled as SP beneficiaries have been released under SARO No. F and NCA No. F both dated December 28, 2012 in the amount of P11,884,094,400 per OR# Based on the document/accomplishment report 2012 submitted by Philhealth, the number of NHTS- PR SP beneficiaries covered by the subsidy totaled to 4.61 million members (out of million total membership) with an estimated million dependents. Based on the report of Philhealth on its benefit payments, claims made related to the SP beneficiaries (both NHTS-PR and LGU sponsored) totaled 931,794 or 19% of all claims processed and paid. Benefit payments made to all SP beneficiaries amounted to Php billion or 26% of all benefits paid by Philhealth for year 2012 (PHIC 2013a). Table 4. Philhealth Registered Members and Dependents, as of December 2012 Sector Registered Members Dependents Members and Dependents Government-Employed Private-Employed Sponsored Program LGU/Regular NHTS-PR Individual Paying Lifetime Member Overseas Worker Program Total Notes: 1. Figures are in millions. 2. The projected population for 2012 (95.88M) used in the estimation of enrollment rate is based on the 2010 population NSO census (medium assumption; annual growth rate = 1.9). 3. Data reported are actual counts of members and dependents registered in the database except for dependents LGU-sponsored Program members which were estimated using the NHTS member to dependent ratio. Source: Philhealth Stats and Charts 2012 Page 17

19 Table 5. Claims Processed and Benefit Payment, January 1 to December 31, 2012 Number of Percent Benefit Payments Sector claims paid Distribution In million pesos All Sectors 4,863, % 47,210.5 Government 745,607 15% 6,846.3 Private 1,482,674 30% 13,379.0 Individually-Paying 1,178,668 24% 9,622.9 Overseas Worker Program 152,515 3% 1,578.1 Sponsored Program 931,794 19% 12,094.6 Lifetime 372,560 8% 3,689.7 Source: Philhealth Stats and Charts 2012 While the coverage of this study focused on year 2012, information concerning fund releases for 2013 were also noted for comparison purposes. The GAA for FY 2013 stipulates that the allocation for the NHTS-PR SP beneficiaries shall be released to Philhealth through the Bureau of Treasury upon submission by Philhealth of the number of indigent enrollees and the financial statements that may be required by DBM. Philhealth reported that the health insurance premium subsidy for 4.95 million enrolled indigent families under NHTS-PR was released by DBM per SARO No. F dated June 26, 2013 with NCA No. F and were collected per OR# dated July 3, 2013 amounting to P11,887,204,800 covering the full NG subsidy (PHIC 2013c). Thus, the tracking study conducted by AER confirmed that for 2012 there was budget allocation for the national government s Sponsored Program as per provision of the GAA FY2012, and that these funds were released to Philhealth after the latter complied with all the requirements as stipulated under the GAA, and the rules and procedures of DBM and DOH. However, the release of the funds was late and transferred only on December 28, Nonetheless, Philhealth claims as per its annual report for 2012 that the funds had been properly utilized by enrolling the target SP beneficiaries and providing due benefits for hospitalization and primary care benefits (PHIC 2013a). This was checked through the survey conducted among the SP beneficiaries as discussed in the next section. The information gathered by the AER team showed that the funds earmarked for the NHTS-PR SP beneficiaries were released much earlier on July 3, 2013 compared to the release made in This may indicate improved capacity of PhilHealth in completing the requirements for fund release. C. Funding flow on Reimbursement of Claims Four local areas were selected for the tracking exercise - one city and three municipalities, covering both urban and rural areas. Two are located in the Greater Metro Manila area and the other two are in provincial areas. As mentioned in the methodology, the local areas were selected purposively, ensuring a cooperative LGU, presence of local partners, adequate number of SP beneficiaries, and a mix of highly urbanized and predominantly rural areas. For each local area, 2 to 4 villages were selected for the tracking survey. All health facilities in the selected areas totaling 25 hospitals, clinics and Rural Health Units were covered by the survey. As mentioned in the limitation of the study, the information sheet distributed to the health facilities were not filled up because of the lack of authority of hospital personnel to accomplish the forms. Instead, information were obtained through interviews of LGU, health facility and Philhealth personnel. Additional information were culled from documents made available to the research team. Page 18

20 The Figure below presents the flow of funds from PhilHealth to payment of claims of public health facilities which treated members of the sponsored program. For a diagram on the overall flow of funds from sources to PhilHealth and from Philhealth to payment of claims to health facilities and beneficiaries see Annex G. Figure 3. Flow of Resources from Philhealth to Health Care Providers Philhealth accredited providers for sponsored program members are the public health facilities which are either owned by the local government units or the national government. Local government units claim benefit payments for the primary care benefit packages usually provided by their rural health units of Municipalities or health centers for cities. They also claim payments for the maternal care packages usually provided by their birthing facilities. Government hospitals claim payments through the case rate payment scheme covering 23 medical and surgical cases while other cases are still paid through the fee for service scheme. Page 19

21 Reimbursement and Benefit payment process Reimbursement of claims to Philhealth follow the following general steps: 1. Health Care Provider (HCP) (Local Government Unit (LGU) hospital and other Public hospitals) submits the properly filled claim forms 2 and claim form 3 or medical abstract, claim form 1 from the member and other documentary requirements together with the transmittal list to the Local Health Insurance Office (LHIO), (or the Philhealth Regional office (PRO), whichever is nearer the claimant.) In cases where the Local government unit claims payment for Primary Care Benefit (PCB) package services, they submit a separate set of documents but the procedure of claiming remains applicable. 2. The LHIO receives and screens claims as to the correct number and names of claimants against transmittal list. Stamps received on the transmittal list if there are no deficiencies in the transmittal and total number of claim; if there is/are name/s listed but no claims attached, crossout name/s in the list and have the transmittal list initialled by the hospital representative/health care provider. 3. The LHIO returns the received copy of transmittal list to hospital representative/health care provider and advises client that processing of claims will be done within the 60-day period. 4. The LHIO transmits the claims documents to the Philhealth Regional office. 5. The Philhealth Regional office processes the claims and if found in order prepares the cheques and advices the corresponding LHIO for pick up. PRO releases checks and documents to LHIO. 6. LHIO informs HCP of checks ready for release. Releases cheques to HCP. In cases where HCP follows up on check releasing at the LHIO; The LHIO verifies if check is available, if not, advices the HCP of status of the check. If cheque is available, releases cheque to HCP. 7. The HCP upon receipt of cheques, counterchecks/validates cheques received then acknowledges receipt of check, affixes signature in the logbook and disbursement voucher. Page 20