[In This Economy] Zero subsidies for PhilHealth in 2025: Are lawmakers out of their minds?

News of economic mismanagement keeps piling up.

On Wednesday, December 11, the bicameral conference committee (consisting of lawmakers from the House of Representatives and the Senate) approved the 2025 budget, which now awaits President Ferdinand Marcos Jr.’s signature.

Already, there are signs that the budget is as bad as ever — maybe even worse.

For instance, the bicam decided to insert P373 billion into the unprogrammed appropriations, similar to the move they did in the 2023 and 2024 budgets.

We’re also hearing that funding for state universities and colleges is down by 4.7%, with the University of the Philippines (where I work) suffering a massive P2.1-billion budget cut — the biggest in nine years.

Even the Department of Education, which oversees basic education, was not spared: its budget has been cut by P12 billion — to the dismay of DepEd Secretary Sonny Angara, who warns that their computerization program will inevitably suffer.

But perhaps the most scandalous aspect of the 2025 budget (so far) is that lawmakers decided to allot zero (literally zero) pesos for the government’s subsidies to the Philippine Health Insurance Corporation or PhilHealth. This, after the executive branch proposed P74.43 billion of such subsidies for 2025.

This move was defended by Senator Grace Poe, chair of the Senate’s finance committee (with support from Senate President Chiz Escudero himself), who said that PhilHealth has a humongous “reserve fund” amounting to about P500 billion or P600 billion, and that they should rely on that first to expand members’ benefits.

Said Senator Poe in Filipino: “If we can see that they have that much money, they need to use it because it’s just going to waste. What are they doing? Why are they just keeping it and not using it?”

The problem with this reasoning is that it’s plain wrong and dangerous on many levels.

First, this is completely at odds with the Universal Health Care Act (Republic Act No. 11223, enacted in 2018), which provides that the “premium subsidy” for indirect contributors (comprising mainly the poor and seniors) “shall be gradually adjusted and included annually in the GAA (General Appropriations Act).”

In other words, the state subsidies in the yearly national budget are meant to cover the premium contributions of the vulnerable sectors in society, who are in fact not contributing themselves on account of their circumstances.

That law also says that part of the appropriations for universal health care “shall be sourced” from, among others, the “National Government subsidy to PhilHealth included in the [GAA].”

Second, giving zero subsidies to PhilHealth contravenes the Sin Tax Reform Acts of 2012 and 2019, which state that 80% of revenues from tobacco and sugar-sweetened beverages must be allocated to PhilHealth to finance the Universal Health Care Act’s implementation. If these funds won’t go to PhilHealth, then who will get to use them?

Third, some fear that because of this move by lawmakers, the poor and elderly may have difficulty availing of healthcare services. But more likely, they will have to contend with more limited expansion of PhilHealth benefits for their respective sectors.

Even more worryingly, there will be a lot more pressure on direct contributors (government employees, private sector employees, and workers in the informal economy) who will have to shoulder the premiums of the poor and elderly. This will most likely manifest in the form of reduced benefits (not higher premiums, which have already increased a lot since 2019).

Fourth, lawmakers are confusing PhilHealth’s reserve funds with surplus funds. According to the National Health Insurance Act as amended, reserve funds are basically a pool of funds coming from each year’s “accumulated revenues not needed to meet the cost of the current year’s expenditures.”

The law states, too, that “the total amount of reserves shall not exceed a ceiling equivalent to the amount actuarially estimated for two (2) years’ projected Program expenditures.”

Furthermore, “whenever actual reserves exceed the required ceiling at the end of the Corporation’s fiscal year, the excess of the Corporation’s reserve fund shall be used to increase the Program’s benefits, decrease the member’s contributions, and augment the health facilities enhancement program of the DOH (Department of Health)…” Any other excess reserves shall be “placed in investments” (interest-bearing assets, debt securities and corporate bond issuances, etc.).

Lawmakers claim that PhilHealth has reserve funds to the tune of P500 billion or P600 billion. But when you look at the numbers, that’s nothing compared to the so-called “insurance contract liabilities” (ICL) of PhilHealth, or the liabilities that PhilHealth expects to pay in the future to fulfill its commitments to its members.

In the Commission on Audit’s 2024 audit report on PhilHealth, it cited an increase in the ICL of P882.783 billion in 2023, on account of, among others, a lower subsidy from the national government. By end-2023, the ICL was estimated at P1.15 trillion, almost twice the current reserve funds as mentioned by senators. With the zero subsidies in 2025, expect the ICL to increase even more in 2025 — making the reserve funds even more inadequate.

In a November 2024 BusinessWorld piece, my friend Enrico Villanueva, a former banker and now an instructor at the University of the Philippines Los Baños, also wrote: “Technically, PhilHealth is already a balance sheet insolvent. While it may have the cash to pay current liabilities, it has insufficient assets to fund long-term liabilities. For March 2024, liabilities (P1.252 trillion) were twice the assets (P612 billion), with Equity already negative at P640 billion.” He warns that such insolvency, if not remedied, could lead to bankruptcy.

We need to see PhilHealth’s latest financials. But even supposing that there are indeed excess reserves (insofar as P600 billion exceeds the P560.55 billion equivalent to two years’ worth of program expenditures), it’s quite clear that the next step is to use any such excess reserves to expand PhilHealth benefits and (not or) decrease members’ contributions.

Emmanuel Ledesma Jr., president of PhilHealth, committed in September that the corporation shall increase benefit package rates by 50% by end-2024. Let’s see if that will come true.

However, if PhilHealth is constrained to dip into its reserve funds next year, precisely because it will receive zero subsidies from the national government, then benefit expansion will almost surely be stymied. The logic can’t be plain enough. Chances are, PhilHealth will struggle to fund more comprehensive healthcare packages or include new treatments, drugs, or services in its coverage.

Ill-thought

You see, now, that lawmakers are shooting themselves in the foot: they clamor for expanded PhilHealth benefits, but they themselves are making it hard for PhilHealth to do so by eviscerating state subsidies by next year.

They’re also effectively punishing contributing members whose benefits stagnate at best or lessen at worst. Any hope of PhilHealth paying for a larger part of Filipinos’ hospitalization bills or other medical expenses is now off the books.

In conclusion, with the 2025 budget they just approved, lawmakers themselves are sabotaging the Philippines’ universal health care project. It’s a classic case of a well-intentioned policy that will surely have devastating consequences. And we know exactly whom to blame. – Rappler.com