Universal Health Coverage, Health Security and Resilient Health Systems

Eduardo Banzon MD MSc & Beverly Lorraine Ho MD MPH

Acknowledgements due to the following: Ida Marie Pantig, Lorra Angelia Sayson, Nel Jason Haw and Mikaela Limcaoco

By 2040, all Filipinos shall enjoy longer and healthier lives, with
minimal socio-economic and geographic disparities in health status,
which are comparable to residents of high-income countries.
Filipinos are empowered and active participants in healthcare and
secure with the knowledge that accessing quality health service does
depend on ones capacity to pay and will not lead to
impoverishment, that the system is designed to minimize
vulnerabilities to communicable disease threats and lifestyle risks,
and that the health system remains dependable in times of disaster.
2016
Jose and Alicia, are minimum wage earners. They live in Cavite but work in a factory in
Mandaluyong. Commuting to work means losing 4 hours daily to travel. Because they are home
late and have to leave the next day early, they are unable to prepare lunch. They are suki to
Aling Nenes rasyon consisting of viand, and rice - food with little nutritional value and
often salty. At work, they are exposed to high heat, with the factory having little ventilation. One
day, Jose had a bad case of diarrhea requiring admission. They chose to go to the nearest
government hospital. Since Jose, a PhilHealth member, was confined in the charity ward where
one nurse takes care of 18 patients simultaneously, Alicia had to stay as a watcher to make
sure all of Joses needs are being met. Moreover, Alicia was tasked by the attending physician to
purchase medicines in a drug outlet a few meters away as the hospital pharmacy ran out of
stocks.
After three days in the hospital, both Jose and Alicia lost 3 days of work, and spent most of their
savings for the last year. Jose will also need to start allocating a portion of his salary for
maintenance medications.

I. Introduction
No one wants to be sick. Yet, those who fall ill are punished with high cost of accessing
healthcare. While one cannot totally prevent it, conditions where an individual is born, grows,
works, lives and ages contribute to lessening the likelihood of falling ill. For example, selected
population groups face many barriers to receiving preventive and promotive care thus increasing
their vulnerability. Those residing in disaster-prone areas cannot rely on their health system in
the immediate aftermath of shock, even after a few year, so that they can live the way they used
to.

This paper argues why the government should sustain its ongoing investments in health, and
proposes where and how these investments should be channeled in order to ensure that (1) the
system is designed in a way that is health promoting or makes it easy for people to choose the
healthier option (2) those who fall sick are not driven to impoverishment, (3) the system remains
dependable in the event of shocks/disasters.
Section II builds the case for why health remains a sound investment for the country. Section III
provides a concise overview of the Philippine health system. Section IV rates the health system
performance using three indicators. Section V summarizes the gains of the recent reforms.
Section VI describes the two possible scenarios for the health system one simply is the
continuation and incremental improvement of the status quo and the other requiring system-wide
structural reforms.

II. Investing in Health

As countries move to sustain inclusive growth that reduces poverty and inequities, health is a
cornerstone for which other reforms can be built on, but also a potential threat that would hold
back economic development and inclusive growth. Health can be an economic driver at the
individual, household and national levels (see Box 1 & 2) with a growing body of evidence that
better health was both a precedent and catalyst for the sustained high rates of economic growth in
East Asia from 1960 to 1990 (Bloom, Canning & Jamison, 2004). Conversely, ill health have
adverse economic consequences with the SARS and Ebola outbreaks resulting to decreased
GDP1 (Hai, Zhao, Wang, & Hou, 2004, and Bausch & Schwartz, 2014) and likely leading to
destabilization, political unrest, civil disorder (Price-Smith, 2004), with the related economic
costs. At the individual level, a health system that relies on out-of-pocket payments (OPP) or
direct payments2 with negligible safety nets can prevent the upward mobility of poor families
resulting into poverty traps, and may even impoverish non-poor families. Moreover, OPP deter
and delay people from using health services, potentially causing heavier future financial strain
from worsening health conditions.
BOX 1. Relationship between Population Health Status and Economic Performance
Various studies substantiate the strong, positive relationship between health, measured in terms of
increase in life expectancy or decrease in disease prevalence or malnutrition or reduction in mortality,
and economic growth, measured in terms of GDP per capita. Nobel laureate in economics Robert W.
Fogel found improvements in the populations food consumption account for between one third and
one half of Englands economic growth in the past 200 years (Mexican Commission for
Macroeconomics in Health, 2004). Mayer (2001) concluded that health is responsible for
approximately one third of long-term economic growth in Mexico from 1970 to 1995. Cross-country
macroeconomic studies showed that an increase in life expectancy from 50 to 70 years would raise
economic growth rate by 1.4 percentage points per year (Barro, 1996); that one extra year of life

The SARS outbreak in 2003 hit Chinas tourism sector and this resulted to GDP of 1-2 percentage points lower had
the outbreak not occurred (Hai, Zhao, Wang, & Hou, 2004). The Ebola outbreak is projected to have cost Sierra
Leone and Liberia up to 8.9% and 12% of their GDPs, respectively in 2015 (Bausch & Schwartz, 2014).
2
Payments made at the point of service in exchange for services rendered, procedures done or medicines dispensed
(World Health Report, 2010)

expectancy raises steady-state GDP per capita by about 4 percent (Bloom et al., 2004); that a 10%
decrease in malaria is associated with an increased annual growth of 0.3% (Gallup & Sachs, 2001)
and that malnutrition causes a decrease in the annual GDP per capita growth worldwide of between
0.23 and 4.7% (Arcand, 2001). For Latin America and the Caribbean, health, measured as the
probability of surviving to the next age group, has a strong long-term relationship with growth.

BOX 2. Mechanisms linking Population Health with Economic Performance

First, better health means higher labor productivity (i.e. less absenteeism) (Bloom, Canning &
Jamison, 2004). Second, better health alters decision space for families, providing the incentive to
save. Longer life spans makes retirement a realistic prospect, and fewer children an option, since they
will have high probability of reaching adulthood thereby allowing them to invest more per child, or
save (The World Bank, 2006). Third, better health can lead to relative workforce size expansion in
either or both ways. Longer life expectancies mean extended time in the workforce. Decreasing infant
mortality rates creates a baby boom cohort, and contributes to future workforce size.

III. Current Philippine Healthcare System

The passage of the Local Government Code of 1991 devolved and transferred majority of the
government health service delivery functions3 to the local government units (LGUs) with the
Department of Health (DOH) retaining control of specialized and regional hospitals and
mandated to focus on organizing programs that will promote health, formulating solutions to
emerging health situations, developing national plans, technical standards and guidelines on
health, and regulating all health services and products. (Hartigan-Go, Valera, & Visperas,
2013). Two attached agencies help DOH fulfill its primary function, the Food and Drug
Administration (FDA) and the Philippine Health Insurance Corporation (PhilHealth). The FDA
regulates all health products/equipment4, while PhilHealth administers the National Health
Insurance Program (NHIP). Interestingly, the establishment of PhilHealth signaled the start of
the ongoing shift of the countrys healthcare system from a budget-based, public service
provision, supply-driven system (government money flows to healthcare facilities) to and outputbased, demand-driven system (government money now following where the member goes) that
is agnostic to the provider being public or private.
Currently, the financing of health is through households and firms contributing through direct
and indirect tax payments, health insurance premiums and out-of-pocket payments (OPP)
complemented by government revenues from the lottery and casinos. The tax revenues then
funds the budget of the DOH and other national agencies providing health services, Internal
Revenue Allotments (IRA)5 of LGUs, and the national government subsidies for the health
insurance coverage of the poor and other subsidized population. From the IRA, the LGUs have
the discretion to allot how much of its funds to health which results to huge variation in LGU
health budget. Health insurance premiums from households and firms, and the government
3

Health service delivery functions include operating local government owned health facilities (provincial and
municipal hospitals, rural health units and barangay health stations) and implementing programs.
4
FDA regulates all processed food, drugs, medical/radiation devices, cosmetics, household hazardous substances.
5
The Internal Revenue Allotment (IRA) is the share of revenues that local government unit's (LGU) provinces,
independent cities, component cities, municipalities, and barangays receive from the national government.

subsidies are generally pooled in a publicly managed fund which is PhilHealth complemented
and supplemented with smaller private funds such as private health insurance and health
maintenance organizations (HMOs) pooling insurance premiums from firms and individuals.
Private healthcare providers are compensated for their services through reimbursement from
PhilHealth and private health insurance reimbursements, negotiated rates by HMOs and
individual OPP, while government healthcare providers receive OPP, PhilHealth output-based
reimbursements, and line item budgetary transfers from DOH or LGU which pays for inputs and
are not linked to output or performance.

Figure 1 Schematic representation of financial flows.

Source: World Health Organization [WHO], 2011

Health insurance reimbursements are paid to health care providers through different mechanisms
based on the health care service provided with primary care services paid by a per capita
(household) rate, and inpatient, ambulatory surgery care and a number of outpatient services paid
with uniform case rates regardless of level of accommodation, healthcare provider skill or
geographic location. This case rate is a fixed published fee schedule which allows the remainder
or the balance of the bill (balance bill) to be shouldered by the patient, either through a
supplementary health insurance or by OPP. Since 2011, PhilHealth has mandated government
hospitals to ensure zero balance bill or OPP when providing care to poor Filipinos who have
been subsidized into PhilHealth.
Health care services are delivered by a fragmented mixed system of public and private providers,
characterized by scarcity and inequitable distribution of healthcare capacities (Banzon, Lucero,
Ho, Puyat, & Factor, 2014). Patients can bypass primary care and directly seek secondary or
tertiary level care. Coordination between DOH and LGU, and between LGUs varies. Several
4

municipalities continue to plan and function as isolated health systems. Market activity
generally dictates where private facilities and professionals set-up shop, especially since there is
no clear national hospital/health facility distribution or zoning plan.
The poor oversight and weak regulation as manifested by this absence of hospital development
plan has resulted to business conglomerates buying out hospitals and pharmacies and
consolidating them without clear government guidance as to how they contribute to national
health objectives. This extends further to private medical clinics that only require LGU-issued
business permits to operate. This has also contributed to the confusion as to the role of public
hospitals given the continued expansion of private rooms and wards, despite legal limitations to
keep private beds at 10% of total beds, and raises some questions on resource allocation practices
within public hospitals. Moreover, majority of physicians in the private sector are independent
free agents whom hospitals have difficulty regulating. These physicians manage their own
outpatient clinics, and own shares of or affiliate themselves with hospitals for higher-level care,
creating an accountability gap wherein hospitals are unable to vouch for quality or implement
professional fee ceilings. Meanwhile, salaried physicians in the public sector usually engage in
dual practices with the same private practice behavior described above.

IV. Health System Performance

The health system has many aspects with health system performance often measured using
several indicators. For the purpose of this paper, macro-level indicators reflecting ultimate health
system goals of population health, financial protection, responsiveness and equity have been
selected with the intention of using these to track progress towards the vision for health by 2040.
However, there is currently no available reliable baseline data for responsiveness. Indicators for
clinical quality and appropriateness of care, effectiveness, productivity or efficiency are
considered intermediate and will not be expounded further.
In measuring overall population health, gains in life expectancy have traditionally been cited as
the leading indicator of improvement (National Research Council, 2010). In recent years, this has
been replaced with Health or Disability Adjusted Life Expectancy (HALE/DALE), a more
comprehensive and nuanced indicator that measures both quantity and quality of life (WHO,
2015) HALE/DALE are able to capture the current phenomenon where advances in healthcare
allow people to live longer but not able to restore people to full health and productivity. Studies
have demonstrated a nearly perfect linear correlation between life expectancy and HALE/DALE,
with an average difference of 7.1 years (WHO, 2000). 2013 DALE Estimates show that the
Philippines ranks poorly compared to its ASEAN counterparts as shown in Table 1.
Unfortunately, there are no DALE data disaggregated based on income class.

Table 1. Disability-adjusted life expectancy

1990
Male population

2013
Female
population
58.51
67.18

Male population

Female
population
64.13
70.67

Global
55.4
60.59
OECD Average
62.86
67.34
ASEAN
55.83
59.78
62.05
66.28
Average
Brunei
65.11
67.12
68.8
70.97
Singapore
65.26
68.49
70.75
73.35
Cambodia
39.74
47.15
54.62
60.23
Indonesia
56.2
59.01
61.33
64.51
Laos
47.82
50.26
56.48
59.74
Malaysia
62.4
65.99
64.09
68.89
Myanmar
49.78
52.71
57.55
61.97
Philippines
54.96
62.28
58.76
64.59
(8th of 10)
Thailand
61.38
66.07
64.3
69.2
Vietnam
55.6
58.75
63.77
69.33
Source: Global Burden of Disease 2013 by Institute of Health Metrics and Evaluation

From 1990 to 2010, there has been a gradual shift towards non-communicable or lifestyle
diseases as the cause of the disability or disease burden. The overall top three risk factors are
dietary risks, tobacco smoking, and high blood pressure (GBD, 2013). Projections show that by
2040, double burden of communicable and non-communicable diseases will persist but with the
latter overtaking the former (Wong, Haw and Uy, 2016).

Figure 2 Ranking of burden of disease in 1990, 2010 and 2040

Because of the complexity of collecting and processing data to arrive at a DALE estimate, infant
mortality rate (IMR) or the number of children for every thousand live births who die before
their first birthday, would be an alternate indicator for population health. It is routinely collected
but also regarded as a highly sensitive proxy measure of population health (Blaxter, 1981;
Robine 2003). High IMR is indicative of gaps in both access and quality of maternal and child
care, nutrition and water and sanitation - all determinants of child survival. From 1990 to 2015,
significant progress has been made in reducing IMR but the rate of decline has been slow
compared to the ASEAN averages (see Figure 3).

Figure 3 Mortality Rate for Philippines, ASEAN and OECD in 2003, 2008 and 2013

Source: World Development Indicators and National Demographic and Health Survey, 2003

Based on the national average of 23 per 1000 live births, the country currently ranks 6th best
among ASEAN nations. Income, regional and rural-urban differences are glaring, with some
approximating the levels found in high-income and others low-income countries. (Figure 4) This
can however be taken to mean that the infrastructure and capacities are there, but not equitably
distributed. More than half of these deaths occur in the neonatal period or the first 28 days of
life.

Figure 4 2013 Infant Mortality Rate, disaggregated per region and income quintile

Source: National Demographic Health Survey 2013, and World Bank World Development
Indicators
In terms of financial risk protection, keeping the share of private out-of-pocket payment (OPP)
low is important because financial catastrophe6 and impoverishment occur greatest in high OPP
settings (Xu et al., 2003). OPP also delays care-seeking especially among lower income
population hence widens health inequity further. Finally, a predominantly OPP financed system
is unable to capitalize on volume payments to drive down costs, hence perpetuates an inefficient
system. In the last decade, average OPP continued to increase with medicines consistently the
main driver despite increased central health government spending in absolute terms and in per
capita basis (Figure 6). The incidence of catastrophic spending has increased from 2000 to 2012
for all income groups, translating roughly to 1.1 million people (Bredenkamp & Buisman, 2015)
but the number may even be an underestimate, as the poor, when sick, are not seeking care as
much as the rich (See figure 9). Using 2012 data, health OPP adds one additional percentage
point to the poverty rate at US $1.25 poverty line, and 1.5 percentage points to the poverty rate at
US $2.00 poverty line. (Bredenkamp & Buisman, 2015). When compared to other Asian
countries (see Table 2), the country performs rather poorly.

Catastrophic health spending is defined as paying more than 40% of household income directly on
health care after basic needs have been met. (Source:
http://www.who.int/health_financing/documents/pb_e_05_2-cata_sys.pdf)
9

Figure 5 Health expenditure by source of funds from 1991-2013

48% 50% 48% 47%

50% 49% 47% 47% 44%

41% 46%

50% 47% 50% 53%

OTHER PRIVATE

57% 55% 55% 53% 53% 58% 57%

HMOs
OUT-OF-POCKET
PAYMENT (OPP)
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2009
2010
2011
2012
2013

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Source: National Health Accounts, Philippine Statistics Authority

90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0

700
600
500
400
300
200
100
0
2007

2008

2009

DOH Budget (nominal)

2010

2011

2012

DOH Budget (constant)

2013

Figure 7 Percentage of Households Incurring Catastrophic Payments

10

2014

DOH Budget per capita

Source: Department of Health

Source: Bredenkamp and Buisman, 2015

DOH Budget per capita

Millions

DOH Budget

Figure 6 DOH budget, 2007 to 2014 (in PhP)

Table 2. Health expenditure per capita, share of Health expenditure to total government
spending, and OOP spending as share of total health spending
GDP per
2013 Health 2013 Health
2013 OOP
GDP per
capita
Expenditure Expenditure 2013 GGHE expend. as %
capita (current
(constant 2005 per capita ($) - per capita ($) as % of GGE of total health
US$)
US$)
current
PPP
expenditure
OECD
Brunei
Darussalam
Cambodia

32,108.19

37,994.60

4,579.00

4,652.38

17.54

13.98

41,344.04

25,490.29

973.56

1,811.61

7.42

7.94

1,090.12

748.78

75.76

228.71

7.73

59.74

Indonesia

3,491.93

1,853.81

106.63

293.3

6.63

45.81

Lao PDR

1,759.78

818.25

32.41

95.2

3.46

39.99

Malaysia

10,933.49

7,373.99

423.43

938.29

5.88

36.11

Myanmar

1,203.84

..

14.4

36.66

1.5

68.2

Philippines

2,870.54

1,665.29

121.6

287.33

8.55

56.67

Singapore

56,286.80

38,087.89

2,507.43

3,578.05

12.46

56.79

Thailand

5,519.36

3,425.70

264.35

658.24

17.01

11.27

Vietnam

2,052.29

1,077.91

111.17

308.3

9.33

49.41

Source: World Bank World Development Indicators, 2015

Figure 8 Proportion of those who experienced illnesses and who visited a health facility

Source: National Health Demographic Survey, 2013

Responsiveness is achieved when individuals legitimate expectations regarding the non-health
enhancing aspects of the health system are met (Silva, n.d.) It encompasses dignity,
confidentiality, autonomy, prompt attention, quality of basic amenities, access to social support
networks during care, and choice of care of provider. Hence, responsiveness, which is measured
against legitimate expectations, should not be confused with patient satisfaction, which
represents a complex mix of individually-determined perceived needs, based on personal or
societal experience. Globally, surveys have been developed to incorporate these elements as no
11

single indicator captures the essence of responsiveness. These however have yet to be
implemented in the country.

V. What have we accomplished so far and what gaps remain?

Over the years, the country has set out to undertake health sector reforms to address rising
challenges in the sector. However, what seems to be lacking is a clearly articulated vision for the
system without which overlaps and contradictions remained unresolved. In financing and
delivery system, the establishment of the National Health Insurance Program in 1995 signaled
the countrys shift where in government only focuses on a purely budget financed and publiclydelivered system (supply/input driven) to one where government (and private pre-paid) money
follows the patients with private providers complementing public providers (demand driven). Yet
the shift was never completed, leaving the country straddling between supply and demand driven
systems, unable to fully reap the benefits of both. This lack of clarity in direction is seen in the
policies in the last five years. The national government massively scaled up enrollment of the
bottom 40% of the population en masse into PhilHealth and made enrollment compulsory.
Government health care facilities were enhanced through the Health Facilities Enhancement
Program for the primary purpose of getting them accredited by PhilHealth. Meanwhile, the
DOH continued to support inputs for government health facilities by expanding medicine access
programs, health human resource deployment programs, and information technology solutions.
There also remains a bias for easily quantifiable inputs (medicines, human resource, facility
upgrading, enrollment into insurance) rather than outputs (efficiency, quality, safety) and
outcomes (health outcomes, financial protection and responsiveness), when monitoring and
reporting supposed gains. These have in turn weakened accountability of government providers,
particularly local government providers, and compromised the purchasing power of PhilHealth to
extract efficiency and quality from healthcare providers.
Governance
Nearly 25 years after the devolution of health services to LGUs, the DOH has yet to successfully
embrace its role of being the enabler rather than a provider of health services shepherding the
sector towards a collective vision guided by long term-strategies, setting standards and enforcing
regulations, building the foundation of reliable information systems, capacitating local
government units to be the frontline providers, harnessing and aligning the private sector, and
surfacing the link between health and other sectors.
A few examples illustrate these. The health human resources flagship program, Doctors-to-theBarrio program, has not been properly leveraged to increase LGU health staffing nor address
gaps in the full range of needed health services in geographically isolated and disadvantaged
areas (GIDAs). Drug prices are markedly reduced for some of the DOH medicine access
programs, but no nationwide policy or infrastructure is in place to bring down prices of drugs in
both government and private settings. The failure to institute standards and accredit or license
information and communications technology (ICT) providers has contributed to delays in full
automation of records in health care facilities as this has deterred private sector ICT providers
who have driven automation in other sectors to work with government. The reluctance to let go
of service delivery function is evident in the first public private partnership (PPP) project which
was designed as a means to increase the capacity but still largely reliant on OPP as the revenue
12

stream for the private partner. If it focuses as the steward of the health system, DOH could be
expected to establish an alternative business model for government hospitals where PhilHealth
reimbursements is the main revenue stream. It can also resolve complications due to DOHs
ownership of health care facilities (i.e. DOH retained hospitals) and DOH chairmanship of the
policymaking body (board) of PhilHealth as this may result in possible conflicts of interest
including preferential treatment of DOH retained hospitals.
With regards to ensuring that government hospitals and health facilities are held accountable for
performance, the absence or limited fiscal and management autonomy they enjoy means they
have no incentive to perform or to link up with other levels of health facilities and ensure
appropriate provision of services. This is despite the experience of corporatized DOH hospitals
and LGU-owned health economic enterprises which have illustrated how fiscal and management
autonomy can drive improvements in service delivery and coordination with other providers.
However, these entities still have not consistently ensured the financial protection of patients.
Whether paid for by budgetary allocation or health insurance payments, there are no explicit
clear criteria or evaluation processes as to which services or goods should be prioritized for
public financing. Efforts to incorporate health interventions and technology assessment have
been initiated in the past but have not resulted to institutionalization of these processes to inform
priority setting. The lack thereof has made the system vulnerable to strong lobby groups, and
has stalled the discussion and decisions on which services the national government, local
government and PhilHealth should pay for. It has also limited the evidence and information that
could have been made available to DOH to guide its allocation of national to local fund transfers
and other support mechanisms to drastically reduce health inequity, especially in the poorest,
high disease burden areas, such as isolated island and mountainous areas.
Although regulatory laws on food, drugs and medicines, quarantine, and a number of health
professionals (i.e. dentists, nurses, midwives) have been updated, key laws regulating doctors,
hospitals and health care facilities, and financing/insurance schemes have not been updated. The
Medical Act of 1959 and the Hospital Licensing Act of 1965 continue to govern the practice of
medicine and the licensing of health facilities despite changes that have transformed how and
where medical services are provided. Task shifting among health professionals is currently not
promoted and innovative delivery platforms are not recognized. In 2013, around 9% of total
health spending is paid for by private health insurance and health maintenance organizations, yet
regulations have not been able to harness their potential in providing complementary and
supplementary health insurance to PhilHealths still limited coverage. No guidelines currently
exist on coordination of benefits, and harmonization of systems, standards and processes. Heath
information and communication technology (ICT) providers meanwhile have not been able to
provide off-the-shelf or outsourced solutions to government providers despite overwhelming
need for ICT solutions in the health sector. The glaring absence of a regulatory framework to
guide the setting up of a national health data dictionary and health information privacy and
portability has also compounded the situation.
Indeed, a key ingredient of effective governance is reliable information system. Within DOH,
nationwide surveys and aggregated administrative data are the usual information source, making
quality control challenging and person-centric surveillance impossible. Health care providers
13

also continue to invoke privacy concerns in order to withhold administrative data. Efforts to
expand the available data had been difficult for even as DOH mandated the submission of key
data as a prerequisite for hospital licensing in 2015, compliance rate has not been optimal.
Analysis and dissemination/feedback are also usually late, or in some cases never. Civil
registration and vital statistics is also quite weak.
Financing
Financing involves three basic functions: generating funds for health, pooling these into single or
multiple funds, and using pooled fund to purchase health services on behalf of a population
group. In the context of universal health coverage, purchasing is considered effective when it is
able to link equitable distribution, efficient, transparent and accountable use of resources with
people ensured access to quality health services that will not leave them impoverished. (Resilient
and Responsive Health Systems [RESYST], 2014)
With the rapid development of new medicines and technology, it is anticipated that the sector
will require ever-increasing financial resources. Raising more revenues can mean finding new
sources, or addressing various sources of inefficiencies and plugging leakages. When health
became one of the top priorities in the present administration, the DOH health budget quadrupled
in the last 5 years, with money coming mainly from the revised excise taxes on tobacco and
alcohol. A significant portion of this was allocated for health insurance subsidies (see Table 3)
and for upgrading of DOH and LGU health facilities. PhilHealth premium has also increased but
considering what and how much it should be covering, both the premium and collection
efficiency remain low. LGU budget allocation meanwhile is still highly dependent on
preferences of local chief executives (See Figure 8).
Table 3 Department of Health Budget and PhilHealth Premium Subsidy Allocation from 2010 to 2016

Year

Department of
Health Total
Health Budget (in
billion)

2010*
24.6
2011*
31.8
2012
42.2
2013
50.4
2014
83.7
2015
87.6
2016
122.63
Source: Department of Health

PhilHealth
Premium Subsidy
Allocation
(in billion)

2
3.5
12.03
12.61
35.29
37.06
43.9

14

Percent of
Total Health Budget

8%
11%
29%
25%
42%
42%
35.7%

Figure 8 LGU expenditure on health, population and nutrition per capita (in Php) by regions based on
the Statement of Income and Expenditures collected by the Bureau of Local Government FInance,
2011
800
700
600
500
400
300
200
100
-

18%
16%
14%
12%
10%
8%
6%
4%
2%
0%

Health expenditure per capita

Share to total expenditure

Source: PIDS, 2014

The national and local governments passively purchase health services from individual
government health facilities through budgetary allocation. This amount is fixed regardless of
output or outcomes of the health facility. Government health facilities adapted to this by making
patients purchase medicines, supplies, diagnostics services and other health services and goods
when the budget runs out, and building private rooms that are mostly reliant on OPP as revenue
sources. Fortunately, PhilHealth has taken steps towards becoming an active purchaser. With
87% of 100 million Filipinos covered, PhilHealth has begun to recognize its potential bargaining
and purchasing power. Benefit payments has rapidly increased the past years, amounting to over
100 billion pesos in 2015 from 78 billion pesos in 2014 and 30 billion pesos in 2010. Thus it is
anticipated that PhilHealths share in the revenues of DOH retained hospitals will likely increase
from its current 20% share, but only if it will begin to set ceilings for co-payments/OPP. There is
increasing recognition of PhilHealth payments to be as important a source of funding as the line
item budgets they receive from government. The same is true for private health care provider,
although admittedly, OPP still account for majority of their revenues.
There is also a change in the traditional view that PhilHealth is simply a means to serve as the
means to help people pay for healthcare services, and the implication that its role is more in
providing financial assistance rather than affording financial protection. This implied that
patients would have the primary responsibility of shouldering the remaining bill (or balance bill)
beyond what PhilHealth pays. In late 2011, this view began to change with Philhealth shifting
from fee-for-service provider payment scheme to case payment with no balance billing (NBB)
option for government-subsidized poor members seeking care in government hospitals. Although
problems from the rates not fully supported by adequate costing studies and compliance to NBB
by government hospitals is only around 60%, the rapid shift to case rate payment mechanism has
increased transparency and facilitated the NBB option.
In 2012, PhilHealth began to further assert its purchasing role by coming out with a new benefit
design that is guided by clinical pathways, backed by costing, with rules on zero or fixed co15

payments, and selectively contracts only qualified health care providers are contracted. The Z
benefits served as a possible template or proof-of-concept as to how PhilHealth can be an active
purchaser and eventually re-design all its benefits. However, despite massive increase in
enrollment and benefit payouts, PhilHealths share of the total health expenditure has remained
at ~10% and it has not made an impact in lowering OPP share as expected. It has yet to fully use
its purchaser tools to minimize fragmentation between different service levels, promote the use
of primary care services, drive improvements in service quality and responsiveness, or provide
additional incentives to facilitate service provision in underserved areas. The inability to fully
assert itself can be accounted in part by a passive agenda setting of its governing board, the
institutional legacy of being a pension fund which translates to apprehensions among
management and staff to support increasing benefit coverage, and a weak information system
that does not give PhilHealth business intelligence to manage the health care providers it is
currently empanelling.
Medicines account for as much as 62% of OPP resulting to numerous initiatives to improve both
financial and physical access to drugs, medicines and devices. (Philippine Statistics Authority,
2014) In 1988, the Generics Act mandated physicians to prescribe drugs in their generic name in
order to provide cheaper alternatives. The Botika ng Bayan (community pharmacies) initiative
was launched to expand the retail distribution of medicines, as well as to ensure that the cheaper
alternatives are geographically accessible. All these have contributed to more generic drugs
dispensed than branded drugs in 2013 despite a recent study by Wong et al. (2013) showing that
majority of patients were not offered generic alternative in drug outlets (Figure 10).

Figure 9. Percentage of patients offered generic alternatives by drugstores

29.3

59.4

76.3

40.6

23.7

70.7

Offered

70.4

62.8

58.5

59.1

29.6

37.2

41.5

41.0

Not Offered

Source: Wong et al, 2013

The Universally Accessible Cheaper and Quality Medicine Act in 2008 further aimed to lower
the cost of relevant drugs in the market by enabling DOH to promote competition and mandate
price limits if the market competition is ineffectual in lowering prices. In 2009, DOH applied this
mandate of setting maximum retail prices for the first and only time for 22 drug molecules. The
DOHs Pharmaceutical Division (PD) also started several medicine access program in 2009 to
help further bring down prices of medicines through bulk procurement. Unfortunately,
16

information gaps from patients and providers alike contributed to poor uptake and utilization,
while lack of coordination with PhilHealth has resulted to inefficient overlaps between the DOH
access programs and PhilHealth benefits (META, 2013). For example, DOH-retained hospitals
contracted for in PhilHealths Z benefit package for breast cancer are reimbursed the full
amount, even if it already receives the cancer drugs for free through the access program. More
importantly, it has become an excuse for PhilHealth to delay the financing of an explicit
pharmaceutical benefit package, which is a more appropriate and sustainable mechanism to
assure geographic and financial access to needed medicines. Nonetheless, the PD has started to
publish a drug price reference index (DPRI), which aims to guide government procuring bodies,
health care providers, and patients on the appropriate procurement and purchase prices. The
prices in the DPRI can be used as mandatory price ceiling. Plans are also under way for the
diagnostics to have a similar price reference index.
Service Delivery
When devolution took place in 1991, local government units were technically and financially
unprepared to respond to their new responsibilities. Despite 25 years of devolution, only a
handful of LGU health systems have succeeded in delivering quality health services without risk
of impoverishment to their constituents. Key ingredients for these successful LGUs included
strong leadership by local chief executive, fiscal and management autonomy for the health
providers, and strategic use of PhilHealth reimbursements. The latter contributed to increased
investments in infrastructure and equipment and better compensation and motivated health staff.
Recognizing the key role of leadership, the DOH contracted the Zuellig Family Foundation as its
partner in implementing the Health Leadership and Governance Program, which intends to
further strengthen local government leadership in health.
Another key aspect of service delivery is integration between the different delivery platforms
primary, secondary, tertiary. Because health facilities are licensed and paid (either as budget or
health insurance reimbursement) as discrete individual facilities rather than as a system, there is
no incentive to refer to the appropriate level or do early intervention at the primary level. This is
evident in PhilHealths benefit payout profile where acute gastroenteritis (diarrhea) and
pneumonia continue to be among the top reimbursed conditions.
Nationally, the lack of and inequitable distribution of the supply inputs is apparent: bed-topopulation ratio has decreased over the years with no substantial increase in hospital or hospital
beds even with continued increase in population (see Figure 10). At least 60% of all medical
practitioners work in urban areas, with the top 3 regions with the most and least healthcare
workers corresponding to the richest and poorest regions. (HHRDB, 2013) The average
availabilities of innovator and generic medicines among government healthcare providers were
8% and 27%, respectively. Underfunded, understocked and understaffed government health
facilities leave patients with no choice but to seek care in private health facilities, whom are
often perceived to provide better quality of care, even if the OPP is high. (META, 2013)
While private health facilities provide the government with a faster option to scale rather than the
option to build up health facilities from scratch, average hospitalization cost costs three times
more in private than in government in the old fee for service payment scheme (NDHS, 2013).
This difference was expected to be resolved by the shift to case rates wherein PhilHealth pays the
17

same rate to either public or private hospitals. But this was not realized as private hospitals
continue to charge the balance bill to OPP. Nonetheless, if the private sector is to be harnessed
and aligned towards universal health coverage, their current business model has to change from
one that is primarily reliant on OPP to health insurance. There are a number of private hospitals
who have begun working within the PhilHealth case payment rates and offering the zero OPP
option.

Figure 10. Total Hospital Beds and Bed Capacity per 10,000 Population (19762012)
120,000

20
18
16
14

80,000

Bed capacity per 10,000 population

Bed Capacity

100,000

12
60,000

10
8

40,000

6
4

20,000

Hospital Beds

2012

2010

2008

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

1978

0
1976

Bed capacity per 10,000 population

Source: Forthcoming Philippine Institute for Development Studies publication

Table 4. Average costs of hospital care (in PhP)

Government
Private
Hospital
Hospital
Average total hospital bill

8,640

25,471

Average paid by PhilHealth

(under FFS Scheme)

3,221

7,278

Source: NDHS 2013

Other Determinants of Health

DSWDs Pantawid Pamilya Pilipino Program (4Ps) requires compliance to several health-related
conditionalities in order for enrolled households to receive cash grants from children getting
immunized and taking deworming pills, and mothers availing of maternal health services from
skilled health professionals in health facilities. The 4Ps shows that health can be advanced also
by interventions outside the health sector. Its focus on incentives for compliance also emphasizes
the point that health has many determinants which are often not just within the health sectors
purview.
Injuries, for example, contribute to a huge burden yet the most cost-effective
18

intervention for injuries due to road traffic accidents are wearing of seatbelts, design and quality
of road construction. Addressing road traffic-related injuries need a combination of the
upgrading of the Philippine Orthopedic Center, the referral center for orthopedic injuries, and
working with Department of Public Works and Highway, Department of Transportation and
Communications, and the Metro Manila Development Authority on road design. Injuries from
acts of violence on the other hand require a mix of strict gun control law and enforcement, and
control of drugs and alcohol programs. Infrastructure projects that would require forest clearing
can trigger vector-borne communicable diseases. These few examples illustrate that the
challenge is designing out potential harm, and designing in potential gains in health into
infrastructure and other sectoral projects and programs.
VI. Scenarios for Health in 2040
For over the last 30 years, the Philippines has been pursuing a piecemeal and incremental
approach to health reforms. This entailed transitioning from line item budgets paying for inputs
and vertical nationally-managed public health programs and service provision into one where the
devolved governments and private providers are main service providers while national
government focuses on policy-making, standards-setting, regulation and purchasing outputs.
This is not unique as many other countries are going through the same struggles. But unlike its
neighboring countries in South East Asia, the Philippines started the reforms earlier, and the lack
of financial resources to implement the reforms is no longer an excuse.
The succeeding paragraphs will discuss the implications of two different scenarios: scenario 1
maintains and incrementally improves the status quo while scenario 2, pursues a bolder,
strategic, more holistic approach that requires complete shift to demand side. Table 5 provides a
summary of the key characteristics of each scenario.
The most crucial factor is finding out whose role is it to design, finance, deliver, regulate/assure
quality and undertake monitoring and evaluation, Until this is resolved, the question as to who
pays for what will continue to persist even when the appropriate question should be who pays
and who delivers. Further, under Scenario 2, the question becomes What criteria have to be
fulfilled for PhilHealth to pay for a particular health service?. This implies that the DOH will
refrain from supplying specific inputs through its national programs - be it commodities, human
resource, or health facility enhancement grants and ICT solutions - as these may only serve to
diminish PhilHealths bargaining and leveraging ability, undermine provider autonomy, and
distract DOH from its more important standard setting and regulatory roles.
Government health care providers will be in charge of delivering quality services, but to be truly
accountable, have to be given management and fiscal autonomy. When these are in place, the
purchaser government through PhilHealth decides what will be produced, while the public or
private health care provider will deliver the agreed outputs or outcomes, which are made
transparent in contracts or service agreements (Department of Finance, 1995). The perceived
benefits of this arrangement include improving responsiveness, accountability, and reducing cost
of service provision (Ryan, Parker, & Brown,2000).

19

Table 5. Scenarios for Health System 2040

Scenario 1 (STATUS QUO)
Unclear, overlapping
Clarity of Roles

Scenario 2 (ALTERNATIVE)
Clear, reinforcing

a. DOH

a. Design, Finance, Deliver,

Regulate, Surveillance

a. Design (through policy), Regulate,

Surveillance

b. PhilHealth

b.

b. Finance

c. LGUs

c. Finance, Deliver

c. Deliver through autonomous

government providers

d. Private Health
Care Providers

d. Deliver without coordination

d. Deliver in coordination with

autonomous government health care
providers

e. Private Health
Insurance

e. Finance without coordination

e. Finance in coordination with

PhilHealth

No

Yes

Health centric

Whole of Government Approach:

integrated with other social
determinants of health (ie. education
and livelihood programs, for the poor)

Focus on health promotion

Focus on creating enabling

environment
Open to all researchers, think tanks

PurchaserProvider Split

Finance

Public Health
Programs

Data Sharing

Limited, by request

The ability to harness credible information in a timely manner for strategic, operational and dayto-day concerns supports strategic management of the health sector, ensures strength and staying
power of reform programs, and enables government to be responsive to emerging threats. New
and valid information can be generated through basic or applied research, household surveys and
administrative data, which under scenario 2 the DOH would be heavily investing in given its
focus as steward of the health system and not as a service provider. This means allocating
resources to conduct regular health-related household surveys, and creating an infrastructure that
improves care quality at the same time routinely collects data, at no added financial and labor
cost.
Datasets need to be made publicly available after proper de-identification or the scrubbing out of
personal information. Even in the absence of government-wide freedom of information
legislation, this data sharing can be done through facilitative data sharing policies. According to
govlab, a UK NHS and New York University Collaboration, opening up data to healthcare
providers, consumers and the industry can improve accountability and system responsiveness.

20

Furthermore, it is expected to enable informed choices; improve efficiency, cost-effectiveness

and outcomes; and drive the establishment of healthcare companies and innovation.
A cadre of highly skilled health systems researchers and policy analysts need to be constantly
developed and nurtured. This can be done best by establishing a quasi-government institution,
funded by a mix of public and private funds providing opportunities for local and international
mentoring, collaboration, publication, and competitive employment package. This institution
will need to have a balance of autonomy in operations and proximity to decision-makers to
ensure independent objective work while appropriately responding to the day-to-day needs of
government. This autonomy with proximity would be crucial to maintaining its relevance in the
health sector. The graduates of this institution could provide the constant flow of trained
personnel into the DOHs Health Policy Development and Planning Bureau and PhilHealths
Health Finance Policy Sector.
Under the current scenario, health programs are implemented as stand-alone programs amidst
overwhelming recognition of the role social determinants play in improving health. This was the
logic behind the Conditional Cash Transfer, for which education and health conditionalities were
enveloped into a primarily social welfare program. For many high burden diseases like
tuberculosis, the impact of medical management runs second only to social interventions. Thus,
scenario 2 will strive to integrate health programs into other social programs, using a whole of
government approach.
Under scenario 2, DOHs role will focus on creating an enabling environment for health care
providers to obtain the highest quality at the best rates and easily hurdle procurement challenges
so that patients will never have to suffer medicine stock-outs. It can do so by implementing an
eProcurement system similar to the PS-DBM that the Department of Budget and Management is
managing. This can promote transparency and sustainably lower risk for persistent bid failures
especially among government health care providers. The DOH should also, in cooperation with
LGUs, enact policies and strictly enforce the presence of diagnostic facilities and pharmacies in
the vicinity of government hospitals, where patients are often sent out.
Under scenario 2, the DOH will address the root causes of inadequate supply, insufficient quality
assurance and inequitable distribution of health human resources. It can do so by regulating
health care workforce compensation in both public and private setting, taking into account
growing PhilHealth incentives. For example, physicians in the private sector earn significantly
more than their government counterparts; while the opposite is generally true for nurses. In terms
of ensuring sustainable supply of both service delivery and research and policy workforce, the
DOH will begin investing in academic programs that have strong service component, like the
University of the Philippines School of Health Sciences (SHS) model, which preferentially
admits individuals who come from underserved areas and are willing to return and serve in their
hometowns.
For building human research capacity in health policy and research, the DOH will invest in the
upgrading of local academic health institutions by infusing both technical and financial

21

resources. To address lack of adequately trained primary care physicians7 and specialists, the
DOH will strengthen training capacities of high volume government hospitals by creating at least
a thousand new plantilla positions for residency and fellowship training positions, and faculty
positions as well. This is expected to create a virtuous cycle of educators and trainees, as evident
in leading training programs such as Philippine General Hospital, the Philippine Childrens
Medical Center, Philippine Heart Center, and a number of private training hospitals. A
consortium between public and private healthcare providers will also ensure that trainees in
private healthcare facilities are adequately exposed to needs of the majority of the population. An
added benefit of strong training program is the institutionalization of quality checks.
Alternatively, it can enact an omnibus law that would allow additional categories of health
workforce, task-shifting and team-based care. For example, to ensure access to primary care
services in the context of physician shortfall, training nurses to become nurse practitioners (NPs)
can be a viable option. Their role is similar to a general practitioner only with less authority to
prescribe medications and refer for other services (Seale, Anderson, & Kinnersley, 2005). They
can work independently and take on the responsibility of their patients health without physician
supervision.

BOX 3. Gatekeeping and the Role of the Primary Care Physician

Essentially, in the Filipino context, the PCP is the friendly neighborhood doctor who knows the
consumer and his/her family at a personal level, rather than just professional; he/she provides
health education, offers advice on healthy lifestyle, run clinics, administer vaccination and carry
out simple surgery. PCPs can be general practitioners, family medicine practitioners, internists
or pediatricians. In the UK, general practitioners undergo a 2-year program to become PCPs and
it is expected that such training program would be required for all PCPs by 2040.

The primary care physician (PCP) will be the first and principal point of contact, who manages day-today health care and coordinates specialist care that may be needed. The PCP ensures that patients receive
the appropriate care, get their moneys value and receive assistance in navigating the system.
22

Table 6. Scenarios for DOHs Role by 2040

DOHs Role
Scenario 1 (STATUS QUO)

Scenario 2 (ALTERNATIVE)

Medicines and
Other Technologies

Address service delivery gaps

(medicine entitlement programs)
Drug Price Reference Index

Develop infrastructure for drug

eProcurement System that limits
procurement price

Human Resources

Address service delivery gaps

(deployment programs)

Address overall supply and quality gaps

(expansion of training programs,
policies on return of service, licensing
and accreditation)

Information and
Communications

Health Facilities
and PPPs

DOH and PHIC create

softwares/programs

Multiple systems with single standard

hence interoperable
DOH and PHIC sets standards, licenses,
and regulates softwares, programs

Business model is based

predominantly on out-of-pocket
payment

Business model of health facilities is

based predominantly on PhilHealth
reimbursements and earmarked sin taxes

Multiple systems, not interoperable

State-of-the-art IT systems form the backbone of evidence-based decision making - literally

enabling knowledge at the fingertips especially for decision-makers. However, both DOH and
PhilHealth have to transition their role from developers of IT platforms to creating standards and
regulating the health-related IT products and services. There should be a recognition that
government would never be able to render 24/7 IT support often required from those who
develop application systems.
A shelved initiative of PhilHealth a few years back captures this essence: the health information
technology provider (HITP) policy for electronic claims (e-claims) sought to minimize the
corporations IT burden by setting standards for the e-claims platform, then accrediting a number
of IT providers who in turn provides their services to thousands of healthcare providers. Another
model is through outsourcing similar to the online civil registration system of the then National
Statistics Office (now the Philippine Statistical Authority).
The HFEP is intended for updating existing health facilities but still does not address lack of
health facilities in many other areas. To catch up with the infrastructure gaps, the expected 15
year equivalent of the 20% of the 85% of the incremental sin taxes earmarked for health can be
securitized to help fund an immediate rapid scale up with private sector partners with the
subsequent collections be made available as part of the availability payments to private sector
partners as they come due. This can be used to design a more appealing PPP option for the
private sector. Based on the 2016 estimates of 64.2 billion pesos of incremental sin tax revenues,
the expected amount available for supply side investments would be 10.9 billion pesos. Simply
multiplying this amount with 15 would have a 15-year projected amount of 16.45 billion pesos
which can be converted into up to a 30 billion pesos-worth of health PPP projects with matching
private sector mobilization that can be implemented immediately. More importantly, with the
23

earmarked sin taxes funding the availability payments, the business model of the health PPP
projects would be consistent to the UHC goals of ensuring financial protection. Indeed, health
PPPs cannot be designed similar to other PPPs where user fees are the primary cost recovery
measure made available for the private partners. In a demand-driven health insurance-based
system where access to health care services is not be driven by capacity to pay but by health
insurance membership, both earmarked sin taxes and health insurance benefit payments should
be the complementary revenue sources for the private partners
Table 7. Scenarios for Health Financing by 2040
Health Financing
Scenario 1 (STATUS QUO)

Flow of Resources

Revenue
Generation for
Health
Pooling of Funds
Purchasers
Purchasing Power
Contracted Unit
Provider Payment
Methodology

Money follows facilities (in public

setting) and patient (in private
setting)
Incomplete shift to demand-side
financing
National and local taxes
High Out-of-pocket payments
Low Insurance prepayments
Limited
DOH, LGU, PhilHealth,
PCSO/PAGCOR/PDAF are all
passive purchasers
PhilHealth is a financial intermediary
Low
Individual Facilities
*fragmented, no complementation
Line Item Budget, Case Payment and
Capitation

Scenario 2 (ALTERNATIVE)
Money follows the patient (regardless)
Complete shift to demand-side financing
National and local taxes
High insurance prepayments
Low Out-of-pocket payments
Extensive
PhilHealth as the main active purchaser
High
Networks
*integrated primary and specialty care,
complementary
Global budget based on DRGs
Performance/Results-based block grants

Continuing Scenario 1 implies that the system may end up relying on OOP with prepayments
remaining persistently low (see Table 7). This means that the country will not achieve 70-85% of
health expenditures financed publicly and through prepayments while reducing of share of direct
payments to 15-30% of total health expenditure.
Scenario 2 will help drive down out-of-pocket payments by raising general government revenues
coupled with increasing premium payment with the latter easier to raise and accepted by paying
insured Filipinos as the purchasing power of the single fund is strategically applied. A
predominantly publicly-financed system is considered global best practice. In EU alone, 73% of
healthcare was publicly financed in 2010. Turkey for example increased public spending to the
EU average which has led to the reduction of nearly 10 percentage points in the share of direct
payments by households. Thailand, after launching their UC scheme scaled up public financing
and halved the share of direct payments. More prepayments can be mobilized as the formal
24

labor sector base expands and as country becomes more affluent. Specifically, the premium
contributions can be raised from the current 2.5% to at least 5% of monthly payroll with the
regressive income ceiling of 35,000 removed. An alternative premium schedule using a
prorated scheme based on number of dependents can also be considered. PhilHealth could also
benefit from massive improvements in administrative efficiency and higher yield of investments.
As the benefits are expanded, the financial protection improved and the pre-payments and
premium levels increase, the current premium of the poor, near poor and other eligible
individuals and families which the national government fully subsidizes can be increased as well.
If the earmarked sin taxes cannot fully finance these subsidies, new earmarks from value added
tax (VAT) collections, special (health) levy on large companies like sugar beverages, financial
transaction tax, the lottery, tourism tax, and mobile phone tax can be considered. More
importantly, existing sources that can be incorporated into the single health fund including the
health assistance funds of agencies such as the Philippine Charity Sweepstakes Office (PCSO)
and Philippine Amusement and Gaming Corporation (PAGCOR). These steps will also have the
added benefits of removing the discretionary manner that presently characterized how these
agencies provide financial assistance for health.
In Scenario 1, DOH, each LGU, each household, and agencies providing medical assistance are
all purchasers, albeit weak, passive ones. PhilHealth remains a financial intermediary, which
simply transfers money from premium contributors to healthcare providers without added value.
In contrast, Scenario 2 will consolidate the funds from these multiple financiers and extract
efficiency, effectiveness and quality from healthcare providers. It can do so because with the
sheer volume and amount of all funds pooled into a single fund and the use of strategic
purchasing arrangements.
When health care providers - primary care service delivery units and high level centers (i.e.
district, provincial and referral hospitals) - are contracted separately, there are no incentives for
appropriate use and judicious referral, thus implicitly pushing healthcare providers to look after
their own survival instead of coordinating and making best use of resources. Thus, in the
absence of a nationwide blueprint and strict regulations to ensure equitable distribution of health
care provider capacity, health care providers not only build where there is market potential defined as capacity of people to pay out-of-pocket - but they also tend to invest in capitalintensive services with higher income potential. Unfortunately, these are anything but primary
care facilities, which carry the most cost-effective interventions. As a result, inequality worsens
with urban areas with larger populations and correspondingly better capacity to pay continue to
gain better access.
Under Scenario 2, service delivery networks, instead of stand-alone providers, will be contracted
to deliver a comprehensive range of clinical (preventive, promotive, curative and rehabilitative
services), diagnostic and pharmacy services. Network based contracts give everyone in the
network an incentive to use resources wisely as everyone benefits from the savings. Networks
promote locating facilities strategically over a geographic area, and minimize redundant
investments. It favors establishment of few specialty centers rather than many one-stop-shops
and effectively utilize economies of scale, potentially reducing administrative costs. Health
facilities in a network can also cross-subsidize the operational costs of health facilities with
25

lower income potential. Moreover, referral transport service can be explored in a network-based
model. The concept of service delivery networks is not new to DOH. It has been used as a
framework for many programs but has yet to be fully implemented. It is also not new to the
region as Thailand had several years of success by contracting district hospital (hub) with a
network of more than ten primary care clinics (spokes). LGU owned health care facilities can
coalesce to form province-based network of government facilities which can be legally organized
into a government-owned and controlled corporation (GOCC) or economic enterprise. This will
render the required agility, self-sufficiency, an political neutrality. Subsequently, it can either
compete with the private networks or subcontract aspects of its operations to the private sector
since it is not bound to a political leadership operating within three-year election cycles
The main problem of the current provider payment methods and contracting mechanisms is
PhilHealths inability to reduce or cap OPP and force the use of more cost-effective interventions
at the lower levels of care. Hence, Scenario 2 will contract networks instead of individual
facilities. In order for networks to make money, they have to keep the population healthy,
avoiding use of higher level of services. In terms of provider payment, a diagnosis baed payment
system with modifiers - calculated and designed fairly similar to how the Z benefits are designed
- will form the backbone of reimbursements with providers receiving global budget
prospectively. Meanwhile, a per capita amount will be computed for primary care and selected
secondary care services. Existing line item budgets will be shifted to performance based grants in
order to leverage funding for results, and extract efficiency further. PhilHealth will have to
strengthen its ability to monitor and track OPP, and enforce its rules.
In a demand-driven, social health insurance-based system, every Filipino will have a choice as to
where to seek consult, and this decision will not affect whether they get public health
commodities for free or not (see Table 8). The poor will not be constrained to seek care only in a
government health care provider, especially if a private health care provider is willing to render
the same services at zero co-payment. To rapidly and fairly expand benefits, PhilHealth will
adopt clear priority setting process using a transparent criteria. Since the DOH will not be
expected to bulk-procure drugs anymore and PhilHealth will be expected to come up with a
pharmaceutical benefits scheme, it is important that a gatekeeping mechanism be in place to
ensure the judicious use of drugs not only for cost containment objectives but also to prevent the
worsening of antimicrobial resistance as well. PhilHealth will also then have to resolve what
mechanisms/tools it will use to negotiate down prices of drugs.

26

Table 8. Scenarios for Benefit Entitlements by 2040

Benefit Entitlements
Scenario 1 (STATUS QUO)
Service Coverage
Public health
commodities
Choice of Health
Facilities
Expansion Process

Dependent on health facility and type

of SHI membership
Not included in health insurance
benefit package; available in public
facilities only

Scenario 2 (ALTERNATIVE)
Uniform for all Filipinos
Available in health insurance benefit
package; available in both public or
private facilities

Poor have limited/no choice

Poor have choice

Ad-hoc, without clear criteria

Based on clear set of criteria

Inpatient, Day Surgery, Outpatient
Pharmaceutical Benefit
Required (Primary Care Provider for
All)

Inclusions

Inpatient, Day Surgery, Outpatient

Gatekeeping

None or Free for All

VI. Realizing the Vision

The Governments of Thailand and Turkey embarked on their quests of universal health coverage
in 2000 and 2003 respectively. In less than 15 years, Thailand was able to improve access to
services and drop out-of-pocket payment share of total health expenditure to 12%. Turkey was
able to lower its infant mortality comparable to OECD countries. What OECD had done in 30
years, Turkey did in 9 years.
What lesson can we take from them? Universal health coverage can be done, and it can be done
fast.

2040
Jose and Alicia are minimum wage earners. They live in Cavite but work in a factory in
Mandaluyong. But efficient public transportation means they commute for a total of an hour
every day. They live close to fresh market, which enables Alicia to prepare healthy meals for
them to take to work. In the factory, strict enforcement of occupational health standards ensure
that workers are comfortable and do not face health risks. On a day when Jose is not feeling well,
he goes to the nearest clinic, where he is treated with utmost respect and care. When Alicia had
to be admitted in a government hospital, she only had to give her name to the hospital clerk and
all is taken care of. Upon discharge, Alicia gets her pack of take home medicines, and did not
have to pay anything out-of-pocket. And because the service in the hospital was good, Jose was
able to continue working even while Alicia is confined. An episode of sickness does not
destabilize Jose and Alicias life.

27

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ARMM

Autonomous Region of Muslim Mindanao

ASEAN

Association of Southeast Asian Nations

DoF

Department of Finance

DOH

Department of Health

DPRI

Drug Price Reference Index

DRG

Diagnostics Related Group

FDA

Food and Drug Administration

GAA

General Appropriations Act

GDP

Gross Domestic Product

GOCC

Government-owned and Controlled Corporation

HALE/DALE

Health or Disability Adjusted Life Expectancy

HHRDB

Health Human Resources Development Bureau

HITP

Health Information Technology Provider

HMO

Health Maintenance Organization

ICT

Information and Communications Technology

IMR

Infant Mortality Rate

IT

Information Technology

LGU

Local Government Unit

NCD

Non-communicable Diseases

NCPAM

National Center for Pharmaceutical Access and Management

NCR

National Capital Region

NDHS

National Demographics Health System

NHA

National Health Accounts

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NHIP

National Health Insurance Program

NHS

National Health Service

OECD

Organization for Economic Cooperation and Development

OOP

Out-of-pocket

PAGCOR

Philippine Amusement and Gaming Corporation

PCP

Primary Care Physician

PCSO

Philippine Charity Sweepstakes Office

PDAF

Priority Development Assistance Fund

PhilHealth/
PHIC

Philippine Health Insurance Corporation

PPP

Public-private Partnership

PSA

Philippine Statistics Authority

SRP

Nurse Practitioner

SSS

Social Security System

THE

Total Healthcare Expenditure

UC

Universal Coverage

UK

United Kingdom

US

United States

VAT

Value Added Tax

WHO

World Health Organization

32