The document summarizes the Philippines' health financing system and outlines strategies to improve principles of solidarity, equity, quality, and cost containment. It discusses how PhilHealth aims to provide universal coverage but faces challenges of weak social solidarity and inequity. A new Health Care Financing Strategy 2010-2020 is introduced with goals like increasing resources, sustaining universal membership, allocating resources efficiently, shifting payment methods, and securing facility autonomy. Initial outputs include a new administrative order, consideration of strategic expenditure estimates, and ongoing work to strengthen various programs.
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1. Principles of Social Solidarity, Equity, Quality Assurance and Cost-Containment: PHIC enrollment, coverage and expenditures Dr. Leizel P. Lagrada Health Policy Development and Planning Bureau Department of Health 14 April 2010
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4. Philippine National Health Accounts, 1997 Total Health Expenditure is PhP 87.1B (3.6% of GDP) Philippine National Health Accounts, 2005 Total Health Expenditure is PhP 180 B (3.3% of GDP) Financing health care mainly from out of pocket indicates a sickly health system
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6. Fragmented health financing system Financial flows Financial sources Financial agents Providers CHD Pharmacies Informal providers DoH Overseas treatment Donors DBM Households/ companies Users Other subsystems Philhealth Private Medical Insurance All LGUs Private providers LGU hospitals Health Financing Flows in the Philippines User fees Premiums Premiums Budget allocation Reimbursement Retained hospitals RHU Taxes
20. Strategy One: Increase resources for health 2010 2014 2020 THE at 3.3% of GDP THE at 4% of GDP THE at 5% of GDP Government spending on health at 5.5% of total public spending Government spending on health at 6% of total public spending Government spending on health at 7% of total public spending OOP as major financing source for health expenses Average premium level of PhilHealth to increase by 5 times the 2009 level in real terms PhilHealth as major financing source for health expenses OOP spending at 30% of THE
21. Strategy Two: Sustain membership in social health insurance of all Filipinos 2010 2014 2020 Formal sector (including casual and contractual): payroll contributions OFWs: Fixed premium OFWs: Premium payment as requirement prior to migration OFW: Continuous premium payment Informal sector: Voluntary Informal sector: Partial subsidy from LGU with contributions linked to administrative licenses/ permits/ documentation Informal sector: Some on partial subsidy from LGU; others fully paying members Indigents: Sponsored program as a shared subsidy between LGU and NG Indigents: Sponsored program fully subsidized by NG
22. Strategy Three: Allocate resources according to most appropriate financing agent 2010 2014 2020 PhilHealth: Main payer of personal care DOH: Subsidies for salaries and MOOE of retained hospitals, subsidies and distribution of drugs through vertical programs DOH: Subsidies for salaries of retained hospitals, subsidies for public heath in provinces without PhilHealth universal membership DOH: Main funder of capital outlay for tertiary hospitals; limited role in public health funding LGU: Subsidies for salaries and MOOE of primary and secondary facilities LGU: Subsidies for salaries of all primary facilities and some secondary facilities LGU: Main funder of capital outlay of LGU-owned facilities and community-focused public health interventions PhilHealth: one of the funders of public health interventions through outpatient packages
23. Strategy Four: Shift to new provider payment mechanisms 2010 2014 2020 Capitation for outpatient benefits for Sponsored Program beneficiaries Capitation as a major tool to pay for primary health care services for all Filipinos Fee-for-service for inpatient care DRG for in-patient care Per case payment under a case-mix system Benefits to include outpatient drugs Per case payment for maternity care package and surgical procedures PhilHealth spending: PHP22 billion PHP 40 billion PHP 162-234 billion
24. Strategy Five: Secure fiscal autonomy of facilities 2010 2014 2020 DOH retained hospitals with income retention DOH retained hospitals receive salaries from DOH budget DOH retained hospitals are fully corporatized and autonomous; they do not receive subsidies LGU health facilities without income retention LGU health facilities with income retention LGU health facilities receive minimal subsidy Revenues = local taxes DOH and LGU fund capital outlay DOH and LGU fund capital outlay GOP spending on supply side: PHP 45 billion PHP 60 billion
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26. Initial Outputs of HCF Strategy Implementation Strategy On-going work 1: Increase resources for health DOH: Health Sector Expenditure Framework LGU: PIPH and Local Health Accounts PhilHealth: efficient collection of premium contributions 2: Sustain membership in SHI of all Filipinos Segmenting the Informal Sector to Strengthen the Individually Paying Program: 3: Allocate resources according to most appropriate financing agent Development of Essential Health Package 4: Shift to new provider payment mechanisms Contracting with Service Providers Piloting of Case Payment 5: Secure fiscal autonomy of facilities Income Retention for DOH Hospitals Economic Enterprise for LGU Hospitals
This picture can give us some answers. Between 1997 and 2005, OOP remains to be the main source of financing health care. However, from the risk protection and equity perspectives. OOP is the worst possible way to finance health care because those who are both sick and poor face the risk of either untreated disease or impoverishment – some combination of these two. Vertical equity – you charge the same fees for the rich and the poor but the poor has higher burden from paying OOP bec of the percentage of the payment over his capacity to pay. Horizontal equity means that people of the same income level should be treated the same. Therefore the poorer areas need to raise more revenues in order to provide the same services provided by the rich areas. And finally, this picture tells us that the level of our health spending is less than the recommendation of WHO of 5% of GDP.
A market is considered efficient when the assumptions underlying the perfectly competitive markets are present: There in no individual economic unit who holds the power to control prices, buyers and sellers have complete information and the decision of the buyer and seller do not affect people who are not participants in the market The presence of externality violates the third assumption. In the health sector externality happens when the consumption of goods and services of one person has an effect on the health of others. As example, the treatment taken for TB by one patient reduces the probability that another person will contract the diseases. Some health care goods and services are public goods. Its very difficult to exclude people from enjoying the benefits from vector control services like spraying for mosquitos. In some instancies, health care goods are produced in monopolistic markets. As example, a pharmaceutical that developed a new drug that has granted patent, can become a monopolist in the production of that drug. The company can then charge very high prices for the drug particularly if the drug is used to treat a very prevalent disease. Information asymmetry arise when one party (provider) has more information about the transaction than the other party which allow the better informaed to exploit the lesser informed. Eg the provider can exploit the patient for the provider’s gain by manipulating the quantity, quality or price of health services provided.
The DBM gets its money from households/corporations through taxes, as well as donations from donors. The DOH sources funds from Donors, DBM and PhilHealth, and provides funding for CHD and RETAINED HOSPITALS. LGUs source their funds from the DBM through IRA allocation, Donors, and finance their health facilities such as RHUs and LGU hospitals. Philhealth gets its funds from DBM, LGUs and HH (through premium payments), and would provide funding through reimbursements for LGU hospitals, retained hospitals, private providers, RHUs and to households. Private medical insurance gets financing from premiums paid by households/corporations, and provide funding for private and public providers. HH through user fees pay the providers, pay taxes and premiums to PhilHealth and private insurance .
The prevalence of out-of-pocket (OOP) expenditures as the main source of heath financing points to a serious inequity in the health financing system since it forces the sick patient’s family to cough up the money to pay for care at the point of need, i.e., at the time when they are most vulnerable. SHI which provides cross subsidization between the rich and the poor, between the healthy and the sick, contributes little to the total health spending. Moreover, the benefits from philhealth are enjoyed more by the richest quintile as compared to the poor. This may be because the areas where the rich reside has more accredited facilities and the rich tend to use private providers which are more dynamic in maximizing philhealth benefits. The second poorest quintile has even the greatest burden since the HH in this quintile may not be entitled to subsidies and thus pay their SHI premium by themselves they get the least benefit from philhealth.
Number of beds, of all three levels of hospital + ASC The total philhealth accreditation rate is 33%. Acceditation rate = accedited/licensed
MAIN MESSAGE: i) First dollar/peso approach – series of limited cash benefits for various elements of hospital costs, which vary according to type of hospital and seriousness of the patient case (3 categories). Also General vs Specialist physician. ii) In principle, provided the cost of care provided by the hospital is within these limits then the patient needs to pay nothing at all. However, the reality is often very far from this. (how is benefit schedule set – based on market prices? Guestimate?) (how is ordinary, intensive etc actually defined. Many doctors not clear.)
MAIN MESSAGE: if you have a serious illness, and/or if you are in a high quality private facility with higher prices, PhilHealth benefits are very unlikely to cover all the costs – or even a substantial proportion. Even for relatively small problems, patients may have to go outside to buy medicines. Especially in gov. hospitals. Conflict of interest re doctors. Medicine prices notoriously high in the Philippines (2005 international study comparing drug price availability and affordability by WHO EMRO and Health Action International shows that for many chronic disease medicines, affordability in the Philippines is very poor – affordability of generics low, branded drugs with strong market share).
As a result of pressure from public, providers, politicians…..made worse by PhilHealth’s large reserves (4-5 years). PhilHealth has raised its benefits ceiling four times since it was created – on average every 3 years.
Evidence that PhilHealth has an inflationary effect. Gertler and Solon 1998 paper (still unpublished), and using 1991 data. Out of date, but the only attempt of its kind, and the system remains essentially the same now as then in terms of design of benefit package and ppm. Hence still largely relevant. Abstract: “A popular approach to reforming the way health care systems are financed in many developing countries is to introduce or expand compulsory social health insurance (SI). The movement towards SI has been motivated by fiscal pressure to shift the burden of delivering and financing health care from the public sector to the private sector. In this paper we show that SI fails to finance care because private medical care providers are able to capture the SI benefits as rent by raising price-cost margins to insured patients. The increase in prices means that expanding SI is not likely to reduce the public’s financial burden for health care. Our empirical results from the Philippines indicate that private hospitals extract 100 percent of SI benefits through increased price-cost margins and that public hospitals extract 70 percent. We show that these results imply that expanding SI actually increases the burden on the public sector rather than relieving it.” Overall, 84% of benefit increases were captured in rent.
Solidarity in funding health services. The cross-subsidy function of social health insurance has to be enhanced. Solidarity can only be brought about by the membership of each Filipino in PhilHealth, from the richest to the poorest. No grey areas. Responsibilities and roles of every player must be clearly identified, understood, and carried out. The HCF strategy must define who pays for what, in terms of type of resources and package of services. Less choice, more protection. In the Philippines, the higher-income groups are used to choice of services and freedom to choose among providers is perceived as a basic right. However, choice can jeopardize the gatekeeping function, and ultimately the efficiency of a health system. In order to stress the importance of overall system efficiency as a goal, this principle will be applied. Users who use the preferred provider system will enjoy higher protection than those who want to retain the freedom to choose. Protection for the most vulnerable groups. Equity must be ensured and financial risk protection guaranteed especially for the poor and the marginalized Filipinos who do not have the resources to pay for health services. New rules, more efficient transactions. Providers who go into contracting arrangements with PhilHealth and government agencies will be paid better and faster.
Resource mobilization – Increase the overall level of health spending until THE reaches about 5 percent of GDP, the norm prescribed by WHO, or until the Philippines catches up with the THE/GDP and per capita THE of neighboring countries. Universal membership – Strengthen financial protection and achieve equity by sustaining the membership in health insurance among the formal, informal, and indigent populations and by linking premium levels with households’ ability to pay. Allocative efficiency – Improve allocative efficiency by defining an essential package of health services for government budgetary commitment, defining the PhilHealth benefit package that complements the public health package, and clearly delineating who pays for what services. Technical efficiency – Enhance overall system efficiency by reforming the provider payment system, providing or increasing the autonomy of retained hospitals, managing LGU health facilities as economic enterprises with the authority to retain income, and strengthening the functional local health system through accreditation.
A classification of hospital case types into groups that are clinically similar and are expected to have similar hospital resource use. The groupings are based on diagnoses, and may also be based on procedures, age, sex, and presence of complications or co-morbidities.
1: Increase resources for health 2: Sustain membership in social health insurance of all Filipinos 3: Allocate resources according to most appropriate financing agent 4: Shift to new provider payment mechanisms 5: Secure fiscal autonomy of facilities
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