The Executive Secretary and PhilHealth’s woes

President Ferdinand Marcos, Jr. appointed House of Representatives Deputy Speaker Ralph Recto the Secretary of Finance in January 2024, replacing Benjamin Diokno.

Mr. Recto was chosen for the position because of his experience and ability to build consensus and to communicate effectively with Congress, valuable assets that ensure the smooth passage and implementation of the administration’s economic agenda. He served three terms as a Senator, including as Senate President Pro Tempore and Minority Leader and multiple terms as a Representative of the 3rd District of Batangas.

He also had previous executive experience, having served as the Socioeconomic Planning Secretary and Director-General of the National Economic and Development Authority (NEDA) during the presidency of Gloria Macapagal Arroyo. He holds a bachelor’s degree in Commerce majoring in Business Management from De La Salle University, and earned masteral units in Business Economics from the University of Asia and the Pacific, and in Public Administration from the University of the Philippines.

As if to live up to his reputation for which he was chosen as the new Secretary of Finance, Mr. Recto approved in May 2024 the transfer of P89.9 billion in excess Philippine Health Insurance Corp. (PhilHealth) funds to the national treasury. The transfer was made pursuant to a provision in the 2024 General Appropriations Act, which authorized the use of “excess” funds from Government-Owned and -Controlled Corporations (GOCCs) to finance the National Government’s unprogrammed appropriations.

The funds were transferred in tranches throughout 2024:

• P20 billion on May 10, 2024.

• P10 billion on Aug. 21, 2024.

• P30 billion on Oct. 16, 2024.

The remaining balance was scheduled for transfer on November 2024, but a Supreme Court Temporary Restraining Order (TRO) was issued, halting the transfer of the last P29.9 billion.

PhilHealth’s P89.9 billion has been invariably referred to as a government subsidy, excess funds, unspent funds, and a reserve fund. If it is a subsidy, it is not a direct subsidy of the government for PhilHealth but a subsidy for more than 38 million Filipinos — indigents, senior citizens, people with disabilities, and others. The subsidy represents the aggregate premium payment for the mass enrollment of the informal sector of the population in PhilHealth.

Withdrawing the P89.9 billion from PhilHealth is tantamount to cancelling the premium payment of the informal sector, consequently cancelling their enrollment in PhilHealth. That would be in violation of RA 11223, An Act Instituting Universal Health Care for All Filipinos.

It matters to PhilHealth, being an insurance company, if the P89.9 billion are excess funds, unspent funds, or a reserve fund. In the context of insurance, a reserve fund is the amount of money set aside by an insurance company to assure the payment of future claims. It will not remain unspent or idle for long. A substantial part of it, or even the entire amount, may be spent within the year.

Anyway, Retired Supreme Court Senior Associate Justice Antonio Carpio, a lead petitioner in a case before the Supreme Court challenging the transfer, had stated in October that Secretary Recto’s approval of the transfer of PhilHealth’s “excess” funds to the national treasury is unconstitutional and potentially constitutes technical malversation or plunder. He said the special funds can only be used for their intended purpose, which is for universal healthcare.

Key points of Carpio’s comments:

• Unconstitutional Transfer: He pointed out that the Constitution specifies that the power to transfer appropriations belongs exclusively to the President.

• Special Funds: The funds, sourced from member contributions and “sin” tax proceeds, are considered special funds and cannot be used for any other government purpose, such as unprogrammed infrastructure projects.

• Personal Liability: He warned that if the Supreme Court deems the transfer unconstitutional, Recto would be personally liable to return the full amount transferred, which was already P60 billion before a TRO was issued.

In response, Secretary Recto argued before the Supreme Court on July 17 that the move was legal, moral, and economically sound, as it was done in compliance with a mandate from Congress in the General Appropriations Act (GAA) of 2024 to utilize idle funds from GOCCs.

According to him, the majority of the remitted funds were allocated under the unprogrammed appropriations of the 2024 General Appropriations Act (GAA) to fund various government priorities, including the financing of critical health-related and social service projects, and emergency allowances for health workers and medical assistance for indigent patients.

The breakdown of how the P60 billion remitted by PhilHealth as of December 2024 was used is as follows:

• P27.45 billion: Paid for the Public Health Emergency Benefits and Allowances for healthcare workers during the COVID-19 pandemic.

• P10 billion: Provided Medical Assistance to Indigent and Financially Incapacitated Patients (MAIPP).

• P4.10 billion: Used for the procurement of various medical equipment for the Department of Health (DoH) and local government unit hospitals and Primary Care Facilities.

• P3.37 billion: Funded the construction of three new DoH health facilities.

• P1.69 billion: Allocated to the Health Facilities Enhancement Program (HFEP).

• The remaining P13 billion: Used as government counterpart financing for foreign-assisted infrastructure and social development projects, which included general infrastructure projects intended to accelerate healthcare service delivery in remote areas and enhance food security. These infrastructure projects were part of the general infrastructure and social development initiatives.

Those would be valid justifications if there was no Republic Act No. 11223, or An Act Instituting Universal Health Care for All Filipinos. “An Act Instituting Universal Health Care (UHC)” is a misnomer. RA 11223 did not really institute universal health care, which means free or affordable healthcare services. This is only feasible if the government owned a sufficient number of hospitals and primary care clinics staffed by healthcare professionals employed by the government.

UHC was meant for people whose lives can be saved or whose good health can be maintained if they receive timely medical attention without ruining them financially. Complications of the leading diseases in the Philippines like bronchitis, influenza, chicken pox, diarrhea, and respiratory tract infection can be prevented if the patient receives preventive, curative, rehabilitative, and palliative health services.

To achieve the goal of UHC, the country must have a strong, efficient, well-run health system that meets priority health needs, access to essential medicines and technologies to diagnose and treat medical problems, a large corps of trained, motivated health workers to provide the services patients need.

While the Philippine government owns hospitals and employs healthcare workers, their numbers fall way short of those required to provide the health services needed by the more than 100 million Filipinos. Many patients are forced to seek medical services in private hospitals.

The World Health Organization (WHO) had advised our legislators to implement universal healthcare fully in 2030 when the country’s health delivery system would be capable of servicing UHC. But some of them rushed the enactment of RA 11223 into law so that they could present UHC in the elections of 2019 as their gift to the Filipino people. Among the authors of the law were Senators JV Ejercito, Sonny Angara, Nancy Binay, and Cynthia Villar, who were all running for re-election.

RA 11223 automatically enrolled all Filipino citizens in PhilHealth, supposedly to defray the cost of medical care. However, according to the findings of the Philippine Institute of Development Studies, PhilHealth pays only 40% of their hospital bills.

That is because PhilHealth is not configured to run a complex and far-flung operation. First, not one of the members of the board of directors had substantive experience in the insurance business, much less in health insurance, to be able to formulate and promulgate policies for the sound administration of the program.

Health Secretary Dr. Ted Herbosa, Chairman of PhilHealth’s board of directors, has made statements that reflect total ignorance of the operating system of PhilHealth and its management. He chided the management of PhilHealth for keeping or investing its money instead of spending it on the people’s health needs.

PhilHealth members pay their membership fees or premiums in advance. The investment manager places the money in the money market to make it grow. The problem is PhilHealth does not have a competent investment manager.

Dr. Herbosa has also referred to wards as charity wards. Most hospitals have three sections: wards, semi-private rooms, and private rooms. What is commonly referred to as a ward is a hall where 10 or more beds for inpatients are located, much like the emergency room of a large hospital. The inpatient pays for every night he occupies the bed. A charity ward is for indigent inpatients.

Also, PhilHealth does not have the personnel required by a health insurance company with more than 100 million enrollees, the majority of whom are vulnerable to diseases due to their harsh circumstances. It does not have the specialists that are key to the viability of the organization: foremost of whom is a formally trained health insurance actuary. The other is the aforementioned investment manager.

During the third round of oral arguments on the petition challenging the transfer of PhilHealth’s “excess” funds, Supreme Court Associate Justice Antonio Kho told DoH Assistant Secretary Albert Domingo, “Probably, it’s time to overhaul PhilHealth and change the board for not complying with what the law requires.”

Finance Secretary Recto and the members of the PhilHealth board did not benefit personally from the transfer of PhilHealth funds to the national treasury, unlike the senators and congressmen involved in the flood control scandal. Still, they violated the law. The appropriate punishment should be applied to them. The saying “No one is above the law” is often invoked nowadays. But Ralph Recto is now the Executive Secretary.

Oscar P. Lagman, Jr. has been a keen observer of Philippine politics since the 1950s.