Universal healthcare law opens financing opportunities in Philippines

The World Health Organisation (WHO) recognises that universal healthcare coverage is critical for realising good health outcomes for all. The WHO defines universal health coverage as one where all people have access to the full range of quality health services they need, when and where they need them, without financial hardship.

Considering the growing challenges for health systems to produce equitable and sustainable health outcomes, the WHO urges its member states, including the Philippines, to exercise government leadership in multisectoral approaches, and commit sufficient funding to implement national policies and plans that advance universal healthcare coverage.

In line with the policies of the WHO, and consistent with the state policy to protect and promote the right to the health of its people, the government of the Philippines signed into law the Republic Act No. 11223, or the Universal Health Care (UHC) Act. The Philippine UHC Act was enacted pursuant to the government’s recognition that high-quality services for health must be accessible to all.

One of the act’s objectives is to reform the healthcare financing landscape in the country by restructuring healthcare payment schemes and financing, and clarifying the roles of various institutions.

SPECIAL HEALTH FUND

One of the focal points of the Philippine UHC Act is the reformation of local healthcare systems and financing. For many years, the devolution and management gaps at a local level have been proffered as one of the reasons for fragmented health services in the country.

Prior to the enactment of the Philippine UHC Act, the challenges in promoting better local health include the susceptibility of local funds to the reallocation and repurposing for other expenditures other than healthcare.

Considering that local government units (LGUs) have full control and autonomy over their facilities, they have varied in allocating portions of their general funds to healthcare inasmuch as these funds are not exclusively dedicated to local health purposes. In 2019, a study showed that local government spending on health remained low. The gap, therefore, lies in the lack of a secured local fund exclusively allocated for local healthcare.

To address this, the Philippine UHC Act mandated the creation of the special health fund (SHF) to: ensure a more strategic and efficient pooling and management of health resources; provide appropriate incentives and mechanisms to achieve and sustain managerial, technical and financial integration; and ensure transparency and proper accountability on the use of health resources.

KEY DETAILS OF THE SHF

Section 20 of the Philippine UHC Act requires province-wide (the province, its municipalities and component cities) or city-wide (highly urbanised cities and independent component cities) health systems to pool and manage their resources intended for health services through an SHF.

It also provides that SHFs will be used to finance population-based and individual-based health services, health system operating costs, capital investments, remuneration of additional health workers and incentives for all health workers.

Under Joint Memorandum Circular No. 2021-0001 by the Department of Health, the Department of Budget and Management, the Department of Finance, the Department of the Interior and Local Government, and the Philippine Health Insurance Corporation (PhilHealth) – titled the Guidelines on the Allocation, Utilisation and Monitoring of, and Accountability for, the SHF – the SHFs shall be treated as a separate type of special fund. Funds maintained in every provincial, city or municipal treasury pursuant to section 309 of Republic Act No. 7160 (the Local Government Code) shall be deemed automatically appropriated for its intended purpose.

The implementing rules and regulations (IRR) of the Philippine UHC Act provide that the provincial health board or city health board of the relevant province-wide or city-wide health system shall assume full responsibility for the management of the relevant SHFs.

As provided in the joint memorandum circular, the health board’s main responsibility is to ensure that the SHF is optimally utilised to help achieve the desirable health outcomes of the population within their respective territorial jurisdiction.

Section 21 of the Philippine UHC Act provides that all income derived from PhilHealth payments shall accrue to the SHF, and shall be allocated by the LGUs exclusively for the improvement of the health system. Section 21.1 of the act’s IRR clarifies this by stating that these incomes shall be derived from PhilHealth payments of LGU-owned and managed health offices, facilities and services.

The act’s IRR, and Joint Memorandum Circular No. 2021-0001, also identify the following as potential sources of funding: grants and subsidies from national government agencies, as included in the general appropriations act; financial grants, donations and assistance from civil society organisations and international health partners; and other fund sources, including LGU budgets intended for health, through mechanisms for co-operative undertakings.

The joint memorandum circular also recognises the following mechanisms that may facilitate the flow of funds from these sources: partnerships for financial grants and subsidies from the Department of Health; contractual agreements for income from PhilHealth; memoranda of agreement for grants and assistance from civil society organisations and international health partners.

The SHF regime requires the ring-fencing of the resources transferred for healthcare purposes, and prohibits their reallocation for any other purpose or expenditure. As noted, the joint memorandum circular deems SHFs to be automatically appropriated for health expenditures.

Further, SHFs shall only be used to augment LGU funds for the following health-related expenditure items as determined and approved by the relevant provincial or city health board: population-based (e.g. health promotion programmes, disease surveillance) and individual-based health services (e.g. ambulatory and inpatient care, medicines); capital investment (e.g. infrastructure and equipment); health system operating costs (e.g. gasoline for ambulances); remuneration of additional health workers until such time that the LGUs have hired the required number of healthcare workers based on the standards determined by the Department of Health; and incentives for all health workers based on the allocation mechanism decided on by the relevant health board.

OPPORTUNITIES

As mentioned, the SHF regime prohibits the reallocating and repurposing of healthcare funds for other expenditures. Thus, LGUs will have financial resources that are exclusively allocated for various healthcare projects.

The authors anticipate the rise of potential opportunities for, and interest from, private entities to enter into government contracts with LGUs in relation to healthcare. For example, private entities will now have more confidence in submitting unsolicited proposals for health infrastructure projects to LGUs under the Build-Operate-Transfer Law, considering that one of the allowable expenses to be charged against the SHFs is healthcare capital investment.

Additionally, the SHF regime can entice LGUs to launch solicited public-private partnership healthcare projects, or to procure various healthcare equipment, considering that the expenses for these may be charged against the SHFs.

Before the SHF regime, LGUs had the flexibility to minimise their expenditures on healthcare and allocate the bulk of their limited resources to other legacy infrastructure projects (e.g. roads and bridges). This is no longer possible under the SHF regime inasmuch as the resources that are part of the SHF may only be used for the above-mentioned purposes.

CONCLUSION

Dedicating SHFs to universal healthcare is a big leap towards reforming the country’s local healthcare system. The creation of the SHF led the government to move forward in ensuring that resources can be more strategically distributed across expenditure needs.

This provides hope to achieve sustainable solutions to combat the previous weak health sector management capacities and lack of co-ordination between the national and local governments.

Needless to say, the Philippine UHC Act paved the way to improving: the system for local health financing; the mechanism for making primary care services accessible to every Filipino, given that all Filipinos are now automatically included in the national health insurance system; the scheme for financing and staffing of healthcare providers to efficiently deliver local health services, without financially overburdening patients; and the system of accountability in managing the SHF and providing quality healthcare among their constituents.

When implemented effectively, the achieved milestones will enable all Filipinos to have access to the proper healthcare required, while eliminating common problems of financial hardship.