Can health agencies absorb sin tax funds?

MANILA, Philippines – Budget Secretary Florencio “Butch” Abad on Thursday, October 18, expressed concern that government health agencies may not be able to “absorb” new funds from the proposed increases in sin taxes, given that the 2013 national budget has already been approved.

The government is expecting additional revenues from a proposed sin tax bill, but the amount still hangs in the balance as Congress has yet to agree on it.

“I’m not too concerned about the [amount]. I’m more concerned about how DOH and Philhealth will absorb it,” Abad said during a forum on the government’s universal health care (UHC) program at Traders Hotel.

Malacañang is pushing for a version of the bill that seeks to raise P60 billion additional revenues for government in the first year of implementation.

Under the plan, 85% of these revenues will be allocated for the Aquino administration’s UHC program. The program will cover premium payments of the poorest families to the Philippine Health Insurance Corp. (Philhealth) and upgrade of public hospitals retained by the Department of Health (DOH).

If the bill is passed, these revenues will be on top of the entire P36.408 billion allocation for the health system under the 2013 national budget.

Philhealth President and CEO Dr. Eduardo Banzon admitted that the state-run insurance agency might not be able to absorb the new funds by 2013. He said though that systems to utilize the funds should be set up by 2014.

One of the new projects to be launched next year is “Philhealth Plus,” which is geared toward those who are willing to pay higher premiums for better benefits.

No timeline for UHC yet

A timeline for the implementation of a comprehensive UHC system is hard to determine since a complete shift from the current supply-based system to a demand-based one is required, said Banzon.

“Universal medical care is never done in a step-wise approach. There must be overall change in the system. If the Philippine Medical Association agrees tomorrow, if the hospital will agree to basic business proposition tomorrow to change, then we will shift to a demand-side scheme,” he said.

In undertaking steps toward a UHC system, Philhealth is taking notes from neighboring country Thailand, which adopted a demand-side approach to health insurance coverage in 2002, where budgets allocated to health care providers are performance-based and are dependent on whether citizens subscribe to them.

“The Thai model removed the budget from the supply side and flowed money to the members and members will only get their money whether Thais get to them. Moving the budget to the demand side is proven all over the world as the way to go,” he said.

In a market where 60% of health care providers are privately-owned, it would be hard to adopt such a system immediately.

This is where the sin tax bill comes in. It would be used to improve the benefits of Philhealth, making them enough to cover basic services so that the agency can gain leverage in the market, which, in turn, can be used to justify an increase in premiums.

“There’s a phenomenon that if we improve the insurance, people actually pay more for health,” he said.

Philhealth coverage

The passage of the sin tax bill will allow Philhealth to guarantee that the universal insurance scheme can cover basic health care payments without the need for citizens to shell out money from their own pockets, according to Banzon.

Out-of-pocket payments or health care services paid for by citizens themselves in the Philippines are at 58%, compared with 20% in  Thailand. Philhealth hopes to reduce the rate to 20%, Banzon said.

In his report, Banzon said 60% of Filipinos die without being attended by a doctor not because of the lack of doctors, but because of their failure to seek care from one.

“Lots of Filipinos are not getting health services because they don’t seek the services in the first place,” he said.

“Pinoys are not becoming poor because of health because they don’t subscribe to services,” he added.

Bill’s passage

With the revenues from sin tax bill crucial in the rollout of UHC, Abad said Malacañang will push for the version it wants.

Abad said, “I am confident that this bill will pass in this congress.”

This despite delays in the legislative process following the resignation of Senator Ralph Recto as chair of the Senate ways and means committee.

Recto wants to withdraw the report on the sin tax bill endorsed by the committee to the plenary.

Abad said the “real issue” is not the passage of the bill, but its “quality.”

The House of Representatives passed in June a version that seeks to raise P31 billion, half of what the Palace is pushing for. On the other hand, the Recto-led ways and means committee approved a version that seeks to raise only P15 billion. – Rappler.com