Written by: Rocco de Castro
Illustration by: Lexa Burroughes
On February 20, 2019, President Rodrigo Duterte signed into law Republic Act (RA) 11223, the Universal Health Care (UHC) Act, which will have wide implications for the economy, development, and the health of our nation. Many models for health care policy exist. Debates about the efficacy of the health care programs of certain “model” countries, like France, Cuba, Sweden, and the USA, can often be polarizing and lead to deadlocks. There is a need to get health care right, for the poor stand to gain the most from an equitable and well-implemented health care system. To get health care right, we need to get its economics right too.
The easiest way to understand UHC is by looking at what it hopes to achieve. The World Health Organization (WHO) defines UHC as the state where “all people receive the quality health services they need, without being exposed to financial hardship.” At its heart is the drive to increase the well-being of a country’s people. But in its simplicity, we realize the ambition and difficulty of its objective.
Health care for all
The WHO introduced a simple framework to explain UHC: a “cube” model. The dimensions of the cube (its length, width, and height) correspond to the population, medical services, and costs covered, respectively. The longer the cube, the more people are covered under a health care system. The wider the cube, the larger the number of medical services covered. Finally, the taller the cube, the larger the share of the costs of the medical services covered by social health insurance. The cube represents the ground a health care system has to cover to achieve UHC.
An ideal world—or country—would see the volume of the cube maxed out, where all are covered, for whatever medical service, whatever the cost. But because we cannot print an infinite supply of money (see: hyperinflation), we cope with trade-offs and strategic public policy decisions. At the moment, UHC does not cover all medical expenses; it begins covering mostly only basic health care services.
The first objective of UHC is health care access for all, for everyone. The starting point of UHC is equality, that anyone has access to the care and treatment they need. From here, we work our way up to increase the width and the height of the cube.
Public health and the finances of a nation
This leads us to the second objective of UHC: alleviating the financial risks associated with seeking health care. On way countries try to address this risk is by enrolling their populations in national health insurance programs, to safeguard them from shocks. But according to the WHO, how health services are paid for is a key aspect of health system performance. All around the world, countries have employed different funding models for these insurance programs, with varying levels of success and failure. Poorer nations more commonly engage in direct, out-of-pocket payment for health care services. How terrible that the people most vulnerable to health risks are also the very people most powerless to fight them.
Welfare is tricky and expensive. If we don’t want people to rely solely on out-of-pocket payments or costly private health insurance, sound fiscal policy (taxation and government expenditures) is key. So, we can try thinking of the Philippine UHC experience in terms of its business model, particularly revenues and costs, to better grasp all the economic moving parts. In the Philippines, DOH Secretary Francisco Duque III estimated earlier in November 2018 that UHC would cost Php 257 billion in 2020, its first full year of implementation.
When the UHC Act was approved in February 2019, appropriations and sources of funding were split as follows: total incremental sin tax collections from RA 10351; 50% of the national government share of PAGCOR revenues; 40% of the Charity Fund of PCSO; contributions from premium direct contributors; annual appropriations of the DOH included in the yearly General Appropriations Act (GAA); and the national government subsidy to PhilHealth, also included in the GAA. Earlier in the year, the gap between the PHP 257 billion cost of UHC and the congressionally approved UHC budget allocation of PHP 217 billion amounted to a massive PHP 40 billion.
It was opportune then that the comprehensive tax reform program spearheaded by the DOF increased funding for UHC through earmarked funds, particularly RA 11346. Passed into law by the president just this July, RA 11346 will increase the excise taxes on regular cigarette packs, of which the Philippines has the cheapest in the Southeast Asian region. According to DOF undersecretary Karl Chua, securing adequate, sustainable funding through measures like increases in the tobacco excise tax rates was necessary in preventing the decline of the UHC Act from a first-class law to third-class status. Using this rhetoric helped pass the bill through both the Upper and Lower Houses, securing an additional PHP 15.7 billion for the UHC budget. On top of these developments, the first bill to pass through the Lower House in the 18th Congress was House Bill No. 1206, which aims to increase excise taxes on alcoholic drinks, e-cigarettes, and vapes. All of these are particularly important for UHC in the Philippines.
Other than funding UHC, sin taxes serve to nudge future consumer behavior towards healthier spending. UHC and sin taxes are like two sides of the same coin. Both aim for increased health and well-being. An excise tax on cigarettes will push up their prices, making them more difficult to acquire by the poor and the youth, the two most vulnerable sectors to cigarette addiction (for more, see article “A Step Forward”). A common critique of sin taxes on cigarettes is that both the poor and the rich will be affected; it isn’t so easy to wean oneself off of an addiction. But the measure is forward-looking in nature, for it aims to prevent potential cigarette smokers, especially among the poor and the youth, from actually becoming smokers in the first place. By preventing addiction, sin taxes make the population healthier and less vulnerable to health care spending.
Public health and the future of a nation
Though welfare is tricky and expensive, it is fulfilling; its pursuit noble. Under UHC, all Filipinos will now be covered for basic health services, including free medical consultations, free lab tests, and an allowance for medications. An important provision of the law is that absolutely all Filipinos will be enrolled into the National Health Insurance Program (NHIP), where two types of membership exist: direct contributors and indirect contributors.
Under the NHIP, direct contributors comprise the people who pay PhilHealth premiums, those usually with formal and stable jobs. But the beauty of the provision lies in its service of the poor. Indirect contributors are composed of those who don’t have the capacity to contribute to any PhilHealth fund. Here, the government subsidizes the premiums for their social health insurance; one would not need to have paid a premium to be eligible for free basic health services. Without a national ID system, this is especially important for the majority of the lower class who don’t have official government IDs or know how to get these.
Though not all medical services will immediately be covered, the government aims to continuously increase the number of services covered under the program (a wider Cube), as well as increase the amount of medical costs covered by the NHIP (a taller Cube). Ultimately, what UHC aims to achieve is healthier people. This achieves another goal of increasing the welfare of people by eventually graduating people to higher levels of income. Education and health are touted as the two most effective investments for increasing the income of people. Nations are only as fast as its slowest members, and it is in our interests as nation-builders and fellow citizens to make sure that by reducing the share of out-of-pocket spending on health care expenditures, UHC empowers people, especially the poor and the disenfranchised.
No easy feat
This is not to say that the UHC Act is perfect—far from it. On top of all the logistical and economic headwinds, political ones abound. Under the law, more power (in both jurisdiction and funding) will be given to PhilHealth, which has recently been embroiled in a series of graft and fraud cases over an extensive “ghost” dialysis treatment scandal. PhilHealth, in its service of the poor, can be a powerful source of good. But just as the inadequacy of funding can devolve a law from first-class to third-class status, corruption, too, can work just as well to destroy efforts for development.
On top of this, the Drug Price Advisory Council (DPAC) asserts that the Philippines has “the highest [drug prices] among all of the Asian countries.” Whether the claim “highest” is true or not, what is certain is that medicines in the Philippines are anything but cheap. At the center of this pricing problem is a very entrenched pharmaceutical industry, with drug importers and a few established local manufacturers. The government is currently trying to institute a maximum drug retail price, to the ire of the industry, which is hard lobbying against such a measure. Given that about half of the UHC budget—which for its first full year will amount to Php 257 billion—will be allocated for medicine and drug purchases, we must prevent UHC from being a mechanism to funnel taxpayer money to the coffers of the powerful pharmaceutical industry. While increasing the amount of money the government allocates to health care spending is a good thing, we must not overlook the importance of actually decreasing the costs in the first place. A taller Cube is good, but it is still possible to reduce the height a Cube must cover.
The success of UHC is not only hinged on the prudent crafting of public policy, but on the proper implementation of law. If the government is genuine in its desire to increase health and well-being, then it must continue to address the age old problems of corruption and competing interests. A law like UHC is an easy one to get behind in theory, but it demands judgment and scrutiny in practice. A momentous law as this demands that we, first, be informed, and second, raise our voices.
At its heart, UHC is a worthy and noble goal. It has its own conundrums and complications, but these are solvable. For the sake of a healthier, happier nation, let us aim for an ever expanding Cube.
World Health Organization and World Bank, Tracking Universal Health Coverage, 2015.
World Health Organization, Arguing for Universal Health Coverage, 2013.
Urban Institute and the Center on Society and Health, How Are Income and Wealth Linked to Health and Longevity?, 2015.