How will PhilHealth’s fund transfer affect Filipinos’ access to healthcare?

MANILA, Philippines – Experts ranging from a doctor to an economist faced the Supreme Court on Tuesday, February 4, to explain how taking away P89.9 billion of “excess funds” from the Philippine Health Insurance Corporation (PhilHealth) will put healthcare beyond the reach of the ordinary Filipino.

The Marcos government has stood firm on the financial soundness of the order to transfer the funds to what they say are other worthwhile projects. However, the oral arguments on Tuesday revealed the nuances in how this can negatively impact PhilHealth, and as a result, the services it can offer to Filipinos.

Taking away P89.9 billion from PhilHealth will weaken the financial stability of the state health insurer, resulting in uncertainty, which in turn, can translate to more conservatism and more out-of-pocket health spending for Filipinos, according to physician Beverly Ho, a former undersecretary of the Department of Health (DOH).

“A stable source of financing is critical in reducing uncertainty of expansion and timely payout to healthcare providers,” Ho told the justices on the first day of the oral arguments on the petitions questioning the legality of the fund transfer.

Ho was called in as amicus curiae or “friend of the Court” who are independent experts called in to help decide on the issue.

Beyond legality, the question of whether the transfer makes sense is what the Supreme Court wants experts to address.

Ho, for one, explained that premium payments made by members allowed PhilHealth to do “aggressive benefit expansion.” Still, they’re not enough. On average, PhilHealth shoulders only 40% of total hospital bills of covered inpatient diseases, she said.

“PhilHealth should maximize this cushion that’s being provided to them to even rapidly increase their benefits,” said Ho.

PhilHealth also needs to upskill, which needs to be paid for too.

“Just as we are determined to expand benefits, we know from experience that this cannot happen overnight without allocating resources and strengthening PhilHealth’s ability to nurture technical experts and brain trusts within the sector to systematically enhance and regularly update the rates, instead of relying on development partners to fund piecemeal benefit expansion,” Ho said.

What needs upskilling

PhilHealth’s actuarial life was raised repeatedly during oral arguments. Actuarial life means ensuring that as a state insurer, it has, and will have, all the money it needs to survive and cover Filipinos’ healthcare. This needs the highly-advanced mathematical expertise of actuaries.

But even the government’s deputy treasurer admitted that PhilHealth’s actuarial estimates are not accurate.

“[PhilHealth’s actuarial department] always missed?” Supreme Court Associate Justice Amy Lazaro Javier asked.

“Yes, your honor,” said Deputy Treasurer Eduardo Anthony Mariño III, who was part of the government team defending the transfer.

“It always missed, it always exaggerated, but PhilHealth does not believe it. You never believe its estimate, right?” Javier asked.

“The board — at least, I do not,” said Mariño.

“Reducing PhilHealth’s finances makes it more difficult to meet already unmet targets,” said Sonny Africa, the executive director of independent think tank Ibon Foundation, another amicus curiae. Africa noted that this financial state is worsened by the fact that Marcos’ 2025 national budget allotted zero subsidy to PhilHealth.

“Any sort of diminution of PhilHealth benefits will affect the poor, low-income, and even middle-class households the worst,” he added.

Out-of-pocket medical expenses for Filipinos remain high. According to Africa, the average share of the state insurer on medical bills stands at 10.2% — down by half from its highest rate of 19.4% in 2014.

“Instead of PhilHealth’s share in expenses increasing, it’s actually fallen and just exactly at a time that budget cuts are being made,” Africa said.

Where’s the money?

But does PhilHealth actually lack money?

Mariño told the Court that “PhilHealth has not actually breached — or at least its expenditure level has stayed relatively stable.”

But when asked by Justice Javier if “relatively stable expenditure” means PhilHealth is paying all the claims, Mariño said he cannot answer in the affirmative, seeing that there are many complaints over delayed PhilHealth reimbursements, if at all.

How can this happen when according to economist Orville Jose Solon, another amicus curiae, PhilHealth was receiving more in terms of member contributions versus how much it is actually spending?

“That there is money on the table means that benefits have not been provided,” Solon said. “That’s equally deplorable than this whole idea of removing money away from PhilHealth,” he added.

When asked by the Court if PhilHealth recognizes all its liabilities — meaning if its books recognize that it has some reimbursements it needs to pay, Marino said: “I cannot make an unequivocal statement because PhilHealth actually rejects claims. And of course, your hospital service provider, healthcare institutions can refile, appeal for the approval of their claims.”

Solon said that if the Supreme Court decides that the P89.9 billion should not be taken away from PhilHealth, “it needs to be used.”

“That this case has been presented here and being argued, this is an opportunity to trigger reforms within PhilHealth. Whatever your decision, reforms have been triggered,” said Solon.

Punishment for inefficiency, or pork?

The Universal Health Care (UHC) law passed in 2019 was supposed to make healthcare in the country more affordable and accessible. It expanded healthcare coverage to include all Filipinos regardless of whether they pay monthly PhilHealth premiums.

The law mandated a yearly hike of premiums for paying contributors. Starting 2020 — when premiums were at 3% — the annual hike was at 0.5%. The goal was to have premium rates reach 5%.

Meanwhile, the premiums of indirect contributors — senior citizens, persons with disabilities, and indigent individuals — are subsidized by the government.

“For the first time in history, we actually have the necessary legal instruments and financial resources not only to provide insurance coverage to every Filipino, but to expand benefits to a level necessary to finance and provide healthcare that Filipinos deserve,” said Ho.

The expansion of benefits for PhilHealth members, however, took a while.

Former PhilHealth president Emmanuel Ledesma Jr. noted that before he took the helm of the state insurer in November 2022, benefit packages had been left untouched for over a decade.

Lawmakers saw this as a mark of “inefficiency” and decided to cut government subsidy from the state insurer altogether.

“Taking away unused funds is not the most effective solution to spending inefficiency. Institutional reform is. And institutional reform also costs money,” said budget analyst Zy-za Suzara, another amicus curiae.

Suzara pointed out to the Court that the transfer of PhilHealth’s unused funds to be part of government’s unprogrammed funds “is the new scheme for massively funding pork barrel.”

Unprogrammed appropriation ideally is a standby authority to be able to fund projects in case there’s an excess — excess in this case is PhilHealth’s unused funds.

“Legislators have been deliberately defunding strategic development programs and projects in the programmed appropriations and transferring them to the unprogrammed appropriations, resulting in an excessive level of standby appropriations. This way of massively funding patronage-driven projects distorts the integrity of the budget and the budget process itself,” said Suzara.

Funding for unprogrammed appropriations ballooned. For instance, she pointed out that from P282 billion in the National Expenditure Program, or the so-called president’s budget in 2024, the allocation increased to P732 billion in the legislated General Appropriations Act (GAA).

“Historically, the level of unprogrammed appropriations in the enacted version of the budget does not deviate from its proposed level in the [NEP],” Suzara said. The independent budget analyst also noted that the opposite happened with the national budgets legislated in 2022, 2023, and 2024.

She also flagged the fourth “special provision” in the 2024 GAA that allowed the government to tap PhilHealth’s funds.

Under the 2024 GAA, the government can source financing for its unprogrammed appropriations from the fund balance of government-owned or -controlled corporations (GOCCs) “from any remainder resulting from the review and reduction of their reserve funds to reasonable levels taking into account the disbursement from prior years.”

Petitioners have argued that this should not have been implemented in the first place, citing its unconstitutionality. Solicitor General Menardo Guevarra, however, said the government was using its “common sense” when the Department of Finance (DOF) issued the circular for the PhilHealth fund transfer and when it included the “special provision” in the 2024 GAA.

Guevarra also defended the transfer on Tuesday as a “temporary measure to address within legal bounds concerns on fund availability for important government programs and projects.” Those listed under unprogrammed appropriations include big-ticket infrastructure projects such as the MRT Line 3 Rehabilitation Project, the MRT Line 4 Project, and the North-South Commuter Railway, among others.

Suzara pointed out that the issue would not have unraveled in the first place. “While tapping GOCC funds instead of imposing new taxes or incurring higher debt may seem fiscally prudent, it should be emphasized that sound public financial management goes beyond effectively managing debt or revenue.”

“A crucial aspect of fiscal prudence is the proper allocation of resources and this must be evident in the budget, she added.

What happened to the P60 billion?

PhilHealth had P89.9 billion in unutilized government subsidies pooled by the end of 2023, Guevarra said. Lawmakers saw this as a mark of “inefficiency” and decided to cut government subsidy from the state insurer altogether in the 2025 GAA.

By the time the High Court issued a temporary restraining order on the fund transfer, the state insurer had already remitted P60 billion back to the National Treasury.

PhilHealth was doing the transfer in tranches last year — P20 billion was sent back in May, P10 billion in August, and P30 billion in October.

The DOF in a statement on Tuesday said that “almost 78%” of the money was spent on health-related projects. The P46.61 billion of the P60 billion transferred by PhilHealth went to:

Public health emergency benefits and allowances of healthcare and non-healthcare workers during the COVID-19 pandemic (P27.45 billion)
Medical assistance to indigent and financially incapacitated patients (P10 billion)
Procurement of various medical equipment for government hospitals and primary care facilities under the DOH and local government units (P4.10 billion)
Construction of three DOH health facilities (P3.37 billion)
Health facilities enhancement program (P1.69 billion)

On Tuesday, ahead of the oral arguments, President Ferdinand Marcos Jr. already replaced Ledesma with a new PhilHealth chief. – Rappler.com