Vol. XVII No. 4
M
July - August 1999
ISSN 0115-9097
DOH presents agenda for health care financing
ajor changes in health care financing policies are being pursued and shall be implemented as part of the Department of Health’s (DOH) overall effort to reform the health sector. In a roundtable discussion sponsored recently by the DOH and the Philippine Institute for Development Studies (PIDS), Health Secretary Alberto Romualdez expounded on these reforms in his presentation entitled “An Agenda in Health Care Financing for the 21st Century.” Said agenda is being presented to various sectors for feedback and further refinements. Romualdez said that the policy reforms on health care financing have been undertaken in order to improve the performance of the health sector. Furthermore, the many problems in the way health care funds are currently being generated and spent give impetus to the efforts to effect changes. Figures cited by the Secretary revealed that in 1997, total health spending amounted to P88.4 billion. From this, out-of-pocket payments from families and individuals accounted for P40.9 billion or 46.3 percent of the total amount. Government --- both national
and local --- spent P34.1 billion or 38.6 percent while the National Health Insurance Program (NHIP) which replaced the Medicare Program spent P6.4 billion or 7.1 percent. The rest of the total health expenditure – P7 billion or 8 percent -- came from various other sources. Based on these figures, one can glean some of the problems associated with the manner by which health care funds are generated. First, the bulk of the financial burden is on individual families. As Romualdez noted, this leads to
WHAT'S INSIDE 3
New health financing agenda to reduce financial burden on families 4 Health as a right: Free for all? 4 Local health systems to be strengthened under new health agenda 5 Public health programs to be intensified 5 Cost escalation: A major problem in private health care system 6 An agenda in health care financing for the 21st century 12 DOH hospitals to be reformed
the inequities obtaining in the health system. “Only those who can afford to pay are able to support such a system,” he said. Second, financing for public health programs is subject to the uncertainties of the annual budget process. Secretary Romualdez pointed out that national
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EDITOR'S NOTES For the past couple of years, health care financing has been one of the major topics for research and advocacy being jointly addressed by the Department of Health and PIDS. It started with the project “Baseline Studies for Health Care Financing Reforms” which gathered basic information on the subject and came up with 24 studies, many of which had, through the past three or four years, contributed to the formulation of health financing policies in the country. At the very least, the findings of these studies added inputs to the debates regarding various health policies. In this special issue of the DRN, we give due prominence to a document that seems to be a natural consequence of all the earlier efforts and initiatives in the area of health care financing reform --the DOH’s “Agenda in Health Care Financing for the 21st Century.”
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DEVELOPMENT RESEARCH NEWS line agencies such as the DOH have to contend with the annual budget negotiations with the Budget Department and Congress before getting financial support. This should be addressed because for public health programs to be effectively implemented, sustained funding over a number of years is required. Third, financing from local government sources is limited due to the uneven capacities of local government units (LGUs) and Internal Revenue Allotment (IRA) mismatch. The amounts of IRA received by various LGUs are not commensurate to the costs of health functions devolved to them which leads to the inequitable distribution of valuable funds. All of these problems contributed to the fact that the drive towards expanding a truly effective NHIP has been set back. There were also some problems on how these funds were spent. In 1997,
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for instance, approximately 75 percent of the P88.4 billion total health expenditure went to personal health care services whereas only about 15 percent was spent on public health services. The remaining 10 percent went to administrative expenses. Clearly, the 75-15 ratio indicates the first problem: not enough is being spent on public health services. The Secretary also noted that local health spending in primary health care was not very effective since devolution led to a fragmentation in the district health systems. Third, subsidies for hospital care from the national health budget are poorly targeted. This is manifested in the concentration of major hospitals in large cities like Manila, Cebu and Davao, leaving many people in the peripheral areas not able to avail of their services. Fourth and last, not enough is being spent on developing administrative capacities which led to low absorptive capacities, particularly with respect to public health programs at the local level. Secretary Romualdez
July-August 1999 pointed out that the 10 percent being spent on overhead (administrative) expenses is not enough, contributing to the poor management of the health system. In view of these problems, what changes in health financing policy does the DOH plan to effect? Romualdez bared the following 5-point agenda which tackles general areas of reforms in order to address these problems. 1. Provide fiscal autonomy to DOH hospitals – In particular, DOH hospitals must be allowed to collect socialized user fees so they can reduce their dependence on direct subsidies from the DOH. They should also upgrade their “critical capacities” like diagnostic equipment, laboratory and medical staff in order to effectively exercise fiscal autonomy. The Department shall also provide for institutional arrangements such as converting DOH hospitals to public
Department of Health Secretary Alberto Romualdez is shown presenting the government's key reforms on health financing that are expected to improve the performance of the health sector. Also present during the roundtable discussion were Dr. Mario B. Lamberte (PIDS acting president) and Dr. Alejandro Herrin (professor at the UP School of Economics).
DEVELOPMENT RESEARCH NEWS corporations to give them efficient autonomy without compromising their social responsibilities. These moves “should make DOH hospitals more competitive and responsive to health needs.” 2. Secure funding for priority public health programs – Upgrading the management infrastructure is one of the most important priorities as it will enhance the ability of public health programs to absorb funds. A multi-year budget for eradicating communicable diseases and investments on new programs to address emerging health programs are also priorities. Emphasis on health promotion and prevention shall likewise be made. The DOH is bent on improving its technical leadership over local health systems by forming a center for disease control to harness R&D capabilities. 3. Strengthen the capacity of DOH regulatory agencies – This move should ensure quality care in both public and private facilities. Specifically, gaps in health regulations in terms of human resources, facilities and equipment must be identified to guarantee that health facilities have the technical capacity to deliver needed health services. Related to this, the capacity of major regulatory and licensing institutions like the Bureau of Food and Drugs shall be enhanced. Lastly, mechanisms to assess and regulate technological innovations that may have health implications shall also be developed. 4. Leverage for the formation and effective performance of local health networks (i.e., district health system) – Romualdez pointed out that the need to improve the performance of local health systems is important especially in areas where LGUs do not have technological or financial resources. For this, a fund for upgrading local health facilities shall
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July-August 1999
New health financing agenda to reduce financial burden on families
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ndividual families need not shell out large sums of money for health care, if the new agenda for health care financing policy being proposed by the Department of Health (DOH) for the new millenium will be approved and undertaken. Aside from improving health outcomes, this is perhaps the most significant effect that the agenda hopes to achieve, according to Health Secretary Alberto Romualdez, in his presentation of the various policy reforms that the Department is embarking on.
"... a lot more is expected from the NHIP whose share of the burden should rise considerably, from 7 to 34 percent while the share of private health insurance should also gain threefold..."
A big bulk of the P88.4 billion total health expenditure in 1997 was shown to have come from direct, outof-pocket payments of individual families -- a total of P40.9 billion or 46.3 percent of the total -- while government’s share of the pie amounted to P34.1 billion or 38.6 percent. The National Health Insurance Program (NHIP) which replaced Medicare shouldered P6.4 billion or 7.1 percent and the remaining P7 billion or 8 percent came from other sources.
Clearly, these figures show gross inequality in that families and individuals are shouldering majority of the burden of health care services by paying for them directly. Furthermore, they are apparently spending the money more on hospital treatments as is evident in the fact that 75 percent of the total health expenditure were spent for curative cases while the government only spent 15 percent of the total health expenditure for public health programs. To reallocate the burden of spending for health care from individual families, the DOH will strongly push for reforms in certain areas of health financing. The reforms target an overall reduction in the family’s spending on health care from the present 46 percent to 10 percent. On the other hand, a lot more is expected from the NHIP whose share of the burden should rise considerably, from 7 to 34 percent while the share of private health insurance should also gain threefold, from 3 percent to 10 percent. Lastly, the government’s share should go up to 46 percent. If all of these targets are achieved, the overall health spending is likely to increase, perhaps reaching the five percent of GNP that the World Health Organization (WHO) is recommending for developing countries such as the Philippines. On the whole, too, better and more access to health services should be made available to the people, with lesser burden on the part of individuals and families. DRN
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he argument goes that if health is a basic right in the same way that education is, then health services should also be free. This was one of the issues brought up and discussed during the open forum of the roundtable discussion sponsored by the Department of Health (DOH) and the Philippine Institute for Development Studies (PIDS). Rhais Gamboa, president of Aetna Philippines, a private multinational health insurance company, raised the issue and said further that considering the figures involved in health care expenditures, “obviously, health is not free since it is ultimately funded by the individual and the resources are finite.” In view of this, he asked if the new agenda on health care financing will include the recognition of health as a right in the context of limited resources. In particular, he inquired on whether it would be possible to identify which services may be free of charge and where they may be provided free.
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July-August 1999
Health as a right: Free for all? He said that there should be a consensus to resolve the fundamental issue of health as a right since questions may arise out of the agenda’s aim to “corporatize” or tranform DOH-retained hospitals into public corporations in order to boost their financial autonomy and at the same time allow them to fulfill their social obligations as public entities. Secretary Romualdez responded by saying that health should not just be thought of as a right “but also as a social good that has to be paid for by someone.” In this regard, it is usually the user who pays in various ways – either directly or indirectly through taxes. Part of the revenues collected is then allocated as health budget of national agencies and local governments. For his part, moderator Dr. Alejandro Herrin said that health as a basic right does not mean it should be
Local health systems to be strengthened under new health agenda
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he new health financing agenda being espoused by the Department of Health (DOH) seeks to strengthen the capacity and efficiency of local health systems as a way of reforming the health sector in the country. Local health systems include public and private health facilities, health services
and programs that are found in a locally-governed area. The agenda includes four ways by which local health networks are to be reformed and enhanced. One is to establish a fund to upgrade local health facilities and improve their capability to serve their constituents. Two is to use
free. Otherwise, he said that people may also demand that food be provided free since nutrition is likewise a basic right. The government’s responsibility is only “to cause health services to be made available but not necessarily to produce or finance it.” However, he also noted that there are services that government may provide at a very high subsidy especially to the poor. Still, he said someone has to eventually pay for them. It is only unfortunate that it is the individual families who do most of the paying at present, usually directly from their pockets. It is in light of this reality that the proposed agenda seeks to reform and strengthen critical areas in the health care system. Health as a right may not mean free services but with the agenda, steps toward easing the burden on individual families are being taken. DRN
this fund to leverage for the establishment of local health networks. Three is to promote and encourage cost-sharing among local government units (LGUs) to strengthen their respective health financing programs. And four is to provide incentives to the private sector to entice them to participate in enhancing the local health networks. The inclusion of local health systems as one of the areas of reform in the new health agenda is significant since the devolution of government functions, including health care, seven years ago as mandated by the Local
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DEVELOPMENT RESEARCH NEWS
Public health programs to be intensified
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he Department of Health (DOH) shall prioritize and invest more on public health programs as one of its major reform agenda to enhance health care financing in the country. Health Secretary Alberto Romualdez said that with the Department’s move to scale down its budgetary support for its retained hospitals and other expenditures, the DOH will focus more on establishing and intensifying public health programs. Such programs have been shown to require lesser amounts of funds while benefiting more people. Yet, figures provided by the DOH reveal that more money are spent on personal health care services (individual care which mostly involves hospitalization) than on public health services. Clearly, the discrepancy warrants a more aggressive thrust toward better public health care programs. The DOH proposes five ways to enhance public health programs: One, upgrade the management infrastructure. One of the most important priorities of the Department is the enhancement of management capacities in order to improve the ability of public health programs to absorb and allocate funds. In particular, new skills and approaches shall be developed to implement and transfer national programs to autonomous local health systems. Two, secure funding for a period long enough to eradicate communicable diseases. Funding shall be estab-
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July-August 1999
Cost escalation: A major problem in private health care system
T
he rising cost of medical treatment in private hospitals should be addressed by the government if its proposed health care financing reform agenda is to succeed.
Health Secretary Alberto Romualdez acknowledged that indeed, cost escalation is a major problem in the health care delivery system wherein the government is at times even contributing to by not providing viable alternatives.
Thus declared Benito Reverente, president of the Association of Health Maintenance Organizations in the Philippines, during the open forum of the DOH-PIDS roundtable discussion.
However, Secretary Romualdez offered hope that with the proposed agenda, cost escalation may perhaps be arrested. In particular, turning DOH-retained hospitals into public corporations and improving the benefits of the national health insurance program (NHIP) may provide the needed alternative. Enhancing the NHIP is critical in this case since a strong health insurance program gives government the leverage to bargain with health care providers with respect to drug prices and service costs. This should also solve the problem posed by medical specialty societies which insist on higher fees. Eventually, though, a national arbitration mechanism is needed to determine how much cost escalation in the private health sector the government may allow. DRN
Dr. Reverente revealed that because of the economic crisis brought about by the Asian currency problem, hospitals arbitrarily increased their rates. Some of these hospitals have also raised their drug mark-ups to as high as 80 percent over retail prices in commercial drugstores. He also reported that some medical specialty groups are conniving and refusing to see patients unless their fees are duly paid. In view of these incidents, Reverente asked if there is a law similar to a restraint of trade that will prevent such practices.
lished for disease control programs such as tuberculosis, malaria, polio and others. A multi-year budget for disease control shall be put in place and access to this budget shall be based on the recipient’s performance. It is important that the funds for this purpose be protected and preserved from the uncertainties of the annual health budgeting process.
Three, invest in new programs to address emerging health problems such as adult health and environmental health concerns, to name a few. Funding shall likewise be obtained for this purpose. Four, increase spending for health promotion and prevention. In
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DEVELOPMENT RESEARCH NEWS
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his gathering is part of a consultative process to arrive at an agenda for reform in the health financing sector in particular and in the health sector in general. In presenting the agenda on health care financing, I will begin by giving an overview of the performance of the health sector, after which I shall present a framework for analyzing this performance and see what we need to do next. I shall also discuss issues that are related to how effectively we are spending the money on health and how health funds are being generated. Finally, I shall present a health spending pattern proposal that will hopefully bring in improvements in health sector performance.
Health sector performance on a declining trend To begin with, how has the health sector performed? We have evidence that the momentum for the improvement of health status indicators throughout the country which basically began in the 1960s and 1970s has somehow declined. One evidence is that the rate of decrease in infant mortality and maternal mortality – two of the basic health indicators – has considerably slowed down. Recent data show that this is true especially from the end of the 1980s to the middle of the 1990s and as we approach the 21st century. Furthermore, infant mortality rates (IMR) in the provinces show large differentials. This is true not only for IMRs but also for all other status indicators. For example, in 1990 and 1995, the top five high mortality provinces had IMRs twice as high as the five lowest mortality provinces. More concretely, Metro Manila has an IMR of
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July-August 1999
An Agenda in Health Care Financing for the 21st Century1 by Hon. Alberto Romualdez Secretary of Health
around 20 which is very close to the norm of developed countries while there are parts of Samar and Mindanao where the mortality rates are still close to or a little over 100 which is the IMR of least developed countries. We still have, as main causes of morbidity, infectious and communicable diseases. The top five are diarrhea, bronchitis, influenza, pneumonia and tuberculosis (TB). Even as communicable diseases remain prevalent, we now have the increasing burden of acute and degenerative diseases. We still need to take concrete steps to address emerging health risks which will mainly affect working-age population. In addition, we also need to be addressing environmental degradation as a byproduct of development, urbanization and industrialization. In looking at how financing affects the performance of the health sector, let us start with the family. At any given year, family members may fall ill and require health services. Approximately 26 percent of all families will require such services during the year. The government as well as private health care providers deliver a range of personal health services to address the family needs and health conditions. There are two classes of such health care services: one is personal or
individual care, a lot of which involves hospitalization; and another is public health services which are aimed at families and communities rather than the individual sick person. Personal and public health services consumed by families are financed through various sources but ultimately come from families and individuals. To some extent, employers also make major contributions.
Total annual health spending not enough How much do we spend for health care? In 1997, P63.5 billion was spent on personal health care services. This amounts to a little over 75 percent of total health expenditures. For public health services, we spent a total of P12 billion, representing a total of 15 percent of the total health expenditures. We also spent P13 billion for overhead expenses needed to run the system. Overall, we spent about P88 billion for health care, representing 3.5 percent of GNP in 1997. Said amount is short of the 5 to 6 percent recommended by the World Health Organization as a standard for health expenditures in developing countries like the Philippines. This, despite the analysis of the 19911997 national health accounts done by a team of researchers from the U.P.
DEVELOPMENT RESEARCH NEWS
School of Economics and the National Statistical Coordination Board which suggests that during this period, health spending has increased in real and per capita terms. There are indicators which suggest that we are not spending enough. At the same time, it has been suggested by certain quarters that we are also not spending the money effectively. In what sense and how?
Problems in health care spending There are a number of problems relating to health spending mentioned in the research analysis. First, not enough is being spent on public health services from national sources. Second, local health spending in primary health care is less effective because of the fragmentation of the district hospital systems brought about by devolution seven years ago. Third, subsidies for hospital care from the national health budget are poorly targeted. There is a concentration of
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major hospitals in Manila, Cebu and Davao where the facilities serve mainly the people in the contiguous geographic areas, leaving many people in peripheral areas unserved. Fourth and last, not enough is being spent on developing administrative capacities which has led to low absorptive capacities, particularly with respect to public health programs at the local level. The 10 percent being spent on overhead expenses is inadequate, resulting in poor management of the health system.
Sources of funds: families bear brunt of health care financing Where does the money come from? Out-of-pocket expenses constitute 46 percent of the total amount spent in 1997. This means that the financial burden is basically on families. In 1997, too, the national government accounted for P18.6 billion of health care expenses or 21 percent of the total. This translates into a Department of Health (DOH) budget of P13.2 bil-
Health Secretary Alberto Romualdez shares a lighthearted conversation with PIDS Acting President Dr. Mario Lamberte and DOH-Health Policy Development Staff (HPDS) Program Manager Ms. Maylene Beltran.
July-August 1999
lion, an amount higher than that in 1991. Over 50 percent of this amount, however, was spent on 48 retained facilities (DOH hospitals) that are largely accessible only to residents of big cities and rich provinces. Around 17 percent of total spending was financed through local health projects. Spending from local sources is growing more rapidly than any other source. In fact, the levels are much higher than the initially-estimated cost of devolved health services. This is why some local government units (LGUs) which took over some of these expenditures are having problems. Meanwhile, the national health insurance program (NHIP), now being implemented by the Philippine Health Insurance Corporation (PHIC), accounted for only 7.1 percent of total health spending. In 1991, the then NHIP (Medicare) accounted for 9.1 percent of total health spending. The share of the social health insurance system has therefore gone down. From the above distribution of shares, one can easily note that there are problems with the way health care funds are being generated. As shown, the heaviest burden is on individual families. This obviously leads to inequities since only those who can afford to pay are able to support such a system. Another problem is that financing for public health programs is subject to the uncertainties of the annual budget process. Financing from local government sources is also limited by uneven capacities and the Internal Revenue Allocation (IRA) mismatch which refers to a higher cost for the provision of local health services than what was anticipated when devolution was implemented. All of these problems contributed to the fact that the drive for developing a truly effective NHIP has been set back.
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DEVELOPMENT RESEARCH NEWS
An agenda in health... From page 7
Policy reforms: reinforcing critical areas What should we thus change in health financing policy? First, we must provide fiscal autonomy to DOH hospitals to make them more competitive and responsive to health needs. Second, we should use these freed-up resources from the DOH budget for other priorities such as public health spending wherein investments are needed not only to expand coverage but also to improve its effectiveness. Third, we need to invest in the capacity-building of regulatory agencies to ensure quality care in both public and private facilities. Fourth, we need to utilize the financial and technical leverage of national bodies to improve the potentials of local health systems. And fifth, we have to reform the national health insurance program in order to make it the major payor of personal health services. Reforms in these five areas are interconnected. For example, NHIP reforms will make autonomy viable; hospital reforms, in turn, will free up resources for investments in public health and in regulation at both national and local levels; and good public health programs should relieve the NHIP from the burden of having to pay an increasing number of curative services and be able to address diseases that are highly preventable.
The five areas of reform: A closer look DOH hospitals (facilities that continue to be controlled and operated by
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the DOH even after the devolution of health care functions to LGUs) should reduce their dependence on direct subsidies from the DOH budget by introducing socialized user fees. Critical capacities like diagnostic equipment, laboratory and medical staff should also be upgraded to enable these hospitals to effectively exercise fiscal autonomy. However, we are still looking at ways to raise funds before giving hospitals more autonomy so that they will be ready to provide services that people are willing to pay for. As hospitals become more competitive and autonomous, subsidies from the DOH should progressively decline. The DOH should provide for appropriate institutional arrangements such as the conversion of these facilities into public corporations to allow them efficient autonomy without compromising their social re-
July-August 1999
such as TB, malaria and polio. Said fund needs to be insulated from the uncertainties of the annual health budgeting process. A multi-year budget for disease control should be put in place and access to this budget should be based on performance. Funding to address emerging health problems such as adult health and environmental health concerns is also required. The development and support for new programs that promote healthy lifestyles and work environments are also required. We must improve the technical leadership of the DOH by giving it better access to information, better knowledge about new technologies and new interventions. To achieve this, we are proposing to put together all the disease control programs in the communicable disease areas into one center for disease control which will
"Reforms in these five areas are interconnected. For example, NHIP reforms will make autonomy viable; hospital reforms, in turn, will free up resources for investment in public health..., etc."
sponsibilities. A term we use is corporatization. To undertake these reforms, we need to establish a fund that may be sourced from unallocated resources in ongoing DOH projects plus counterpart contributions from cities where the facilities serving local needs are located. On public health programs, one of the most important priorities is the upgrading of management capacities in order to improve the ability of public health programs to absorb funds. In particular, new skills and approaches have to be developed to implement national programs in autonomous local health systems. There should be funding for disease control programs
harness both the research and program development capabilities that are now in separate areas of the DOH. On regulatory functions, we need to identify gaps in health regulations in terms of being able to produce and distribute human resources for health in a much better way. We must ensure that health facilities have the technical capability to deliver needed health services. We also have to make sure that products such as pharmaceuticals are of the quality and quantity required by the majority of our people. As an aside in this area, we have embarked on a revitalized implementation of the national drug policy which was initiated in 1988. Not surprisingly, of course, we
DEVELOPMENT RESEARCH NEWS
are encountering the same problems as in 1988. We also need to assess the requirements for new health devices and technologies. We have to strengthen the capacities of major institutions such as the Bureau of Food and Drugs and other agencies for standards and regulations so that we can have a better regulatory environment and a better licensing process. Finally, we need to have a mechanism to assess and regulate technological innovations that influence health. One example is the microwave technology being used almost everywhere. We should be able to assess the long-term effects of being in an environment where microwave ovens are used a lot. Another example is laser which is used even with toys. These two have health implications. We need to improve the performance of our local health systems. This is especially seen in areas where the local governments do not have technological or financial resources. For this, we are proposing to establish a fund targeted at upgrading local health facilities. This fund will be used to leverage for local health networks so they can work with each other. We shall also promote cost-sharing among LGUs and provide incentives for the private sector to participate in local health networks. Finally, we have to improve the NHIP. The first step is to increase benefits to make the program more attractive. Initially, we are simply increasing the peso value of the existing benefits but this is not enough. Our current benefits are limited to paying hospitalization costs. We have to develop packages which will not continue to encourage overutilization of hospital facilities. We have to use the improved benefits to aggressively enroll more members to cover most of our population. With better benefits and more members, we can ensure good quality and adequate financing as well as check abuses. We
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likewise have to develop an administrative infrastructure in the PHIC that will be able to handle the increased workload. The PHIC has already begun to establish local health insurance offices to decentralize activities. We are also seriously working on a computerized system for greater efficiency not only in collecting premiums and paying benefit claims but also in collecting data that can be used for improvements in the provision of services.
Expected outcomes How do we envision the health financing scenario in the next five years? Spending on personal health services should somewhat drop – from 75 percent to 65 percent of the total. Outof-the-pocket spending by the family should drop from 46 percent to 10 percent. This is probably the most significant effect that we hope to see. Spending by private insurance companies on personal health care should double from 2 to 7 percent. Spending on personal health care by the NHIP should also increase from 5 to 30 percent while government spending on personal health should drop from 20 to 18 percent. The latter remains a major component of total health expenditures because there will always be clashes of intervention and illnesses which individuals will be hard put to spend for and which the PHIC cannot rationally provide benefits for. On public health spending, we would like to see a total increase from 15 to 20 percent. There is no public health spending expected from the family, private insurance and the NHIP. Thus, the increase will come basically from government spending. This is making very strict definitions as to what constitutes public health care because hospitals can engage in some public health activities like health promotion
July-August 1999
Vol. XVII No. 4
July-August 1999
Editorial Board Dr. Ponciano S. Intal, Jr. President (on leave) Dr. Mario B. Lamberte Acting President Mr. Mario C. Feranil Acting Vice-President and Director for Project Services and Development Ms. Jennifer P.T. Liguton Director for Research Information Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant
Staff Jennifer P.T. Liguton Editor-in-Chief Barbara F. Gualvez Guest Editor Liza P. Sonico, Corazon P. Desuasido Joel C. Cruz, Edwin S. Martin and Jane C. Alcantara Contributing Editors Valentina V. Tolentino Rossana P. Cleofas Exchange Delia S. Romero, Galicano A. Godes, Necita Z. Aquino, Lilet L. Lamayo and Federico D. Ulzame Circulation and Subscription Genna J. Estrabon Lay-out and Design
which will cost money but which will not be accounted in this system. Finally, for overhead expenses, we would like to see an increase from 10 to 15 percent of the total. This would represent the increase in expenditures from one
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DEVELOPMENT RESEARCH NEWS
DOH presents... From page 3
be established. The fund shall also be used to leverage for the formation of local health networks. Cost-sharing among local governments and providing incentives for the private sector to participate in local health networks shall also be promoted. 5. Expand the coverage and benefit spending of the NHIP – The first step is to increase the benefits of the program in order to attract more members. At the same time, other benefit packages will be developed which are aimed at discouraging the overutilization of hospital services. This improved set of benefits and services will be used to aggressively enroll more members, especially in the cities. With better benefits and more members, there will be more leverage for a better program performance where financing is adequate and abuses are controlled. Along with these steps, the Philippine Health Insurance Corporation (PHIC) will be developed to enable it to handle
DOH hospitals...
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the increased workload. Romualdez revealed that the PHIC has begun establishing local health insurance offices to decentralize activities. It is also working on a computerized system that will improve collection, reimbursement and data gathering. Romualdez pointed out that reforms in these five areas are interconnected. “NHIP reforms will make autonomy viable. Hospital reforms, in turn, will free up resources for investments in public health and in regulation at both the national and local levels. And good public health programs should relieve the NHIP from the burden of having to pay an increasing number of curative services and be able to address those diseases which are highly preventable,” he said. Ultimately, the reforms in health care financing policy aim to improve the health status of the people through greater and more effective coverage of national and local public health programs; increased access to health services especially by the poor; and reduced financial burden on individual families. DRN
New Publications!
From page 12
be augmented by counterpart contributions from cities where the facilities serving local needs are located. With these proposals for reforming the DOH hospitals, the Department targets a two-pronged advantage: independence for the hospitals and a freer DOH budget that may be used to invest more in other priorities such as public health spending. Certainly, the latter benefits more people for a lot less money. Unfortunately, not much attention and priority have been given to it. DRN
Research Paper Series 1998-01 Credit Unions as Channels of Microcredit Lines: The Philippine Case Mario Lamberte Research Paper Series 1998-02 Philippine Households' Response to Price and Income Changes Gilberto Llanto Journal of Philippine Development Second Semester 1997
July-August 1999
Editor's Notes From page 1
Presented before a roundtable discussion composed of representatives from various sectors like the government, academe, private business, and nongovernment organizations, the agenda dwells on five areas of reforms in health financing policy that would have broad repercussions insofar as improving the general health situation for the country’s citizenry. This issue, in particular, features Philippine Health Secretary Alberto Romualdez’ presentation of said agenda wherein he outlines the manner by which the Department would go about in realizing the reforms in such a complex concern as health care financing. The other articles expound on specific points raised in the agenda as well as on various related health issues discussed during the open forum. Stressing that the agenda is by no means a done deal, Secretary Romualdez noted that it is a work in progress which the DOH hopes to continually refine in consultation with various sectors in order to address other issues that may be raised. Health financing is a complex and critical issue. Certainly, it is something that cannot be resolved overnight. But drawing up an agenda that focuses on key aspects that would help in expanding and streamlining it is a first big step. With a lot of work with and cooperation from various quarters, the ultimate objective of “Health for All” for the next century may not be too farfetched after all. DRN
Access the PIDS Website: http://www.pids.gov.ph
DEVELOPMENT RESEARCH NEWS
Local health systems... From page 4
Government Code has somehow fragmentized the delivery of health care services in the LGUs. Thus, one of the goals of the agenda is to put together what was lost through decentralization and see to it that the local health systems can deliver the services in a functional and integrated manner. This is especially important when it comes to delivering public health services where the impact cuts across administrative boundaries. Secretary Romualdez noted that devolution, which affected local health systems, has “effectively isolated the district hospital (which) became a functionless entity, with no connections to the local governments, and the municipalities (running the district hospital) had very little support from the provinces, with nowhere to turn to with respect to organized referral system.” By promoting cost-sharing among LGUs, the DOH would therefore like to reestablish the two-way referral system between local governments and national facilities, especially in the municipalities where the number of con-
Public health programs... From page 5
particular, this involves the development of and support for programs and activities that promote healthy lifestyles. And lastly, invest in critical areas that will help enhance technical leadership over local health systems. This shall be done by giving local health units better access to information, better knowledge about new technologies
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stituents cannot adequately support any kind of hospital, much less the district hospitals. There are limitations on the kind of services, facilities and health programs that can be offered if only a few are pooling their resources and sharing the risks. By strengthening local health networks, the clustering of municipalities and districts will help achieve a “critical mass” of population that can support a hospital. The DOH also considers the important role that local health insurance schemes play. Thus, it is examining the mechanisms of these schemes and how they can be linked up with the Philippine Health Insurance Corporation (PHIC) which implements the national health insurance program. The DOH shall look into the many ways by which the PHIC can accommodate these schemes and enhance their benefits. In view of this, one of the functions of the regional health offices of the PHIC is to help develop health programs, especially for indigents in their areas. In seeking to enhance the local health systems, the DOH sees its role as being that of a catalyst – encouraging LGUs to find ways of working together, rewarding best practices and discouraging ineffective activities in health care delivery. DRN and new interventions. One related proposal is to put all the different disease control programs in communicable diseases under one Center for Disease Control to harness both the research and program development capabilities that are still separately undertaken at the DOH. On the whole, the Department’s proposed reforms involving greater prioritization and investments in public health programs are aimed to make them more effective, expand their coverage and ultimately, enhance the health status of the people. DRN
July-August 1999
An agenda... From page 9
to three percent by the private sector health insurance system as it improves its administrative capacities as well as the increase in spending from one to four percent by the NHIP on administration. This means major investments in management and information networks while government overhead costs remain at 8 percent.
Conclusion: Easing the load of families In sum, health care spending of families should drop from what it is at present to 10 percent. On the other hand, the share of private health insurance in total health expenditures should rise from 3 percent to 10 percent while that of the NHIP should rise from 6 percent to 34 percent. The government’s share, meanwhile, must also increase to 46 percent. If all of these are achieved, we should expect improvements in the performance of the health sector through greater and more effective coverage of national and local public health programs, increased access to health services especially by the poor, and reduced financial burden on individual families. DRN Presentation made during a roundtable discussion jointly sponsored by the DOH and PIDS on April 8, 1999 at the Romulo Hall, NEDA sa Makati Building, Makati City. 1
20 Years of Service through Research
DEVELOPMENT RESEARCH NEWS
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July-August 1999
DOH hospitals to be reformed
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ospitals that have been retained under the control of the Department of Health (DOH) shall be made to obtain fiscal autonomy in order to make them more competitive and responsive to the health needs of the people. This is one of the major reforms that the DOH shall pursue.
There are currently 48 hospitals in the country which the DOH continues to fund and operate even as devolution should have put them under the control of their respective local government units (LGUs). Some 35 of these hospitals are classified as tertiary or those that are fully departmentalized and equipped to treat most ailments. Seven are secondary and six are primary hospitals --facilities that offer basic medical services. Some popular examples of DOH hospitals are the so-called “centers of excellence” such as the Philippine Heart Center, National Kidney Institute, the Lung Center and the Philippine Children’s Medical Center. The Department is proposing a number of ways for these hospitals to attain fiscal autonomy. One is to allow them to collect, retain and allocate revenues from “socialized” user fees (patients will be charged according to their ability to pay). This arrangement should make these hospitals more competitive as a set of varied fees will attract more patients and make them less dependent on direct subsidies from the DOH. Two is to upgrade the “critical capacities” of these facilities such as
diagnostic equipment, laboratory, and medical staff in order that they can more effectively serve the needs of their patients. Three is to raise funds for these hospitals before greater fiscal autonomy is undertaken so that they will be better equipped to provide more services to more patients. As these DOH hospitals become more competitive and autonomous, subsidies from the DOH budget should progressively decline. Finally, the proposed health financing agenda proposes that the DOH hospitals be converted into public corporations to “allow them efficient autonomy without compromising their social responsibilities” as public hospitals. During the open forum of the roundtable discussion, Health
Secretary Alberto Romualdez further explained that he wants to see the Philippine hospital system as a whole and not distinct from one another. “When we think of hospitals, we should not be thinking of them as retained, local or private. We should be looking at the whole system because in the end, that is what it should be like.” He also said that the Department is addressing the often-questioned issue of favoring DOH hospitals in terms of giving out funds, loans and facilities to them by now requiring development programs to include hospitals that do not belong to the DOH. He said that the DOH development plan has a loan program, including soft and hard loans, for the construction and equipping of hospitals of high level facilities as well as their upgrading. One of the visions for the DOH is for it to “act as a broker for the financing of hospital improvements when the indigenous financing capabilities are not sufficient.” Since these reforms will entail a big amount of money, funding will be sourced from unallocated resources of ongoing DOH projects. This fund will
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DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars. PIDS is a nonstock, nonprofit government research institution engaged in long-term, policy-oriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings. The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments are welcome. Please address all correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines Telephone numbers 892-4059 and 893-5705 Telefax numbers (632) 893-9589 and 816-1091 E-mail address: publications@pidsnet.pids.gov.ph Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P150.00 for local subscribers; and US$20.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.