DON HONORIO VENTURA STATE UNIVERSITY

Graduate School
Main Campus, Bacolor, Pampanga

Five (5) Fiscal Major

Problems of Philippine Health
Insurance Corporation
(PhilHealth)

Report Submitted to:

LUIS M. LANSANG, CPA, DPA

Professor
Chairperson, Master of Public Administration

In partial fulfillment of the requirement for the course PFA

Submitted by:

Macasero, Madonna P.
Jubac, Erlinda T.
Lazatin, Mary Rose B.

Public Fiscal Administration

MPA – 1A

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 May 21, 2021
1st Trimester
AY 2021 – 2022

I. INTRODUCTION

A. Definitions of Terms

B. Objectives

II. THE FIVE (5) FISCAL MAJOR PROBLEMS OF PHILHEALTH

III. RECOMMENDATIONS

IV. REFERENCES

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I. INTRODUCTION

Health care systems are established and given to a specific demographic in order to address
the health care needs of that group. One of the State's responsibilities is to provide an efficient,
comprehensive, and free-of-charge health-care service to the entire population in a way that can
be driven publicly or privately, usually in parallel or in various forms of complementarity.
Regardless of the mode of provision, the production of these services should cover the ever-
increasing needs of the modern society. In the Philippines there is an agency responsible for
providing this health care service to Filipinos, it is the Philippine Health Insurance Corporation
or PhilHealth.
In the last 20 years, the Philippines' health-care system has undergone significant changes,
including the government's implementation of several reforms and programs aimed at providing
easy access to health benefits for all Filipinos. The majority of hospitals provide effective and
economical health care. However, when compared to those in high-end health facilities abroad,
the Hospital Facilities do not come close to matching their productivity. Although since then,
private hospitals in the country have increased their technical facilities over state hospitals.
In the Philippines, creating a world-class healthcare system has proven difficult. There have
been a huge number of unsolved cases of various diseases all over the country, as well as a lack
of intervention and health education for far-flung populations.
According to Son H.'s research, health outcomes in the Philippines have remained stable
following 5 years of decentralization in the health sector. The paucity of BHWs, for example, is
one reason that causes provincial variations in antenatal care services and in seeking treatment
for tuberculosis among males. Each region or province must have sufficient funding, resources,
capacities, and policy actions customized to them.
Our country is in desperate need of a systemized healthcare system that benefits both the rich
and the poor, particularly the poor who need it the most.
Indeed, with all of these occurrences mentioned, there is a need to investigate the issues that
the PhilHealth is facing, as this will improve the quality of health for all Filipinos while also
eliciting inefficiencies. After all, good health is a fundamental human right. The purpose of this
synthesis paper is to address the issues that the PhilHealth is facing, as well as possible solutions
to those difficulties.

A. Definition of Terms

1. Fiscal Policy refers to the use of government spending and tax policies to
influence economic conditions, especially macroeconomic conditions, including
aggregate demand for goods and services, employment, inflation, and economic
growth.

2. Philippine Health Insurance Corporation or PhilHealth is a government-

owned and controlled corporation (GOCC) founded on February 5, 1995. Its main
goal is to ensure the health of every Filipino through social health insurance
regardless of social status: poor, rich, young, old, sick, healthy, working or
jobless. To achieve this, all premiums paid by members are pooled nationally and
in effect, there is a cross-subsidization across districts.

B. Objectives:
The main objectives of this paper are:
1. Learn about the five major fiscal issues in PhilHealth.
2. Recommend potential solutions to PhilHealth's five major fiscal issues.

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II. FIVE (5) FISCAL MAJOR PROBLEMS OF PHILHEALTH

A. Cycle of Irregularities
Unfortunately, fraud is not only widespread in the Philippines, but also cyclical. The
form of criminality appears to shift over time, depending on when the modus operandi is
exposed and when PhilHealth takes steps to prevent abuse.
A spike in coverage reimbursements for cataract removals was noticed in 2015,
prompting a series of inquiries. PhilHealth reimbursed P16,000 for each cataract surgery,
which is an outpatient operation that might take as little as 15 minutes. PhilHealth paid
out P2 billion in such claims in 2014 alone, equating to 125,000 treatments.
This was reportedly made possible with the help of scouts who were paid to look for
patients. Patients who did not require eye surgery were forced to endure the treatment,
and much worse, fictitious patients were created.
When PhilHealth issued a new order limiting eye doctors to 50 claims per month, this
abuse was halted. However, it appears that the systematic problem that produced similar
acts was not corrected.
When there's a lot of money involved, there's a good possibility that abuse will
follow. Pneumonia cases are one of PhilHealth's largest, if not the largest, allocations for
benefit payments. Hemodialysis is another example.

B. Upcasing and Overpayment

Simple coughs and colds were escalated to pneumonia, which could fetch anywhere
between P15,000 and P32,000 per patient. The COA has previously identified “upcasing”
as a common practice in government hospitals and clinics.
Cases that have been fraudulently upgraded allow the attending physician to charge
more and provide possibilities to pad pharmaceutical prices with forged receipts. This is
certainly unethical on the part of the doctor, and it becomes a criminal when additional
accusations are added.
The all-case rates (ACR) payment structure, on the other hand, treads a fine line by
giving hospitals more than they request. For example, a provincial hospital may have
forwarded a P500 dialysis billing, but because ACR allows a maximum of P4,000, the
system will process the latter amount.
Officials from PhilHealth may argue that while the reimbursements are supplied to
the government health facility, they are used for other expenses related to its day-to-day
operations, this does not benefit individuals.
Still, these smacks of irregularity, not least because it gives a deceptive indication of
the exact amount of money spent on a sickness by PhilHealth, especially if the
overpayment is three or four times what is invoiced.

C. Bigger Scam
Because of the passage of the sin tax reform initiative in 2012 and recent amendments
further increasing tobacco product taxes, universal health care and PhilHealth, as well as
the Department of Health, have been given increased importance – and a larger budget
allocation – under the Duterte administration.
Given the amount of money it receives from the Treasury each year, PhilHealth, as a
government-owned and controlled enterprise, is vulnerable to political abuse at both the
local and national levels. PhilHealth had a budget allocation of P67.35 billion this year,
up 24.4 percent from the previous year.
We've heard reports of politicians working in eye clinics stealing from PhilHealth
benefit claims for forced and ghost cataract removal procedures. It's not impossible to
find a link between this and the recently discovered dialysis fraud.

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 If the data provided by PhilHealth whistleblowers are right, the P154 billion lost to
overpayments, "upcasing," and other forms of fraud in the last six years since 2013 is a
scandal that dwarfs the P10 billion pork barrel scam that occurred between 2003 and
2013.

D. (Mam Zane)
Irregular practice
A report revealed that P98.05 million in allegedly overpriced items and P132.2 million
worth of items that had been subjected to the splitting of contracts to avoid the
requirement of holding a public bidding.

Conflict of interest
Manifested in PhilHealth’s lease of a building owned by the family of Health Secretary
Francisco Duque III. Agency’s administrators should have thoroughly studied the
background of the lessor for the relocation of its office.

E. A MASSIVELY OVERBLOWN 2020 IT BUDGET

PhilHealth has been at the center of widespread controversies and scandals over the
years. A questionable P2.1 billion budget was proposed by PhilHealth for Information
and Technology for 2020. Some items were given a tag price way above the amount
approved by the Department of Information and Communications
Technology, including what must be very special laptop models that we haven't heard
of yet. Two sets were tagged as costing P4.11 million for one and the other, a
whopping P115.32 million. Just to compare, a new Mac Pro with the works in terms
of memory, processor, and storage would cost about P3.11 million. Other items listed
in the proposed budget include:

 P21 million for Adobe Master Collection software (approved cost is

P168,000)
 P40 million for application servers and licenses (approved cost is P25 million)
 P5 million for structured cabling (approved cost is P500,000)
 P42 million for identity management software (approved cost is P20 million)
 P21 million for office productivity software (approved cost is P5 million)
 P25 million for application servers and virtualization licenses (approved cost
is P14.8 million
One component of the project flagged as “anomalous” by the Commission on Audit
(COA) and PhilHealth’s resident auditors in three separate reports was the planned
procurement of various equipment worth P734 million, which was not contained in
the original budget proposal submitted by the state insurer.
The internal audit of the IT System in relation to the planned upgrade shows lapse in
the recording and monitoring of ICT resources from procurement to disposal
process; No inventory System that will address the recording of ICT resources both
the hardware and software from procurement to financial reporting; Absence of
policy and guidelines on coordination of offices/departments in management of the
properties of the corporation in relation to acquisition, utilization, monitoring and
disposal of the corporation’s properties.

III. RECOMMENDATION

A. Prosecution of guilty parties

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 The initial step is to make the fraud and abnormalities public. To ensure that
taxpayers' money is spent properly and is protected from political maneuverings, a
complete and nonpartisan systems assessment of PhilHealth is clearly required.

More essential, ongoing investigations must be concluded as quickly as feasible. The

public needs to see examples of criminals being prosecuted to the full extent of the law.

Corruption is an abhorrent disease in our society, but when it is combined with an

ineffective system, especially one controlled by the government, it is doubly poisonous for a
country with over 30 million people who rely on government monies for their health care.

B. (Mam Zane) Establishment of a governing body and trial

Establishment of a tripartite governing body must be materialized to evaluate the

funds to be utilized by the agency up to the acquisition of items. Being said, this will
ensure the transparency and fairness of the transaction that will take part.
Betrayal of public trust is a serious offense. Investigation must be kept rolling to
bring the violators and their cohorts to justice. Freezing of assets is also essential to
keep them from utilizing their ill-gotten wealth.

C. Thorough Budget Preparation for the proposed project.

The usage of government funds according to Department of Budget and Management

(DBM) shall be utilized in accordance with the appropriations authorized for the purpose.
Having limited appropriations can be greatly affect the development initiatives of all
government agency when it comes to providing better service for every Filipino. The
procurement of ICT equipment were important tools to eliminate corruption and helps to
achieve PhilHealth’s vision, mission and goals.

In a CNN Interview Philhealth President and CEO Ricardo Morales says the project
should proceed, he is determined to push the new IT System. He even plans to ask congress
to double the project budget to 5 billion pesos.

As annual national budgets are being prepared a year before the utilization of the
approved funds that we can somehow resolve the current limitations. If an agency
would like to conduct a new activity for the following year, they should submit the
budgetary requirements of the said activity during the budget preparation phase. The
Planning Officer, Head of Agency and Budget Officer should closely during the said
phase in order to properly present the economic value of the activity that needs
funding and the impact of the activity to the beneficiaries. If an activity is presented
well during the budget preparation phase in can be given the budget authorization for
the next fiscal year with proper budget execution and accountability.

III. REFERENCES

The Free Dictionary by Farlex, viewed 29 th May 2021

https://www.thefreedictionary.com/Fiscal+issues

I Money Learning Center, PhilHealth: Universal Health Coverage For All Filipinos, viewed 29 th
May 2021, <https://www.imoney.ph/articles/everything-about-philhealth-contribution-
philippines/>

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Gamboa, Rey, 2019, Corruption and Inefficiency in Philhealth, The Philippine Star, viewed 22 nd
May 2021, <https://www.philstar.com/business/2019/06/20/1927841/corruption-and-
inefficiency-philhealth>
Mia Rodriguez Aug 5, 2020 https://www.spot.ph/newsfeatures/the-latest-news-
features/83112/philhealth-issues-fraud-overpayments-it-budget-a4362-20200805?
fbclid=IwAR2pu4IT3VQnvL6qWuMptxvvigDGeaMu5XCCdEIZewaGGEmCHjQ0Jb0WIOM