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Eur J Health Econ (2008) 9:343–349 DOI 10.



Lessons for health care reform from the less developed world: the case of the Philippines
Konrad Obermann Æ Matthew R. Jowett Æ Juanito D. Taleon Æ Melinda C. Mercado

Received: 9 February 2007 / Accepted: 25 September 2007 / Published online: 20 October 2007 Ó Springer-Verlag 2007

Abstract International technical and financial cooperation for health-sector reform is usually a one-way street: concepts, tools and experiences are transferred from more to less developed countries. Seldom, if ever, are experiences from less developed countries used to inform discussions on reforms in the developed world. There is, however, a case to be made for considering experiences in less developed countries. We report from the Philippines, a country with high population growth, slow economic development, a still immature democracy and alleged large-scale corruption, which has embarked on a long-term
Konrad Obermann and Matthew R. Jowett had the original idea for the paper and carried out initial research. Juanito D. Taleon and Melinda C. Mercado contributed additional expertise and gave detailed comments. All authors contributed to the write-up of the paper. K. Obermann (&) University of Applied Sciences of the German Red Cross, ¨ Reinhaeuser Landstr. 19-21, 37083 Gottingen, Germany e-mail: M. R. Jowett GTZ Unified Health Programme, c/o PhilHealth 709 Shaw Boulevard, Pasig City, Philippines e-mail: M. R. Jowett Department of Health Sciences, University of York, York, UK J. D. Taleon Bureau of Local Health Development, Department of Health, Sta. Cruz Compound, Metro Manila, Philippines e-mail: M. C. Mercado Philippine Health Insurance Corporation, City State Tower, 709 Shaw Boulevard, Pasig City, Philippines e-mail:

path of health care and health financing reforms. Based on qualitative health-related action research between 2002 and 2005, we have identified three crucial factors for achieving progress on reforms in a challenging political environment: (1) strive for local solutions, (2) make use of available technology and (3) work on the margins towards pragmatic solutions whilst having your ethical goals in mind. Some reflection on these factors might stimulate and inform the debate on how health care reforms could be pursued in developed countries. Keywords Health care reform Á Philippines Á Decentralisation Á Technology Á Ethics JEL Classification I 18 Á H 41

Introduction Development assistance has, at least semantically, shifted from the one-way transfer of knowledge to mutual cooperation wherein donors and recipients work and learn together and foster a climate of exchange. However, in the field of health care reform, the one-way transfer still prevails. Health care systems appear to have fundamentally different problems at grossly uneven financing levels— there would appear to be no point in considering the experience of a cash-starved system and whether there may be lessons for highly developed and technology-driven systems with per-capita health care expenditures 50–100 times those of poorer countries. As a result, most articles on health care reform in less developed countries either draw lessons from the developed world [1, 2] or present experiences for use in other less developed countries [3–5]. Berwick [6] criticises this imbalance and presents



K. Obermann et al. Table 1 Major determinants of health care delivery in the Philippines High population growth and environmental degradation Immature democratic system Brain drain through emigration of doctors and nurses High prices of medicines Low health care expenditures, almost 50% of which is paid out-of-pocket Double burden of infectious diseases and rapidly emerging lifestylerelated chronic diseases still prevails

examples of successful project management in hard-pressed health systems, which could provide inspiration to the process of health-sector reform in wealthy nations. Moreover, there is ongoing discussion about the usefulness of qualitative research methods in clinical and health-service research. It is now widely accepted that quantitative studies cannot reveal the full picture on how and why certain measure or initiatives succeed or fail [7–9]. Given the inherent complexity of any health care system, it is very difficult, if not impossible, to clearly ascribe any changes to a specific policy change or intervention. Qualitative research can help to elucidate possible interactions and causal relationships [10, 11]. We describe the results of health-related action research [12] whilst assisting reform implementation in the Philippine health sector between 2002 and 2005 and highlight some qualitative aspects that appear to work successfully in this setting. We then go on to outline how these experiences could be useful in a high-income health care setting.

Table 2 Important health data of the Philippines Selected health care issues Life expectancy at birth: female/male (2003) (years) Infant mortality rate (per 1,000 live births, 2003) (%) Under five mortality rate (per 1,000, 2003) (%) Births attended by skilled staff (total %) Health expenditure per capita (2003) (US$) Total health expenditure (2003) (GDP %) Statistics 67/71 27 36 60 30 2.9 1.1 80 0.1

Background: the Philippines The Philippines is a tropical archipelago in Southeast Asia with a population of approximately 83 million, increasing at the rate of 2.3% annually, and with a per-capita gross domestic product of US $1,170 in 2004. Over the past 50 years, the country has fallen from a highly promising number two in the region, about to overtake Japan, to next to the last in terms of economic development. The political system of the country can be characterised as an immature democracy [13] with an alleged high level of corruption influencing all spheres of politics and administration [14]. The negative experience with centralised power under dictator Ferdinand Marcos triggered a far-reaching process of decentralisation, culminating in the ‘‘Local Government Code’’ of 1991. The Department Of Health (DOH) was one of the institutions most affected by this process of devolution [15], with around 50% of its manpower and budget and 95% of all buildings transferred from the central DOH to local governments (both provinces and municipalities). Enormous problems in the delivery of health care followed: a weakening of the referral system due to lack of cooperation between health facilities, inadequate technical knowledge at the local level and extremely limited districtlevel management [16]. The situation has been aggravated by the high prices of medicines [17] and almost no control over the performance of hospitals and medical professionals. A wide-ranging health-sector reform agenda was conceived in the late 1990s, with two of its major goals being the establishment of local health care systems and the strengthening of social health insurance [18]. Table 1 summarises key factors influencing the delivery of health

Public health expenditure (2003) (GDP %) Measles immunisation (children \1year, 2003) (%) HIV seroprevalence (population age 15–49 years) (%) Source: [19, 20]

care in the country, whilst Table 2 provides selected health data. Despite these problems, average life expectancy has risen to just under 70 years, and the under-5 mortality rate has dropped and is now on track to achieve the level set by the millennium development goals [21]. The country’s morbidity profile shows a typical transition pattern, with infectious diseases (especially tuberculosis) still prevailing whilst cardiovascular diseases steadily increase [22]. PhilHealth, the country’s social health insurer, covers around 60% of the population, but many of the poor are not adequately covered, and utilisation of benefits (rate of hospitalisation) is still low [23]. Health care expenditures are around 3% of GDP, well below the 5% recommended by the World Health Organisation (WHO). Out-of-pocket expenditures account for 44% of all health-related expenditures [19].

Working on reforms: the project on local health-systems development The DOH, PhilHealth, the province of Southern Leyte and German Technical Cooperation (GTZ) agreed on a project to strengthen the implementation of the government’s


Lessons for health care reform from the less developed world


health-sector reform agenda in a pilot area of Southern Leyte. Three major goals were identified: – Improvement of local cooperation between municipal health officers and hospital doctors: this includes equipment sharing, referral system development, new approaches to hospital planning and joint efforts to stop the exodus of medically qualified personnel. Raising the attractiveness of PhilHealth for voluntary members: PhilHealth benefits are still heavily geared towards hospital treatment and need more emphasis on outpatient care. In addition, there is a need to show members the ‘‘added value’’ of PhilHealth membership, e.g. through direct payment of bills for medicines. Building an alternative distribution system for highquality medicines at low prices: a franchising system has been developed that allows nongovernmental organisation to set up a store for selling over-thecounter and selected prescription-only drugs.

Some methodological remarks Health-related action research has been proposed as a method taken from the social sciences in order to identify the barriers to the uptake of the finding of biomedical research in clinical practice [12]. Such research draws on qualitative methods such as interviews and observations to elucidate organisational and individual factors that shape clinical practice, besides the application of quantitative findings. A similar situation can be described in the case of reforming health care systems. There is a growing body of evidence-based health policy [24, 25], but a systematic uptake is slow and affected by numerous political, organisational and sometime individual factors [4]. Action research usually consists of participation of the researchers, ‘‘democracy’’ in the sense that the researchers work on equal footing with the participants of the study and a contribution both to social change as well as social science [12]. We combined results from qualitative research methods [8] such as participation in discussion forums, interviews with major stakeholders (governors, majors, DOH and PhilHealth officials at central and local levels, and municipal doctors) and had several long discussions amongst the research group to balance the results from our different points of view in order to achieve some form of triangulation. We tried to be as comprehensive as possible in that we simultaneously looked at policy makers and field staff at central as well as local levels concerned with the local health systems development project. Our guiding question was: ‘‘Can factors be identified that support the successful change in health care policy and, if so, can these factors be concisely described?’’

The project was started in Southern Leyte late in 2001. Feedback on the project was and is overwhelmingly positive, but paying lip service cannot be distinguished from true enthusiasm and willingness to change matters. Local politicians often view health care as a means to win votes and thus apply a form of political cost-benefit analysis. Obstacles are manifold: agreements are difficult to implement; transfer of funds is usually delayed for weeks and months; many mayors do not have a clear understanding of health care policies and the advantages of social health insurance; there is a strong tendency to invest in visible, tangible projects such as hospitals instead in training and improved systems; in many cases corruption has to be accounted for when ordering drugs or medical supplies; and the large-scale brain-drain of qualified personnel leads to immense difficulties in recruiting doctors, nurses and local managers.

Strive for local solutions Given the political history of the country, the Philippines started the process of wide-ranging decentralisation as a means to overcome the many hurdles of centralised policy making. Health care was amongst the first and foremost of government functions that were transferred to local governments after the ‘‘Local Government Code’’ had been passed [26]. Local solutions can have many advantages, not least a more rapid response to local needs. However, the risk of corruption and abuse of power remains. The pilot province for the project was chosen after discussions with a number of governors in order to ensure full support. For example, the governor of Southern Leyte responded to our findings about hospital planning and in 2003 organised a conference to tackle this issue in a broad and comprehensive manner. She was able to convince 20 of the 21 mayors in the province to attend a 2-day

Overcoming barriers: the identification of success factors Despite these obstacles, progress has been made. After 3 years we have noticed changes not only in the delivery of care but, more importantly, in attitudes. Health and health care are now more prominent on the political agenda, the provincial governor and municipal mayors have put more emphasis and money into improvement of services and there is a lot of interest from other provinces, as well as from the DOH, on the activities and reforms initiated in Southern Leyte. How did these changes come about? Money from development partners is necessary but by no means sufficient.



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conference on health care issues—something we would have never been able to achieve. The very positive result of the localised approach was certainly influential in designing a new health reform project for the country with funding by the European Commission, which puts special emphasis on supporting health care systems at the provincial level [27]. Shortage of qualified medical and nursing staff is becoming increasingly pressing in the country, especially in rural areas where large portions of the medical workforce train to become nurses in order to be eligible to apply for positions abroad. One of the rural hospitals has been able to attract new doctors against the general national trend. The hospital chief and local politicians did not wait for programmes from the DOH but devised their own local scheme: they provided extra pay (funded by participating municipalities) and teamed up with provincial hospital for continuous medical education and specialist training. These two measures alone proved sufficient to be able to hire new staff. Medicines in the Philippines are expensive and often difficult to obtain, as the hospitals frequently run out of even the most essential medicines. We developed a cash advance mechanism at the level of the local health zone using the reimbursements from PhilHealth in order to pay private pharmacies for drugs availed of by the members not available at government health care institutions (details available upon request). It would have been impossible to develop such a novel mode of financing at the national level, but the high degree of freedom at the regional level for both the DOH and PhilHealth allows for trying out something new and innovative. The scheme has yet to prove its superiority and sustainability but has evoked considerable interest at PhilHealth and has been put on the list of ‘‘training and exposure models for interested international and local partners’’ [28, p. 12].

the discussion but had to respond to the questions posed by the audience (details available upon request). We also employed a geographical information systems specialist in order to visualise the geographical distribution of hospitals and the resulting access (details available upon request). It became very clear to the politicians that three out of the seven hospitals in the province could be closed without a substantial compromise in geographical access. Within a year, two of these hospitals were closed. A third example was the discussion on sending text messages to mobile phones as a means to educate on contraception and family planning. We convened a discussion forum consisting of representatives from the regional DOH, a municipal doctor, the provincial health officer, a political representative of the governor and technical experts from PhilHealth. Although identification of the target group seemed technically possible, a host of substantial problems were voiced that eventually led to abandoning the plan. Major objections included the message could be read by someone other than the intended recipient, families and religious leaders could be irritated by the unsolicited message and could impose sanctions on the network operator, the necessarily short messages could lead to substantial confusion amongst teenagers, even more so as they had to be rather short but tackled a complex topic. This showed us that the use of technology needed to be discussed carefully and that a wide range of stakeholders should be involved up front, especially when contentious issues are debated.

Work on the margins towards pragmatic solutions whilst having your ethical goals in mind PhilHealth is gradually expanding its package of benefits. Making use of cost-effectiveness analysis might be technically appropriate and is now advocated for use in less developed countries [29], but sometimes a not so costeffective intervention might be the better choice if this leads to greater political support. PhilHealth and its predecessor Medicare have responded to public and political pressure when certain technologies (such as dialysis, radiotherapy), medicines (chemotherapy) or procedures (such as cataract surgery) were included into the benefit catalogue. In turn, PhilHealth today enjoys wide support and a comparatively large degree of financial autonomy [23]. PhilHealth established a Health Technology Assessment Committee in 2000 but started to produce health technology assessment (HTA) newsletters in 2003, in which explicit cost-effectiveness considerations were published. Now an HTA forum is published where clinical practice guidelines are presented as a basis for quality assurance and accreditation.

Make use of available technology Even in technical discussions, the attitude of seniority still prevails, meaning that high-ranking officials and administrators usually dominate. We were able to overcome this to a large extent by introducing a technology that allowed participants during a conference about hospital reform to make use of their mobile phones (almost universally owned) in posing questions and comments. The participants were only allowed to send questions via mobile phone to a certain telephone number, which automatically transferred the question onto a computer and displayed it in on a large screen. This not only allowed anonymity but also forced everyone to be brief and concise. The usually dominating political and technical leaders could not lead


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A major issue in PhilHealth enrolment is inclusion of the so-called ‘‘politically indigent’’, i.e. constituents favoured by the mayor and selected to receive 100% government subsidy to cover the PhilHealth premium. At present, an ‘‘alternative means test’’ is being developed for simple yet valid identification of the needy population in order to prevent such political abuse. This alternative means test will be based on the presence of several defined and immediately visible belongings of a family, e.g. certain building materials used in the house, electrical devices, motorbike or car—the presence of which excludes the family from the status ‘‘indigent’’. Sensitivity and specificity is targeted at around 90%. Again, PhilHealth has put this ‘‘alternative means test’’ on the list of models for interested international and local partners [28, p.12]. The guiding principles of the ‘‘National Health Insurance Act’’ are concise and clear in terms of underlying value concepts (e.g. equity, responsiveness, financial stability, professional quality of care). Such a statement of principles, based on the ‘‘Bayanihan’’ spirit, the Philippine equivalent to western ‘‘solidarity’’, is an important starting point when dealing with technical issues. It will always be necessary to make compromises to an ideal and rational social health insurance design with respect to coverage, payments and benefits [4], but such guidelines help PhilHealth to achieve its goals in a difficult environment. For example, in 2004, in preparation for the last presidential election, PhilHealth was tasked by the government with the enrolment of an additional 5 million poor Filipinos, using money from the national lottery. Whilst the political appropriateness of this move could be argued, some highranking managers at PhilHealth looked it at from a different angle and claimed that once people were enrolled and could avail themselves of the benefits, political pressure would be mounted on local politicians to renew the membership in the years to come. Moreover, PhilHealth tries to work with a multitude of stakeholders and capture possible advantage from very different angles of society [30].

Overall health status improved in 2006 compared with 2005. It significantly differs by age and socioeconomic status (‘‘poor’’ vs. ‘‘nonpoor’’), but not by gender. Utilisation of health facilities declined in 2006 compared with 2005. Satisfaction ratings for health facilities have fallen for hospitals (both poor and nonpoor households) but have improved for rural health units (for poor households). Private clinics are most utilised by nonpoor households, whereas traditional healers and rural health units are mostly visited by poor households. More people are utilising health facilities for curative care than for preventive care. Average medical expenditures have increased in the recent years for the nonpoor but have remained stable for the poor.

These results raised a number of questions, most notably, the reasons for improvement in health status whilst utilisation of health facilities has gone down. Moreover, what is the cause of rising medical expenditures, and how does the higher level of PhilHealth reimbursement contribute to changes in health care expenditures for the poor and the nonpoor? Any lessons for developed countries? Clearly, the ‘‘success factors’’ outlined above cannot simply be taken and applied to the process of reform in developed countries. But we believe they describe an attitude and also (cautious) optimism that might stimulate the debate on reforms in industrialised nations. Local solutions could be tried and tested without waiting for central specifications. In Germany, for example, local social policies had been the norm before the Bismarckian reform. Guilds had their funds, and social miners’ and mine employees’ insurance existed since the fifteenth century. Local social projects starting as early as the sixteenth century were specifically meant to benefit the local population. Local solutions allow for more flexibility (within a defined standard) and should reduce administrative rules substantially. In many health care systems, there is the perception that health politics and health policy has to be equally valid for all regions in a country. Why not introduce competition amongst regions? England has gone much further in this respect than most other European countries, but more case studies from other parts of the world might add evidence for a decentralised and locally heterogeneous approach. Technology is useful not only to improve efficiency. For example, it assists in combating fraud by providers and patients, thus securing support for social institutions and strengthening social cohesion. Technology might also allow the lowering of transaction costs involved in eliciting

Current status of the project The GTZ project on local health systems development has been extended to 2008 to work on decentralised health care reform; population management has been included in the scope of the project (see asien-pazifik/philippinen/13658.htm). A large-scale household study [the Baseline and Monitoring Study (BMS)] was conducted in 2006. It provides some preliminary data on the quantitative changes in local health care delivery (unpublished, details available upon request):



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public preferences, hence strengthening the vital role the public can play in decisions about health care planning and even rationing. Although technology comes at a price, we got the impression that it is often easier to obtain additional funding for such a project than to ask for an immediate change in administration or in the political balance of power. An important caveat remains: technology cannot remedy inadequate structures and processes [31]. Pragmatism and practicality could help to overcome the still prevailing idea that health care planning has to cover all eventualities and that regulation needs to specify in detail every conceivable option. More leeway and more (local) freedom might lead to unintended effects but might also bring some very much wanted fresh ideas in that providers, health insurers or new entrants into the market might want to capture emerging arbitrage and business opportunities. Moreover, an initial law might create a dynamic situation that leads to more responsive market structures. An illustrative example comes from Germany, where federal legislation in 1993 allowed citizens to choose freely amongst sickness funds and thus led to competition between the funds. Despite rather strong regulation, the sickness funds were quick to introduce new services to patients and the insured in order to increase their market share. Furthermore, the increased competition led to a huge wave of mergers, and after some 12 years, only around 20% of the funds of 1992 are still independent. A direct legislation aiming to reduce the number of funds would most likely not have been politically feasible. The current focus on economic efficiency has somewhat overshadowed the discussion about ethical goals and principles in health care. The discussion about the inclusion of ‘‘equity’’ into cost-effectiveness analysis highlights the shortcomings of the welfare maximisation approach. Simple phrases about ‘‘solidarity’’ or ‘‘building social capital’’ will do neither. A general discussion about values might give good guidance in balancing competing interests in health care reform. Reformers might be well advised to regularly contemplate the ethical underpinnings of their work. We believe the experience of health care reforms in resource-poor settings can stimulate and refresh the reform debate in industrialised countries, if only to show that even in very difficult economic and political environments, individual efforts can make a difference. Summary points At present, experiences in health care reform are usually transferred from developed to less developed countries. Reports on experiences in low-income settings should be published with the aim of stimulating debate in rich

countries—qualitative research might serve as an appropriate methodology and approach. Experience from the Philippines indicates that factors can be identified that seem to improve reform prospects in a challenging political and economic environment. We suggest consideration of these factors to stimulate and inform health care reform in developed countries.
Acknowledgments The authors thank Dr. Maria Ofelia Alcantara, Dr. Eduardo Banzon and Dr. Claude Bodart for their stimulating discussions. The views expressed here, however, are entirely the authors and do not necessarily reflect the views of the institutions we work for. We also wish to thank two anonymous referees for very helpful comments. Conflict of interest and funding KO was a long-term advisor for GTZ Health in the Philippines between 2002 and 2004. MRJ works for GTZ Philippines as an advisor to PhilHealth and holds a visiting research position at the Department of Health Sciences, University of York, UK. JDT is responsible for the development of local health systems at the Department of Health. MCM is senior vice president, operations, for PhilHealth. There was no specific funding for writing this paper; no institution has had any influence in the preparation of this manuscript.

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