Marcos backs zero subsidy for PhilHealth in 2025

By Kyle Aristophere T. Atienza and Kenneth Christiane L. Basilio, Reporters

PHILIPPINE President Ferdinand R. Marcos, Jr. on Monday justified a bicameral conference committee (bicam) move to remove the government’s subsidy for the state health insurer under the proposed 2025 national budget, citing the agency’s reserves.

This comes even as financial experts warned that the agency’s fiscal health is deteriorating.

The Philippine Health Insurance Corporation (PhilHealth) “has a P500-billion reserve and the cost to provide their services in 1 year is less than P100 billion,” Mr. Marcos told reporters at the presidential palace.

“The reason why we do not want to subsidize (PhilHealth) [is] because the subsidy will just sit in its bank account and won’t be used,” he said in mixed English and Filipino.

“So that’s a simple explanation there.”

Mr. Marcos said PhilHealth has been efficient in providing services for its members, citing increases in its coverage for cancer patients. “We are attending to more people.”

He claimed that the problem hounding the agency is its low “processing capacity,” which he said could be addressed through “digitalization” efforts.

“They have sufficient funds to carry on,” Mr. Marcos said, reiterating that the agency does not have a problem in providing insurance coverage for its members.

The reserves that PhilHealth has were also cited by bicam members in defunding the state insurer, but financial experts told BusinessWorld on Sunday that these were way below the required provision for its projected liabilities beyond two years.

According to Section 11 of the Universal Health Care Act of 2019, the total amount of PhilHealth reserves “shall not exceed a ceiling equivalent to the amount actuarially estimated for two years’ projected program expenditure.”

If actual reserves exceed the required ceiling at the end of the fiscal year, the excess “shall be used to increase the program’s benefits and to decrease the amount of members’ contributions,” it added.

Reacting to Mr. Marcos’ first remarks following the defunding of PhilHealth, University of the Philippines Los Baños Senior Lecturer of Money and Banking Enrico P. Villanueva said: “It is deplorable that our own government is not telling the complete picture about PhilHealth.”

“It is already balance sheet insolvent with assets lower than liabilities,” he said in an X message, adding that PhilHealth’s members’ equity has already decimated and is already negative.

PhilHealth may “carry on” for a few years but “it cannot last long if the government refuses to pay the premium for non-paying members and passes the universal health care burden to paying members,” Mr. Villanueva said.

“What the government is doing to PhilHealth is unconscionable.”

The Sin Tax Reform Acts of 2012 and 2019 mandated the government to allocate 80% of revenues from tobacco products and sugar-sweetened beverages for PhilHealth to fund the country’s universal health care program.

A reserve fund is neither a saving nor an excess fund that can be taken away, Mr. Villanueva said.

“In the same way the Government Service and Insurance System (GSIS) and Social Security System (SSS) are supposed to build reserves for pension, PhilHealth is supposed to build reserves for future insurance liabilities,” he added.

He said PhilHealth, GSIS, and SSS all have negative reserves “because of mismanagement through the years where additional benefits are promised without adequate funding and reserve setting.”

“International accounting standards which our government adopted required that reserve maintenance,” he said. “Government has a poor record of following insurance best practice.”

The health insurer transferred P20 billion and P10 billion of its unused funds to the Bureau of the Treasury on May 10 and Aug. 21, respectively, in compliance with a Department of Finance circular.

Another P30 billion was remitted to the national treasury on Oct. 16, while the final tranche, scheduled in November, was halted as the transfer is being challenged by members of civil society and former government officials before the Supreme Court.

Health Secretary Teodoro J. Herbosa, who sits as chairperson of the PhilHealth Board of Directors, said should the President sign the Congress-approved budget, PhilHealth would still have a P150-billion surplus from its 2024 budget.

That could pay for the subsidy of indirect members, who should be subsidized with the amount of P5,000 each, he said at a flag ceremony at the Department of Health on Monday.

If there are 16 million indirect members, he said PhilHealth has more than enough from its P150-billion surplus to pay for the estimated P80-billion subsidy next year.

Several senators including Senate President Francis Joseph G. Escudero have criticized the agency for its supposed inefficiency in using its funds in the past.

Senate Finance Committee Chair Mary Grace Llamanzares-Poe, who is also a bicam member, said in a statement on Monday that “working with finite resources to fund infinite needs is not an easy choice.”

“But what we have reflects the careful decisions made within the constraints we face,” she added. “We reiterate that the education sector remains a priority, as we have increased the budget for students and teachers.”

DEPED BUDGET CUT
Among the key issues hounding the Congress-approved national budget are the cuts for the budgets of agencies in the education sector, which the 1987 Constitution said should have the highest allocation in the annual spending plan.

Mr. Marcos said the allocation for the education sector was “contrary to all our policy direction” for STEM (science, technology, engineering, and mathematics) development, citing the P10-billion cut from the proposed computerization program of the Department of Education (DepEd) for 2025.

“We’re working on it to make sure that we will restore it. I do not want to line-item veto anything because that just gets in the way,” he added. “We’re still talking about it and trying to find a way.”

“And I think we’ll still be able to do it, to be able to do something,” he added, noting that they were working for the fixing of the P12-billion budget cut for DepEd.

When asked by BusinessWorld how exactly his administration plans to fix the education budget in the Congress-approved budget, Mr. Marcos said: “Let’s leave it to them. I don’t want to have that discussion here.”

“We’ll have that discussion with the bicam essentially and the leaders of both Houses.”

The post-dictatorship 1987 Constitution gives the President the power to exercise line-item veto in an appropriation, revenue, or tariff bill “but the veto shall not affect the item or items to which he does not object.”

Congress may reconsider the veto by a vote of two-thirds of all the members of the House.

Experts earlier said a line-veto may not cure budget cuts made by bicam members.

DepEd reported an obligation rate of 41.9% as of August, ranking 11^th among government agencies in terms of budget utilization.

But DepEd’s was still higher than that of Congress, which had the lowest obligation rate at 8.8%.

Education Secretary Juan Edgardo “Sonny” M. Angara earlier hit the budget cut, saying in an X post on Monday, “It seems the congressman wants us to sink even lower.”

CONSTITUTIONALLY SOUND
The Congress-approved budget bill is constitutionally sound, lawmakers said on Monday amid concerns that the spending plan violated the 1987 Constitution by having more funding for the Public Works department than the country’s education sector.

Party-list Rep. Jude A. Acidre said the proposed P6.352-trillion national budget still prioritizes the education sector, compliant with a constitutional provision obliging the government to provide the “highest budgetary priority” to the country’s school system.

“If you put all together the sums… of the CHED (Commission on Higher Education), SUCs (State Universities and Colleges), TESDA (Technical Education and Skills Development Authority) and others, and if we include infrastructure projects related to the education sector, our allocation for education is still significant,” Mr. Acidre, a member of the House of Representatives’ contingent to the budget bill’s bicameral conference committee, said in a media briefing.

“There is jurisprudence saying that budgetary priority is not equal to the highest budgetary allocation,” he added.

The Supreme Court in 1991 ruled that lawmakers have the authority to grant higher allocations to other agencies for the sake of “national interest.”

Analysts last week flagged that the proposed national budget for next year could have violated the Constitution as it boosted funding for the Public Works department by 29.7% to P1.1 trillion from P825 billion, dwarfing the total allocations for the education sector.

Allocations for the education sector amounted to P912 billion, with the Department of Education receiving P737 billion of the total. About P122 billion was provided to SUCs, with P33.3 billion allocated to CHED; while P20 billion was granted to TESDA, according to a copy of the budget bill signed by the bicameral conference committee.

“We can’t just sum it up per agency. It doesn’t work that way. We have to look at the entirety of the allocations provided for the education sector,” Mr. Acidre said in Filipino.

Zambales Rep. Jefferson F. Khonghun said that some of the funding allocated for the Public Works department would be used for the construction of infrastructures needed by certain government agencies.

“Many projects are included under the Department of Public Works [and Highways], such as hospitals… as well as funds for high school buildings,” he said in Filipino during the same briefing.

Ms. Poe also maintained that education remains a priority for the Marcos administration as they “increased the budget for students and teachers.”

In a separate statement on Monday, minority bloc congressmen urged both the leaders of the Senate and the House to reconvene its bicameral conference committee on the budget bill, citing “misplaced priorities” over the shifting of allocations in the Congress-approved proposed spending plan.

“We call on the leadership of both the House and Senate to address the growing public outrage by immediately reconvening the bicameral conference committee. The bicameral must restore the slashed budgets for social services and remove all pork barrel allotments in infrastructure projects,” the joint statement by Party-list Reps. Arlene D. Brosas, France L. Castro and Raoul Danniel A. Manuel read.

Lawmakers should hold the bicameral conference committee open to the public to ensure full transparency in the proceedings, they added.