Vol. XVII No. 4 July - August 1999 ISSN 0115-9097

DOH presents agenda for health care financing

ajor changes in health and local --- spent P34.1 billion or 38.6 the inequities obtaining in the health care financing policies percent while the National Health In- system. “Only those who can afford to are being pursued and surance Program (NHIP) which re- pay are able to support such a system,” Mshall be implemented as placed the Medicare Program spent he said. part of the Department of Health’s P6.4 billion or 7.1 percent. The rest of (DOH) overall effort to reform the the total health expenditure – P7 bil- Second, financing for public health health sector. lion or 8 percent -- came from various programs is subject to the uncertainties of other sources. the annual budget process. Secretary In a roundtable discussion spon- Romualdez pointed out that national sored recently by the DOH and the Based on these figures, one can = 2 Philippine Institute for Development glean some of the problems associated Studies (PIDS), Health Secretary with the manner by which health care Alberto Romualdez expounded on funds are generated. First, the bulk of EDITOR'S NOTES these reforms in his presentation en- the financial burden is on individual fami- titled “An Agenda in Health Care Fi- lies. As Romualdez noted, this leads to For the past couple of years, health nancing for the 21st Century.” Said care financing has been one of the major agenda is being presented to various topics for research and advocacy being sectors for feedback and further refine- WHAT'S INSIDE jointly addressed by the Department of ments. Health and PIDS. It started with the project “Baseline Studies for Health Care Financing Reforms” which gathered basic Romualdez said that the policy 3 New health financing agenda to information on the subject and came up reforms on health care financing have reduce financial burden on with 24 studies, many of which had, been undertaken in order to improve families through the past three or four years, the performance of the health sector. 4 Health as a right: Free for all? contributed to the formulation of health Furthermore, the many problems in 4 Local health systems to be financing policies in the country. At the strengthened under new health very least, the findings of these studies the way health care funds are currently added inputs to the debates regarding being generated and spent give impe- agenda 5 Public health programs to be various health policies. tus to the efforts to effect changes. Fig- intensified ures cited by the Secretary revealed that In this special issue of the DRN, we 5 Cost escalation: A major in 1997, total health spending give due prominence to a document that problem in private health care seems to be a natural consequence of all amounted to P88.4 billion. From this, system the earlier efforts and initiatives in the area out-of-pocket payments from families 6 An agenda in health care of health care financing reform --the and individuals accounted for P40.9 financing for the 21st century DOH’s “Agenda in Health Care Financing st billion or 46.3 percent of the total 12 DOH hospitals to be reformed for the 21 Century.” amount. Government --- both national = 10 DEVELOPMENT RESEARCH NEWS 2 July-August 1999 line agencies such as the DOH have to for instance, approximately 75 percent pointed out that the 10 percent being contend with the annual budget of the P88.4 billion total health spent on overhead (administrative) negotiations with the Budget expenditure went to personal health expenses is not enough, contributing Department and Congress before care services whereas only about 15 to the poor management of the health getting financial support. This should percent was spent on public health system. be addressed because for public health services. The remaining 10 percent programs to be effectively went to administrative expenses. In view of these problems, what implemented, sustained funding over Clearly, the 75-15 ratio indicates the changes in health financing policy does a number of years is required. first problem: not enough is being spent the DOH plan to effect? Romualdez on public health services. The Secretary bared the following 5-point agenda Third, financing from local also noted that local health spending in which tackles general areas of reforms in government sources is limited due to the primary health care was not very effective order to address these problems. uneven capacities of local government units since devolution led to a fragmentation (LGUs) and Internal Revenue Allotment in the district health systems. Third, 1. Provide fiscal autonomy to (IRA) mismatch. The amounts of IRA subsidies for hospital care from the national DOH hospitals – In particular, DOH received by various LGUs are not health budget are poorly targeted. This is hospitals must be allowed to collect commensurate to the costs of health manifested in the concentration of socialized user fees so they can reduce functions devolved to them which leads major hospitals in large cities like their dependence on direct subsidies to the inequitable distribution of Manila, Cebu and Davao, leaving many from the DOH. They should also valuable funds. All of these problems people in the peripheral areas not able upgrade their “critical capacities” like contributed to the fact that the drive to avail of their services. Fourth and diagnostic equipment, laboratory and towards expanding a truly effective last, not enough is being spent on developing medical staff in order to effectively NHIP has been set back. administrative capacities which led to low exercise fiscal autonomy. The absorptive capacities, particularly with Department shall also provide for There were also some problems respect to public health programs at institutional arrangements such as on how these funds were spent. In 1997, the local level. Secretary Romualdez 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 discus- sion were Dr. Mario B. Lamberte (PIDS acting president) and Dr. Alejandro Herrin (professor at the UP School of Economics). DEVELOPMENT RESEARCH NEWS 3 July-August 1999 corporations to give them efficient autonomy without compromising their New health financing agenda social responsibilities. These moves “should make DOH hospitals more competitive and responsive to health to reduce financial burden needs.” on families 2. Secure funding for priority public health programs – Upgrading ndividual families need not Clearly, these figures show gross the management infrastructure is one shell out large sums of money inequality in that families and of the most important priorities as it for health care, if the new individuals are shouldering majority of will enhance the ability of public health agenda for health care the burden of health care services by programs to absorb funds. A multi-year I financing policy being proposed by paying for them directly. Furthermore, budget for eradicating communicable the Department of Health (DOH) they are apparently spending the diseases and investments on new for the new millenium will be money more on hospital treatments as programs to address emerging health approved and undertaken. is evident in the fact that 75 percent of programs are also priorities. Emphasis the total health expenditure were spent on health promotion and prevention Aside from improving health for curative cases while the government shall likewise be made. The DOH is outcomes, this is perhaps the most only spent 15 percent of the total bent on improving its technical significant effect that the agenda health expenditure for public health leadership over local health systems by hopes to achieve, according to programs. forming a center for disease control to Health Secretary Alberto harness R&D capabilities. Romualdez, in his presentation of To reallocate the burden of the various policy reforms that the spending for health care from 3. Strengthen the capacity of Department is embarking on. individual families, the DOH will DOH regulatory agencies – This move strongly push for reforms in certain should ensure quality care in both areas of health financing. public and private facilities. Specifically, gaps in health regulations in terms of "... a lot more is expected from the The reforms target an overall human resources, facilities and NHIP whose share of the burden reduction in the family’s spending on equipment must be identified to health care from the present 46 guarantee that health facilities have the should rise considerably, from 7 to percent to 10 percent. On the other technical capacity to deliver needed 34 percent while the share of hand, a lot more is expected from the health services. Related to this, the private health insurance should NHIP whose share of the burden capacity of major regulatory and should rise considerably, from 7 to 34 licensing institutions like the Bureau also gain threefold..." percent while the share of private of Food and Drugs shall be enhanced. health insurance should also gain Lastly, mechanisms to assess and threefold, from 3 percent to 10 regulate technological innovations that percent. Lastly, the government’s share may have health implications shall also A big bulk of the P88.4 billion should go up to 46 percent. be developed. total health expenditure in 1997 was shown to have come from direct, out- If all of these targets are achieved, 4. Leverage for the formation of-pocket payments of individual the overall health spending is likely to and effective performance of local families -- a total of P40.9 billion or increase, perhaps reaching the five health networks (i.e., district health 46.3 percent of the total -- while percent of GNP that the World Health system) – Romualdez pointed out that government’s share of the pie Organization (WHO) is the need to improve the performance amounted to P34.1 billion or 38.6 recommending for developing of local health systems is important percent. The National Health countries such as the Philippines. On especially in areas where LGUs do not Insurance Program (NHIP) which the whole, too, better and more access have technological or financial replaced Medicare shouldered P6.4 to health services should be made resources. For this, a fund for billion or 7.1 percent and the available to the people, with lesser upgrading local health facilities shall remaining P7 billion or 8 percent burden on the part of individuals and = 10 came from other sources. families. DRN DEVELOPMENT RESEARCH NEWS 4 July-August 1999

he argument goes that if health is a basic right in the Health as a right: same way that education is, T then health services should Free for all? also be free.

This was one of the issues He said that there should be a free. Otherwise, he said that people brought up and discussed during the consensus to resolve the fundamental may also demand that food be pro- open forum of the roundtable discus- issue of health as a right since questions vided free since nutrition is likewise sion sponsored by the Department of may arise out of the agenda’s aim to a basic right. The government’s re- Health (DOH) and the Philippine In- “corporatize” or tranform DOH-re- sponsibility is only “to cause health stitute for Development Studies tained hospitals into public corpora- services to be made available but not (PIDS). tions in order to boost their financial necessarily to produce or finance it.” autonomy and at the same time allow However, he also noted that there are Rhais Gamboa, president of them to fulfill their social obligations services that government may provide Aetna Philippines, a private multina- as public entities. at a very high subsidy especially to the tional health insurance company, poor. Still, he said someone has to raised the issue and said further that Secretary Romualdez responded eventually pay for them. It is only un- considering the figures involved in by saying that health should not just fortunate that it is the individual fami- health care expenditures, “obviously, be thought of as a right “but also as a lies who do most of the paying at health is not free since it is ultimately social good that has to be paid for by present, usually directly from their funded by the individual and the re- someone.” In this regard, it is usually pockets. sources are finite.” In view of this, he the user who pays in various ways – ei- asked if the new agenda on health ther directly or indirectly through It is in light of this reality that care financing will include the recog- taxes. Part of the revenues collected is the proposed agenda seeks to reform nition of health as a right in the con- then allocated as health budget of na- and strengthen critical areas in the text of limited resources. In particu- tional agencies and local governments. health care system. Health as a right lar, he inquired on whether it would may not mean free services but with be possible to identify which services For his part, moderator Dr. the agenda, steps toward easing the may be free of charge and where they Alejandro Herrin said that health as a burden on individual families are may be provided free. basic right does not mean it should be being taken. DRN

this fund to leverage for the establish- Local health systems ment of local health networks. Three is to promote and encourage cost-shar- to be strengthened ing among local government units (LGUs) to strengthen their respective under new health agenda health financing programs. And four is to provide incentives to the private sector to entice them to participate in enhancing the local health networks. he new health financing and programs that are found in a agenda being espoused by locally-governed area. The inclusion of local health the Department of Health systems as one of the areas of reform T(DOH) seeks to strengthen The agenda includes four ways by in the new health agenda is significant the capacity and efficiency of local which local health networks are to be since the devolution of government health systems as a way of reforming reformed and enhanced. One is to es- functions, including health care, seven the health sector in the country. Local tablish a fund to upgrade local health years ago as mandated by the Local health systems include public and facilities and improve their capability = 11 private health facilities, health services to serve their constituents. Two is to use DEVELOPMENT RESEARCH NEWS 5 July-August 1999

Public health programs to be Cost escalation: intensified A major problem in private health care system

he Department of Health (DOH) shall prioritize and he rising cost of medical Health Secretary Alberto invest more on public health treatment in private Romualdez acknowledged that in- programs as one of its major hospitals should be deed, cost escalation is a major prob- T addressed by the lem in the health care delivery system reform agenda to enhance health care T financing in the country. government if its proposed health wherein the government is at times care financing reform agenda is to even contributing to by not provid- Health Secretary Alberto succeed. ing viable alternatives. Romualdez said that with the Department’s move to scale down its Thus declared Benito However, Secretary Romualdez budgetary support for its retained hos- Reverente, president of the Associa- offered hope that with the proposed pitals and other expenditures, the tion of Health Maintenance Organi- agenda, cost escalation may perhaps DOH will focus more on establishing zations in the Philippines, during the be arrested. In particular, turning and intensifying public health pro- open forum of the DOH-PIDS DOH-retained hospitals into public grams. Such programs have been roundtable discussion. corporations and improving the ben- shown to require lesser amounts of efits of the national health insurance funds while benefiting more people. Dr. Reverente revealed that be- program (NHIP) may provide the Yet, figures provided by the DOH re- cause of the economic crisis brought needed alternative. Enhancing the veal that more money are spent on about by the Asian currency prob- NHIP is critical in this case since a personal health care services (indi- lem, hospitals arbitrarily increased strong health insurance program vidual care which mostly involves hos- their rates. Some of these hospitals gives government the leverage to bar- pitalization) than on public health ser- have also raised their drug mark-ups gain with health care providers with vices. Clearly, the discrepancy warrants to as high as 80 percent over retail respect to drug prices and service a more aggressive thrust toward better prices in commercial drugstores. He costs. This should also solve the prob- public health care programs. also reported that some medical spe- lem posed by medical specialty soci- cialty groups are conniving and re- eties which insist on higher fees. The DOH proposes five ways to fusing to see patients unless their Eventually, though, a national arbi- enhance public health programs: fees are duly paid. In view of these tration mechanism is needed to de- incidents, Reverente asked if there termine how much cost escalation in One, upgrade the management is a law similar to a restraint of trade the private health sector the govern- infrastructure. One of the most that will prevent such practices. ment may allow. DRN important priorities of the Department is the enhancement of management capacities in order to improve the ability of public health programs to lished for disease control programs Three, invest in new programs to absorb and allocate funds. In particular, such as tuberculosis, malaria, polio and address emerging health problems new skills and approaches shall be others. A multi-year budget for disease such as adult health and environmen- developed to implement and transfer control shall be put in place and ac- tal health concerns, to name a few. national programs to autonomous local cess to this budget shall be based on Funding shall likewise be obtained for health systems. the recipient’s performance. It is im- this purpose. portant that the funds for this purpose Two, secure funding for a period be protected and preserved from the Four, increase spending for long enough to eradicate communi- uncertainties of the annual health bud- health promotion and prevention. In cable diseases. Funding shall be estab- geting process. = 11 DEVELOPMENT RESEARCH NEWS 6 July-August 1999

his gathering is part of a consultative process to arrive An Agenda at an agenda for reform in Tthe health financing sector in Health Care Financing in particular and in the health sector in general. for the 21 st Century 1 In presenting the agenda on by health care financing, I will begin by Hon. Alberto Romualdez giving an overview of the performance of the health sector, after which I shall Secretary of Health 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 around 20 which is very close to the individual care, a lot of which involves spending the money on health and norm of developed countries while hospitalization; and another is public how health funds are being generated. there are parts of Samar and Mindanao health services which are aimed at fami- Finally, I shall present a health spend- where the mortality rates are still close lies and communities rather than the ing pattern proposal that will hopefully to or a little over 100 which is the IMR individual sick person. Personal and bring in improvements in health sec- of least developed countries. public health services consumed by tor performance. families are financed through various We still have, as main causes of sources but ultimately come from fami- Health sector performance on a morbidity, infectious and communi- lies and individuals. To some extent, declining trend cable diseases. The top five are diar- employers also make major contribu- rhea, bronchitis, influenza, pneumonia tions. To begin with, how has the health and tuberculosis (TB). Even as commu- sector performed? We have evidence nicable diseases remain prevalent, we Total annual health spending not that the momentum for the improve- now have the increasing burden of enough ment of health status indicators acute and degenerative diseases. We throughout the country which basically still need to take concrete steps to ad- How much do we spend for began in the 1960s and 1970s has some- dress emerging health risks which will health care? how declined. mainly affect working-age population. In addition, we also need to be address- In 1997, P63.5 billion was spent One evidence is that the rate of ing environmental degradation as a by- on personal health care services. This decrease in infant mortality and mater- product of development, urbanization amounts to a little over 75 percent of nal mortality – two of the basic health and industrialization. total health expenditures. For public indicators – has considerably slowed health services, we spent a total of P12 down. Recent data show that this is true In looking at how financing af- billion, representing a total of 15 per- especially from the end of the 1980s to fects the performance of the health cent of the total health expenditures. the middle of the 1990s and as we ap- sector, let us start with the family. At We also spent P13 billion for overhead proach the 21st century. Furthermore, any given year, family members may fall expenses needed to run the system. infant mortality rates (IMR) in the ill and require health services. Approxi- Overall, we spent about P88 billion for provinces show large differentials. This mately 26 percent of all families will health care, representing 3.5 percent is true not only for IMRs but also for require such services during the year. of GNP in 1997. Said amount is short all other status indicators. The government as well as private of the 5 to 6 percent recommended by health care providers deliver a range the World Health Organization as a For example, in 1990 and 1995, of personal health services to address standard for health expenditures in de- the top five high mortality provinces the family needs and health conditions. veloping countries like the Philippines. had IMRs twice as high as the five low- This, despite the analysis of the 1991- est mortality provinces. More con- There are two classes of such 1997 national health accounts done by cretely, Metro Manila has an IMR of health care services: one is personal or a team of researchers from the U.P. DEVELOPMENT RESEARCH NEWS 7 July-August 1999

School of Economics and the National major hospitals in Manila, Cebu and lion, an amount higher than that in Statistical Coordination Board which Davao where the facilities serve mainly 1991. Over 50 percent of this amount, suggests that during this period, health the people in the contiguous however, was spent on 48 retained fa- spending has increased in real and per geographic areas, leaving many people cilities (DOH hospitals) that are largely capita terms. in peripheral areas unserved. Fourth accessible only to residents of big cit- and last, not enough is being spent on ies and rich provinces. Around 17 per- There are indicators which sug- developing administrative capacities cent of total spending was financed gest that we are not spending enough. which has led to low absorptive through local health projects. Spend- At the same time, it has been suggested capacities, particularly with respect to ing from local sources is growing more by certain quarters that we are also not public health programs at the local rapidly than any other source. In fact, spending the money effectively. level. The 10 percent being spent on the levels are much higher than the overhead expenses is inadequate, initially-estimated cost of devolved In what sense and how? resulting in poor management of the health services. This is why some local health system. government units (LGUs) which took Problems in health care spending over some of these expenditures are Sources of funds: families bear having problems. There are a number of problems brunt of health care financing relating to health spending mentioned Meanwhile, the national health in the research analysis. Where does the money come insurance program (NHIP), now being from? implemented by the Philippine Health First, not enough is being spent Insurance Corporation (PHIC), on public health services from national Out-of-pocket expenses consti- accounted for only 7.1 percent of total sources. Second, local health spending tute 46 percent of the total amount health spending. In 1991, the then in primary health care is less effective spent in 1997. This means that the fi- NHIP (Medicare) accounted for 9.1 because of the fragmentation of the nancial burden is basically on families. percent of total health spending. The district hospital systems brought about In 1997, too, the national government share of the social health insurance by devolution seven years ago. Third, accounted for P18.6 billion of health system has therefore gone down. subsidies for hospital care from the care expenses or 21 percent of the to- national health budget are poorly tal. This translates into a Department From the above distribution of targeted. There is a concentration of of Health (DOH) budget of P13.2 bil- 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 Health Secretary Alberto afford to pay are able to support such Romualdez shares a light- a system. Another problem is that hearted conversation with financing for public health programs PIDS Acting President Dr. is subject to the uncertainties of the Mario Lamberte and annual budget process. Financing from DOH-Health Policy De- velopment Staff (HPDS) local government sources is also limited Program Manager Ms. by uneven capacities and the Internal Maylene Beltran. 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. = 8 DEVELOPMENT RESEARCH NEWS 8 July-August 1999

the DOH even after the devolution of such as TB, malaria and polio. Said An agenda in health... health care functions to LGUs) should fund needs to be insulated from the From page 7 reduce their dependence on direct sub- uncertainties of the annual health bud- sidies from the DOH budget by intro- geting process. A multi-year budget for ducing socialized user fees. Critical ca- disease control should be put in place pacities like diagnostic equipment, and access to this budget should be Policy reforms: reinforcing critical laboratory and medical staff should also based on performance. Funding to areas be upgraded to enable these hospitals address emerging health problems to effectively exercise fiscal autonomy. such as adult health and environmen- However, we are still looking at ways to tal health concerns is also required. What should we thus change in raise funds before giving hospitals The development and support for new health financing policy? more autonomy so that they will be programs that promote healthy ready to provide services that people lifestyles and work environments are First, we must provide fiscal au- are willing to pay for. As hospitals be- also required. We must improve the tonomy to DOH hospitals to make come more competitive and autono- technical leadership of the DOH by them more competitive and responsive mous, subsidies from the DOH should giving it better access to information, to health needs. Second, we should use progressively decline. The DOH should better knowledge about new technolo- these freed-up resources from the provide for appropriate institutional gies and new interventions. To achieve DOH budget for other priorities such arrangements such as the conversion this, we are proposing to put together as public health spending wherein in- of these facilities into public corpora- all the disease control programs in the vestments are needed not only to ex- tions to allow them efficient autonomy communicable disease areas into one pand coverage but also to improve its without compromising their social re- center for disease control which will 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 tech- "Reforms in these five areas are interconnected. For example, NHIP nical leverage of national bodies to improve the potentials of local health reforms will make autonomy viable; hospital reforms, systems. And fifth, we have to reform in turn, will free up resources for investment in public health..., etc." the national health insurance program in order to make it the major payor of personal health services. sponsibilities. A term we use is harness both the research and program Reforms in these five areas are corporatization. To undertake these re- development capabilities that are now interconnected. For example, NHIP forms, we need to establish a fund that in separate areas of the DOH. reforms will make autonomy viable; may be sourced from unallocated re- hospital reforms, in turn, will free up sources in ongoing DOH projects plus On regulatory functions, we need resources for investments in public counterpart contributions from cities to identify gaps in health regulations health and in regulation at both na- where the facilities serving local needs in terms of being able to produce and tional and local levels; and good pub- are located. distribute human resources for health lic health programs should relieve the in a much better way. We must ensure NHIP from the burden of having to pay On public health programs, one of that health facilities have the technical an increasing number of curative ser- the most important priorities is the capability to deliver needed health ser- vices and be able to address diseases upgrading of management capacities vices. We also have to make sure that that are highly preventable. in order to improve the ability of pub- products such as pharmaceuticals are lic health programs to absorb funds. In of the quality and quantity required by The five areas of reform: A closer particular, new skills and approaches the majority of our people. As an aside look have to be developed to implement in this area, we have embarked on a national programs in autonomous lo- revitalized implementation of the na- DOH hospitals (facilities that con- cal health systems. There should be tional drug policy which was initiated tinue to be controlled and operated by funding for disease control programs in 1988. Not surprisingly, of course, we DEVELOPMENT RESEARCH NEWS 9 July-August 1999

are encountering the same problems likewise have to develop an administra- as in 1988. We also need to assess the tive infrastructure in the PHIC that will requirements for new health devices be able to handle the increased and technologies. We have to workload. The PHIC has already begun strengthen the capacities of major in- to establish local health insurance of- Vol. XVII No. 4 July-August 1999 stitutions such as the Bureau of Food fices to decentralize activities. We are and Drugs and other agencies for stan- also seriously working on a computer- Editorial Board dards and regulations so that we can ized system for greater efficiency not have a better regulatory environment only in collecting premiums and pay- Dr. Ponciano S. Intal, Jr. and a better licensing process. Finally, ing benefit claims but also in collect- President (on leave) we need to have a mechanism to assess ing data that can be used for improve- and regulate technological innovations ments in the provision of services. Dr. Mario B. Lamberte Acting President that influence health. One example is the microwave technology being used Expected outcomes Mr. Mario C. Feranil almost everywhere. We should be able Acting Vice-President and Director for Project Services and Development to assess the long-term effects of being How do we envision the health in an environment where microwave financing scenario in the next five Ms. Jennifer P.T. Liguton ovens are used a lot. Another example years? Director for Research Information is laser which is used even with toys. Ms. Andrea S. Agcaoili These two have health implications. Spending on personal health ser- Director for Operations and Finance vices should somewhat drop – from 75 Atty. Roque A. Sorioso We need to improve the perfor- percent to 65 percent of the total. Out- Legal Consultant mance of our local health systems. This is of-the-pocket spending by the family especially seen in areas where the lo- should drop from 46 percent to 10 per- Staff cal governments do not have techno- cent. This is probably the most signifi- logical or financial resources. For this, cant effect that we hope to see. Spend- Jennifer P.T. Liguton we are proposing to establish a fund ing by private insurance companies on Editor-in-Chief targeted at upgrading local health fa- personal health care should double Barbara F. Gualvez cilities. This fund will be used to lever- from 2 to 7 percent. Spending on per- Guest Editor age for local health networks so they sonal health care by the NHIP should can work with each other. We shall also Liza P. Sonico, Corazon P. Desuasido also increase from 5 to 30 percent while Joel C. Cruz, Edwin S. Martin promote cost-sharing among LGUs and government spending on personal and Jane C. Alcantara provide incentives for the private sec- health should drop from 20 to 18 per- Contributing Editors tor to participate in local health net- cent. The latter remains a major com- works. Valentina V. Tolentino ponent of total health expenditures Rossana P. Cleofas because there will always be clashes of Exchange Finally, we have to improve the intervention and illnesses which indi- NHIP. The first step is to increase ben- viduals will be hard put to spend for Delia S. Romero, Galicano A. Godes, Necita Z. Aquino, Lilet L. Lamayo efits to make the program more attrac- and which the PHIC cannot rationally tive. Initially, we are simply increasing and Federico D. Ulzame provide benefits for. Circulation and Subscription the peso value of the existing benefits but this is not enough. Our current On public health spending, we Genna J. Estrabon Lay-out and Design benefits are limited to paying hospital- would like to see a total increase from ization costs. We have to develop pack- 15 to 20 percent. There is no public ages which will not continue to encour- health spending expected from the age overutilization of hospital facilities. family, private insurance and the NHIP. which will cost money but which will We have to use the improved benefits Thus, the increase will come basically not be accounted in this system. Finally, to aggressively enroll more members from government spending. This is for overhead expenses, we would like to cover most of our population. With making very strict definitions as to what to see an increase from 10 to 15 per- better benefits and more members, we constitutes public health care because cent of the total. This would represent can ensure good quality and adequate hospitals can engage in some public the increase in expenditures from one financing as well as check abuses. We health activities like health promotion = 11 DEVELOPMENT RESEARCH NEWS 10 July-August 1999

the increased workload. Romualdez DOH presents... revealed that the PHIC has begun Editor's Notes From page 3 establishing local health insurance From page 1 offices to decentralize activities. It is also working on a computerized system be established. The fund shall also be that will improve collection, used to leverage for the formation of reimbursement and data gathering. Presented before a roundtable local health networks. Cost-sharing discussion composed of representa- tives from various sectors like the gov- among local governments and Romualdez pointed out that ernment, academe, private business, providing incentives for the private reforms in these five areas are and nongovernment organizations, the sector to participate in local health interconnected. “NHIP reforms will agenda dwells on five areas of reforms networks shall also be promoted. make autonomy viable. Hospital in health financing policy that would reforms, in turn, will free up resources have broad repercussions insofar as im- proving the general health situation for 5. Expand the coverage and for investments in public health and in the country’s citizenry. benefit spending of the NHIP – The regulation at both the national and first step is to increase the benefits of local levels. And good public health This issue, in particular, fea- the program in order to attract more programs should relieve the NHIP tures Philippine Health Secretary members. At the same time, other from the burden of having to pay an Alberto Romualdez’ presentation of benefit packages will be developed increasing number of curative services said agenda wherein he outlines the manner by which the Department which are aimed at discouraging the and be able to address those diseases would go about in realizing the reforms overutilization of hospital services. This which are highly preventable,” he said. in such a complex concern as health improved set of benefits and services care financing. The other articles ex- will be used to aggressively enroll more Ultimately, the reforms in health pound on specific points raised in the members, especially in the cities. With care financing policy aim to improve agenda as well as on various related better benefits and more members, the health status of the people through health issues discussed during the open forum. there will be more leverage for a better greater and more effective coverage of program performance where financing national and local public health Stressing that the agenda is by is adequate and abuses are controlled. programs; increased access to health no means a done deal, Secretary Along with these steps, the Philippine services especially by the poor; and Romualdez noted that it is a work in Health Insurance Corporation (PHIC) reduced financial burden on individual progress which the DOH hopes to con- tinually refine in consultation with vari- will be developed to enable it to handle families. DRN ous sectors in order to address other issues that may be raised. DOH hospitals... Health financing is a complex From page 12 New Publications! and critical issue. Certainly, it is some- thing that cannot be resolved over- night. But drawing up an agenda that focuses on key aspects that would help be augmented by counterpart Research Paper Series 1998-01 in expanding and streamlining it is a contributions from cities where the Credit Unions as Channels first big step. With a lot of work with facilities serving local needs are located. of Microcredit Lines: and cooperation from various quarters, The Philippine Case the ultimate objective of “Health for All” for the next century may not be With these proposals for Mario Lamberte too farfetched after all. DRN reforming the DOH hospitals, the Department targets a two-pronged Research Paper Series 1998-02 advantage: independence for the Philippine Households' hospitals and a freer DOH budget that Response to Price may be used to invest more in other and Income Changes priorities such as public health Gilberto Llanto Access spending. Certainly, the latter benefits more people for a lot less money. Journal of Philippine Development the PIDS Website: Unfortunately, not much attention and Second Semester 1997 http://www.pids.gov.ph priority have been given to it.

DRN DEVELOPMENT RESEARCH NEWS 11 July-August 1999

stituents cannot adequately support Local health systems... any kind of hospital, much less the dis- An agenda... From page 4 trict hospitals. There are limitations on From page 9 the kind of services, facilities and health programs that can be offered if only a few are pooling their resources and Government Code has somehow frag- sharing the risks. By strengthening lo- to three percent by the private sector mentized the delivery of health care cal health networks, the clustering of health insurance system as it improves services in the LGUs. Thus, one of the municipalities and districts will help its administrative capacities as well as goals of the agenda is to put together achieve a “critical mass” of population the increase in spending from one to what was lost through decentralization that can support a hospital. four percent by the NHIP on adminis- and see to it that the local health sys- tration. This means major investments tems can deliver the services in a func- The DOH also considers the im- in management and information net- tional and integrated manner. This is portant role that local health insurance works while government overhead costs especially important when it comes to schemes play. Thus, it is examining the remain at 8 percent. delivering public health services where mechanisms of these schemes and how the impact cuts across administrative they can be linked up with the Philip- Conclusion: Easing the load of boundaries. pine Health Insurance Corporation families (PHIC) which implements the national Secretary Romualdez noted health insurance program. The DOH In sum, health care spending of that devolution, which affected local shall look into the many ways by which families should drop from what it is at health systems, has “effectively isolated the PHIC can accommodate these present to 10 percent. On the other the district hospital (which) became a schemes and enhance their benefits. In hand, the share of private health insur- functionless entity, with no connections view of this, one of the functions of the ance in total health expenditures to the local governments, and the mu- regional health offices of the PHIC is should rise from 3 percent to 10 per- nicipalities (running the district hospi- to help develop health programs, es- cent while that of the NHIP should rise tal) had very little support from the pecially for indigents in their areas. from 6 percent to 34 percent. The provinces, with nowhere to turn to with government’s share, meanwhile, must respect to organized referral system.” In seeking to enhance the local also increase to 46 percent. If all of By promoting cost-sharing among health systems, the DOH sees its role these are achieved, we should expect LGUs, the DOH would therefore like as being that of a catalyst – encourag- improvements in the performance of to reestablish the two-way referral sys- ing LGUs to find ways of working to- the health sector through greater and tem between local governments and gether, rewarding best practices and more effective coverage of national and national facilities, especially in the mu- discouraging ineffective activities in local public health programs, increased nicipalities where the number of con- health care delivery. DRN access to health services especially by the poor, and reduced financial burden

on individual families. DRN and new interventions. One related Public health programs... proposal is to put all the different dis- 1Presentation made during a roundtable From page 5 ease control programs in communi- discussion jointly sponsored by the DOH and cable diseases under one Center for PIDS on April 8, 1999 at the Romulo Hall, NEDA Disease Control to harness both the sa Makati Building, Makati City. particular, this involves the develop- research and program development ment of and support for programs and capabilities that are still separately un- activities that promote healthy dertaken at the DOH. lifestyles. On the whole, the Department’s And lastly, invest in critical areas proposed reforms involving greater 20 Years of Service that will help enhance technical lead- prioritization and investments in pub- ership over local health systems. This lic health programs are aimed to make through Research shall be done by giving local health them more effective, expand their cov- units better access to information, bet- erage and ultimately, enhance the ter knowledge about new technologies health status of the people. DRN DEVELOPMENT RESEARCH NEWS 12 July-August 1999

Secretary Alberto Romualdez further DOH hospitals explained that he wants to see the Philippine hospital system as a whole and not distinct from one another. to be reformed “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, ospitals that have been diagnostic equipment, laboratory, and that is what it should be like.” retained under the control medical staff in order that they can of the Department of more effectively serve the needs of their He also said that the Department Health (DOH) shall be patients. H is addressing the often-questioned is- made to obtain fiscal autonomy in sue of favoring DOH hospitals in terms order to make them more competitive Three is to raise funds for these of giving out funds, loans and facilities and responsive to the health needs of hospitals before greater fiscal to them by now requiring development the people. This is one of the major autonomy is undertaken so that they programs to include hospitals that do reforms that the DOH shall pursue. will be better equipped to provide not belong to the DOH. He said that more services to more patients. As the DOH development plan has a loan There are currently 48 hospitals these DOH hospitals become more program, including soft and hard in the country which the DOH competitive and autonomous, subsidies loans, for the construction and equip- continues to fund and operate even as from the DOH budget should ping of hospitals of high level facilities devolution should have put them progressively decline. as well as their upgrading. One of the under the control of their respective visions for the DOH is for it to “act as a local government units (LGUs). Some Finally, the proposed health broker for the financing of hospital im- 35 of these hospitals are classified as financing agenda proposes that the provements when the indigenous fi- tertiary or those that are fully DOH hospitals be converted into nancing capabilities are not sufficient.” departmentalized and equipped to public corporations to “allow them treat most ailments. Seven are efficient autonomy without Since these reforms will entail a secondary and six are primary hospitals compromising their social big amount of money, funding will be --facilities that offer basic medical responsibilities” as public hospitals. sourced from unallocated resources of services. Some popular examples of ongoing DOH projects. This fund will DOH hospitals are the so-called During the open forum of the “centers of excellence” such as the roundtable discussion, Health = 10 Philippine Heart Center, National Kidney Institute, the Lung Center and the Philippine Children’s Medical 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 Center. projects and important policy issues discussed during PIDS seminars. PIDS is a nonstock, nonprofit government research institution engaged in long-term, policy-oriented research. The Department is proposing a This publication is part of the Institute's program to disseminate information to promote the use of research number of ways for these hospitals to findings. The views and opinions expressed here are those of the authors and do not necessarily reflect those of the attain fiscal autonomy. One is to allow Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as them to collect, retain and allocate suggestions or comments are welcome. Please address all correspondence and inquiries to: revenues from “socialized” user fees (patients will be charged according to Research Information Staff Philippine Institute for Development Studies their ability to pay). This arrangement Room 304, NEDA sa Makati Building, should make these hospitals more 106 Amorsolo Street, Legaspi Village, competitive as a set of varied fees will 1229 Makati City, Philippines attract more patients and make them Telephone numbers 892-4059 and 893-5705 Telefax numbers (632) 893-9589 and 816-1091 less dependent on direct subsidies from E-mail address: [email protected] the DOH. Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates Two is to upgrade the “critical 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. capacities” of these facilities such as