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.