Health Care Financing Strategy 2010-2020 (Philippines)

TOWARD FINANCIAL RISK PROTECTION Health Care Financing Strategy of the Philippines 2010—20202

HSRA Monograph No. 10 3

TOWARD FINANCIALRISK PROTECTION

HEALTH CARE FINANCING STRATEGYOF THE PHILIPPINES 2010-2020

HSRA Monograph No. 10

DEPARTMENT OF HEALTHRepublic of the Philippines


Toward Financial Risk Protection: Health Care Financing Strategy of the Philippines 2010-2010Health Sector Reform Agenda Monograph No. 10July 15, 2010

ISBN No. 978-971-92539-4-5

Published by the Department of Health-Health Policy Development and Planning Bureau (HPDPB)San Lazaro Compound, Rizal Avenue, Sta. Cruz, Manila, 1003 Philippines.TELEPHONE +632-781-4362 EMAIL [email protected]

The mention (if any) of specific companies or of certain manufacturer’s products does not imply thatthey are endorsed or recommended by the DOH in preference over others of a similar nature. Articlesmay be reproduced in full or in part for non-profit purposes without prior permission, provided creditis given to the DOH and/or the individual authors for original pieces. A copy of the reprinted or adaptedversion will be appreciated.

Health Sector Reform Agenda Mario C. Villaverde, MD, MPH, MPMMonograph Series Editorial Board Ma. Virginia G. Ala, MD, MPH

Lilibeth C. David, MD, MPH, MPMKenneth G. Ronquillo, MD, MPHOrville C. Solon, PhD

Health Sector Reform Agenda Leizel P. Lagrada, MD, MPH, PhDMonograph Series Rosa G. GonzalesPublications Management Team Clarissa B. Reyes

Regina C. Sobrepeña, MDDorie Lynn O. Balanoba, MDAlbert Francis E. Domingo, MDVida Zorah S. Gabe, MA

Copyeditor Arvin Mangohig

Cover Design and Layout Ariel G. Manuel

Suggested Citation:

Toward Financial Risk Protection:Health Care Financing Strategy of the Philippines 2010-2020. HealthSector Reform Agenda – Monographs. Manila, Republic of the Philippines - Department of Health, 2010.(DOH HSRA Monograph No. 10).


TABLE OF CONTENTS

List of Tables and Figures 6

Foreword 7

Contributors and Resource Persons 9

Abbreviations and Acronyms 10

Definition of Terms 13

Executive Summary 16

Introduction 21

I. Rationale 22

Background 22

Underspending in Health 22

Fragmented Health Financing System 23

Weak Social Protection, Equity, and Solidarity 24

Inappropriate Incentive Structures 24

Marginal Impact of Past Reforms 25

II. Health Care Financing Principles, Goals,and Options 27

Resource Mobilization 27

Universal Membership 29

Technical Efficiency 34

III. Health Care Financing Strategy 36

Strategy One: Increase resources for health 36

Strategy Two: Sustain membership in social health insurance of all Filipinos 37

Strategy Three: Allocate resources according to most appropriate financing agent 38

Strategy Four: Shift to new provider payment mechanisms 39

Strategy Five: Secure fiscal autonomy of facilities 39

IV. Implementation and Monitoring Plan 41

Monitoring and Evaluation Framework 41

Monitoring Indicators, Data Sources, and Collection Methodologies 42

Implementation Plan for Monitoring and Evaluation 48

Appendices 50

References 61


LIST OF TABLES AND FIGURES

TABLE 1. Indicators of Health Expenditures of Selected Southeast Asian Countries,Mid-2000s 23

TABLE 2. Percent Share of Health Expenditures by Financing Agents, 2000–2005 26

TABLE 3. Options for Resource Mobilization 30

TABLE 4. Who Should Pay for What Outputs? 32

TABLE 5. Who Should Pay for What Inputs? 33

TABLE 6. Steps toward Increased Resources for Health 37

TABLE 7. Steps toward Sustained Universal Membership 37

TABLE 8. Steps toward Allocation of Resources by Most Appropriate Financing Agent 38

TABLE 9. Steps toward PhilHealth’s New Provider Payment Mechanisms 39

TABLE 10. Steps toward Securing Fiscal Autonomy of Health Facilities 40

TABLE 11. Indicators, Definitions, Baseline Data, Targets, Data Sources,Collection Methodology, and Frequency 43

TABLE 12. Regional and LGU Support for the HCF Strategy 49

FIGURE 1. Health Financing Flows in the Philippines 28

FIGURE 2. Proposed Restructuring of the Health Financing System in the PhilippinesAccording to the National Objectives for Health 28

FIGURE 3. Summary of Final Outcome, Intermediate Outcomes, and Final Outputsof HCF Strategy 41


Health care financing has long been recognized as a key component of our country’s health sector reformefforts. This publication is the first attempt to craft a strategy that focuses on health care financing over a tenyear timeframe.

The 2010-2020 Health Care Financing Strategy of the Philippines has one, clear direction: to safeguard allFilipinos from the financial risk of poor health. It is a strategy that has been developed by the two major actorsin health care financing of our country: the Department of Health and the Philippine Health InsuranceCorporation. They did not develop it alone. Over the past three years, consultations have been held withother health stakeholders from local government units to health care providers to civil society.

Harnessing ideas into a collective, coherent strategy for health care financing contained in this publicationwas a giant step. The next giant step is equally daunting. It calls for all stakeholders to support and engage inthe successful implementation of the strategy.

Esperanza I. Cabral, MD

FOREWORD

The Department of Health has identified equitable health care financing as one of the three health systemgoals to be pursued to guarantee equitable, sustainable, and quality health care to all Filipinos. Initiatives forreforming the health financing in the Philippines have been undertaken to secure higher, better, andsustainable financing for health. Initial gains have been achieved through increasing government budget forhealth, improving efficiency in its utilization and improvements in social health insurance in terms of expandingmembership base especially among the poor, increasing benefits and expanding the accredited providers.However, major challenges remain to be addressed in order to provide financial risk protection for thepopulation, including among others, underspending in health, inequitable health financing, inappropriateincentive measures for providers, and fragmentation of health financing.

Cognizant of these challenges, the Department of Health, with support from its partners, has developedthe Health Care Financing Strategy 2010-2020 that will provide the roadmap towards attaining the strategicgoals of increasing overall level of health spending, promoting universal coverage, improving allocativeefficiency, and promoting technical efficiency.

The Department of Health together with the Philippine Health Insurance Corporation, along with LocalGovernment Units, development partners, and other stakeholders in health shall endeavor to implement thehealth financing reforms articulated in this Strategy paper so that all Filipinos can access health serviceswithout becoming impoverished by it.

Francisco T. Duque III, MD, MScFormer Secretary of HealthCivil Service Commission

Let me er e to every because

Former Secretary of Health


The 2010-2020 Health Care Financing Strategy of the Philippines: Toward Financial Risk Protection is theblueprint for meeting the challenge posed to us by President Benigno Aquino III of “serbisyong pangkalusugansa tulong ng PhilHealth para sa lahat sa loob ng tatlong taon.” This challenge is one of the five marching ordersof the President to the health sector.

Stronger mechanisms must be set in place to mandate and compel everyone to enroll in the National HealthInsurance Program. PhilHealth members must know their entitlements and responsibilities. Accreditedfacilities and providers must understand their roles and obligations. Quality health care should be provided atthe point of health service with manageable out-of-pocket expenses. And, in doing all these gigantic tasks,we have to institute the highest level of governance in health in terms of good public financial managementand the appropriate administrative infrastructure.

If met, this challenge will provide each Filipino access to quality care and adequate financial protection. Iam happy to commit the resources of my office to meet this challenge.

Enrique T. Ona, MD, FPCS, FACSSecretary of Health

This document presents the key steps for the challenge of Health Care.


CONTRIBUTORS AND RESOURCE PERSONSTECHNICAL WORKING GROUP (TWG)

Department of Health (DOH)Dr. Enrique T. OnaSecretaryDepartment of Health

Dr. Esperanza I. CabralFormer SecretaryDepartment of Health

edrevalliV.CoiraM.rDyratercesrednU

Sectoral Management andPolicy and Standards Development for Service Delivery

nartleB.MenelyaM.sMVIrotceriD

Bureau of Inte Health CoopeeriegreV.SoirasoR.aM.rD

Division Chief, Policy DivisionHealth Policy Development and Planning Bureau

adargaL.PlezieL.rDDivision Chief, Planning DivisionHealth Policy Development and Planning Bureau

Ms. Laurita Mendoza

Health Policy Development and Planning Bureau

G. GonzalesasoR.sMDivision Chief, Research Division

Health Policy Development and Planning Bureau

IIIeuquD.TocsicnarF.rDFormer Secretary – Department of Health

noissimmoCecivreSliviC–namriahC

alA.GainigriV.aM.rDDirector IVHealth Policy Development and Planning Bureau

Ms. Leslie nAdministr ve Assistant IIIHealth Policy Development and Planning Bureau

PhilippineHealth Insurance Corpor (PhilHealth)arelaV.RenieledaM.rDoniuqA.ByeR.rD

tnediserPeciVroineSremroFreciffOevitucexEfeihCdnatnediserProtceSyciloPecnaniFhtlaeHhtlaeHlihP

ognimoD.ByelrihS.rDasaB.AnhoJnebuR.rMpuorGecnarussAytilauQ–tnediserPeciVtnediserPeciV

rotceSyciloPecnaniFhtlaeH–CIOpuorGsriaffAetaroproCzaiD.AnoicavlaSadliG.sMogaitnaS.RassireN.sM

reganaMroineSyrautcAfeihCytupeDdnatnediserPeciVInterna onal and Local Coopera on Department

.rJairoS.ZocsicnarF.rDsagraP.AsicnarFlearsI.rDreganaMroineSreganaMroineS

Bene Development and Research Department Accre DepartmentserroT.BainesrA.sMyaguS.JaitroPasiraN.rD

reganaMroineSreganaMroineStnemtrapeDgninnalPetaroproCtnemtrapeDgnirotinoMdnasdradnatS

OthersareveiNellicuL.sMslayniVsiulL.rM

reciffOmargorProsivdAlacinhceTnoitazinagrOhtlaeHdlroWmargorPtroppuSyciloProtceShtlaeH

European UnionarroGnyliraM.rDnalasnuPsivraJ.rD

tnatlusnoCtnatlusnoClatnilacaMellehciM.sMoiramlA.SanilemE.sM

tnatlusnoC Research AssistantMr. Oscar PicazoConsultant


ABBREVIATIONS AND ACRONYMS

APIS Annual Poverty Indicator Survey

AVPC Average value per claim

BHFS Bureau of Health Facilities and Services

BSP Bangko Sentral ng Pilipinas

CFO Commission on Filipinos Overseas

CHD Center for Health and Development

CO Capital outlay

DBM Department of Budget and Management

DILG Department of the Interior and Local Government

DOF Department of Finance

DOH Department of Health

DRG Diagnosis-related group

DSWD Department of Social Welfare and Development

EU European Union

EHP Essential health package

EXECOM Executive Committee

FAPs Foreign-assisted programs

FFS Fee-for-service

FIES Family Income and Expenditure Survey

GDP Gross domestic product

GNP Gross national product

GOP Government of the Philippines

GSIS Government Service Insurance System

HCF Health care financing

HMO Health maintenance organization

HPDPB Health Policy Development and Planning Bureau

HSEF Health Sector Expenditure Framework

HSPSP Health Sector Policy Support Program

HSRA Health Sector Reform Agenda

IMF International Monetary Fund

IP Indigenous people

IPP Individually paying program


IS Information systems

LFS Labor Force Survey

LGC Local Government Code

LGU Local Government Unit

LHA Local health accounts

LICT Local Implementation and Coordination Team

M&E Monitoring and evaluation

MDGs Millennium Development Goals

ME3 Monitoring and evaluation for equity and effectiveness

MOOE Maintenance, operating, and other expenses

NDHS National Demographic and Health Survey

NEDA National Economic and Development Authority

NG National government

NGO Non-governmental organization

NHA National health accounts

NHIP National Health Insurance Program

NOH National Objectives for Health

NSCB National Statistics Coordination Bureau

NSO National Statistics Office

ODA Official Development Assistance

OFW Overseas Filipino workers

OOP Out-of-pocket

OPB Outpatient benefit

OWP Overseas Workers Program

PBG Performance-based grant

PCP Primary care physician

PH Public health

PHC Primary health care

PhilHealth Philippine Health Insurance Corporation

PHO Provincial health office

PHP Philippine peso

PIP Phased implementation plan

PIPH Provincewide Investment Plan for Health

PMT Proxy means test

PNHA Philippine National Health Accounts

PPM Provider payment mechanism


PPP Purchasing power parity

PRO PhilHealth regional office

PS Personnel services

RA Republic Act

RHU Rural health unit

RICT Regional Implementation and Coordination Team

RTD Round table discussion

SDAH Sectorwide Development Approach to Health

SHI Social health insurance

SP Sponsored program

SS Sentrong Sigla

SSS Social Security System

SWAP Sectorwide approach

SWS Social Weather Stations

TB DOTS Tuberculosis directly observed treatment short-course

TGE Total government expenditures

THE Total health expenditures

TWG Technical working group

UC Universal coverage

ULAP Union of League of Authorities of the Philippines

USAID United States Agency for International Development

USD United States dollars

WB World Bank

WHO World Health Organization


DEFINITION OF TERMS

Access - Ability to utilize available health serviceswithout any significant barriers or obstacles

Allocative efficiency - Method of allocationwhere resources are distributed amongmultiple activities within a sector or programin a way that maximizes a specified outcome

Average value per claim - Total reimbursementsover total claims

Benefit - Services covered under a healthinsurance contract or a medical scheme

Capitation - Payment mechanism where a fixedrate, whether per person, family, household,or group, is negotiated with the health careprovider who shall be responsible fordelivering or arranging for the delivery ofhealth services required by the coveredperson under the conditions of a healthprovider contract

Case mix - Relative complexity and intensity ofservices required to treat patients in a hospitaldue to diagnosis, disease severity, and patientcharacteristics

Case-based payment method - Hospital paymentmethod that reimburses hospitals apredetermined fixed rate for each treatedcase; also called per-case payment

Contract - Agreement between payer(s) andprovider(s) which defines in advance thehealth services to be purchased, theirquantity, quality, and price

Co-payment - Fixed peso amount paid by anindividual at the time of receiving a coveredhealth care service from a participatingprovider. The required fee varies by serviceprovided and by health plan.

Cost containment - Set of strategies aimed atcontrolling the level or rate of growth ofhealth care costs. These measures encompassactivities that focus on reducingoverutilization of health services, addressingprovider reimbursement issues, eliminatingwaste, and increasing efficiency in the healthcare system.

Coverage - Coverage of a population for healthservices often represented in threedimensions: breadth, or the extent of thecovered population; depth, or the types ofservices covered; and height, or the level ofcost sharing

Curative care - Personal health care or hospital-based services

Diagnosis-related group - Classification ofhospital case types into groups that areclinically similar and are expected to havesimilar hospital resource use. The groupingsare based on diagnoses and also onprocedures, age, sex, and presence ofcomplications or comorbidities.

Efficiency - Use of energy, time, and money toproduce maximal outputs. It involvesdimensions of technical efficiency (generatinga specific output at least cost) and allocativeefficiency (selecting the right mix or set ofoutputs to get the best results out ofresources).

Essential health package - Minimum set of healthcare services recommended for the intendedbeneficiary


Fee-for-service - Traditional method of paying formedical services under which doctors andhospitals are paid for each service theyprovide. Bills are either paid by the patient,who then submits them to the insurancecompany, or are submitted by the provider tothe patient’s insurance carrier forreimbursement.

Financial protection - Ultimate effect of healthfinancing schemes that eliminate or greatlyreduce the amounts patients must pay out ofpocket

Fiscal autonomy for health facility - Capacity tomanage and keep the funds allocated to/generated by health facilities

Fiscal impact - Burden that different groups(national and local government, social healthinsurance, individual, and other privategroups) must pay to finance health systemcosts. It is closely linked to financial riskprotection and is a function of how key groupscontribute to financing a specific healthproduct or service.

Health equity - Defined alternatively as equalhealth status for different income groups,equal access to care, equal payment for healthcare, equal uptake of public subsidy, etc.

Incentive - Economic signal that directsindividuals or organizations (economicentities) toward self-interested behavior

Indigent - Person who has no visible means ofincome, or whose income is insufficient forthe subsistence of his family

Inpatient support value - Reimbursement overtotal hospitalization cost

Local economic enterprise - Restructuring of LGUhospitals into a corporate setup as embodiedin the 1991 Local Government Code

Means test - Protocol administered to determinethe ability of individuals or households to payvarying levels of contributions to the NationalHealth Insurance Program, ranging from theindigent in the community, whosecontributions should be totally subsidized bygovernment, to those who can afford tosubsidize part but not all of the requiredcontributions for the program

National Health Insurance Program - Compulsoryhealth insurance program of the governmentas established in the National HealthInsurance Act of 1995 (RA No. 7875), whichshall provide universal health insurancecoverage and ensure affordable, acceptable,available, and accessible health care servicesfor all Filipinos

Out-of-pocket payment - Amount that a family isrequired to pay for health care. This couldarise because the family has no social healthinsurance cover or has to pay user fees inpublic facilities. Even if the family has healthinsurance, OOP could arise as a result of co-payments, deductibles, or benefit limits orexclusions, or from the use of medical savingsaccount which individualize family healthexpenditure.

Performance-based grant - Transfer of resources,normally from government or developmentagencies, linked to achievement ofperformance targets

Persistency rate - Active members of current yearover active members of previous year

Provider payment mechanism - Method used totransfer resources from the payers of healthcare services to the providers

Proxy means test - Statistical formula used toapproximate income to determine the poor,using socioeconomic variables that wouldpredict household income and allow forobjective ranking, classification, andprioritization of poor households


Public health services - Science and practice ofprotecting and improving the health of acommunity, as by preventive medicines,health education, control of communicablediseases, application of sanitary measure, andmonitoring of environmental hazards

Quality - Compliance of goods and services with aprescribed standard. The standard may involvedimensions of quantity (number), structure(facility, equipment, supplies, or drugs used),or processes (skill or practice, “decisionmaking”). Compliance with quality standardsresult in improved health outcomes, financialrisk protection when such quality standardsare linked to payment of benefit packages,and client satisfaction.

Risk pooling - Pooling health risks among young,healthy people, and older and more illness-prone people in an insurance scheme in orderto lower the average financial risk to theinsurer

Technical efficiency - Proper allocation of servicessuch that waste and unnecessary use ofmedical services are minimized

Total health expenditure - Total amount offinancial resources spent on health relatedissues, regardless of source or agent

Universal coverage - Means providing all citizenswith the mechanism to gain financial access tohealth services through the National HealthInsurance Program, which shall provide theentire population with at least a basicminimum package of health insurancebenefits

Utilization - Percent of number of claims overbeneficiaries per sector


EXECUTIVE SUMMARY

The following critical factors impelled the formulation of the 2010–2020 health care financing (HCF) strategyfor the Philippines:

• First, the total health expenditures (THE) in the country remain low and stagnant by international standards,resulting in underinvestment in health and the potential erosion of any gains in health status.

• Second, while the devolution of health services to local government units (LGUs) brought planning andmanagement of public health services closer to the people, it has also unintentionally splintered healthservices and financing. Thus, the country’s health financing system is extremely fragmented, leading tomajor coordination problems, aggravated by inadequate regulation.

• Third, the system is highly inequitable and provides weak protection to households from the financialconsequences of getting sick.

• Fourth, at the facility level, some institutional structures and incentives are inappropriate and inadequateto yield good service performance.

Past reform programs dealt with these problems incrementally and have not dramatically improved thehealth financing picture. As the country expects to move into the higher ranks of middle-income economies,higher levels of consumption as well as financing of health services are expected.

The urgent need for an integrated HCF strategy is evident, one that will be guided by the following principles:

•enhanced. Solidarity can only be brought about by the membership of each Filipino in the PhilippineHealth Insurance Corporation (PhilHealth), from the richest to the poorest.

•carried out. The HCF strategy must define who pays for what in terms of type of resources and package ofservices.

•and freedom to choose among providers is perceived as a basic right. However, choice can jeopardize thegatekeeping function, and ultimately the efficiency of a health system. In order to stress the importanceof overall system efficiency as a goal, this principle will be applied. Users who use the preferred providersystem will enjoy higher protection than those who want to retain the freedom to choose.

•especially for the poor and the marginalized Filipinos who do not have the resources to pay for healthservices.

•and government agencies will be paid better and faster.

They will also address the following goals:

•percent of the gross domestic product (GDP), the norm prescribed by the World Health Organization

Solidarity in funding health services. The i on of i l l i be

No grey areas. Re e role of eve er be cle ide ed unde d

Less choice, more In higher-income choice of

for the most vulnerable groups. be

New rules, more e ent Provide who go eme PhilHe h

Resource Incre e e over level of he ending e THE re e 0


(WHO), or until the Philippines catches up with the THE/GDP and per capita THE of neighboring countries.

•in health insurance among the formal, informal, and indigent populations and by linking premium levelswith households’ ability to pay.

•government budgetary commitment, defining the PhilHealth benefit package that complements the publichealth package, and clearly delineating who pays for what services.

•providing or increasing the autonomy of retained hospitals, managing local government unit (LGU) healthfacilities as economic enterprises with the authority to retain income, and strengthening the functionallocal health system through accreditation.

Within the context of the critical factors in Philippine health care financing, the principles to be followed,and the goals to be achieved, the 2010–2020 HCF Strategy: Toward Financial Risk Protection Health CareFinancing Strategy proposes five strategies. It should be noted that health financing reform cannot movealone. Other parts of the overall health sector are important to its implementation and therefore have tomove alongside it. In the area of human resources, the problems of low-paid staff, migration of health workers,and the use of the maintenance and other operating expenses (MOOE) budget to complement poor salarieshave to be addressed. In the area of service delivery, facilities must be given the opportunity to retain incomegained from efficient management. Accreditation of nonhospital health facilities must also be fast-tracked. Inthe area of drugs and technology, the regulation and availability of affordable quality drugs, as well as ofmedical equipment needed to provide services for the population and designed as part of the PhilHealthbenefit packages, require attention. In the area of information systems, financial resources have to becommitted to develop systems, especially in PhilHealth as the organization that will carry the burden ofhealth financing initiatives. Finally, in the area of governance, efficient resource allocation within the systemcan only take place if resources are concentrated instead of fragmented and managed by hundreds of decisionmakers at different levels of government.

The five strategies follow:

STRATEGY ONE

2010 2016 2020

THE at 3.3% of GDP THE at 4.0% of GDP THE at 5.0% of GDP

Government spending on health Government spending at 6.0% Government spending on health atat 5.5% of total public spending of total public spending 7.0% of total public spending

OOP as major financing source for OOP spending at 45.0% of THE Average premium level of PhilHealthhealth expenses: 48.0% of THE as to increase by 5 times the 2009 levelof 2005 NHA in real terms

PhilHealth as major financing sourcefor health expensesOOP spending at 35.0% of THE

Universal membership. Strengthen and achieve equity by sustaining the membership

Alloc e ciency. Improve alloca by ning an e al package of health services for

Technical e ciency. Enhance overall system e ciency by reforming the provider payment system,

INCREASE RESOURCES FOR HEALTH


STRATEGY TWO

2010 2016 2020

Formal sector (including casual and contractual): payroll contributions

OFWs: Fixed premium OFWs: Premium payment as OFWs: Continuous premium paymentrequirement prior to migration

Informal sector: Voluntary Informal sector: Partial subsidy Informal sector: Some on partialfrom LGU with contributions linked subsidy from LGU; others fully payingto administrative licenses/permits/ membersdocumentation

Indigents: Sponsored program as a Indigents: Sponsored program fully subsidized by NGshared subsidy between LGU and NG

STRATEGY THREE

2010 2016 2020

PhilHealth: Main payer of personal care

DOH: Subsidies for salaries and DOH: Subsidies for salaries of DOH: Main funder of capital outlayMOOE of retained hospitals, retained hospitals for tertiary hospitals; limited role insubsidies and distribution of public health fundingdrugs for national priority programs

LGUs: Subsidies for salaries and LGUs: Subsidies for salaries of all LGUs: Main funder of capital outlayMOOE of primary and secondary primary facilities and some of primary and secondary facilitiesfacilities secondary facilities and community-focused public

health interventions

PhilHealth: One of the funders ofpublic health interventions throughoutpatient packages

SUSTAIN MEMBERSHIP IN SOCIAL HEALTH INSURANCE OF ALL FILIPINOS

ALLOCATE RESOURCES ACCORDING TO MOST APPROPRIATE FINANCING AGENT


STRATEGY FOUR

2010 2016 2020

Capitation for outpatient benefits for sponsored program beneficiaries Capitation as a major tool to pay forprimary health care services for allF ilipinos

Fee-for-service for inpatient care DRGs for inpatient care Per-case payment under a case-mixsystemBenefits to include outpatient drugs

Per-case payment for maternity care Per-case payment for case-mixpackage and selected medical and system for preferred providerssurgical procedures

STRATEGY FIVE

2010 2016 2020

DOH-retained hospitals DOH budget funding salaries DOH-retained hospitals fullywith income retention of DOH-retained hospitals’ corporatized and autonomous; not

personnel receiving subsidies

LGU health facilities Majority of LGU health facilities LGU health facilities receivingwithout income retention with income retention minimal subsidy

DOH and LGUs fund capital outlay DOH and LGUs fund capital outlay

To evaluate the HCF strategy, the Department of Health (DOH) Monitoring and Evaluation for Equity andEffectiveness (ME3) will be used as the framework.

The HCF strategy’s final outcome will be measured in terms of improving the financial risk protection ofhouseholds from sickness as reflected in the overall health status of all Filipinos, financing that is not drivenby out-of-pocket (OOP) expenditures, and client satisfaction and responsiveness to the Philippine healthcare system.

The intermediate outcomes of access, quality, and efficiency directly impact on this final outcome and areembodied in the HCF strategy. The intermediate outcome of access is met through universal membership inPhilHealth that will help to reduce financial barriers. Physical barriers will be addressed by LGU and nationalgovernment (NG) spending. The intermediate outcome of quality is met through licensure and accreditationstandards, current acceptable standards of practice for health service delivery, and provider payment

SHIFT TO NEW PROVIDER PAYMENT MECHANISMS

SECURE FISCAL AUTONOMY OF FACILITIES


mechanisms. The intermediate outcome of efficiency, both allocative and technical, involves the allocationof resources to the most appropriate financing agent as well as the organization of public health facilities intoeconomic enterprises that are able to manage their budgetary and extrabudgetary resources so that theybecome less dependent on budgetary subsidies.

The final outputs of the HCF strategy will have an impact on the four dimensions of health sector reform:financing, governance, service delivery, and regulation. These outputs are: increased resources for health,sustained membership in social health insurance of all Filipinos, allocation of resources according to the mostappropriate agent, shift to new provider payment mechanisms, and fiscal autonomy of facilities.

Through the final outcome, intermediate outcomes, and final outputs of the HCF strategy, equity for allFilipinos in health systems will be achieved.

Two time horizons or cycles will be used for the M&E plan for the HCF Strategy of the Philippines: 2010–2016 and 2017–2020. Each cycle will have a phased implementation plan (PIP) that will give more details aboutthe activities to support the strategies. Both plans will undergo continuous review and revisions so that theyare always updated to be responsive to any change that may affect the successful implementation of the HCFstrategy.

An HCF Oversight Committee involving the DOH and the PhilHealth, with participation from the Union ofLeague of Authorities of the Philippines, representatives from academe and nongovernmental organizations,as well as all other pertinent bureaus, offices, and persons, will be created to take the lead in theimplementation and evaluation of the HCF strategy. The Health Policy Development and Planning Bureau(HPDPB) will serve as the secretariat of the committee.

Proper implementation of the HCF strategy requires the engagement of all the stakeholders involved.With the support of the HPDPB, policy forums will be held to introduce and disseminate the strategy topartner agencies and institutions, together with the distribution of pertinent materials. Manuals for specificpartners, whose roles are crucial to the HCF strategy and its implementation, monitoring, and evaluation willalso be prepared. Said partners include the Centers for Health Development (CHD), the PhilHealth regionaloffices, the provincial/city/municipality LGUs nationwide, and health care providers.


INTRODUCTION

Work on “Toward Financial Risk Protection: Health Care Financing (HCF) Strategy of the Philippines 2010–2020” was carried out in response to the following factors: First, Article XIII of the 1987 Constitution of theRepublic of the Philippines, which clearly states that the State shall adopt an integrated and comprehensiveapproach to health development and shall endeavor to make essential goods, health, and other social servicesavailable to all the people at affordable cost. Second, the achievement of the Millennium Development Goals(MDGs), which require the strengthening of health systems, including health financing, in order to meet andsustain the targeted health outcomes. Third, the recognition of health financing as one of the four pillars ofthe DOH reforms intended to improve the performance and responsiveness of the Philippine health systemto all Filipinos. Fourth, the need for a single, focused, and integrated strategy to address health care financingissues that are at present dealt with in a limited manner in the National Objectives for Health (NOH), theHealth Sector Reform Agenda (HSRA), and the FOURmula One Policy Framework.

The HCF strategy paper was prepared by a technical working group (TWG) from the Department of Healthand the Philippine Health Insurance Corporation, with technical assistance from the European Union TechnicalAssistance to the Health Sector Policy Support Program (EU-TA HSPSP) and additional support from the WorldHealth Organization. The paper has benefited from presentations to United States Agency for InternationalDevelopment (USAID) and EU-TA HSPSP consultants, TWG round table discussions, and consultative meetingswith other government agencies, local government units, nongovernmental agencies, civil society, and otherstakeholders as well as presentations at DOH executive committee and national staff meetings, PhilHealthexecutive committee, and meetings with National Economic and Development Authority (NEDA) andDepartment of Budget and Management (DBM). Overall coordination of the work to develop the HCF Strategywas provided by the DOH Health Policy Development and Planning Bureau.

Potential users of the HCF strategy paper are (1) the Department of Health, (2) the Philippine HealthInsurance Corporation, (3) the national government, (4) local government units, (5) government agenciesinvolved in health care and health financing, (6) legislators, and (7) other public and private partners in thehealth sector.

The HCF strategy paper consists of four major sections. The first part presents the rationale of the paper,including the background as well the critical factors that impelled its formulation. The second part enumerateshealth care financing principles and goals that give shape to the strategy and also examines the possibleoptions to be taken. The third part identifies and discusses the five major health care financing strategies forthe Philippine health sector. Finally, the fourth part outlines an implementation and monitoring plan for theHCF strategy, consisting of a monitoring and evaluation framework, indicators and sourcing/collectionmethodologies, and an implementation plan. The paper also includes a definition of terms, a list of references,and appendices.


IRATIONALE

BACKGROUNDIn developing the health care financing strategy

of the Philippines, it is important to remember thathealth financing reform cannot move alone. Otherparts of the overall health sector are important toits implementation and therefore have to movealongside. In the area of human resources, theproblems of staff with low salaries, migration ofhealth workers, and the use of MOOE tocomplement low salaries have to be addressed. Inthe area of service delivery, facilities must be giventhe opportunity to retain income gained fromefficient management. Accreditation ofnonhospital health facilities must also be fast-tracked. In the area of drugs and technology, theregulation and availability of affordable qualitydrugs, as well as of medical equipment needed toprovide services for the population and designedas part of the PhilHealth benefit packages, requireattention. In the area of information systems,financial resources have to be committed todevelop systems, especially in PhilHealth as theorganization that will carry the burden of healthfinancing initiatives. F inally, in the area ofgovernance, efficient resource allocation within thesystem can only take place if resources areconcentrated instead of fragmented and managedby hundreds of decision makers at different levelsof government.

Within the Philippine health sector, four criticalfactors impelled the formulation of this HCFstrategy for the Philippines. First, the total healthexpenditures in the country remain low andstagnant by international standards resulting inunderinvestment in health and the potentialerosion of any gains in health status. Second, whilethe devolution of health services to localgovernment units brought planning andmanagement of public health services closer to the

people, it has also unintentionally splintered healthservices and financing. Thus, the country’s healthfinancing system is extremely fragmented, leadingto major coordination problems, aggravated byinadequate regulation. Third, the system is highlyinequitable and provides weak protection tohouseholds from the financial consequences ofgetting sick. Fourth, at the facility level, someinstitutional structures and incentives areinappropriate and inadequate to yield good serviceperformance.

Past reform programs dealt with these problemsincrementally and have not dramatically improvedthe health financing picture. As the country expectsto move into the higher ranks of middle-incomeeconomies, higher levels of consumption of healthservices are expected. The need for an integratedhealth care financing strategy to address these fourcritical factors is urgent.

UNDERSPENDING IN HEALTHIn 2005, the Philippines spent only 3.3 percent

of its GDP on the health sector while other SoutheastAsian countries spent about 4.0–5.0 percent onaverage (see Table 1). While the percentage-pointdifference may not look large, it is quite significantin terms of gross expenditures and if one considersthat the health sectors of the countries in the regionare also underfunded. Indeed, the WHO hasrecommended globally that countries should spendat least 5.0 percent of their GDP on health.Industrial countries now spend 8–12.0 percent oftheir total domestic output on health.

Philippine per capita health spending is alsosignificantly lower than its neighbors. In 2005 theaverage THE per capita was US$199 (in purchasingpower parity, or PPP), compared to almost US$300in nearby Asian countries (see Table 1).Government expenditures on health as apercentage of total government spending were 5.5percent, slightly below the regional average.Selected macroeconomic indicators of the countryare presented in Appendix 1.


FRAGMENTED HEALTHFINANCING SYSTEM

Figure 1 depicts the health financing flows inthe Philippines according to funding source,financing agent, and health service provider. Noindication is given as to the relative size of financialresources; what the figure captures is thefragmentation of the country’s financing system.The figure also does not take into account theprivate sector which constitutes about half of thecountry’s health service providers, causing furtherfragmentation.

Government health spending is controlled ordetermined by hundreds of actors (DOH officials,governors, mayors, PhilHealth officials) who havedirect control over health resources and differentmandates and responsibilities. DOH continues tofinance the so-called retained hospitals while LGUsuse their internal revenue allocations to operatetheir own health facilities. Both DOH and LGU healthfacilities, in turn, receive PhilHealthreimbursements and, sometimes, external supportfrom donors (mostly in kind). In addition, thefacilities may or may not have their own fee or otherrevenue-generating programs. As a result of allthese, planning, coordination, and allocation ofavailable resources are highly inefficient.Fragmentation of donor support has also

engendered huge transactions costs while awaitingthe full implementation of a sectorwideinvestment program, or a sectorwide approach(SWAP).

The devolution of health services to LGUs wasmeant to result in a more responsive, as well asmore accountable, health system at the local level.However, it has also had the unintendedconsequence of further splintering service deliveryand financing. The Local Government Code of 1991transferred health services up to the level ofprovincial and district hospitals to local governmentunits consisting of 81 provinces, 136 cities, and 1,495municipalities. Devolution resulted in threeadministrative levels: central DOH in charge ofregulation and provision of tertiary care (throughretained hospitals), the provincial governmentsresponsible for secondary care (provincial anddistrict hospitals), and the municipal governmentsin charge of primary care. City governmentsinherited city health facilities. Some public healthactivities remained the responsibility of the centrallevel with the support of regional units or Centersfor Health Development. Funding, includingreimbursements from PhilHealth, was also sourcedacross all levels.

New challenges have emerged with devolution,in particular the greater need for coordination and

TABLE 1.Indicators of Health Expenditures of Selected Southeast Asian Countries, Mid-2000s

Country THE as % of GDP GHE as % of TGE Per capita HE Per capita GHE GDP per capita(PPP int. $) (PPP int. $) at PPP

in US$ (2008)

Indonesia 2.1 5.1 78.0 36.0 3,990

Malaysia 4.2 7.0 454.0 203.0 14,225

Philippines 3.3 5.5 199.0 73.0 3,539

Thailand 3.5 11.3 323.0 207.0 8,379

Vietnam 6.0 5.1 221.0 57.0 2,774

Average 3.9 6.3 299.8 111.1 6,581

Sources: WHO and IMF Web sites


policy monitoring. The DOH, no longer in control ofoverall planning and resource allocation, has tonegotiate with a range of actors to rationalizeinvestments and service delivery, including localgovernment executives with contrary perspectiveson health. The splitting of the referral system intolocal, provincial, and central elements is anothermajor challenge. The current devolvedenvironment with its unclear boundaries,disjointed responsibilities, and fragmentedfinancing can result in unclear accountabilities andsubstantial administrative workload.

WEAK SOCIAL PROTECTION,EQUITY, AND SOLIDARITY

In general, the health financing system does notprovide a safety net for Filipinos from the financialconsequences of sickness. Ordinary Filipinos whoget sick can easily slide into poverty because of thefollowing reasons:

• Prevalence of out-of-pocket healthspending. The prevalence of out-of-pocketexpenditures as the main source of heathfinancing points to a serious inequity in thehealth financing system, since it forces thesick patient’s family to cough up the moneyto pay for care at the point of need, i.e., atthe time when they are most vulnerable.

• Limitations of PhilHealth spending forhealth. These limitations have severaldimensions. In terms of membership,PhilHealth mainly covers those employed inthe formal sector of the economy. Althoughinroads have been made in recent years tocover the informal sector workers and thoseworking overseas and provide PhilHealthsponsorship for the poor and theunemployed, sustained universalmembership has yet to be achieved.Moreover, membership in the indigentsponsorship program can be irregular andvolatile. In terms of support value,PhilHealth reimbursements do not fullycover hospitalization costs since there areno restrictions on balance billing andprofessional/hospital fees. Reimbursements

for outpatient consultations and drugs stillhave to be set in place, although additionalbenefits that include outpatient TB DOTS,outpatient care for sponsored program (SP)members, and maternity care are nowprovided. In terms of contributions,PhilHealth premium levels continue to beregressive since their low ceiling meansthat those in the upper salary bracketscontribute proportionately less than thosewho earn less.

• Erosion of social solidarity throughincreasing reliance on voluntary privatehealth insurance. Since PhilHealth cannotprovide full insurance coverage, better-offhouseholds find it more convenient to enrollin supplemental private health insuranceplans while those with little means are leftwith no choice. If this situation persists, thecross-subsidy function of PhilHealth will notsucceed and the promise of social solidarityunder this social health insurance programwill remain unfulfilled.

INAPPROPRIATE INCENTIVESTRUCTURES

Incentives play a key role in the rationalallocation of health services and facilities. Basedon the country’s present health sector performance,incentives have not played that role well.

First, fragmented decision making jeopardizesthe establishment of a health care delivery systembased on a long-term facility rationalization plan.Some remote areas have no facilities, restrictingaccess to services. In contrast, other areas havemultiple facilities, some of them too big for theircatchment population, resulting inunderutilization. In fact, LGUs have the freedomand power to make decisions about their healthservice delivery network with minimal coordinationwith their neighboring LGUs as well as little regardfor the overall national referral system. Moreover,the private sector is guided by market-basedmotives leading them to where capacity to pay islocated, mainly in urban areas.


Second, supply-side allocations, largely throughbudgets, do not provide the right incentives forperformance, both in terms of quantity and quality.No clear relationship exists between the amountof resources received by public hospitals and theirperformance. Historical-based budgeting is themain method used to decide how to allocate publicmoney. From the demand side, PhilHealth needsto do more in terms of ensuring adequate healthcare provision. For instance, PhilHealthreimbursements do not fully encourage cost-effective treatments since the use of generics isnot promoted and access to basic services in highlyspecialized facilities is allowed without referralsfrom lower levels of health facilities.

Third, the inability to retain income and the lackof fiscal autonomy serve as disincentives since well-

managed health facilities do not benefit frompossible income gains and earnings.

MARGINAL IMPACT OFPAST REFORMS

Past reform programs have dealt with healthfinancing problems incrementally and have notdramatically improved the health financing picture.The current HCF Strategy embodies the principlesset in the Health Sector Reform Agenda, echoed inthe National Objectives for Health, and restated inthe current DOH’s FOURmula One framework.Appendix 2 summarizes the goals defined in thesedocuments related to health care financing issues.Appendix 3 highlights government health spendingobjectives in the NOH, while Appendix 4 presentsthose of PhilHealth.

FIGURE 1 Health Financing Flows in the Philippines

Sources: HPDPB, DOH


The government spending objectives in the NOHindicate mixed progress. Based on the 2005Philippine National Health Accounts (PNHA),overall resource mobilization goal will be achieved.However, money has not been substantiallyfocused on public health interventions whenmeasured as a percentage of total health spending.The performance-based financing strategy initiatedby the DOH in 2005 has yet to be implemented.Also, out-of-pocket spending as a percentage of theTHE remains high, mostly to the disadvantage ofthe poor and vulnerable groups in the country.

The PhilHealth objectives in the NOH also showmixed progress. Equity and financial protectionindicators will most likely not be met. PhilHealthenrollment of the poorest households has not beensustained during the period of 2005–2010, despitetwo years of high enrollment in 2004 and 2006. Also,deficient targeting tools might have led to nonpoorhouseholds that are being subsidized, while a bignumber of poor households have been excluded.

TABLE 2. Percent Share of Health Expenditures by Financing Agents, 2000–2005

Financing Agents 2000 2001 2002 2003 20041/ 2005

Government 40.6 36.2 31.0 31.1 30.7 28.7

National 21.2 17.1 15.8 15.2 15.7 15.8

Local 19.3 19.1 15.2 15.9 15.0 12.9

Social insurance 7.0 7.9 9.0 9.1 9.6 11.0

PhilHealth 6.8 7.7 8.8 8.6 9.4 10.7

Employees’ compensation 0.2 0.2 0.2 0.5 0.3 0.4

Private sources 51.2 54.5 58.6 58.6 58.5 59.1

Out-of-pocket 40.5 43.9 46.8 46.9 46.9 48.4

Private insurance 2.0 2.5 2.9 2.3 2.5 2.4

HMOs 3.8 3.1 3.6 4.7 4.3 3.9

Employer-based plans 3.7 3.9 4.1 3.4 3.6 3.2

Private schools 1.1 1.2 1.3 1.3 1.2 1.2

Others 1.3 1.3 1.4 1.2 1.2 1.2

All sources 100.0 100.0 100.0 100.0 100.0 100.0

1/ Revised

Sources: NSCB, NHA 2005

The current payment system does not provideenough financial protection to members.Operational issues, such as claims processing, stillhave to be improved. On the positive side,accreditation indicators show an uptrend and mostprobably will be met on schedule.

Available data suggest that the current healthfinancing reforms have had limited though positiveimpact on the major HCF challenges. Out-of-pocketspending represents a hefty and worrisome 48.4percent of total health expenditures (see Table 2).The share of public spending on the THE hasdecreased from 41.0 percent to 27.0 percent from2000 to 2005. Indeed, while PhilHealth spendinghas increased from 7.0 percent to 11.0 percent overthe same period, the increase merely shows thatPhilHealth has crowded out and replaced publicspending. A comprehensive strategy is needed, onewith more visible and effective impact on financialprotection, resource mobilization, and allocativeand technical efficiency.


IIHEALTH CARE

FINANCING PRINCIPLES,GOALS, AND OPTIONS

In developing the Philippine HCF strategy, thefollowing principles were kept in mind:

• Solidarity in funding health services. Thecross-subsidy function of social healthinsurance has to be enhanced. Solidarity canonly be brought about by the membershipof each Filipino in PhilHealth, from therichest to the poorest.

• No grey areas. Responsibilities and roles ofevery player must be clearly identified,understood, and carried out. The HCF strategymust define who pays for what, in terms oftype of resources and package of services.

• Less choice, more protection. In thePhilippines, the higher-income groups areused to choice of services, and freedom tochoose among providers is perceived as abasic right. However, choice can jeopardizethe gatekeeping function, and ultimately theefficiency of a health system. In order to stressthe importance of overall system efficiencyas a goal, this principle will be applied. Userswho use the preferred provider system willenjoy higher protection than those who wantto retain the freedom to choose.

• Protection for the most vulnerable groups.Equity must be ensured and financial riskprotection guaranteed especially for the poorand the marginalized Filipinos who do nothave the resources to pay for health services.

• New rules, more efficient transactions.Providers who go into contractingarrangements with PhilHealth andgovernment agencies will be paid better andfaster.

Four goals should be met if the challenges ofhealth financing in the Philippines are to be met:

• Resource mobilization. Increase the overalllevel of health spending until the THE reachesabout 5.0 percent of GDP, the norm prescribedby WHO, or until the Philippines catches up withthe THE/GDP and the per capita THE ofneighboring countries.

• Universal membership. Strengthen financialprotection and achieve equity by sustaining themembership in health insurance among theformal, informal, and indigent populations andby linking premium levels with households’ability to pay.

• Allocative efficiency. Improve allocativeefficiency by defining an essential package ofhealth services for government budgetarycommitment, defining the PhilHealth benefitpackage that complements the public healthpackage, and clearly delineating who pays forwhat services.

• Technical efficiency. Enhance overall systemefficiency by reforming the provider paymentsystem, providing or increasing the autonomyof retained hospitals, managing LGU healthfacilities as economic enterprises with theauthority to retain income, and strengtheningthe functional local health system throughaccreditation.

The interplay of the four goals is bestunderstood with the help of Figure 2, which putstogether the various functions, sources, and keyplayers involved in health financing.

RESOURCE MOBILIZATIONAccording to the WHO regional office

recommendation, the Philippine THE shouldincrease to at least 5.0 percent of GDP in 2020 fromits current level of 3.3 percent, amounting to anestimated Php 678 billion (at 2008 prices). Since thePhilippines is a transitional country in terms of


health needs, dealing with both communicable andnoncommunicable diseases that require two healthsystem structures, health costs for the country canbe expected to escalate.

The small share of government spendingrelative to GDP, approximately 19.0 percent in 2009,shows the limitation of mobilizing additionalresources out of tax-based money. However, thepresent government allocation for health(estimated at 5.5 percent) is far from its potential.Countries in the region allocated, on average, 6.3percent of their budget to health in 2005. If thethree bottom countries (Pakistan, India, andMyanmar) are removed, the regional averagewould grow to 8.5 percent. Assuming a fair annualreal global budget increase of around 5.0 percentfor the next 10 years plus a sustained healthallocation of 7.5 percent of the budget to health,the Philippine government could spend aroundPHP192 billion in 2020 (at 2008 prices) on health, alittle more than three times the current figure.Appendix 5 presents the methodology used.

Table 3 presents options that the Philippines canconsider for resource mobilization. Setting aside

options that do not promote financial protection(i.e., OOP expenditures) or equity (i.e., privatehealth insurance), two options remain. These aretax-based resources and PhilHealth, assessedaccording to three criteria.

Neither one of the two options can be relied onby itself to generate the additional resourcesneeded; both options have to be used. In the bestcase scenario, health spending at 5.0 percent of theGDP will remain a target, together with theexpansion of social health insurance funds throughthe increasing membership of F ilipinos inPhilHealth. As the number of PhilHealth membersincrease, so will the financial protection offeredby PhilHealth to these members as well asreduction of OOP expenditures for health.

The most important goal is to reduce OOPexpenditure from its current size (48.0 percent ofthe THE) to 35.0 percent in 2020. To reach this target,other funding agents must grow faster than OOP.Considering the limitation of the governmentbudget, extrabudgetary resources from PhilHealthhave the greatest potential to supplant OOP withprepaid funds. In order to reach a significant share

FIGURE 2Proposed Restructuring of the Health Financing System in the Philippines

According to the National Objectives for Health

ORevenue collection D General taxation Premiums Out-of-pocket

A OT

Pooling and Hallocation No pooling E

Nat. Local Rgov. gov. PhilHealth S

Purchasing Individualpurchasing

Provision Public providers Private providers

Source: Modified from Figure 5.2, The World Health Report 2000


of the market (set arbitrarily at one-third of theTHE), PhilHealth reimbursement claims should growat a sustained rate of 20.0 percent per year.

A certain level of the THE will remain as OOP.But much still remains to be done to decrease OOPto this level. In this regard, the following optionsare recommended:

• Clarify the responsibility for monitoringfinancial protection and elevating it in the policyagenda. Unclear responsibilities contribute tothe poor impact of the policy goal on financialprotection. No specific institution is in chargeof activities that aim to reduce OOPexpenditures; baseline data are not available,while impact evaluation research has not beencarried out at all. Existing PhilHealth studies onsupport value are very aggregative. Moreover,they are based only on PhilHealth claims dataand therefore do not take account of patientswho did not benefit from PhilHealth and whomay have suffered from financial risk of sicknesseven more. A more robust M&E system is neededto provide timely data to fine-tune theimplementation and to adjust relevant policies.

• Increase public spending on health and use asignificant part of it for premium payments forthe poor. Public spending on health, measuredas the proportion of total government spendinggoing to the health sector, should grow fromthe current 5.5 percent to 7.0 percent. Assumingan expansion of government spending ofaround 5.0 percent during the next 11 years,between PHP180 billion and PHP190 billion willbe available for health. Approximately half ofthis amount should be allocated to PhilHealththrough premium payments for the poorest andpartial subsidy schemes for those in theinformal economy sector. The other half (PHP80billion) will fund DOH nonservice deliveryfunctions (policy setting, regulation, etc.) andthe remaining operation of public facilities.

• Increase premium levels. To ensure that theabove projections are feasible, the averagepremium value should be increased by fivetimes the current level in real terms by 2020.

UNIVERSAL MEMBERSHIPOverall improvement in membership

management to achieve universal coveragerequires both political will and administrativeimprovement. The advantages of having allFilipinos enrolled in PhilHealth are compelling.Universal membership makes available far morefinancial resources for the single payer,strengthening PhilHealth’s purchasing power inprice negotiations with private providers. It makescross-subsidization a reality, allowing PhilHealth tobecome a social safety net for risk of illness,especially catastrophic care. It makes PhilHealthmore financially robust, able to cope with thevagaries of illness patterns of its members. Finally,it also favors more homogeneous implementationarrangements and can reduce the presentfragmentation among providers of basically thesame services.

Official PhilHealth reports state that 86.0percent of all Filipinos in 2009 had health insurance.The coverage rate is derived using the averagefamily size estimates from the census and otherofficial data sources and disaggregated these byregion and type of member. On the average, afamily consists of 4.5 persons. The fact, however,is that some families may have more than onePhilHealth member. Thus, the estimation may needfurther refinement to arrive at a more accuratemembership rate.

Sustaining universal membership is not solelythe charge of PhilHealth. It requires that allstakeholders be involved, including the nationaland local governments, central governmentdepartments, and nongovernmental organizations(NGOs).

• Membership of the formal sector. The assistanceof the Department of Labor and Employment,especially its labor inspection arm, is critical toget all enterprises to abide with Philippinesocial legislation regarding mandatory pensionand health insurance enrollment of workers.Some employers in the formal sectordeliberately employ their labor force on a“casual” basis in order to avoid paying for their


PhilHealth premiums. Payment of the correctpremium levels using their employees’ actualsalaries should also be ensured.

• Membership of the informal sector through theindividually paying program (IPP). Localgovernments and local business coalitions canhelp in enlisting informal sector enterprises andworkers in PhilHealth. The subsidy program,now limited to the indigent and unemployed,may have to be expanded to include the poorestinformal sector workers. Their membership mayhave to be supported by a hybrid of premiumand tax-based enrollment payment.

• Membership of indigents through the indigentsponsorship program. To ensure programsustainability, different options should beexplored. At present, the program isshouldered by LGUs (provincial governor,municipal mayor, or barangay official) orcongressmen. However, this arrangement has

TABLE 3. Options for Resource Mobilization

Criteria Tax-based Resources PhilHealth

resulted in a number of problems: the selectionprocess becomes politicized, membership isusually coterminous with the term of thepolitical official, and there is no uniform androbust set of selection criteria for indigents thatcan be applied nationwide. The assistance ofthe Department of Social Welfare andDevelopment and LGUs is critical to identify allpoor and socioeconomically marginalizedpopulations through the proxy means test(PMT) and then enlist them in the sponsoredprogram.

The 2007 decrease in the members of thesponsored program, estimated to cover 2million families, provides an important lessonto policymakers. It is clear that the currentcounterpart system between LGUs andPhilHealth plus weak enforcement efforts havefailed to sustain enrollment numbers, despitethe increasing number in LGU-funded

Potentialfor resourcemobilization

Equity in raisingrevenues

Potential politicalsupport (feasibility)

The share of government spending inGDP is currently small. In 2020, thegovernment could mobilize betweenPhP180 and PhP190 billion for health,equal to 7.0 percent of its totalspending.

The equity of raising resources throughtaxation depends on the overallfairness of the tax system of thegovernment. Normally, taxation is anequitable way of raising revenues.

The health sector faces competitionfrom other sectors for budgetallocation and may find it difficult tosecure an additional 2.0 percent of thetotal budget. Also, the government’sabilityto allocate more resources will belimited by its debt service.

In 2020, PhilHealth could generatePhP160 billion from premiums ifmore informal economy workers andOFWs become membersand if 60.0 percent of all formaleconomy workers plus OFWs earn amonthly average salary of PhP25,000,out of which 3.0 percent is contributedto PhilHealth.

The fairness of the system will dependon the capacity of the PhilHealth to setand implement different premium levelsaccording to the member’s ability to pay.The PhilHealth has succeededin achieving equity in raising revenuesto some extent; the informal sectorcontinues to be a challenge.

Setting premium PhilHealth levels iscarried out through policy changessupported by research studies.


enrollment. A long-term agreement amongstakeholders, including national governmentagencies, should be pursued, making universalmembership a priority. Turning over thefinancing responsibility for indigents from LGUsto the national government is highlyrecommended but would require amendmentof the law.

• Role of other health insurance schemes.PhilHealth’s new role as main purchaser shouldnot prevent other actors from participating inthe system as financing agents. The strategicthrust is to channel the biggest chunk of publicand private spending through PhilHealth.However, due to its limitations on benefits,PhilHealth will not be able to—indeed, shouldnot—cover expenses deemed less essential ornonessential services. The coverage of theseservices, mainly demanded by the richestsegment of the population, should rely onsupplemental health insurance or employerhealth programs within a legal framework thatensures fair competition and quality. Moreover,microinsurance as well as community-basedinsurance programs should not duplicate theservices already provided by PhilHealth.

In exploring the options for allocative efficiency,two questions need to be asked. Both are variationsof the basic question: Who pays for what? The firstquestion is: Who should pay for what outputs?Although this is a central question in resourceallocation, it has not been addressed in a forthrightmanner. The existing resource allocation system inthe Philippines is based on historical inertia.Throughout the years, multiple sources of financinghave evolved, resulting in different loci forresource allocation. With devolution, the situationeven became more complex as LGUs themselvesbecame payers of health services and owners oflocal public health facilities.

The lack of clear principles and criteria has ledto the duplication of functions. Health managersmanifest various forms of adoptive behavior asthey seek to extract as much as they can frompotential funding sources, whether these be

PhilHealth reimbursements, budget requests,donor funding, user fees, or others. This situationis aggravated in areas where private providers havea substantial presence.

Table 4 explores the issue of who should pay forwhat outputs. It presents the current and potentialrole of the three financing agents: PhilHealth, DOH,and LGUs. Clearly, PhilHealth emerges as thestrongest contender for becoming the main funderof most services. However, at present, until the timethat universal membership is sustained, DOH andLGUs have to continue funding certain outputs. Inparticular, LGUs should continue their role as payersof primary health and hospital services.

The second question is: Who should pay for whatinputs? Table 5 presents the advantages of usingthe main three financing agents: DOH, PhilHealth,and LGUs. Advantages are given in terms of the toolsavailable to them that will improve input efficiencyand result in greater productivity.

Compared to PhilHealth, DOH and LGUs havefewer tools available to them. They have not yetfully implemented the use of performance-basedpayment schemes, are constrained by salarystructures for public sector personnel, and haveinadequate information systems. Again, PhilHealthemerges better positioned to introduce purchasingmechanisms that will promote efficiency andproductivity.

There are additional factors to look into in thedecision on which of the three main financing agentsshould purchase health services. In exploring theirrespective strengths and weaknesses, policymakersshould look at their (a) capacity to design andmanage contracts, (b) capacity to monitorperformance and quality through a reliableinformation system and a sound auditing function,(c) experience with tools that promote efficiency,and (d) capability of getting political support.

• In terms of the capacity to manage contracts,DOH may not have the needed experiencebecause of its mindset as a public institution.For PhilHealth, the experience is also quitelimited and is only in terms of the outpatientbenefit (OPB) package for LGUs. However, its


countrywide network of offices withexperience in claims management will serveit well. LGUs act more as providers rather thanpurchasers; most of their contractingarrangements are ad hoc.

• In terms of the capacity to monitor performanceand quality, DOH has experience in the area ofpublic health-related benchmarks. PhilHealth hasfinancial resources to support an informationsystem while LGUs generally have uncoordinatedand fragmented information systems.

• In terms of available tools that promoteefficiency, DOH has a performance-basedbudgeting scheme that is not fully functional.LGUs have not developed any tools to date

while PhilHealth’s performance incentives areattached to patient behavior and requirements.

• For the fourth requirement of political will, DOHcan strengthen its regulatory functions.PhilHealth has a public mandate to fund healthservices for the entire population while LGUexecutives are interested to show their supportfor health services in order to win moreconstituents’ votes.

In summary, PhilHealth is best positioned as thepurchaser. Indeed, the purchasing function willnaturally gravitate toward PhilHealth as it poolsmore resources for its social health insuranceprogram. However, LGUs will not be able to reduce

TABLE 4. Who Should Pay for What Outputs?

Outputs DOH PhilHealth LGUs

Public healthinterventions

Universal package ofbasic primary healthcare services

Hospital services

Outpatient drugs

DOH, through the CHDs,supports theimplementation of verticalprograms.

DOH has no mandate forthis.

DOH provides thesethrough its retainedhospitals, which aremostly centers of trainingand excellence but alsoinclude district hospitalsin Metro Manila.

DOH has no mandate topay for outpatient drugsand no logistic capacity tohandle them.

Until universalmembership issustained, this is notfeasible sincenonmembers will not beable to avail of theseinterventions.

Until universalmembership issustained, this is notfeasible sincenonmembers will not beable to avail of theseservices.

PhilHealth pays for theseservices through itsinpatient benefitpackages.

PhilHealth has thepotential to implement asingle nationwideprogram and to wieldstrong negotiation powerin purchasing outpatientdrugs.

LGU-owned facilitiesprovide these services.

LGUs pay for and providethis. Their administrativelevel is closest to serviceprovision.

LGUs pay for and providelower level hospitalservices; they do not haveresources for higher levelservices except for somelarge cities, such asManila and Makati.

In general, LGUs’negotiation power is tooweak to control prices ofoutpatient drugs.


TABLE 5. Who Should Pay for What Inputs?

Outputs DOH PhilHealth LGUs

their role as purchasers until universal membershipis sustained and basic services are funded throughPhilHealth reimbursements or other mechanisms.

Current transactions between purchasers andproviders are based on budget allocations andreimbursement claims. In both cases, there are noperformance targets of quantity and quality ofservices to be delivered. Also, the lack of flexibilityin these transactions results in poor services orhigher costs shouldered by patients, since theyshoulder any excess cost. Alternative paymentmethods should be explored as strategic optionsto the prevailing fee-for-service (FFS) system.Through contractual arrangements, these newprovider payment mechanisms can explicitlyinclude clauses that ensure better use of resources.

Five criteria are considered to select the bestpayment methods among budget allocation, per-case payment, and capitation for institutions on the

supply side (DOH and LGUs) and on the demandside (PhilHealth). These criteria are: (a) costcontainment, (b) efficiency improvements, (c)implementation arrangements, (d) financialprotection, and (e) risk sharing.

• In terms of cost containment, budget allocationis effective for DOH and LGUs. For PhilHealth,budget allocation is not a realistic approach untiluniversal membership is sustained. Per-casepayment by PhilHealth is currently beingimplemented but is limited. Capitation is goodfor cost containment for PhilHealth and makesplanning easier. However, services covered bycapitation are not adequately monitored.

• In terms of efficiency improvements,performance budgeting is not on track for bothDOH and LGUs. Per-case payments will easeclaims processing for PhilHealth and decreasetransaction costs. Capitation might result in

Personnel services(salaries)

MOOE

Drugs

Capital outlay

Salaries are easy tomanage because theyfollow the governmentscale but they aregenerally low.

Allocation throughcurrent budgetmechanism does notprovide incentives forperformance and alsomakes it difficult to trackhealth service costs.

DOH has regulatorypowers with respect todrug prices.

DOH can perform sectormanagement and see toit that facilities adhere toa long-term vision

PhilHealth paymentsfor professional feesserve as a strongincentive forincreasing supply.

PhilHealth is able tosupport nonsalaryrecurrent costs throughreimbursements.

PhilHealth can addresssome of the challengesrelated to drug costsand rational usethrough areimbursementpackage.

This is not related tothe provision ofdetermined servicesand is difficult tojustify for PhilHealth.

Salaries are easy tomanage because theyfollow the governmentscale but are generallylow.

Capacity to mobilizeresources is limited andthe budget does notprovide enough incentivesfor providers.

In general, purchasingcapacity is limited andthe power to negotiate isweak but there areinstances of goodpooling arrangements.

LGUs have goodknowledge aboutunderserved areas.


decreased services by providers unless clearlyaddressed by contracting arrangements.

• In terms of implementation challenges, theeasiest payment method is through budgetallocation. DOH and LGUs may not have enoughresources for per-case payments; forPhilHealth, the challenge lies in the requiredinformation system. Capitation is easy forPhilHealth to plan and implement.

• In terms of financial protection, DOH and LGUbudget allocations provide limited subsidy andusually only for public providers. Per-casepayments and capitation will depend on thecontracting arrangements and some privateproviders may actually not agree to thearrangements.

• In terms of risk sharing, the contractingarrangement is the deciding factor although therisk is usually shifted from payer to providersfor budget allocations, shared betweenproviders and payer for per-case payments, andshifted from insurer to providers for capitation.

The assessment of the payment mechanismsvis-à-vis the five criteria and the three main playerssuggests that budget allocations should be replacedby a mix of per-case payments and capitation.

TECHNICAL EFFICIENCYFunding of primary health care services is

fragmented. Financing for rural health units (RHUs)come from the LGU budget allocation, the DOH,donor donations, the PhilHealth capitation fund,and some user fees. Varying priorities for health aswell as capabilities to mobilize local resourcesresult in inequities in health expenditure acrossmunicipalities. Decision making at different levels,and by different entities, on resource allocationresults in inefficiency and higher transaction costs.Decentralization may make sense from a serviceprovision perspective; from a financingperspective, it has caused fragmentation and hasvirtually eliminated cross-subsidies across LGUs,since each LGU is an independent purchasing andspending entity.

Reducing the number of actors and clarifying thescope of their responsibilities can help build a moreefficient and fair health system. The involvementof the LGU in both the supply and demand sides ofthe market should be discontinued or, at least, madeclearer. A related and more daunting reform is theownership and autonomy of facilities and, byextension, the status of public health workers.

The benefits that accrue to advanced providerpayment mechanisms depend on the providers’response to the incentives in these mechanisms.For example, capitation works as a cost-containment incentive only if providers receive thecapitation funds and can retain any potential savingsfrom efficiency gains. Otherwise, the expected costcontainment and performance improvement willnot take place. Thus, the importance of givingproviders a degree of autonomy with respect tomanaging resources allocated to or generated bythem.

Autonomy for hospitals can take different forms:letting them retain revenues from fees, giving themthe power to hire and fire staff, and allowing themto raise funds through borrowing. As the level ofautonomy increases, more demanding reforms willbe required. A hospital organized as anautonomous, government-owned and controlledcorporation will have a separate budget from theDOH (or LGU) and will be governed by anindependent board of directors or trustees. Inaddition, its civil servant employees will ceasebeing part of the civil service and will have to berehired by the new autonomous hospital. However,autonomy does not negate the administrative roleof the DOH or the LGU in the hospital. In fact, theseautonomous hospitals will have to be supervisedand regulated by them as parent organizations. Insome instances, the parent organization may decidethat capital outlay of the autonomous hospital willremain under its control. Whatever form hospitalautonomy takes, the DOH or LGU must still be ableto influence and shape the local health facilitynetwork, to make rational investments inunderserved areas, and to ensure that hospitaloperations are always assessed vis-à-vis healthoutcomes.


To address the challenges posed by health carefinancing in the Philippines, which range fromunderspending in health, a fragmented healthfinancing system, weak social protection andinequity, to inappropriate incentive structures forthe entire sector as well as for individual facilities,the goals proposed for a responsive HCF strategyare resource mobilization, universal membershipin social health insurance, allocative efficiency, andtechnical efficiency. Various options can be takento reach these goals. The options for the Philippinesare expressed in the five strategies detailed in thefollowing section.


IIIHEALTH CARE

FINANCING STRATEGY

The key role that PhilHealth plays in thePhilippine health care financing strategy washighlighted in the earlier discussions on rationale,health financing principles and goals, and strategicoptions to take. PhilHealth has the greatestpotential in supplanting OOP as a health financingsource as it aggressively works on its membershipcampaigns for the sponsored program, the informalsector, and the overseas Filipino workers (OFWs)while working on increases in premium levels andsupport values. Compared to the DOH and LGUs, itis better positioned to be the main funder of mostservices and also has the most tools to introducepurchasing mechanisms that will promoteefficiency and productivity. The power to fund andto purchase can only be expected to grow asPhilHealth works toward universal coverage.Already, PhilHealth has initiated capitation and per-case payments that ensure some measure of costcontainment, financial protection, risk sharing, andefficiency improvements.

The role to be played by PhilHealth to meet thegoals of resource mobilization, universalmembership, allocative efficiency, and technicalefficiency is further fleshed out in the fivestrategies that comprise the overall health carefinancing strategy for the country. This role can onlybe performed by PhilHealth if legislative changestake place to support, and in fact, mandate it.

STRATEGY ONE: INCREASERESOURCES FOR HEALTH

The two main sources of increased resourcesfor health are (1) DOH/LGUs and PhilHealth, and (2)OOP. According to the WHO guidelines, Philippinehealth spending should increase from the current3.3 percent of GDP to 5.0 percent by 2020. Assuminga strong annual economic growth of 5.0 percent and

an average increase in the THE of around 9.0 percentper year, the Philippines should spend aboutPHP678 billion in 2020, reckoned at constant 2008prices. This increases to around PHP1.2 trillion whenan annual inflation rate of 4.0 percent is assumed.The estimated per capita expenditure in 2020 ofPHP5,900 (PHP678 billion/114 million inhabitants),equivalent to US$125 at March 2009 prices,however, is still way below the average for middle-income countries.

The allocation of around 7.0 percent of totalgovernment expenditures to health will bringPhilippine health spending closer to the regionalaverage. Assuming a sustained budget increase of5.0 percent per year in the next decade, the amountavailable for health will be around PHP191 billionat 2008 prices. The PHP35–51 million to be allocatedby the national government to PhilHealth can fullycover 5.5 million poor families in 2020, withpremiums estimated at PHP4,500–9,000 at 2008prices. LGU allocation to PhilHealth, amounting to50.0 percent to 75.0 percent of premium payments,can partially fund 5 million more families. Thenational and LGU subsidies for indigents canultimately be sourced from just the nationalgovernment and will dramatically ease enrollmentefforts and reduce transaction costs. The remainingnumber of families, estimated at 15 million(including OFWs and excluding nonpayingmembers), are assumed to fully pay their respectivepremiums.

For OOP’s share in total health expenses to beovertaken by DOH/LGUs, and PhilHealth, PhilHealthneeds to increase premium levels. Averagepremium value should increase by five times thecurrent level in real terms by 2020. Simultaneously,PhilHealth’s collection rate should grow morevigorously.

In increasing resources for health, the followingsteps are to serve as guidelines:


STRATEGY TWO: SUSTAINMEMBERSHIP IN SOCIAL HEALTHINSURANCE OF ALL FILIPINOS

Table 7 summarizes the steps toward sustainedPhilHealth universal membership. From the currentsituation, the steps to take include expandedmembership among OFWs, an enrollment drivewithin the formal sector to include casual andcontractual employees, better coverage for informalsector workers with the poorer within this grouppartially subsidized by the local government,enrollment and subsidy of the invisible poor or thosewithout any formal documentation, and full subsidyof sponsored program members by the nationalgovernment. By 2020, on the assumption that everyhousehold has at least one member enrolled inPhilHealth, total PhilHealth membership should

reach 28.5 million, approximately 10 million morethan the present number.

With all Filipinos enrolled in PhilHealth, the fullintent of the PhilHealth law will be met. Socialsolidarity will be achieved as resources areconcentrated that foster cross-subsidies from richerto poorer households, from healthier to sickermembers, and from younger to older individuals.PhilHealth’s pooling function will be supported bypublic subsidies and premiums. Membership inPhilHealth will remain mandatory but otherinsurance schemes will be allowed to compete forservices that complement the PhilHealth benefitpackage, whether these be private healthinsurance, health maintenance organizations, orprovincial health insurance initiatives.

TABLE 6. Steps toward Increased Resources for Health

2010 2016 2020

THE at 3.3% of GDP THE at 4.0% of GDP THE at 5.0% of GDP

Government spending on health Government spending at 6.0% Government spending on health atat 5.5% of total public spending of total public spending 7.0% of total public spending

OOP as major financing source for OOP spending at 45.0% of THE Average premium level of PhilHealthhealth expenses: 48.0% of THE as to increase by 5 times the 2009 levelof 2005 NHA in real terms

PhilHealth as major financing sourcefor health expensesOOP spending at 35.0% of THE

TABLE 7. Steps toward Sustained Universal Membership

2010 2016 2020

Formal sector (including casual and contractual): payroll contributions

OFWs: Fixed premium OFWs: Premium payment as OFWs: Continuous premium paymentrequirement prior to migration

Informal sector: Voluntary Informal sector: Partial subsidy Informal sector: Some on partialfrom LGU with contributions linked subsidy from LGU; others fully payingto administrative licenses/permits/ membersdocumentation

Indigents: Sponsored program as a shared subsidy between LGU and NG Indigents: Sponsored program fullysubsidized by NG


STRATEGY THREE: ALLOCATERESOURCES ACCORDING TO MOSTAPPROPRIATE FINANCING AGENT

Working on Strategy Three requires, first,determining what services should be provided andsecond, clarifying in broad terms who should payfor what services.

Public spending on health should be allocatedfor services with the greatest impact on healthoutcomes. The factors that should be consideredare population needs, cost-effectiveness, anddistribution across all socioeconomic groups.Population needs reflect the epidemiologicalprofile of the country while cost-effectivenessmeans spending on medical procedures,technologies, and medicines that have provenefficacy. On a broader perspective, cost-effectivehealth spending requires a shift from curative toprimary and preventive care interventions. Acrossall socioeconomic groups, the cost of outpatientdrugs is the most inaccessible; public spending foroutpatient drugs will ensure access to them by awider population. Clearer role definitions areneeded with respect to who pays for what services,to avoid duplication as well as shortfalls in funding.

As financing agent, the DOH should keep control ofcapital outlay of retained hospitals in order to enhancecapacity and ensure the proper mix of availability offacilities that promote access, quality, and equity. Theform of support needed, either in grants or loans, willbe decided by each of the retained hospitals.

As financing agent, PhilHealth should be themain payer of personal care, acting as an agent forits members and fully exploiting the power of itspurchasing function to improve the cost-effectiveness of service delivery. PhilHealth willfund operations of health facilities, leaving capitalexpenditures to the DOH and LGUs. A differentialbetween reimbursements paid to private andpublic facilities might be introduced to reflect thefact that private facilities do not benefit from capitalsubsidies from government. Because expenditureson outpatient drugs make up a big share of OOPspending, PhilHealth packages covering these areessential for both the financial protection of itsmembers and the rational use of medicines.

As financing agent, LGUs should fund public healthinterventions in their respective areas untilPhilHealth, once its universal membership issustained, can partially or completely fund themthrough capitation. Before this point, LGUs should alsocontinue funding the essential health service package.Once universal membership is sustained, resourceswill shift from paying inputs for facilities to payingPhilHealth premiums. At the final stage of the reform,premiums paid by LGUs will be merged with subsidiesfrom the national government, reducing transactioncosts and resulting in administrative ease. At that finalstage, PhilHealth also becomes one of the payers ofpublic health interventions and will no longer belimited to its traditional role of paying primarily forinpatient/curative care.

The steps for this strategy are as follows:

TABLE 8. Steps toward Allocation of Resources by Most Appropriate Financing Agent

2010 2016 2020

PhilHealth: Main payer of personal care

DOH: Subsidies for salaries and DOH: Subsidies for salaries of DOH: Main funder of capital outlayMOOE of retained hospitals, retained hospitals for tertiary hospitals; limited role insubsidies and distribution of public health fundingdrugs for national priority programs

LGUs: Subsidies for salaries and LGUs: Subsidies for salaries of all LGUs: Main funder of capital outlayMOOE of primary and secondary primary facilities and some of primary and secondary facilitiesfacilities secondary facilities and community-focused public

health interventions

PhilHealth: One of the funders ofpublic health interventions throughoutpatient packages


STRATEGY FOUR: SHIFT TO NEWPROVIDER PAYMENT MECHANISMS

Table 9 summarizes the steps towardPhilHealth’s new provider payment mechanisms.The major strategic shift in the purchasing functionis to deemphasize and gradually eliminate fee-for-service payment for the PhilHealth benefit packageand to adopt new payment mechanisms thatenhance financial protection and cost containment;promote fairer risk sharing among contributors,financing agents, and providers; minimizeadministrative costs; and promote good quality ofcare. The new payment mechanisms must also becognizant of the patients’ choice of provider,portability of services, and reliability of theinformation system.

The table starts off with capitation paymentslinked to targets and some simple form of case-based payment. By 2014, all preferred providers willbe paid per case while fee-for-service mechanismsare retained for nonpreferred providers. By 2020,PhilHealth will use capitation as a major tool to payfor primary health care and per-case payments forinpatient care, and will give benefits to includeoutpatient drugs. At that point, PhilHealth will bespending PHP162–234 billion.

For all new provider payment mechanisms,PhilHealth will establish formal relations withproviders based on contracts with specific details

about the quantity and quality of services andpayment terms. This strategy requires substantialrestructuring in PhilHealth’s core processes,introducing computerized payment mechanisms,postaudits, and the culture of meeting targets andsetting obligations and rights of parties.

STRATEGY FIVE: SECURE FISCALAUTONOMY OF FACILITIES

Table 10 shows the steps needed to enhanceprovision of care through changes in facilitymanagement and ownership. Pooling resources inPhilHealth implies that current budget allocationto facilities will be channeled to PhilHealth aspremium payments. In turn, PhilHealth, throughthese increased reimbursements, pays foroperations of facilities using new paymentarrangements that serve as incentives for improvedservice delivery and performance, as well as cost-effectiveness.

For reimbursements and paymentarrangements to truly serve as incentives, theownership status and management framework ofhealth facilities have to undergo reform as well.For instance, if hospital and clinic managers cannotretain income resulting from efficientmanagement, the positive incentives attached tonew paying mechanisms will not be realized.

TABLE 9. Steps toward PhilHealth’s New Provider Payment Mechanisms

2010 2016 2020

Capitation for outpatient benefits for sponsored program beneficiaries Capitation as a major tool to pay forprimary health care services for allF ilipinos

Fee-for-service for inpatient care DRGs for inpatient care Per-case payment under a case-mix system

Benefits to include outpatient drugs

Per-case payment for maternity care Per-case payment for case-mixpackage and selected medical and system for preferred providerssurgical procedures

PhilHealth spending: PhP22 billion PhP40 billion PhP162–234 billion


From 2010 to 2020, DOH-retained hospitals areexpected to undergo the needed changes for fullcorporatization and fiscal autonomy. By the end ofthat period, they will no longer receive subsidies.During the same time frame, LGU health facilitieswill start with income retention and will end withminimal subsidy from their respective localgovernment units. Income earned by both DOH-retained and LGU facilities will fund their recurrentcosts (MOOE initially and eventually personnelservices, or PS); capital outlay will continue to befunded by DOH and LGU funds. In other words,hospital operations will be funded through thePhilHealth benefit package.

DOH-retained hospitals may become publiccorporations. Governance can be provided bymanagement boards made up of representativesfrom provincial government, municipalgovernment, DOH, civil society, and the privatesector. Professional managers can be hired to runthe hospitals.

LGUs can also corporatize their health facilitieswithin the public domain. They should continuesupporting them by enhancing their capacitythrough regular upgrades. They can maintainownership in order to ensure that publicperspective is present. However, they shouldguarantee income retention in order to boostefficiency.

TABLE 10. Steps toward Securing Fiscal Autonomy of Health Facilities

2010 2016 2020

DOH-retained hospitals DOH budget funding salaries DOH-retained hospitals fullywith income retention of DOH-retained hospitals’ corporatized and autonomous; not

personnel receiving subsidies

LGU health facilities Majority of LGU health facilities LGU health facilities receivingwithout income retention with income retention minimal subsidy

DOH and LGUs fund capital outlay DOH and LGUs fund capital outlay

GOP spending on supply side:

PhP45 billion PhP60 billion

Note: Government spending contribution, estimated at current prices, refers to supply-side interventions to pay forhospital upgrades and the regulation function. This is part of the total public spending estimated at 7.0 percent ofthe total 2020 budget.


IVIMPLEMENTATION AND

MONITORING PLAN

MONITORING AND EVALUATIONFRAMEWORK

The existing Department of Health Monitoringand Evaluation for Equity and Effectivenessframework sets the context for the evaluationframework of the HCF strategy. The ME3 systemaims to determine whether the government’shealth reforms are achieving the goals of equityand effectiveness. The ME3 framework defines theperformance of any program, project, or activity interms of a hierarchy of three levels of achievement.At the highest level is the final outcome of financialrisk protection as reflected in health status, healthcare financing, and client satisfaction andresponsiveness. Immediately below these are theintermediate outcomes defined in terms of access,quality, and efficiency. The achievement of theseintermediate outcomes, in turn, is determined bythe completion of major final outputs in the areas

of financing, service delivery, regulation, andgovernance. This hierarchy of performance to beevaluated is summarized in Figure 3.

The HCF strategy’s final outcome will bemeasured in terms of improving the financial riskprotection of households from sickness as reflectedin the overall health status of all Filipinos, financingthat is not OOP-driven, and client satisfaction andresponsiveness with the Philippine health caresystem.

The intermediate outcomes of access, quality,and efficiency directly impact on this final outcomeand are embodied in the HCF strategy. Theintermediate outcome of access is met throughuniversal membership in PhilHealth that will helpto reduce financial barriers. Physical barriers willbe addressed by LGU and national governmentspending. The intermediate outcome of quality ismet through licensure and accreditation standards,current acceptable standards of practice for healthservice delivery, and provider paymentmechanisms. The intermediate outcome ofefficiency, both allocative and technical, involvesthe allocation of resources to the most appropriatefinancing agent as well as the organization of publichealth facilities into economic enterprises that are

FIGURE 3Summary of Final Outcome, Intermediate Outcomes, and Final Outputs of HCF Strategy

Health status <<< Financing >>> Client satisfaction and responsiveness

FINAL OUTCOME: Financial risk protection

E INTERMEDIATE OUTCOME: INTERMEDIATE OUTCOME: INTERMEDIATE OUTCOME:Q Access Quality EfficiencyUI * Financial access * Structural aspects of quality * Allocative efficiencyT * Physical access * Procedural aspects of quality * Technical efficiencyY

Financing, service delivery, regulation, and governance


able to manage their budgetary and extrabudgetaryresources so that they become less dependent onbudgetary subsidies.

The final outputs of the HCF strategy will havean impact on the four dimensions of health sectorreform: financing, governance, service delivery, andregulation. These are: increased resources forhealth, sustained membership in social healthinsurance of all Filipinos, allocation of resourcesaccording to most appropriate agent, shift to newprovider payment mechanisms, and fiscalautonomy of facilities.

Through the final outcome, intermediateoutcomes, and final outputs of the HCF strategy,equity for all Filipinos in health system will beachieved.

MONITORING INDICATORS,DATA SOURCES, ANDCOLLECTION METHODOLOGIES

The following table presents the proposedindicators for each of the five strategies. Themonitoring frame includes only output indicators.Process indicators, including midterm benchmarks,must be defined and included in the DOH,PhilHealth, and LGUs’ annual and multiannual plans.Each stakeholder must translate the agreed long-term commitments into operational indicators.HPDPB will provide technical support in thepreparation of plans and indicators consistent withthe overall HCF strategy.

For each indicator, definitions are given,together with latest available baseline data, datasource, collection methodology, and frequency.Targets are also indicated per cycle ofimplementation: Cycle 1 corresponding to 2010–2016, and Cycle 2 corresponding to 2017–2020.Baseline data range from 2005 to 2016 based on thecycle. Most data can be sourced from the databaseand official reports of the Department of Health,PhilHealth, and Commission on Filipinos Overseas(CFO), and regular surveys for the PhilippineNational Health Accounts, National Demographicand Health Survey (NDHS), Local Health Accounts(LHA), Annual Poverty Indicator Survey (APIS), LaborForce Survey (LFS), and Family Income andExpenditure Survey (FIES), although there areothers that require surveys and special studies.Whenever needed, special surveys and studies willbe commissioned to validate data from secondarysources.


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HSRA Monograph No. 10 45St

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arge

tD

ata

Colle

ctio

nFr

eque

ncy

Dat

a (Y

ear)

Cycl

e 1

Cycl

e 2

Sour

ceM

etho

dolo

gy(2

010–

(201

7–20

16)

2020

)

3.A

lloca

tere

sour

ces

acco

rdin

gto

mos

tap

prop

riate

agen

t

1.LG

U s

pend

ing

as %

of T

HE

2.LG

U s

pend

ing

for

publ

ic h

ealt

h

3.LG

U s

pend

ing

for

cura

tive

care

4.N

atio

nal

spen

ding

as %

of T

HE

5.N

atio

nal

spen

ding

for

publ

ic h

ealth

6.N

atio

nal

spen

ding

cura

tive

care

7.Ph

ilHea

lth

spen

ding

as

% o

fTH

E

8.Ph

ilHea

lth

spen

ding

for

pub

liche

alth

LGU

spen

ding

÷ T

HE

LGU

spe

ndin

g on

publ

ic h

ealt

h as

defin

edin

PN

HA

ALL

is a

t co

nsta

nt20

06 p

rice

s

LGU

spen

ding

for

pers

onal

car

eas

def

ined

in P

NH

AA

LL is

at

cons

tant

2006

pri

ces

Nat

iona

l sp

endi

ng÷

THE

Nat

iona

l le

vel

spen

ding

for

pub

liche

alth

as d

efin

ed in

PN

HA

Nat

iona

l le

vel

spen

ding

for

pers

onal

car

e6

as d

efin

ed in

PN

HA

PhilH

ealt

hsp

endi

ng÷

THE

PhilH

ealth

PNH

A

PNH

A

PNH

A

PNH

A

PNH

A

PNH

A

PNH

A

Des

k re

sear

chSt

udy

Des

k re

sear

ch

Des

k re

sear

ch

Des

k re

sear

ch

Des

k re

sear

ch

Des

k re

sear

ch

Des

k re

sear

ch

Des

k re

sear

ch

13.0

% (

2005

)

PhP1

0.8B

,or

46.

0%(2

005)

PhP6

B,or

26.

0%(2

005)

16.0

%(2

005)

PhP9

.2B,

5

or 3

2.0%

(200

5)

PhP1

5.4B

,7

or 5

4.0%

(200

5)

11.0

%(2

005)

Less

tha

n4.

0%(2

009)

11.0

%

PhP2

9B,

or 5

5.0%

PhP1

3B,

or 2

5.0%

10.0

%

PhP1

0B,

or 2

0.0%

PhP2

8B,

or 5

5.0%

19.0

%

10.0

%

PhP4

2B,3

or 6

0.0%

PhP1

5B,4

or 2

0.0%

9.0%

PhP9

B,or

15.

0%

PhP3

6B,

or 6

0.0%

21.0

%

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

3Si

xty

perc

ent

(60.

0 pe

rcen

t) o

f LG

U s

pend

ing

is a

ssum

ed t

o be

allo

cate

d to

pub

lic h

ealt

h in

terv

enti

ons,

the

res

t go

ing

to h

ealt

h fa

cilit

ies.

4Tw

enty

per

cent

(20

.0 p

erce

nt)

is a

ssum

ed t

o be

use

d fo

r ad

min

istr

ativ

e an

d ot

hers

pur

pose

s.5

This

inc

lude

s Fo

reig

n A

ssis

ted

Prog

ram

s (F

APs

).6

Reso

urce

s ar

e to

be

allo

cate

d to

CO

and

PS,

res

ulti

ng i

n re

duce

d re

sour

ces

for

MO

OE.

7Th

is i

nclu

des

FAPs

.


Stra

tegy

Indi

cato

rD

efin

itio

nBa

selin

e

Tar

get

Dat

aCo

llect

ion

Freq

uenc

yD

ata

(Yea

r)Cy

cle

1Cy

cle

2So

urce

Met

hodo

logy

(201

0–(2

017–

2016

)20

20)

4.Sh

ift to

new

prov

ider

paym

ent

mec

hani

sms

9.Ph

ilHea

lth

reim

burs

emen

ts a

s%

of t

otal

bud

get o

fpu

blic

hos

pita

ls

10. D

OH

bud

get a

s %

of to

tal b

udge

t of

reta

ined

hos

pita

ls

11. L

GU

bud

get a

s %

of

tota

l bud

get o

f LG

Uho

spit

als

12. P

rim

ary

care

faci

litie

s bu

dget

as

% o

f to

tal p

ublic

spen

ding

for

hea

lth

1.Be

nefit

s pa

idth

roug

h ca

pita

tion

as %

of t

otal

bene

fits

paid

by

PhilH

ealt

h

2. A

ccre

dite

d fa

cilit

ies

paid

on

per-

case

or

DRG

pay

men

t by

PhilH

ealth

as

% o

fto

tal

PhilH

ealt

hac

cred

ited

fac

iliti

es

3.PB

G s

pend

ing

as %

of to

tal D

OH

bud

get

PhilH

ealt

hre

imbu

rsem

ents

÷to

tal b

udge

t of

publ

ic h

ospi

tals

DO

H b

udge

t ÷ t

otal

budg

et o

f ret

aine

dho

spit

als

LGU

bud

get ÷

tot

albu

dget

of L

GU

hosp

ital

s

Prim

ary

care

faci

litie

s bu

dget

÷to

tal

publ

icsp

endi

ng f

orhe

alth

Bene

fits

paid

thro

ugh

capi

tatio

n÷

tota

l ben

efits

paid

by

PhilH

ealth

Num

ber o

fac

cred

ited

faci

litie

s pa

id o

npe

r-ca

se o

r D

RGpa

ymen

t by

PhilH

ealth

÷ t

otal

num

ber o

fPh

ilHea

lth

accr

edit

edfa

cilit

ies

PBG

spe

ndin

g ÷

tota

l DO

H b

udge

t

PhilH

ealth

repo

rts

DO

H-

BHFS

DO

HLH

A8

LHA9

PhilH

ealth

PhilH

ealth

HPD

PB

40.0

% (

2006

)

57.0

% (

2006

)

2.9%

(20

09)

2 to

4 (2

010)

35.0

%

60.0

%

50.0

%

30.0

%

65.0

%

100.

0%

Des

k re

sear

ch

Stud

y of

hos

pita

lan

nual

rep

orts

subm

itted

to D

OH

Stud

y of

hos

pita

lan

nual

rep

orts

subm

itted

to D

OH

Stud

y of

hos

pita

lan

nual

rep

orts

subm

itted

to D

OH

Ann

ual r

epor

tsO

ffic

e re

port

s an

dda

taba

se

Off

ice

repo

rts

and

data

base

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

Ann

ual

8Th

is i

s ba

sed

on L

HA

of

four

pro

vinc

es w

itho

ut r

etai

ned

hosp

ital

s (B

ilira

n, E

aste

rn S

amar

, N

egro

s O

rien

tal,

and

Capi

z).

9Th

is i

s ba

sed

on L

HA

s of

six

pro

vinc

es (

Bili

ran,

Eas

ter

Sam

ar,

Neg

ros

Occ

iden

tal,

Neg

ros

Ori

enta

l, Ilo

ilo,

and

Capi

z).


Stra

tegy

Indi

cato

rD

efin

itio

nBa

selin

e

Tar

get

Dat

aCo

llect

ion

Freq

uenc

yD

ata

(Yea

r)Cy

cle

1Cy

cle

2So

urce

Met

hodo

logy

(201

0–(2

017–

2016

)20

20)

5.Se

cure

fisc

alau

tono

my

of faci

litie

s

1.Re

tain

ed h

ospi

tals

with

inde

pend

ent

Boar

d of

Dir

ecto

rsas

% o

f tot

alre

tain

ed h

ospi

tals

2.%

of L

GU

hos

pita

lsw

ith fe

e (in

com

e)re

tent

ion

3.Re

tain

ed in

com

ein

clud

ing

PhilH

ealt

hre

imbu

rsem

ents

as

% o

f tot

al M

OO

E of

accr

edite

d RH

Us

4.Re

tain

ed in

com

ein

clud

ing

PhilH

ealt

hre

imbu

rsem

ents

as

% o

f tot

al M

OO

E of

all

accr

edit

edpu

blic

hos

pita

ls

Num

ber o

fre

tain

edho

spit

als

wit

hin

depe

nden

tBo

ard

of D

irec

tors

÷to

tal n

umbe

r of

reta

ined

hosp

ital

s

Num

ber o

f LG

Uho

spit

als

wit

hfe

e (in

com

e)re

tent

ion

÷ t

otal

num

ber o

f LG

Uho

spit

als

Reta

ined

inco

me

incl

udin

gPh

ilHea

lth

reim

burs

emen

ts÷

tota

l MO

OE

of a

ccre

dite

dRH

Us

Reta

ined

inco

me

incl

udin

gPh

ilHea

lth

reim

burs

emen

ts÷

tota

l MO

OE

ofal

l ac

cred

ited

publ

ic h

ospi

tals

DO

H

DO

H

DO

H

DO

H

Stud

y

Des

k re

sear

ch

Des

k re

sear

chSt

udy

Stud

y

Ann

ual

Ann

ual

Ann

ual

Ann

ual


IMPLEMENTATION PLAN FORMONITORING AND EVALUATION

OrganizationThe Health Care F inancing Oversight

Committee, to be created by a DOH personnelorder, will be chaired by the DOH undersecretaryfor Sectoral Management and Coordination Clusterand cochaired by the senior vice president ofPhilHealth for Health Finance Policy Sector, withthe director of the Health Policy Development andPlanning Bureau as the alternate chair. Thecommittee’s members will come from DOH,PhilHealth, Union of League of Authorities of thePhilippines (ULAP), representatives from academeand nongovernmental organizations, as well as allother bureaus, offices, and persons deemedrelevant and competent by the DOH-Office of theSecretary. The HPDPB will serve as secretariat ofthe HCF Oversight Committee.

One of the major functions of the HCF OversightCommittee is to take the lead in the M&E of theHCF strategy and to provide the DOH ExecutiveCommittee with updated information accordingly.The Enhanced Philippine National Health Accountsshall be the primary source of information to trackthe impact of HCF strategy implementation,particularly on the levels of OOP, total healthexpenditures, and total health spending. The HCFOversight Committee shall identify and monitorperformance indicators that will measure theachievement of the HCF strategy’s goals andobjectives. In this connection, it will use the datacollection mechanisms that have already beeninstitutionalized. Special surveys and studies willalso be carried out to generate data that are notroutinely collected.

Implementing ArrangementsProper implementation of the HCF strategy

requires the engagement of all the stakeholdersinvolved. Even at the HCF Oversight Committeelevel, the importance of these stakeholders isunderscored by their participation in thecommittee. With the support of the HPDPB, policy

forums will be held to introduce and disseminatethe strategy to partner agencies and institutions,together with the distribution of pertinentmaterials. Manuals for specific partners, whoseroles are crucial to the HCF strategy and itsimplementation, monitoring, and evaluation willalso be prepared. These include the Centers forHealth Development, the PhilHealth regionaloffices, and the provincial/city/municipality LGUsnationwide.

Table 12 shows the work to be done at theregional and LGU levels to support the fivestrategies. Management structures within theregion and the LGU, such as the RICT (RegionalImplementation and Coordination Team) and LICT(Local Implementation and Coordination Team),will be examined to assess how they can bestrengthened and used to generate support.

Implementation Plan and TimeframeTwo time horizons or cycles will be used for the

M&E plan for the HCF Strategy of the Philippines,2010–2016 and 2017–2020. Each cycle will have aphased implementation plan that will give moredetails about the activities to support thestrategies. These plans will undergo continuousreview and revisions so that they are alwaysupdated to be responsive to any change that mayaffect the successful implementation of the HCFstrategy. Appendix 6 presents an indicativeimplementation plan for the first cycle.

While the indicative implementation planidentifies activities according to the five strategies,certain crosscutting activities will be undertakenas well. These consist of three types of activities.First, a legislative mapping will be carried out inorder to assess which of the strategies are alreadybeing addressed by existing and proposedlegislation and which strategies may requireadditional, new legislation, perhaps even anamendment to the original law that createdPhilHealth. The mapping will be conducted at bothnational and local levels. Second, a vigorousinformation campaign will be mounted todisseminate the strategy throughout the country


and in so doing, generate the needed support fromall stakeholders for its successful implementation.Third, a research agenda will be developed, basedon studies already done and studies that are still

TABLE 12. Regional and LGU Support for the HCF Strategy

Strategy Regional: DOH CHDs LGUsand PhilHealth Regional Offices

Increase resourcesfor health

Sustain membershipin social health insurancefor all Filipinos

Allocate resources accordingto most appropriatefinancing agent

Shift to new provider paymentmechanisms

Secure fiscal autonomy offacilities

Campaign for accreditationof services

Guide PIPH process

Maximize claims reimbursements

Mount information driveon PhilHealth services

Mount information campaign includingIEC development and distribution

Establish facility-basedenrollment system

Advocate for IPP enrollment

Promote essential health package

Assist LGUs to allocate budget, throughthe PIPH, that will ensure delivery ofthe EHP

Use PBGs to provide additionalresources for poor provinces

Negotiate for fast processingof benefit payments

Conduct information drive regardingthe new provider payment mechanisms

Advocate for income retention

Work on stricter implementationof the proper use of capitation funds

Orient LGUs regarding economicenterprises

Increase LGU budget for health(through PIPH counterpartand income retention of facilities

Increase LGU subsidy for sponsoredprogram/IPP premiums to coverentire poor population

Promote and sustain membership inPhilHealth of all sectors of the LGUpopulation: formal, informal,sponsored program

Increase LGU subsidy for sponsoredprogram/IPP premiums to coverentire poor population

Fund essential health package,in particular public health

Increase budget for capital outlay ofprimary and secondary healthfacilities

Implement contracts betweenPhilHealth and LGU-owned primaryand secondary facilities usingprovider payment mechanismsof capitation and per-case payments

Allow health facilities to retainincome

Retain ownership of facilities toensure public perspective

Support upgrades, including capitaloutlay, of primary and secondaryfacilities

Allow health facilities to retainincome

Transform LGU-owned facilities intoeconomic enterprises

needed, that can provide evidence-based findingsfor more informed decisions on how to furtherrefine and hone the health care financing strategyof the country.


APPENDICES

APPENDIX 1

MACROECONOMIC INDICATORS OF THE PHILIPPINES

Indicators Unit 2005 2006 2007 2008 2009 2010

GDP in current Current billion 5,444 6,031 6,647 7,423 7,669 8,341prices pesos

GDP in current Current Billion 98.829 117.534 144.043 167.479 160.991 181.508prices International

dollars

GDP per capita Current 63.9 69.3 74.9 82.1 83.2 88.7Pesos(‘000)

Inflation Percent (%) 6.7 4.3 3.9 8.0 4.4 4.5

Government Current million 795.7 882.4 1,136.6 1,202.9 1,123.2 ——income pesos

Government Current million 963 1,044 1,149 1,271 —— ——spending pesos

Government Percent (%) 17.7 17.3 17.3 17.1 —— ——spending GDP

Exchange rate Pesos/USD 55.1 51.3 46.1 44.3 47.7 ——with USD

Population Millions 85.3 87.0 88.6 90.5 92.2 94.0

* Underlined figures are projected/estimated.Sources: BSP, DOF, IMF, NSCB, and NSO Web sites


APPENDIX 2

LINK BETWEEN GOALS OF THE HCF STRATEGY, HCF-RELATED OBJECTIVESOF THE HSRA, NOH, AND FOURMULA ONE FOR HEALTH

Objectives HSRA 2001 National Objectives Formula 1 for Health, 2004for Health 2005–2010

Financialprotection

Equityin funding

Equityin access

Efficiency

Administrativeefficiency

Aggressive enrollmentof members (SP andIPP)

Improvementof benefitsto make PHIC moreattractive

Introductionof measuresto improveperformance

Development ofadministrativeinfrastructure that canhandle the increasedwork load

Increased coverage of NHIPIncreased benefit spendingand financial risk protection:- Increased support value- % of claims with zero co-payment

Improved allocation of healthresources particularly for thepoor and vulnerable group

Improved financial risk protection,particularly through social healthinsuranceIncreased coverage of the NHIPIncreased benefit spendingand financial risk protectionProgressiveness of premiumcontribution

Improved allocation of healthresources particularlyfor the poor and vulnerable group:- Out-of-pocket health spending as

percentage of total healthexpenditures

Augmented availability of services:- % of facilities with Sentrong Sigla

and/or PhilHealth accreditation- % of facilities offering OPB

package

Improved efficiency of healthresource utilization:- Established performance-based

financing system for hospitals,public health systems, and healthregulatory agencies

- Established SDAH

Improved operational efficiencythrough enhanced internalprocesses and information systems:- PHIC: % of claims that are

fraudulent- PHIC: Increased collection

efficiency- Eligibility checking- Customer satisfaction

Mobilizing resources fromextrabudgetary sources:- User fees for nonpoor- Utilizing assets as

“economic rent”- Efficient use of actual

resources (technical andallocative efficiency)

Expanding NHIP:- Benefits- Provider payments- Premiums to increase

coverage

Coordinating local andnational health spending:- PIPH implementation

(one plan with all funds)

Focusing direct subsidiesto priority programs:- Prioritized programs

with performance-basedbudget

Adopting a performance-based financing system:- Revenue-generating

institutions to fundthemselves and helpothers

Sources: Health Sector Reform Agenda, National Objectives for Health, and FOURmula One for Health Framework, developed by DOH


APPENDIX 3

GOVERNMENT HEALTH SPENDING OBJECTIVES IN THE NOH, 2005–2010

Objective Indicator Target Baseline Data Likelihood to beand Source Achieved in 2010

Increasedmobilizationand generationof resourcesfor health

Increasedinvestmentsfor public healthcare

Total healthexpendituresas percentageof GNP

Per capitahealthexpenditures

Totalgovernmenthealthexpendituresas percentageof total healthexpenditures

Total socialhealthinsuranceexpendituresas percentageof total healthexpenditures

Total publichealth careexpendituresas percentageof total healthexpenditures

Total publichealth careexpendituresas percentageof totalgovernmenthealthexpenditures

3.0–4.0 % of GNP

PhP2,000 percapita healthexpenditures

50.0% of totalhealthexpenditures:18.0% national32.0% local

15.0% of totalhealthexpenditures

20% of total healthexpenditures:5.0% national15% local

50.0% of totalgovernment healthexpenditures:20% national30% local

2.9% of GNP(PNHA, 2003)

PhP1,662 (at currentprices) per capitahealth expenditures(PNHA, 2003)

35.0% of total healthexpenditures:17.0% national18% local(PNHA, 2003)

9.5% of total healthexpenditures(PNHA, 2003)

12% of total healthexpenditures:4.0% national8.0% local(PNHA, 2003)

35.0% of totalgovernment healthexpenditures:11.0% national14.0% local(PNHA, 2003)

Yes

Yes

Yes/ No

No

No

No


Source: National Objectives for Health 2005–2010


Establishedperformance-based financingsystem forhospitals, publichealth programs,and healthregulatoryagencies

EstablishedSectorwideDevelopmentApproachfor Health

Out-of-pocketheath spendingas percentageof total healthexpenditures

Improvedfinancial riskprotectionparticularlythrough socialhealth insurance

Improvedefficiencyin the utilizationof healthresources

Improvedallocationof healthresourcesparticularlyfor the poorand vulnerablegroup

No

Yes

No,with the currentstrategy

Yes,but qualitativetargeting

Performance-basedfinancing strategyinitiated(DOH, 2005)

SDAH systeminitiated(DOH, 2005)

45.0% out-of-pocketspending out of totalhealth expenditures(PNHA, 2003)

70.0% coverageof health insurancefor poor families(PhilHealth, 2004)

Institutionalizedperformance-based financingsystem

SDAH systemestablished

Reductionof out-of pocketspending to 20%of total healthexpenditures

100.0% coverageof healthinsurance forpoor families


APPENDIX 4

PHILHEALTH-RELATED OBJECTIVES IN THE NOH, 2005–2010


Improvedallocationof health resourcesparticularlyfor the poorand vulnerablegroup

Increased coverageof the NHIP

Increased benefitspendingand financial riskprotection

Improvedfinancial riskprotectionparticularlythrough socialhealth insurance

% coverageof the totalpopulation

% coverageof indigents outof total eligibleindigent sectorpopulation*

% coverageof informalsector outof total eligibleinformal sectorpopulation

Averagepercentageof benefitsupport value

Percentageof claimswith zero co-payment

Progressivityof premiumcontribution

100% of poor havesocial healthinsurance

Zero co-payment forall sponsoredprogram memberclaims

85% of totalpopulation covered

100% of indigentscovered

80% of informalsector covered

80% support valueof ward rates

30% of claims withzero co-payment

PhP30,000 salarycap by 2007 for theemployed sector

Different premiumrates for theindividually payingprogram

100% of poor havesocial health insurance

Zero co-payment for allsponsored programmember claims in DOH-retained hospitals(PhilHealth, 2004)

84% of total populationcovered(PhilHealth, 2004)

100% of indigentscovered(PhilHealth, 2004)

35% of informal sectorcovered(PhilHealth, 2004)

74% support value ofward rates(PhilHealth, 2004)

20% of claims with zeroco-payment for allmember types

30% of claims fromsponsored programmembers with zeroco-payment(PhilHealth, 2004)

PhP15,000 salary capfor the employed sector

PhP1,200 for allindividually payingprogram members(PhilHealth, 2004)

Yes,but no sustainedcoverage; targetingissues to be fixed.

No(at 2008)

Yes,but no sustainedcoverage; targetingissues to be fixed.

No

No

Yes,with changes in PPM

Yes(salary cap)

No,different IPP rates

* Enrollment of indigents to the sponsored program is on an annual basis.


Source: National Objectives for Health 2005–2010


Percentageof accreditedhealth facilitiesofferingoutpatientbenefit package

Collectionefficiency

Eligibilitychecking

CustomerSatisfaction

Percentageof healthfacilitieswithSentrong Siglaand/orPhilHealthaccreditation

Outpatient clinics· Rural Health Units

– 731 (31%)· Free-Standing

Dialysis Clinics –18 (66%)

· Maternity CareClinics – 71

· DOTs Centers – 29(18%)

· Private clinics –To be determined(PhilHealth, 2004)

70% efficiencybased on potentialcollection

94% efficiencybased on collectiontarget for year(PhilHealth, 2004)

Processing timefor approvalof accreditationfor health careinstitutions at90 days(PhilHealth, 2004)

68% satisfaction,accdg. to the SWSsurvey(PhilHealth, 2004)

55% of RHUsand health centerswith SS/PhilHealthaccreditation(PhilHealth, 2004)

89% of licensedhospitals withPhilHealthaccreditation(PhilHealth, 2004)

Outpatient clinics· Rural Health

Units – 80%· Free-Standing

Dialysis Clinics– 90%

· Maternity CareClinics – 90%

· DOTs Centers –50%

· Private clinics –50%

95 % of potentialcollection

Premiumcontributionposted in 7calendar days

Processing timefor approvalof accreditationfor health careinstitutionsreduced to 15 days

80% satisfaction

80% of RuralHealth Unitsand health centerswith PhilHealthaccreditation

100% of licensedhospitals withPhilHealthaccreditation

Increasedoperationalefficiencyby enhancinginternal processesand IS

Improvedaccess to safe andquality healthproducts, devices,facilities andservices

Uncertain

Uncertain

No

Uncertain

Yes

Yes


APPENDIX 5

METHODOLOGY FOR PROJECTING LONG-TERMHEALTH CARE EXPENDITURES FOR THE HCF STRATEGY FORMULATION

by Lluis Vinyals

Long-term projections presented in the HCF strategy were prepared using the following steps:

1. Analyzing the latest officially available Philippines National Health Accounts (2005) by source of resources(left column) and financing agents (top row). See table below (in billion pesos):

NG LGU PhilHealth HMOs OOP Total

National government 13.8 3.0 16.8

LGU 23.3 3.0 26.3

Donors and loans 12.5 12.5

Families/ companies 13.2 21.5 87.5 122.2

Total 26.3 23.3 19.2 21.5 87.5 177.8

Note: the 3 billion Pesos difference to 180.7 Billion reported by PNHA 2005 is related to PHIC reserve funds. Reservefunds are resources mobilized but not spent.

2. Preparation of macroeconomic assumptions, based on WHO THE target of 5% of GDP and estimated economicand public spending growth:

Number and Formula Estimates 2008 2020

1. Total health expenditure/Gross Domestic Product (GDP) 3.50% 5.00%

2. GDP (in billion pesos) 7,423 13,3313. GDP growth expected average 5.00%4. (2. X (1+CPI)^12 GDP at current price

(including estimated inflation) 21,3435. (2. X 1.) THE in billion pesos 259.8 6676. (5. X (1+CPI)^12 At current price, in billion pesos 1,0677. Government spending, (budget,

in billion Pesos – includesdebt services) 1,629 (2009) 2,786

8. Gov. spending on health in % 4.50% 6.50%9. (7. X. 8.) Gov. spending on health, in billion

pesos (at constant 2008 prices,no inflation considered) 73 181

10. (9./ Population) Estimated per capita total healthexpenditure 3,027 5,639

C. Price Index average for the period: 4%Average THE increase for the period: 9% (to reach 5% of THE in 2020)


3. Computing growth estimates of each financing agent so that PhilHealth becomes the main health payerand OOPs are reduced while ensuring the feasibility of the options (affordability of premiums). This stepis limited to applying the estimated growth rate (see next table) to 2005 data for every financing agent.

4. Adjustment of estimates in two scenarios, consistent with PhilHealth current management projections(low scenario) and more ambitious ones (high scenario) that will make PhilHealth the main health purchaser.This was done in order to accommodate the projections of PhilHealth’s Office of the Actuary.

Financing Agent Average Annual Growth

Low Scenario High Scenario

National government 5% 6%LGUs 8% 6%PhilHealth 14% 18%Out-of-pocket 8% 6%Private insurance 13% 12%HMOs 13% 12%Employer-based plans 13% 12%

Others 5% 5%

The main differences are in the growth rates differential of PhilHealth and OOP expenses. This means that ifPhilHealth’s share is not growing enough, OOP expenses have to make up for it. Note also that public spendingwill be almost constant in the two scenarios (as a source of funding). The different growth rates of nationalgovernment and LGUs parts come about because of their varying roles as financing agents (managers of funds).In the low scenario, a smaller PhilHealth will have less money because both members and the government paylower premiums. Government will use money from taxes to support the budgets of health facilities.

5. Final result. The following table presents the estimates for the two suggested scenarios.

2010 2012 2016 2018 20202005 Low High Low High Low High Low High Low High

National

government 28,651 36,567 37,446 40,315 41,678 49,003 51,632 54,026 57,467 59,563 63,963

LGUs 23,271 33,720 30,414 39,113 33,852 52,624 41,936 61,041 46,676 70,803 51,952

PhilHealth 19,899 38,315 45,525 49,794 63,389 84,100 122,898 109,296 171,123 142,041 238,271

Out-of-pocket 87,508 128,685 117,144 150,148 131,641 204,411 166,237 238,505 186,809 278,285 209,926

Private

insurance 4,344 8,004 7,656 10,220 9,604 16,664 15,112 21,278 18,956 27,170 23,778

HMOs 7,082 13,048 12,481 16,662 15,656 27,166 24,636 34,689 30,903 44,294 38,765

Employer-based plans 5,755 10,604 10,143 13,540 12,723 22,076 20,020 28,189 25,113 35,995 31,502

Private

schools 2,158 2,754 2,754 3,037 3,037 3,691 3,691 4,070 4,070 4,487 4,487

Others 2,102 2,683 2,683 2,958 2,958 3,596 3,596 3,964 3,964 4,371 4,371

Total 180,772 274,381 266,247 325,787 314,538 463,332 449,757 555,057 545,081 667,008 667,014

The total amount corresponds to the THE amounting to 5% of GDP by 2020. The differences are due to the size of each stakeholder.


APPENDIX 6

INDICATIVE IMPLEMENTATION PLAN, 2010-2016

Strategies Substrategies Selected Activities Lead Office(s)

1. Increaseresources forhealth

2. Sustainmembership insocial healthinsurance of allF ilipinos

Increase nationaland local government spendingon health

Expand collection network

Increase PhilHealth premiumlevels based on households’capacity to pay

Provide NG subsidy for SP

Segment, expand,and sustain IPP enrollment

Expand and sustain OFWenrollment in PhilHealth

Expand and sustain formalsector enrollment to includecontractual, casual, temporary,and project-based workers

Enroll the elderly

Engage in marketing activitiesfor all sectors

Conduct legislative mapping

Initiate required changesin laws and policy issuances

Undertake special effortsfor informal sector

Maximize 3% increase salarycap

Work on full NG subsidyfor SP premiums

Operationalize two-tier system

Provide partial LGU subsidy forIPP

Estimate numberof “invisible” IP

Enroll at point of service

Secure and allocate NG/LGUfunding for prepaid premiums

Continue and strengthenpartnership with OWWA

Conduct pertinent activities withDOLE

Link with SSS and GSIS database

Develop and implementmarketing plans for all sectors

DOH

DOH/PhilHealth

PhilHealth

PhilHealth

PhilHealth/DOH

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth



3. Allocateresourcesaccording tomostappropriatefinancing agent

4. Shift to newproviderpaymentmechanisms

Define essential health package

Set NG–LGU subsidy

Support capital outlaywith DOH/LGU funds

Shift public health spendingfrom DOH to PhilHealth

Shift from fee-for-serviceto mix of per-case payment andcapitation

Phase out balance billing

Identify componentsof essential health package forRHUs, hospitals, etc. (primaryhealth care)

Identify componentsof complementary package

Identify the services that NG–LGU are subsidizingin their respective hospitals

Provide DOH public healthfunding only for provinceswithout universal coverage

Provide LGU funding for RHUsalaries

Use DOH funds to providecapital outlay for DOH-retainedhospitals

Use LGU funds to provide capitaloutlay for RHUsand their hospitals

Differentiate betweencommunity-basedand individual-directed publichealth spending

Continue to use DOH funds forcommunity-based public healthspending

Use PhilHealth fundingfor individual-directed publichealth spending

Expand outpatient benefits toother sectors

Use capitationfor primary health care services

Implement cost containmentschemes for drugsand medicines

Arrange contractwith providers

Increase support value

DOH

DOH

DOH

DOH

LGU

DOH

LGU

DOH

DOH

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth

PhilHealth



5. Secure fiscalautonomy offacilities

Arrange contractwith providers

Fully corporatize and giveautonomy to DOH-retainedhospitals

Fully corporatize and giveautonomy to LGU hospitals

Allow LGU nonhospital healthfacilities to retain revenues

Have local health systemaccredited

Use FFS for inpatient carefor nonpreferred providers; andper-case paymentfor case-mix systemfor preferred providers

Use per-case payment under acase-mix system for allproviders

Prepare documents and gothrough process to changeorganizational structureof hospitals

Set up hospital boards

Allow hospitals to retainrevenues

Change sector employmentstatus of hospitals’ employeesfrom publicto private

Provide DOH subsidyfor salaries of retainedhospitals

Prepare documents and gothrough process to changeorganizational structureof hospitals

Set up hospital boards

Allow hospitals to retainrevenues

Change sector employmentstatus of hospitals’ employeesfrom public to private

Provide LGUs subsidyfor salaries of their hospitals

Work on needed documents forSB approval

Work on accreditationof local health system

PhilHealth

PhilHealth

DOH

DOH

DOH

DOH

DOH

LGU

LGU

LGU

LGU

LGU

LGU

PhilHealth


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World Health Organization–EURO. “Approaching Health Financing Policy in the WHO European Region.”Paper presented at the 56th session of the Regional Committee for Europe, Copenhagen, Denmark,September 11–14, 2006.

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_____. “Strategy on Health Care Financing for Countries of the Western Pacific and South East AsiaRegions, 2006-2010.” Paper presented at the 56th session of the Regional Committee for Europe,Noumea, New Caledonia, September 19–23, 2005.

DEPARTMENT OF HEALTHManila, Philippines

Softcopies of this publication can be downloaded at:http://www.rchsd.doh.gov.ph/

Documents

Health Care Financing Strategy 2010-2020 (Philippines)