Topic: Principles of Health Financing

Lecturer: Dr. Layug

PRINCIPLES OF HEALTH FINANCING

contribution mechanism), and the agents that collect

these revenues. This means that all funds for
healthcare, excluding donor contributions, are
collected in one way or another from the general
population or certain sub-groups. Collection
mechanisms include:

At the end of the session, the student learners are expected

to:

3.
4.
5.

What is Health Financing?

According to the World Health Organization, health financing
is the function of a health system concerned with the
mobilization, accumulation and allocation of money to cover
the health needs of the people, individually and collectively,
in the health system.
WHO, 2000

o
o
o
o

Collection agents could be government or

independent public agencies, public insurance funds,
or healthcare providers.
2.

Health Financing has three main purposes:

1.
2.
3.

Make funding available

Set the right financial incentives to providers
Ensure that all individuals have access to effective
public health and personal health care

Basic Principles in Health Finance

Raise enough revenues to provide individuals with a

basic package of essential services and financial
protection against catastrophic medical expenses
caused by illness and injury in an equitable, efficient,
and sustainable manner
Manage these revenues to pool health risks
equitably and efficiently
Ensure the purchase of health services in ways that
are allocatively and technically efficient

Health Financing Functions

1.

Revenue collection -- concerned with the sources of

revenue for health care, the type of payment (or

taxation,
social insurance contributions,
private insurance premiums, and
out-of-pocket payments.

3.

Risk Pooling is the collection and management of

financial resources so that large unpredictable
individual financial risks become predictable and are
distributed among all members of the pool. In risk
pooling, individuals pay a predetermined amount to
the establishment to protect themselves against a
large unpredictable medical expense. The pooling of
resources is the accumulation and management of
funds from individuals or households (pool
members) in a way that insures individual
contributors against the risk of having to pay the full
cost of care out-of-pocket in the event of an illness.
Resource allocation and Purchasing -- refers to the
many arrangements for buyers of health care
services to pay health care providers and suppliers.
This includes mechanisms for determining for whom
to buy, what to buy, from whom, how to pay, and at
what price. Purchasing of health services is done by
public or private agencies that spend money either
to provide services directly to purchase services for
their beneficiaries. In many cases, the purchaser
of health service is also the agent that pools the
financial resources. Purchaser of health services are
typically the Department of Health, social security
agencies, district health boards, insurance
organizations and individuals or household (who pay
out-of-pocket at time). Purchasing can either be
passive or strategic. Passive purchasing simply
follows predetermined budgets or pays bills when
they are presented. Strategic purchasing, on the
other hand, uses a deliberate approach to seeking
better quality services at low prices.
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2.

Define and describe Health Financing and its

purpose
Enumerate and discuss the basic principles in Health
Finance
Describe the key functions in Health Financing
Discuss the basic mechanisms of collecting revenue
Discuss the basis for the establishment of the
Philippine National Health Insurance Law

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1.

Ministry of Health or National Health Service

Main features:
o Primary funding comes from general
revenues
o Provide medical coverage to the countrys
entire population
o Services are delivered through a network of
public providers
2.

Characterized by:
o Independent
or
quasi-independent
insurance funds
o Reliance on mandatory earmarked payroll
contributions
from
individuals
and
employers
o A clear link between these contributions
o Right to a defined package of health
benefits
3.

Community-based Health Insurance

Not-for-profit prepayment plans for health care that

are controlled by a community that has voluntary
membership
Most schemes operate according to core social
values and cover beneficiaries excluded from other
health coverage
4.

Social Health Insurance Systems

Private or Voluntary Health Insurance

Any health insurance paid for by voluntary

contributions
Supplements publicly funded coverage
Paid for by non-income-based premiums (not tax or
social security contributions)

The present set-up of health financing of the government was

brought forth as one of the components of the Health Sector
Reform Agenda, which was made in response to the health
problems inherited by then President Cory Aquino.
Health Sector Reform Agenda (HSRA) 5 approach in its
reforms:

Local Health Systems Development reforms

extended to the local government granting them
shared responsibility in the management of health
problems in cooperation with the national
government.

Looking into the present economic state of Filipinos, we see a

meager improvement of the state of health from the 90s.
Economics-wise, 1/5 of all Filipino households (5M Filipinos)
earn only around P3000/month. Comparing 2006 and 2009
statistics, poverty incidence among families decreased slightly
with an increase in the annual per capita poverty threshold.
Even with meager resources, most of health expenditures of
Filipino families still come by out-of-pocket with just a slight
decrease from 2007 to 2010 data.
PHILHEALTH
PHILHEALTH otherwise known as Republic Act 7875 (National
Health Insurance Act of 1995) or An Act Instituting a
National Health Insurance Program for all Filipinos and
Establishing the Philippine Health Insurance Corporation for
the Purpose was signed into law February 14, 1995 by
President Fidel V. Ramos.
In 2004, Republic Act 9241 was signed as an Act
amending RA 7875 transferring health insurance
management to a corporation that will handle inpatient medical services of employees and their
dependents.
Those considered dependents are:
- (1) the legitimate spouse who is not a
member;
- (2) the unmarried and unemployed
legitimate,
legitimated,
illegitimate,
acknowledged children as appearing in the
birth certificate; legally adopted or
stepchildren below 21 years of age;
(3) children who are 21 years old and
above but suffering from congenital
disability, either physical or mental, or any
disability acquired that renders them totally
dependent on the member for support;
- (4) the parents who are 60 years old or
above whose monthly income is below an
amount to be determined by the
Corporation in accordance with the guiding
principles set forth in the Act. However,
other medical needs of women outpatients
may not be covered.

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Hospital Reforms - focus on the upgrading of

facilities of government-owned hospitals.
Public Health Programs Reforms - focuses on the
institution of effective public health education and
campaign to all Filipinos.
Health Regulatory Reforms - fixes the system of
promulgation and execution of regulations with
regards to health.
Social Health Insurance Reforms- sought to fix the
state of health financing in the country and sought
the replacement for Medicare.

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Four Main Health Insurance Mechanisms

1. State-funded Systems

 President Benigno S. Aquino III

The basis of the Law was in response to Section 11, Article XIII
of the 1987 Constitution of the Republic of the
Philippines stating the State shall adopt an integrated and
comprehensive approach to health development and priority
shall be given to those in need of health care but have limited
personal or family financial resources.
The State shall adopt an integrated and comprehensive
approach to health development which shall endeavor to
make essential goods, health and other social services
available to all the people at affordable cost
Section 11, Article XIII of the 1987 Constitution of the
Republic of the Philippines
Priority for the needs of the underprivileged, sick, elderly,
disabled, women and other children shall be recognized.
Likewise, it shall be policy of the State to provide free medical
care to paupers.

In the present government, the Aquino Health Agenda

focuses in investing in Filipinos especially the poor through
four strategies: universal healthcare, education, housing,
and conditional cash transfer. Universal Healthcare or
Kalusugan Pangkalahatan has three strategic thrust which
includes:

Financial risk protection through the expansion of

the National Health Insurance Program enrolment
and benefit delivery
Improved access to quality hospitals and healthcare
facilities
Attainment of the health-related Millennium
Development Goals (i.e. reduction of maternal and
child mortality, morbidity and mortality from TB and
malaria, and the prevalence of HIV/AIDS)

Developments in Social Health Insurance in the Philippines

VISION of PhilHealth
Bawat Pilipino Miyembro

Bawat Pilipino Protektado

AQUINO HEALTH AGENDA

The Social Contract with the Filipino People
From treating health as just another area for political
patronage to recognizing the advancement and protection of
public health, which includes responsible parenthood, as key
measures of good governance.

SOCIAL SOLIDARITY: Bayanihan into the National

Health Insurance Program where the healthy,
wealthy and unaffected look after the sick, poor and
afflicted
No one is excluded, everybody are entitled to the
care of the nation
All are members and all have rights and
responsibilities, and being a contributing member
alone allows everybody to fulfill their responsibilities
Employees, sponsored members, individually paying
members, lifetime members, OFWs
Who are the qualified dependents: spouse of the
member, parents who are 60 years old and above
who are not members, children who are below 21
years old

PhilHealths deliverable to the society is Financial

Risk Protection
Every Filipino gets financial assistance, have access
to excellence providers where healthcare is paid for,
use for assistance when needed, and receive
significant support
To have the opportunity to get financial assistance
whenever it might be needed
To have accessibility to health professionals and
facilities where quality healthcare is paid for
To actually use the assistance when needed when
doing so, to receive a significant amount of support

Kalusugan Natin Segurado

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1963 Francisco Duque proposed the formation of a

National Health Service under the administration of
President Diosdado Macapagal
1969 RA 6111 or Philippine Medical Care Act
(Medicare) was signed into law by President
Marcos to cover for the health expenses of the
formal sector (government and private employees,
with premiums to be shared by employee and
employer)
1995 National Health Insurance Act of 1995 was
signed into law (RA 7875)
1997 PhilHealth assumed coverage of government
employees from the Government Service Insurance
System (GSIS)
1998 PhilHealth implemented coverage of indigent
families with premium sharing from the national and
local government units (50-50), with modification
based on classification of municipality
1998 PhilHealth assumed coverage of private
employees from the Social Security System (SSS)
1999 PhilHealth implemented coverage of the selfemployed
2004 RA 7875 was amended (RA 9241)
2005 PhilHealth assumed coverage of Overseas
Filipino Workers from the Overseas Workers Welfare
Administration (OWWA)

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MISSION
Sulit na Benepisyo sa Bawat Miyembro
Dekalidad na Serbisyo para sa Lahat

Other Facts regarding Phil Health

National Health Insurance Fund

PhilHealth gets its money from the National Health Insurance
Fund, which has three components:
1.
2.

Specific Goals
3.

Payors appreciation of PhilHealths Value the

willingness to pay a fair premium
Enrolment of entire population -- universal coverage
for basic healthcare needs
Providers enthusiasm to partner with PhilHealth -transparent provision of needed goods and services
to all members at set PhilHealth rates
Patients utilization of benefits and packages -PhilHealth contributes to all medical transactions
Enhanced reputation as a center of government
excellence -- trust in the institution for partnership
and employment opportunities

What are the guiding principles of the National Health

Insurance Act?
Prohibitions

Providing health care directly

Buying and dispensing drugs and pharmaceuticals
Employing physicians and other professionals for the
purpose of directly rendering care
Owning or investing in health care facilities

Limited to paying for the utilization of health

services by the covered beneficiaries or to
purchasing health services on behalf of beneficiaries
Exempted from paying corporate taxes because it is
a government owned and controlled corporation
All government and private EMPLOYERS are required
to register their employees with Phil Health within
30 days after hiring them
Members and their dependents are eligible for
confinements outside the country provided the
following are submitted within 180 days after
discharge (1) official receipt from the health care
institution, (2) certification of the attending
physician as to the final diagnosis, period of
confinement and services rendered.

Basic Benefit Funds -- finances the basic minimum

package to be enjoyed by all members
Supplementary Benefit Funds -- finances the
extension and availment of additional benefits not
included in the basic minimum benefit package but
approved by the PhilHealth Board of Directors. In 5
years time, the SBF will become part of the BBF
Reserve Funds portion of the PhilHealth
accumulated revenues not intended to meet the
cost of the current years expenditures. This is
usually equivalent to not more than the estimated
amount of the programs expenditures in two years.
The money is invested in interest-bearing bonds,
securities, deposits, loans and securities to banks
and stocks

Funds come into the NHIF by way of premiums from the

labor sector and this is shared by both the employer and
the employee. The monthly contribution will be determined
by the income of the employee. Individually-paying members
also pay a fixed premium monthly. Indigent people in a
community will be sponsored by both the local and national
government. Some grants and donations from the private
sectors also make up part of the funds. A portion of the
funds are invested in some businesses to gather interest.
Where does PhilHealth get its money for funds?

Premiums
Individual
National Government
Local Government
Grants and Donations

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Address inequities in health

No Filipino will ever be financially afraid of getting
sick, and that no one will left behind in the race
toward Universal Health Care and financial risk
protection
PhilHealth needs to and will leverage its purchasing
power to helo break the silos and foster increased
collaboration
How to use PhilHealths purchasing power?
Use performance commitment contracts to ensure
that health facilities are safe and high quality
Provide incentives to ensure that health human
resource is adequate in number, purposely
distributed and properly compensated
Negotiate for lower costs and charges of healthcare
goods and services
PhilHealth wants to change how healthcare services
are rendered by providers with care and received by
members with pride
Case payments for all diseases provides clear,
explicit and predictable financial support
No balance billing policy (sapat na ang bayad ng
PhilHealth)

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Premium Contributions

Amount paid by or on behalf of a member for

PhilHealth coverage
For formal sector employees based on
salaries/wages
For self-employed household earnings and assets
Indigent paid for by the local and national
government

illnesses such as acute lymphocytic leukemia in children,

early stage breast cancer, low to intermediate prostate
cancer, and end stage renal disease requiring kidney
transplant.
Not included in the benefit package

Membership into PhilHealth

Paying Members
o Government employees
o Private sector Employees
o Regular wage earners
o Household helpers
o Sea-based OFWs
Individually paying members
o Fishermen,
farmers,
businessmen,
professionals, land-based OFWs
Indigent Members
Privately-sponsored Members
Non-paying Members
o Retiree-members of SSS/GSIS
o Retiree members of AFP, PNP, BFP and
BJMP

Who are entitled to benefits?

Benefit Package

In-patient Hospital Care

o Room and board
o Services of health care professionals
o Diagnostic, laboratory and other medical
examination services
o Use of surgical or medical equipment and
facilities
o Prescription drugs and biologicals (subject
to limitations)
Out-patient Hospital Care
o Services of health care professionals
o Diagnostic, laboratory and other medical
examination services
o Personal preventive services
o Prescription drugs and biologicals (subject
to limitations)

TYPE Z (CATASTROPHIC DISEASES) BENEFIT PACKAGE

Last June 2012, PhilHealth started implementing Case Type Z
Benefit Package (catastrophic care package) that intends to
provide substantial assistance to any member who contracts

Non prescription drugs and devices

Drugs/alcohol abuse or dependency treatment
Cosmetic surgery
Optometric services
5th and subsequent normal obstetrical delivery
Cost ineffective procedures as determined by
PhilHealth

Member
o A member who has paid at least 3 months
worth of contributions within 6 months
before his availment of the benefits
o SSS/GSIS members more than 65 years old
and have paid at least 120 monthly
contributions
Enrolled indigents
Dependents
o Legitimate spouse who is not a member
o Unmarried and unemployed legitimate,
legitimated, illegitimate, acknowledged
children; legally adopted or stepchildren
below 21
o Children 21 and above but suffering from
congenital disability (physical or mental)
o Parents 60 years and above whose monthly
income is below amount to be determined

Mechanisms of Payment of Claims for Doctors

Fee for service -- a physician may receive payment

from PhilHealth for each unit of service
Capitation payment -- a physician may receive a
fixed rate for delivery of the health care needs
required by a particular individual, or family,
household or group under conditions of the contract
Case payment -- a physician may receive a fixed
amount for every specific case that is diagnosed

23 Case Rates (No balance billing for Sponsored Program

beneficiaries in government hospitals)
( image on ze last page)
Other things to remember

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Investment Earnings
Sin Taxes

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All claims by physicians should be filed within 60

days from patients date of discharge
Health care institutions may not charge for
PhilHealth forms and processing fees
PhilHealth would only pay for drugs included in the
Philippine National Drug Formulary (PNDF)
Doctors must not charge over and above the
professional fees provided by the NHIP

Current News on the Status of PhilHealth

Increase in PhilHealth enrolment rate

o 100% coverage of the NHTS-PR identified
poorest
households
(5.2
million
households/25 M individuals with annual
premium cost doubled from P 1,200 per
family to P 2,400 or totalling P 12.5 billion.
o Dec 2012, enrolment increased to 82.4M
Filipinos (86%) of the 95.8 M projected
population for 2012
o 65% increase in PhilHealth enrolment of the
poor and an overall increase of 17% in the
total population.
Introduction of More PhilHealth Benefits
o Primary Care Benefit Package (basic
laboratory tests and medicines)
o Case rates for 23 most common medical
and surgical conditions and selected
catastrophic diseases (Type Z) with No
Balance Billing Policy for Sponsored
members

References:
Gottret, P. and G. Schieber, 2006. Health Financing Revisited:
A Practitioners Guide Overview. The World Bank.
National Health Insurance Program Implementing Rules and
Regulations 1994.
----From Doc Layugs presentation and last years batch notes.
The highlighted words are the ones that are included in the
objectives and the ones that Doc Layug emphasized on.
That In all things God May be Glorified

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23 Case Rates (No balance billing for Sponsored Program

beneficiaries in government hospitals)
~FIN~
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