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Universal Healthcare in the Philippine Setting

Research · October 2015

DOI: 10.13140/RG.2.1.1580.8726

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 THE HEALTH SYSTEM1 OF THE PHILIPPINES:
THE BENEFITS AND COSTS OF UNIVERSAL HEALTHCARE
A paper in Economics 151 prepared by Richard Mel Caplis2

Introduction
The archipelagic geography of the Philippines affects the allocation and distribution of
basic human services including healthcare. Further, Philippines have the desire to
achieve universal health coverage3 (Tangcharoensathien, et al., 2011). To achieve
such end, Philippines launched the program called Kalusugan Pangkalahatan which
calls for among others increase in the expenditure for health, which includes increase
in expenditure for healthcare infrastructure and manpower and aggressive
promotion of the social health insurance system (Department of Health, 2014)4- the
Philippine Health Insurance System or PhilHealth (Tangcharoensathien, et al., 2011).
This research contends that an increase in the government healthcare expenditure
leads to a positive change in the health of the Philippine population and an inverse
relationship to the out of the pocket expenditures of the Filipino people on health leading
to a universally accessible healthcare system.
Research Questions
This paper seeks to answer the following questions:
1. What is the relationship of government healthcare expenditure to the health of
the Philippine population?

1
Health systems are defined by the United Nations as “A health system is the sum total of all the organizations,
institutions and resources whose primary purpose is to improve health. A health system needs staff, funds,
information, supplies, transport, communications and overall guidance and direction. And it needs to provide
services that are responsive and financially fair, while treating people decently.” (As cited in
http://www.who.int/features/qa/28/en/)
2
This research is largely patterned in a paper of Richard Mel Caplis and Levy Lloyd Orcales entitled THE HEALTH
SYSTEMS OF INDONESIA AND THE PHILIPPINES: A COMPARATIVE POLITICAL STUDY ON THE IMPACTS OF HEALTH
DEVOLUTION FOR THE PERIOD OF 2001 TO 2012 submitted in Political Science 178 class of the University of the
st
Philippines Baguio- College of Social Sciences for the 1 Semester of AY 2014- 2015.
3
Universal Health Coverage as defined by the World Health Organization is “The goal of universal health coverage is
to ensure that all people obtain the health services they need without suffering financial hardship when paying for
them.” (As cited in http://www.who.int/features/qa/universal_health_coverage/en/)
4
Social insurance as defined in Encyclopaedia Britannica is “Public insurance program that provides protection
against various economic risks (e.g., loss of income due to sickness, old age, or unemployment) and in which
participation is compulsory.” (As cited in http://www.britannica.com/EBchecked/topic/551273/social-insurance)
 2. Is there a relationship or impact between the government healthcare expenditure
in reducing the out of the pocket expenditures5 of a Filipino?
3. What is the effect of the healthy citizenry to the productivity of the nation?
4. What policy changes should be made to reach the goal of universal health
coverage in the Philippines?

The Context of the Philippines

The Policies
The health devolution in 1991 in the Philippines radically altered the health delivery in
the Philippines. It is because 490 out of the 534 public hospitals, and all of the 12, 580
rural health units (RHUs), municipal health centers, and barangay health stations
(BHSs) under the Department of Health (DOH) were transferred to the administration of
the local government units (LGUs) (Perez, et. al., 1995 as cited in Atienza, 2004)
Further, 75% of the 45, 945 members strong DOH field staff has been devolved to the
provincial, city, municipal and barangay levels (Brilliantes, 1998). Withthis setup, the
LGUs continues to receive guidance from the DOH throught the regional centers for
health development (CHD). Also, the licensing of health practitioners, of the products
related to health, licensing of health facilities, regulation of health services, quarantine
and international disease control are still addressed by national agencies (Asia Pacific
Observatory on Health Systems and Practices, 2011). However, devolution failed to
address the issue of providing health coverage for the poor and the Philippine Health
Insurance Corporation (PHIC or PhilHealth)- a government owned and controlled
corporation which is also the largest health insurer in the country- was tasked to do
tackle the matter (Lieberman, 2002). To fulfill this mandate, the PHIC as a social health
insurance system that receives premium from its members and that it receives

5
Out of the pocket expenditure (OOP) is defined as “…comprise cost-sharing, self-medication and other expenditure
paid directly by private households, irrespective of whether the contact with the health care system was established
on referral or on the patient’s own initiative” (As cited in http://stats.oecd.org/glossary/detail.asp?ID=1967). The
OOP was selected as an indicator on if a healthcare system is universal or not since it measures the amount
shouldered by the individual seeking healthcare. A high OOP share in the total health expenditure indicates a non-
universal healthcare system since the system dissuade those of lower income to seek healthcare since by doing so
their savings and assets may be reduced and will thus plunge them into deeper poverty.
subsidies to cover the premium payments of the poorest of the poor from the national
government and the LGUs (Philippine Health Insurance Corporation, 2012).
The Healthcare Delivery
Healthcare is delivered by the public health facilities and by the private (both for- profit
and non- profit) entities. In the public sector, the cities and municipalities provide
primary medical care, the provincial governments provide secondary medical care, and
that the hospitals still managed by the DOH serve as referral centers for tertiary medical
care. Collectively, they serve 70% of the population. The private for- profit and non-
profit providers which are considered to be more superior than the public healthcare
providers in terms of manpower, finances and facilities, and they serve the remaining
30% of the population (Asia Pacific Observatory on Health Systems and Practices,
2011).
Statistical Analysis and Modeling using the Data from the United Nations and
World Health Organization Online Databases
To answer the question if there is a relationship between government expenditure on
health and on the over- all health of the Filipino people, the total government
expenditure on healthcare in 2005 United States Dollars for the year 2000, and 2005 to
2012 (the independent variable) was correlated with the Health Index Score of the
Philippines from the United Nations and World Health Organization online databases for
the same years (the dependent variable). The Pearson’s r value is 0.90139454
indicating a very strong direct relationship between the two variables. The linear
regression equation which models the relationship between the two is estimated to be
Y= 2-5 X+ 0. 7036. The coefficient of correlation which indicates how close the
predictions of the model to the actual data are is 0.812512116, indicating 81.25%
accuracy. The adjusted coefficient of correlation stands at 0.785728133. Thus,
increased government expenditure in healthcare results in a healthier nation in general,
ceteris paribus.

2000 2005 2006 2007 2008 2009 2010 2011 2012

Total Government Expenditure (in millions, 2005 US $) 1257.41 1547.77 1575.27 1581.9 1460.85 1886.89 2063.71 2225.98 2516.4
Health Index Score 0.72 0.73 0.732 0.734 0.737 0.739 0.742 0.744 0.747
Table 1: The Total Government Expenditure (in millions, 2005 USD) and the Health Index
Scores of the Philippines
 0.755
0.75 y = 2E-05x + 0.7036
R² = 0.8125
H S 0.745
I
e c 0.74
n
a o
d 0.735
l r Series1
e
t e 0.73
x Linear (Series1)
h s 0.725
0.72
0.715
0 500 1000 1500 2000 2500 3000
Total Government Expenditure (in millions, 2005 US $)

Figure 1: The Relationship of Total Government Expenditures and Health Index Scores
To assess if increasing government expenditures translate to a lesser share of the
individual from the pangs of sickness, the independent variable is the share of the
government (including social health insurance) and the dependent variable is the
percentage of out of the pocket expenditures from the total health expenditures for the
year 2000 to 2012.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Government Share 47.57 44.17 40.01 40.23 40.37 38.37 36.75 35.14 31.67 36.33 37.21 36.9 37.74
Out of the Pocket Share 40.5 43.85 46.78 46.88 46.89 51.93 53.96 55.12 57.87 53.3 52.51 52.71 52
Table 2: The Government Share and the Out of the Pocket Share (in %)

70
O
60
u S
t P h 50
o a 40 y = -1.2003x + 96.722
o c r R² = 0.9526
f k e 30 Series1
e 20 Linear (Series1)
(

t t
% 10
h
)

e 0
0 10 20 30 40 50
Government Share (%)

Figure 2: The Relationship of Government Share and the Out of the Pocket Expenditure

In the light of the foregoing, there is a very strong inverse relationship (Pearson’s r is -
0.975993) between the government share and the out of the pocket expenditures of the
Filipinos, and is modeled to be as Y= - 1. 2003 X+ 96. 722. The model is 95.62%
accurate in predicting the relationship according to the correlation of relationship
calculated. Therefore, as the government increases its expenditure of healthcare, the
burden of the public in accessing it is reduced making the healthcare system more
universal.

The government expenditure on healthcare is divided into two. First is its expenditure to
fund the plantilla and the infrastructures of the Department of Health and second are the
disbursements of the Philippine Health Insurance Corporation or PhilHealth. To discover
which of the two should be funded more to reduce more efficiently the out of the pocket
expenditures by correlating the percentage of the total health expenditure allocated to
DOH and to PhilHealth separately to the percentage share of the out of pocket
expenditure.

For the DOH, the relationship is modeled as Y= -2 .0956 X+ 67. 436, indicating an
inverse relationship wherein as indicated by the slope, a 1 percentage point increase in
the share of DOH translates to more than 2 percentage points reduction in the share of
out of pocket expenses in the total health expenditures of the country. The model
implies an 87.18% correlation between the two. The model of relationship between the
PhilHealth share and of the OOP share pales in comparison since it is depicted
mathematically as Y= -0.1363 X+ 51.491. The slope given as -0.1363 states that a 1
percentage point increase in the share of PhilHealth in the Total Health Expenditure
translate to .1363 percentage point reduction in the share of out of pocket expenditures
in the total health expenditure. Therefore, make the healthcare system more universal,
the government should focus in increasing the allocation of DOH in the budget more
than increasing the PhilHealth benefits.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
DOH 13.28 9.53 10.24 10.33 9.33 7.63 6.37 6.36 6.42 6.12 6.36 6.92 7.22
OOP 40.5 43.85 46.78 46.88 46.89 51.93 53.96 55.12 57.87 53.3 52.51 52.71 52
Table 2. a. The DOH share and the Out of Pocket share in the Total Health Expenditure
 70

60
Out of Pocket Share (%)

50

40 y = -2.0956x + 67.436
R² = 0.8718
30 Series1
Linear (Series1)
20

10

0
0 2 4 6 8 10 12 14
DOH Share (%)

Figure 2. a. The Relationship of the DOH share and the Out of Pocket share in the Total
Health Expenditure

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
PhilHealth 7.01 7.94 9.03 9.12 9.64 8.71 7.71 7.45 7.25 8.15 8.91 9.08 10.67
OOP 40.5 43.85 46.78 46.88 46.89 51.93 53.96 55.12 57.87 53.3 52.51 52.71 52
Table 2. b. The PhilHealth share and the Out of Pocket expenses share in the Total Health
Expenditure

70

60
Out of Pocket Share (%)

50

40

30 Series1
y = -0.1363x + 51.491 Linear (Series1)
20
R² = 0.0008
10

0
0 2 4 6 8 10 12
PhilHealth Share (%)

Figure 2. b. The Relationship of PhilHealth and Out of the Pocket Share in the Total
Health Expenditure

To estimate the perceived benefits of a healthy citizenry to the economic productivity of

the country, the independent variable is the Health Index Score for the year 2000, and
2005 to 2012 and the dependent variable is the constant Gross Domestic Product per
employee at constant 1990 Purchasing Power Parity Dollars. The relationship is said to
be a very strong (Where the Pearson’s r is equal to 0.976838167) direct relationship
modeled to be as Y= 66874 X- 40626. According to the coefficient of correlation
calculated, this model is accurate in predicting the 95.50% of the relationship.
2000 2005 2006 2007 2008 2009 2010 2011 2012
HI Score 0.72 0.73 0.732 0.734 0.737 0.739 0.742 0.744 0.747
GDP per employee 6931 7398 7677 7958 8163 8024 8401 8457 8667
Table 3: The Health Index Score and the GDP per employee in 1990 PPP Dollars

10000
9000
8000
GDP per Employee

7000
y = 65874x - 40526
6000 R² = 0.965
5000
Series1
4000
Linear (Series1)
3000
2000
1000
0
0.715 0.72 0.725 0.73 0.735 0.74 0.745 0.75
Health Index Scores

Figure 3: The Health Index Scores and the GDP per employee

Policy Proposal
Universal healthcare is therefore an economic policy that will increase the productivity of
the nation and must be achieved through increase in the government expenditure that
includes development of the public healthcare infrastructure and manpower, further
development of the social health insurance system, and by encouraging people to
invest in the private health insurance providers to the end that the out of the pocket
expenditures are reduced. Amidst the fact that an increase in the government
expenditure related to healthcare manpower and infrastructure is more efficient than
that of increasing the disbursements of PhilHealth in reducing the out of the pocket
expenditures, this paper opines that policy improvements must be made in the social
health insurance system for the Philippines in the light of the fact that the private
healthcare providers are more efficient. Quimbo, Kraft, Capuno and Tan (2013) states
that the Benefit Delivery Rate (BDR) model is a good indicator on how effective a social
health insurance system in protecting its members from excessive financial burden from
any insurable health risk. The higher the BDR implies a higher effectiveness of the
social health insurance system in protecting its clients. BDR is given by the formula:

BDR= Coverage Rate x Claim Rate x Reimbursement Rate

Where: Coverage Rate: Number of People Covered÷ Total Population

Claim Rate: Number of Claims÷ Number of People covered by the
social health insurance system that availed of a professional
health attention
Reimbursement Rate: Total Value of Benefits Paid÷ Total
expenditures of the people covered by the social health insurance
system (Quimbo, Kraft, Capuno, & Tan, 2013).

Therefore, to make the social health insurance systems more effective, most especially
in an environment where the private sector shoulder an increasing share in the cost of
healthcare and where development in the healthcare infrastructure and manpower of
the public sector takes years to be completed (not to mention the budget constraint
being faced by the government), the Philippine government should ensure that the
greatest possible number of its citizens are covered by the social health insurance. This
can be achieved by enforcing the legislation that compelling all of the citizens of the
country to be enrolled in the Philippine Health Insurance System or PhilHealth and by
subsidizing the premium of the poorest of the poor in the country. In addition, the social
health insurance providers should simplify claims processing process to the end that all
of its members seeking medical care will be able to file their claim. The value of the
reimbursements made should likewise be increased. These actions should be coupled
by strong and sustained information dissemination over the benefits and processes
related to the program. Funds for the increase in reimbursements can be sourced from
the subsidies of the government, premiums paid by the members of the system and by
sound actuarial and financial management. The subsidies in a devolved set- up can be
divided between the local and the national government, wherein the share of the local
government is a directly proportional to the number of people the local government
wants to enroll. Local governments may also create their own local social health
insurance systems that shall cater to the members of their community that is tailor fit to
their needs making the local social health insurance system more responsive.

Conclusion

Devolution as a policy has affected the institutions in the health systems of the
Philippines. In the health systems of the country where fee- charging private sector
providers prevail, there is a need to make social health insurance system coverage
available to the poorest of the poor, especially through premium subsidies. The
devolution of powers may facilitate the enforcement of this proposal through the cost
sharing of local and national governments or by creating social health insurance
systems in the local levels given with the assumption that the local governments are
empowered by devolution with the needed information to create programs suitable to
local needs.

In terms of benefits and costs, universal healthcare increases the productivity of an

employee. This comes however with a cost, and that is by increasing the government
share in the total health expenditure pie to minimize the out of pocket expenditures
borne by the public especially by increasing the funding for the public healthcare
manpower and infrastructure. High out of pocket expenditures dissuade the public from
availing healthcare that may result to lesser productivity.
 INDICATORS 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total Health Expenditure (THE) as % of
GDP 3 2.79 3.25 3.23 3.91 3.95 3.89 3.83 4.26 4.23 4.43 4.59
Per Capita Expenditure in 2005 USD 32.04 30.28 36.24 37.7 47.01 49.06 50.65 51.05 56.53 59.36 63.47 68.94
A. PRIVATE SECTOR
Private expenditure on health (PvtHE) as
% of THE 55.83 59.99 59.77 59.63 61.63 63.25 64.86 68.33 63.67 62.79 63.1 62.26
Out of pocket expenditure as % of PvtHE 78.55 77.97 78.43 78.63 84.25 85.3 84.99 84.69 83.71 83.63 83.53 83.53
Out of pocket expenditure as % of THE 43.85 46.78 46.88 46.89 51.93 53.96 55.12 57.87 53.3 52.51 52.71 52
Private insurance as % of PvtHE 10.1 10.74 11.76 11.35 10.23 9.64 9.94 10.27 11.15 11.53 11.69 11.69
B. PUBLIC SECTOR
General government expenditure on
health (GGHE) as % of THE 44.17 40.01 40.23 40.37 38.37 36.75 35.14 31.67 36.33 37.21 36.9 37.74
GGHE as % of National Budget 7.21 5.94 7.08 7.47 8.85 8.72 8.21 7.37 8.74 9.31 10.21 10.3
National Government Expenditure as %
of THE 17.10 15.80 15.20 15.70 15.80 10.80 11.40 12.30
Local Government Expenditure as % of
THE 19.10 15.20 15.90 15.00 12.90 29.04 27.69 24.42 15.10 15.20 14.70 27.07
Social Health Insurance as % of GGHE 17.98 22.57 22.67 23.88 22.71 20.97 21.18 22.89 22.44 23.94 24.6 28.26
Social Health Insurance as % of THE 7.94 9.03 9.12 9.64 8.71 7.71 7.45 7.25 8.15 8.91 9.08 10.67
Table 4: The Health System of the Philippines (Based on the data from the United Nations and the World Health Organization and counterchecked with the
2013 Statistical Yearbook of the Philippines published by the National Statistics Authority).
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