PhilHealth: Who is on trial?

The gift arrived in a box, but the dancer sprung unwrapped, also unwrapping ideas that the Philippine Health Insurance Corp. (PhilHealth) execs have money to burn.

The Senate investigation may ripen into a case that will raise more questions until the presumed innocence of the accused is overcome. However, there are simply publicly available facts that can enlighten insured Filipino workers on PhilHealth’s performance and help them form a judgment if they should be worried. PwC Philippines’ Data Analytics team helped me cull these data and this Sunday, I present below some of them.

The taxes we pay partially fund PhilHealth every year

PhilHealth, as our national medical insurance provider, does not rely on premiums paid by members alone. It is funded annually by the national government through the General Appropriations Act (GAA) to pay for premiums on behalf of senior citizens, indigents, unemployed persons with disabilities, and the financially incapable persons identified by the Department of Social Welfare and Development and local government units. In 2019, it received P67.3 billion and in 2020, P71.4 billion.

PhilHealth is also allowed to use as much as five percent of its annual appropriation to pay for its personnel and administrative costs. It is taxes we pay from our hard-earned money that pay for these funding and thus, for whatever amounts stolen through connivance and fraud within PhilHealth.

PhilHealth was a profitable insurance

company up to 2019

Even if claims for expenses against PhilHealth include padded, fraudulent ones, PhilHealth premium income has been sufficient to cover those up to 2019. It was only during the first quarter of 2020 that the situation reversed when the government granted a reprieve or deferment of premium contributions from certain groups because of the quarantine.

PhilHealth also has a diverse and performing portfolio in low-risk special savings accounts, corporate bonds, and government securities that gives it an average cumulative yield of 4.67 percent as of end of May this year. Its annual income from investments alone are almost enough for cash operational expenses. Despite this, PhilHealth seems pampered, being allowed to use up to five percent of its funding from the national government to pay for personnel salaries.

In 2019, PhilHealth took over five months on the average to settle claims

Financial statements show that PhilHealth took 154 days in 2019 (130 days in 2018) to settle claims on average. This resulted in a lot of cash in its financial reports. Under Republic Act 9241, PhilHealth should settle within 60 days from date of discharge. But actual settlements were done way beyond this mandate even as PhilHealth officials publicly claimed turnaround time of 20 days in 2019.

Smaller hospitals have shorter runways and cannot absorb this kind of delay – that will not be sustainable. So if they refuse to treat PhilHealth members unless the latter pay in cash, PhilHealth will be the very reason why the insured will be left untreated.

Pandemic unemployment could result in over

P10 billion in lost premium contributions by end of year

Data shows that most of PhilHealth’s employed contributors are minimum wage earners but over 4.1 million of them lost their jobs in the first half of the year due to the pandemic. With OFW job displacements, temporary closures and flexible work hours, the data analytics team forecasts unemployment to reach over five million by end of the year and would result in over P10 billion in lost premium payments.

Cash deficit is projected at P32 billion by the end of year. But even if only the remaining employed members pay their premiums in full, this deficit will be under control. To extend PhilHealth’s runway, it may need to liquefy some of its assets, or rely on bigger government allocation from the GAA - funds that would be taken from education, social amelioration, or infrastructure budgets because all these come from the same pie.

More than a dozen styles of irregularities and fraud hound PhilHealth

The Commission on Audit (COA), in its 2018 audit and the just-concluded Senate inquiry, disclosed that PhilHealth may have been been bombarded with diverse styles of fraud: excessive allowances, benefits and bonuses; overpriced IT equipment and software; accrual of premium income from inactive companies; overstatement of premium contributions through duplication; unsupported restatement of financial statements; arbitrary release of advance payments through interim disbursement mechanism (IRM); and limited access granted to the COA team to the claims system, preventing the testing of transactions that may involve the overpayment schemes to certain complicit medical institutions.

There are even more alleged styles that seem to make PhilHealth really a milking cow for many years sans regard to the sick and the hospitals that serve them.

A few important questions also need to be answered: why was the Governance Commission for Government-Owned and Controlled Corporations (GCG) emasculated? Where was it all this time? If it was functioning as it was supposed to (when first set up by PNoy during his term), even just one governance feature such as a robust whistle-blowing policy could have made these gut-wrenching anomalies surface much earlier.

The other question is: What happened to the other anomalies involving other Government-Owned and Controlled Corporations (GOCCs)? Does the fact that none of the allegations ripened to jail time emboldened the practice in other GOCCs? What will happen now to PhilHealth executives and any horrendous crime committed against insured citizens and taxpayers?

The legislative, executive, and judicial branches of government are the ones truly on trial.

* * *

Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He is the Chairman of the Integrity Initiative, Inc. (II, Inc.), a non-profit organization that promotes common ethical and acceptable integrity standards. Email your comments and questions to [email protected]. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.