UHC at risk without new sin taxes

Yellow Pad

Last Jan. 18, leaders of 30 Philippine medical societies gathered to call for the Senate passage of a bill increasing the excise tax on cigarettes to at least P60 per pack. “The increase will provide crucial funding for the Universal Health Care (UHC) Act that will benefit the current and future generations of all Filipinos from womb to tomb,” went their manifesto.

Indeed, sin taxes have played a significant role in boosting the health budget since legislation of the Sin Tax Reform Act in 2012. Not only did the said law significantly raise the excise taxes on alcohol and cigarettes, but it also earmarks a substantial portion of the incremental revenues for health. As a result, the health budget has grown tremendously over the last six years, from P44 billion in 2012 to P171 billion in 2018. This is despite the law’s effectiveness in reducing the number of smokers in the country.

Recently, however, some senators seem to be confident that the soon-to-be signed Universal Health Care Act can be sufficiently funded even without an increase in sin taxes. In particular, Senate President Vicente Sotto III enumerates the following resources for UHC: existing sin tax incremental revenue for health, subsidy for PhilHealth premiums of sponsored members, existing budget of the Department of Health (DoH), 40% of the PCSO charity fund, 50% of the national government share of PAGCOR earnings, and PhilHealth premium contributions. The first three items in the list are actually overlapping; remove the intersections and they make up the national budget for health.

But are existing funds really enough to support an anticipated major reform in the health care system?

A closer look at the numbers reveals that the emerging 2019 proposed budget for health by the Senate is P25 billion less than the P171 billion health budget in 2018. Why are we cutting the health budget when UHC is expected to improve access to health care by growing the number of health care workers and expanding PhilHealth membership and health benefits of all Filipinos?

While there have been pronouncements that the Senate intends to augment the budget by P32 billion more so that the national budget increases to P178 billion, it has yet to happen. Even so, that will still be just an increment of P7 billion, a measly amount compared to the huge changes that UHC hopes to accomplish.

The amount that will be pooled from PCSO and PAGCOR is also not entirely “new money” for health. Bulk of the P17 billion that is expected from PCSO and PAGCOR are already being spent on health. This is not to belittle the importance of pooling of funds (which is a reform on its own as it helps our country move towards a single-payer health care system) but only to emphasize that it will not be enough in bridging the financing gap for UHC.

What about the P60 billion, which is the estimated total of PhilHealth premium contributions for 2019; will this not address UHC’s funding requirement? According to the Annual Report of PhilHealth, a total of P57 billion was collected from the premium contributions of non-sponsored members in 2017. This implies that only P3 billion will be added to the existing funds already being collected by PhilHealth.

In summary, we see a potential increment of P7 billion, subject to the Senate’s fulfillment of its promise to add P32 billion to the emerging national budget for health, and another P3 billion from premium contributions, or a total of P10 billion.

Meanwhile, six out of ten Filipinos die unattended by any medical personnel. Non-communicable diseases are on the rise even as infectious diseases, such as tuberculosis and pneumonia, continue to kill thousands of Filipinos each year. Maternal mortality in the country is still one of the highest in the region. The inequities in access to health care and health outcomes remain to be severe, despite increased PhilHealth coverage of the poor.

For sure, we still can and need to improve on how we are allocating and spending our current resources for health. This too is one of the main objectives of UHC. Nevertheless, the gaps in our health care system are so huge, complex, and intertwined that full implementation of a comprehensive reform, such as UHC, is necessary to effectively address them. In other words, piecemeal approaches will no longer work.

Now, how in the world could we make P10 billion enough for the big changes that UHC will introduce in its first year? Without a corresponding increase in the excise taxes, where can we expect to get substantial and sustainable additional funds for health, especially in the succeeding years of UHC implementation?

I fervently hope that, for the sake of the Filipino people, our senators will reconsider our doctors’ appeal for the immediate passage of the sin taxes. May this last part of the medical societies’ manifesto serve as an encouragement to our legislators, especially the reelectionists, to do the right thing: “In this coming election, we and our constituents commit to fully support legislators who champion this measure, and rally against those who delay or block its passage.”


Jo-Ann Latuja-Diosana is a trustee of Action for Economic Reforms.

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