PhilHealth’s reserve fund is now less than a year’s worth of benefit payments.

From a conservative fund manager, whose past reserves averaged at four times its annual benefit payments, it has finally become an institution that generously pays for the health needs of the Filipino people.

While the said shift is definitely good news, some early red flags threaten PhilHealth’s financial sustainability and effectiveness in providing financial risk protection. If not addressed immediately, this may spell disaster not only for PhilHealth but also for the entire health care system.

Benefits skewed towards catastrophic and inpatient services

Topping the list is the lack of a comprehensive benefit package on preventive and primary care.

Since 2012, PhilHealth has been introducing new catastrophic and inpatient benefit packages every year, covering a whole range of cases including treatment of cancers, kidney transplant, coronary artery bypass graft surgery, orthopedic implants, and hemodialysis and peritoneal dialysis, among others. Yet, the primary care benefit (PCB) package that it launched in early 2012, which was already an improved version of the old outpatient benefit package, allocated a measly budget of P500 per family and covered only a few targeted sectors.

There is news that an improved PCB with a higher budget of P1,800 per family, which will cover not only consultations and necessary laboratory exams but also medicines for selected cases, including maintenance drugs for chronic conditions such as diabetes, hypertension and high cholesterol, will be re-introduced in 2016. Still, the new PCB package will only be available to indigents and sponsored members and its coverage remains to be limited to a few primary conditions.

In the medium to long term, PhilHealth’s very limited coverage of outpatient and/or preventive care will be pushing Filipinos to seek care only when their illness or condition has already worsened. As a result, there will be an exponential increase in the number of claims for catastrophic benefit packages and a steep rise in PhilHealth’s benefit payments. What’s worse, the increasing payments may not also necessarily translate to saving lives and improving the quality of life.

Fraud and gaming as symptoms of lack of a monitoring system and poorly designed packages

Then there’s a whole gamut of fraudulent acts and gaming of providers and even patients that is reflective of the lack of a monitoring system. The reality is that PhilHealth has currently no technological capacities to detect real-time abnormalities in claims patterns. That is why the recently suspected bogus claims of some eye centers were only tackled by the agency in the middle of 2015, several months after the claims were made in 2014.

Yet, the cataract package is just the tip of the iceberg since it is only one of many benefit packages that are vulnerable to fraud and gaming. The monitoring task will even become more challenging in the coming years as PhilHealth continues to introduce more benefit packages.

Other known schemes of gaming the system involve health providers that artificially increase the prices of services or professional fees instead of deducting PhilHealth benefits from the true cost of care. There are also those that are committed by patients, such as opting for confinement to take advantage of inpatient benefits even if outpatient care would suffice. But unlike the cataract scam, these schemes are more a result of poorly-designed packages and implementation policies that incentivize adverse behavior.

All of these create inefficiencies and leakages that contribute to endangering the financial viability of PhilHealth’s program. They slowly eat up on the limited resources that we have for health and certainly prevent some needy patients from receiving essential health services. Even more important than the financial losses and opportunity costs of paying for bogus services are the health harms that the fraudulent acts bring, as in the case of the cataract scam.

The solution: devote more resources for primary care

So how can PhilHealth make its program more financially sustainable and effective in protecting Filipinos from financial risks, and, at the same time, significantly contribute to improving people’s quality of life? It should start devoting more resources to keeping our citizens healthy.

Immediately, the PCB package should be made universal and available to all PhilHealth members. This will entail increasing PhilHealth premiums in the next two or three years, but a national subsidy of P30 billion to provide PCB to all PhilHealth members is initially necessary to gain public support for future premium increases and strengthen social solidarity. Anyhow, financing can be easily sourced from PhilHealth’s P100-billion reserve fund and government’s increased fiscal space.

That’s not to say that the PCB package is already perfect.

But it is a good starting point to channel more resources for preventive services and evolve the country’s health care system towards a more integrated system, that is the primary care system. It also possesses an essential feature, namely the use of electronic medical records as a requirement for accreditation of providers, which can facilitate real-time generation of data to aid monitoring and package development.

The PCB package must continually evolve to ensure that it creates the proper incentives for providers to deliver the highest quality of care at the most affordable cost. It must also shape patients’ behavior so that they are encouraged to take good care of their health and demand for appropriate care that is just sufficient (not too little and not too much).

One adjustment that can be made in the short-term is to disallow reimbursements if patients go directly to subspecialists without being examined by a primary care provider, so that primary care providers become gatekeepers to the complex health care system.

Doing so will not only minimize fraud and leakage but also ensure that only the most cost-effective services will be accessible to patients.

Eventually, through the constant adjustment and refinement of the PCB package, PhilHealth will be able to strengthen the primary care system. As many studies have already pointed out, strong primary care systems are associated with decreased health care spending, higher patient satisfaction, and better health outcomes leading to more equitable and accessible health care.

In the long run, PhilHealth may develop more interventions that are closely linked to addressing the social determinants of health. Simultaneously, PhilHealth’s performance indicators must change to become more reflective of health outcomes and the quality of life.

For it is only when PhilHealth, together with the entire health care system, is able to take good care of the health of the Filipinos that it can also be true to its purpose and vision — “Bawat PilipinoMiyembroBawat MiyembroProtektadoKalusugan NatinSigurado.”

Jo-Ann Latuja-DiosanA is a Senior Economist at Action for Economic Reforms.