Privatize

It seems privatizing the controversy-ridden PhilHealth hangs in President Duterte’s mind. He instructed his new appointee to clean up the organization by year-end or else.

“Or else” in this case means either abolishing or privatizing the agency. Why not?

The problem with PhilHealth goes beyond the vulnerable internal procedures and corporate culture it evolved. There seems to be a design issue here as well.

The first indication of a design issue is that the law creating PhilHealth sits the secretary of health as ex-officio chairman of the board and requires its chief executive officer to have public health experience. But PhilHealth is not, despite its name, an agency that dispenses public health care. It is first and foremost an insurance operation.

As an insurance operation, it collects premiums and invests the fund in the most profitable way to support the health coverage it is supposed to extend to its members. If it fails in its investments or commits a lapse in its actuarial calculations, the fund collapses.

Therefore, the first qualification for choosing the PhilHealth CEO is expertise in fund management. The life of the fund depends on this.

When former NBI chief Dante Gierran was appointed to head PhilHealth, he candidly admitted he had no public health experience. He did not need one. The requirement is rooted in the misconception of legislators responsible for creating this agency.

It was so easy for everyone to waive the requirement of public health experience. It was the requirement that was wrong, not the appointment of Gierran.

What Gierran is most qualified to do is to investigate the anomalies alleged. Having built a rather impressive career at the NBI, it does seem we have built in the investigative mechanism right into the heart of a failing agency.

But clamping down on corruption in the agency is not all that is needed to save this fund – although it does seem to be the immediate task at hand. The long-term challenge is to make the fund viable.

This is the same challenge confronting our two other social security institutions: the SSS and the GSIS. All are threatened with benefits outstripping contributions, shortening actuarial life.

As a health insurance fund, PhilHealth is owned by its members: those that contributed hard-earned money to the fund. They expect to collect on their contributions some time down the road. If the fund is dissipated, all the members lose.

The advantage PhilHealth has over private healthcare insurance companies is that contributions to the fund are mandatory. As in the case of the PagIbig Fund, contributions are automatically deducted from the payroll.

If PhilHealth is completely privatized, those who had made contributions over many years will be shortchanged. Their contributions will be stolen from them if the agency is suddenly abolished.

But PhilHealth contributors have been shortchanged many times before. When politicians freely distributed PhilHealth membership cards or decreed that senior citizens are all qualified for benefits, the number of beneficiaries will outstrip the number of contributors. Therefore, the benefits contributors might qualify for will shrink. The denominator was changed – unconscionably.

This is the other vulnerability of PhilHealth. Over the years, the fund was treated as another pork barrel for politicians to play with. That reduces the fund’s efficacy for delivering meaningful health insurance for those who contributed to it. The law that created PhilHealth should have anticipated this and insulated the fund from politicking.

That insulation could still be installed – although the fund’s ability to meet the healthcare costs of its actual contributors has already been seriously dissipated. This is why I rely on my private health insurance account rather than go through the bureaucratic nightmare of seeking PhilHealth support.

What could be most feasibly privatized is the fund management component of PhilHealth.

I imagine a policy decision to outsource its core fund management function does not require legislation. It should be a policy decision management could make – with the approval of the board, of course.

It is absolutely silly to even propose that the chairmanship of PhilHealth be transferred from the secretary of health to the secretary of finance. The board makes policy. Management of the fund requires day-to-day (in fact, hour-to-hour) hands-on duties.

The corruption that is alleged to plague PhilHealth, however, has nothing to do with fund management. It has everything to do with the disbursement of benefits: the pricing of cases, the advanced deployment of reimbursement and the accuracy of hospital reporting.

In the US, the wide availability of healthcare insurance is blamed as the cause for the steep inflation of hospitalization costs. With insurance, hospitals can charge sky high. Without insurance, patients are beggared. There is no in-between option.

We have to take a long, hard look at how PhilHealth is designed in consonance with our overall public health policy.

This institution appears to favor capital-intensive hospital care over preventive and grassroots health care. Many of those who contribute mandatorily to the fund actually rely on their private health insurance coverage. Most of those who do not have regular jobs and therefore could not contribute to the fund actually need PhilHealth coverage more direly.

The deep inequalities in our society and the large informal sector of our economy distort PhilHealth’s functions within the universe of institutions serving public health. We will have to redesign PhilHealth at some point. But this will require legislation and, unfortunately, the participation of the politicians who see health insurance as a freebie to dole out to their constituents.