Pandemic corruption

Recently, the country was witness to the spectacle of corruption laid bare in public hearings conducted to examine the operations of the Philippine Health Insurance Corp. (PhilHealth), the institution that administers the nation’s health insurance program.

The scale of corruption appears to be massive on the basis of the cases and issues discussed. Up to this point, the hearings have collected information that could help the legislative process.

But, of course, such hearings also make plain the next question: What happens next?

The government’s health insurance agency. The PhilHealth is the nation’s medical health insurance corporation, created and designed to implement the national public health program. Its membership consists of the nation’s wage and income earner,s and non-paying senior citizens to help safeguard the nation’s health. Like the Social Security System, it is managed in the long run to be on a pay-as-you go basis.

However, because it is a relatively new program (just founded in 1995, and strengthened only recently in  2019), it has depended also heavily on national government capitalization. The surge of needs in recent times, especially during the time of the COVID-19 pandemic, made the government use the institution to facilitate the transfer of budget resources in support of fighting the pandemic.

Good practices, strong institutions, and the audit function. Important findings in the legislative investigations are a number of troubling practices that also indicate mismanagement, inefficiency and the poor oversight of its operations. The practices reported in the hearings included large, illegal releases of interim reimbursement mechanisms (IRMs) to affiliated client hospitals, bloated procurement budgets for some internal operations exceeding recommended standards (in information technology procurement), ghost operations covering special programs (dialysis, cataract operations), and, in general, admission of existence and awareness of fraud even by high management.

Such practices, to be sure, have their corresponding counterparts in other corrupt arrangements found where procurements are involved, whether in government or in private business, here and in other countries. In the government, the idea of check and balance is effected through an audit system to help oversee the spending and management of agencies and government entities.

That service is provided by the Commission on Audit (COA).

If all these malfeasance and misfeasance have happened and even prospered, the matter also calls for inquiring as to what happened to the internal audit function of the national insurer? In general, good management sets directions and guides the actions according to the agency’s mandate and high goals. In what has been laid bare, there apparently has been gross lapses of management, if only to say something generous on the manner it is led.

There is, of course, the watchdog agency – the COA, which sets the standards of audit with respect to the spending and management functions of government entities. An effective COA, like all audit systems, is tasked to determine that operations of an agency (in spending and in budgeting) are in compliance with policies and procedures, that internal controls are of good quality, that risks taken are responsibly assessed before decisions are made.

But what if the audit function is weak, in cahoots with the supervised (in short, also corrupt), or is generally ineffective, too? Weak societies often breed weak leaders and institutions, and weak counter-institutions that are supposed to keep them honest.

The quality of personnel in an institution is often the result of poor leadership in that institution.

It is also the case that sometimes, poor standards or rules to use in decision-making abets bad practices. For instance, President Duterte, in the State of the Nation, spoke of the inadequacy of the “lowest bidder” rule in government procurement as a culprit in poor quality of outcomes. There are situations that permit of flexibility.

But the issue applies in the choice of contractors for important projects (for instance, those on issues of infrastructure.) Often, that has led to the problem of inferior or substandard execution of projects, because of the wrong choice of contractors.

And then, there is always the ultimate question, Who is to check the checker, if he is weak, corrupt, or incompetent?

Pandemic corruption. Our country scores poorly in cross-country measures of social indicators when it comes to international surveys concerning the prevalence of corruption. We also score poorly in such other indicators concerning “the ease of doing business.” To a lot of observers, these measures are highly correlated indicators.

Although the government has made many efforts to improve regulations and practices that are associated with such measurements, in general, the improvement of country scores along these social indicators have not been impressive or sufficiently satisfying. However hard we try, the same set of happenings remain to perceptive observers.

The strengthening of society’s concern to improve its performance metrics reveal themselves through outcomes which are often preceded by corrective actions. Such corrective actions have to be demonstrated, as they help to discipline future outcomes. Otherwise, corrupt practices become habits and get institutionalized.

Too often, in our case, the exposés on corruption are momentary showcases bereft of true follow-ups. No one is punished. Since all is for show, the bad outcomes continue.

As in our case as a society, when this happens often and no one is made to account after the sound and fury of denunciations and public show, the result is a pandemic of corruption practiced all around.

Strong societies emerge when there is follow up so that those who commit malfeasance are pursued and made to account fully.

Etched strongly in my personal memory is the story of a corruption scandal that happened when I was a graduate student in America many years ago (during the 1960s).

The city government decided to build a huge underground parking under the Boston Common. An exposé of corruption in the public awareness became the talk of the town. Some years later, during the next decade, long after my life had been consumed by other interests, I learned that around 10 public officials – high and low – were sent to jail. Justice not denied.

For archives of previous Crossroads essays, go to: https://www.philstar.com/authors/1336383/gerardo-p-sicat. Visit this site for more information, feedback and commentary: http://econ.upd.edu.p h/gpsicat/