The Department of Finance (DoF), under Secretary Raphael Recto, has issued Department Circular No. 003-2024, reallocating unused funds from the Philippine Health Insurance Corp. (PhilHealth) — in the amount of P89.9 billion — so that they could be channeled into more productive purposes.
Health is a basic, emotional issue among Filipinos, primarily because only a small segment of the population can afford excellent medical care on their own. But Secretary Recto is taking this unpopular stand because he believes this is the better option. In this, he has our support.
The DoF’s move to reallocate idle funds is in line with the 2024 General Appropriations Act (GAA). For example, an initial remittance of P20 billion from PhilHealth was used to settle P27.5 billion in unpaid COVID-19 allowances for frontliners, covering 5.04 million claims. Is this not a good thing? The government has now fully paid its debt to frontliners — people who sacrificed a lot to serve other people and the country during the darkest days of the pandemic — with a total of P121.3 billion disbursed.
The remaining funds will be allocated to projects in nutrition, education, agriculture, social development, and infrastructure.
According to the DoF, a cost-benefit analysis shows that funding projects through unprogrammed appropriations will boost gross domestic product growth by 0.7%, generate an additional P23 billion to P24.4 billion in revenues, and create thousands of jobs.
On the other hand, delaying projects would incur opportunity costs, and funding them through additional borrowing would raise the deficit from 5.6% to 6.4% and the debt ratio from 60.6% to 61.4%. This would lead to P12.7 billion in extra interest payments annually and could jeopardize the Philippines’ Medium-Term Fiscal Program, potentially leading to a credit rating downgrade, which would increase borrowing costs by P15 billion per year and harm economic recovery efforts.
The concern being raised by some sectors is understandable, but it is only because they have not been given details that would allay their fears.
Here are the facts: Tapping into PhilHealth’s idle funds would not impede the expansion of benefit packages for its members. The DoF clarified that this move would not disrupt PhilHealth’s daily operations or affect member contributions. Mr. Recto stated that PhilHealth is projected to have a net income of P61.18 billion by year-end. Profits have grown from P4.66 billion in 2019 to P173.46 billion in 2023. Next year, PhilHealth will receive P70 billion in government subsidies to expand its benefit packages.
PhilHealth still holds a reserve of P500 billion, which the DoF confirmed is more than sufficient to cover multi-year claims. PhilHealth will continue receiving government subsidies, and no benefits or member contributions will be reduced. In fact, President Ferdinand Marcos, Jr. announced in his State of the Nation Address (SONA) that PhilHealth benefits for outpatient care, serious illnesses like cancer, and children with disabilities will be increased.
According to Mr. Recto, the DoF conducted a thorough review to ensure that using excess funds from GOCCs would support economic growth and comply with legal requirements. Consultations were made with the Governance Commission for GOCCs (GCG) and the Office of the Government Corporate Counsel (OGCC). The DoF received favorable legal opinions from the OGCC and Commission on Audit (CoA).
More importantly, PhilHealth is considering an additional 30% increase in all its benefit packages, expanding its service to the people without imposing an additional burden on its members in the form of higher contributions.
This will sufficiently address calls for better coverage. “PhilHealth has shown its solvency. It does not need another rate hike to sustain its operations and services to its members, it needs efficient management of its funds,” said the President of the Philippine Chamber of Commerce and Industry, Consul Enunina Mangio.
We take these into consideration as we remind ourselves that the budget deficit, according to the Bureau of the Treasury, remains substantial. For the first seven months of 2024, the deficit amounted to P642.8 billion, indicating an increase of 7.21% or P43.2 billion from the same period last year.
In fact, seven former Finance secretaries came out with a statement supporting the DoF’s exercise of its authority to use excess funds to finance crucial government projects in areas like health, education, social services, and infrastructure.
“We believe this move will bring substantial benefits to the Filipino people. Mobilizing these excess funds will enable important public projects that can strengthen our economy and ensure long-term gains through more jobs, higher incomes, and reduced poverty,” said ex-Secretaries Cesar Virata, Roberto de Ocampo, Jose Pardo, Alberto Romulo, Jose Isidro Camacho, Margarito Teves, and Cesar Purisima. The support of these experts says a lot about the merits of Recto’s move.
Moving forward, we should also find ways to ensure that funds are managed well and spent as programmed, especially since there is a deficit in many other areas.
This is the people’s money, anyway. We should make it work for the people.
Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.