Health Secretary Teodoro Herbosa, chairperson of the Philippine Health Insurance Corp. (PhilHealth), criticized the agency’s management on Friday for treating it like a retirement fund.

Herbosa emphasized that PhilHealth, which lost its government subsidy in the proposed 2025 national budget after it was found to have P600 billion in a reserve fund, was a health insurance system.

“The PhilHealth management (which is distinct from its board of directors) has treated its funds like a pension fund,” Herbosa said.

“That’s why their emphasis has been on protecting the fund and resist paying the health benefits of its members. We need to fix this broken system,” he stressed.

Herbosa pointed to a widespread misunderstanding of the fundamental difference between a pension fund and health insurance, which he said led to the operational inefficiencies in PhilHealth.

A pension fund, Herbosa noted, “provides a steady income stream after retirement, ensuring financial stability and security in old age.”

Typically offered by employers or purchased individually, contributions are made during one’s working years, with the benefits paid out after retirement, usually in a monthly annuity.

In contrast, he pointed out, health insurance is designed to cover medical expenses, hospitalization, and other healthcare-related costs, offering short-term financial protection in times of illness or injury.

Herbosa emphasized that health insurance, such as PhilHealth provides, should focus on paying out healthcare benefits rather than stockpiling funds.

“Many do not understand the difference between a pension and health insurance,” he said, reiterating that PhilHealth’s primary purpose is to protect its members from the financial burden of medical expenses.

His statement came amid a contentious decision by lawmakers to withdraw the government subsidy for PhilHealth from the 2025 national budget.

Senators announced that PhilHealth would receive no subsidy in the coming fiscal year, citing its reserve fund amounting to P600 billion.

Enough reserves

Senator Christopher “Bong” Go, however, assailed PhilHealth’s defunding, saying it would hit the poorest Filipinos hardest since they do not have money to spare for healthcare.

But Go’s apprehension was not shared by President Ferdinand Marcos Jr., who assured the public on Thursday that instead of PhilHealth’s operations being hamstrung by the defunding, it would even expand the services it provides.

Despite the loss of its subsidy, PhilHealth will be operating with a P284-billion corporate operating budget in 2025, sourced from its reserves and member contributions.

Lawmakers echoed Marcos’ view that the state insurer’s significant reserves should be sufficient to sustain its operations and fulfill its mandate.

However, critics warned that cutting government support might limit PhilHealth’s ability to expand its benefits and address inefficiencies, particularly as the agency continues to face scrutiny over allegations of mismanagement and corruption.

The move also comes as PhilHealth is expected to play a crucial role in implementing the Universal Health Care Act, which would ensure equitable access to healthcare services for all Filipinos.

Senator Grace Poe defended the decision to deny PhilHealth a subsidy, stressing the need for the agency to demonstrate an efficient use of its existing resources.

“PhilHealth must prove it can manage its funds effectively to provide much-needed healthcare services to the people,” she said.