In its 2023 report on the besieged Philippine Health Insurance Corp. (PhilHealth), the Commission on Audit (CoA) clearly pointed to mismanagement as the culprit in the agency’s failure to implement the Universal Health Care (UHC) Act.

The law has been in force for five years, aiming to provide free medical care to all Filipinos, but until now, 60 percent of such expenses remain a burden, particularly for the poor.

CoA’s report indicated that instead of judiciously investing the huge funds from its Sin Tax share, Philippine Amusement and Gaming Corp., and Philippine Charity Sweepstakes Office contributions, PhilHealth funneled money into government securities.

The ultimate objective of Republic Act 11223, or the Universal Health Care Act, is to ensure that all Filipinos have equitable access to quality and affordable health care and are protected against financial risk. CoA said that the objective “may not be fully achieved due to the management of PhilHealth Reserve Fund.”

PhilHealth’s use of the reserve fund did not fully comply with the law. This issue is aggravated by the investment of funds without considering actuarially estimated two-year projected program expenditures, the delayed and minimal expansion of benefit programs, and the partial utilization of subsidies from the national government. These factors resulted in the return of P89.9 billion in unutilized funds to the Bureau of Treasury, depriving members of adequate and additional benefit coverage.

CoA said it conducted verification to determine if PhilHealth is actively expanding its benefit programs or decreasing the amount of members’ contributions, as required by Section 11 of the UHC Act. However, decreasing members’ contributions was not considered due to the progressive premium collection scheme provided in Section 10 of the UHC Act, which limited management’s ability to reduce premium contributions from members, according to CoA.

That provision could have been the only aspect of the UHC Act that PhilHealth’s management complied with.

Regarding the implementation of new benefit packages, PhilHealth introduced no new programs since the pandemic, except for the Outpatient Benefits Package for Mental Health. However, no amount has been paid out for this program. “The data showed a nil amount in benefit claims paid during 2023, considering that there is a rising epidemic of mental health crises in the country,” CoA noted, citing the Philippine Mental Health Association Inc.

In 2023, total cash outflows from operating activities, including the payment of benefit claims amounting to P127.036 billion, were less than half of the cash paid for investing activities, which reached P274.241 billion, CoA found. Cash inflows from investing activities, therefore, were higher than those from operating activities.

Such accumulation of funds became the target of the Department of Finance (DoF). Through Department Circular (DC) 003-2024, the DoF sought to sweep excess funds from government-owned or -controlled corporations (GOCCs). The directive called for the return of the unused portion of subsidies from the national government, amounting to P89.9 billion, which PhilHealth had placed in various investments.

CoA indicated that the government incurred losses from the pre-termination of the invested amount. Documentary stamp taxes and interest losses for the entire P89.9 billion were placed at P2.5 billion.

“For the initial P20 billion actual funds transferred to the Bureau of Treasury, the amount would be P59.500 million for documentary stamps plus the interest loss at P329.300 million, or a total of P388.800 million,” CoA stated.

The huge losses of some P2.8 billion from the retrieval of the “excess funds” could have paid for the hospitalization of many poor Filipinos but ultimately amounted to nothing due to the failures of PhilHealth.

CoA’s findings indicate that the current roster in PhilHealth is incapable of implementing the UHC Act. This situation must prompt quick and decisive action from the Palace leadership.