SC justice says PhilHealth bankrupt; not so, says Recto
Credit to Author: Daphne Galvez| Date: Fri, 7 Feb 2025 00:00:00 +0800
MANILA, Philippines — Supreme Court (SC) Associate Justice Amy Lazaro-Javier has revealed that the Philippine Health Insurance Corp. (PhilHealth) is actually “bankrupt,” citing a report from the Commission on Audit (COA).
During the oral arguments on the controversial P89.9-billion PhilHealth fund transfer on Feb. 4, Lazaro-Javier focused on how PhilHealth has been implementing Section 11 of the Universal Health Care (UHC) Act which requires it to allocate a portion of its accumulated revenue as reserve funds, as long as they do not exceed two years’ worth of projected expenditures.
Any unused reserves not needed to meet the current expenditure obligations or support the abovementioned programs shall be invested to earn an average annual income at prevailing rates of interest, which will be referred to as the investment reserve fund, according to the law.
According to Deputy Treasurer Eduardo Anthony Mariño III, by the end of 2023 and the beginning of 2024, the accumulated revenue of PhilHealth stood at P464.29 billion.
Mariño revealed that this amount had been invested, which surprised the associate justice.
“Really? Are you allowed to invest? Are you not allowed to invest only from the excess of the reserve funds? There is a limitation on the investment, and the law imposes conditions before PhilHealth can invest. An investment is the least priority,” Lazaro-Javier said.
Mariño then pointed out that every year, PhilHealth generated more revenues than expenditures, adding that “whatever is needed for the year is actually being more than met by the inflows of additional revenues for the year, and that net income is being plowed back into the reserve fund.”
Lazaro-Javier, however, refuted this, citing a COA report, which she said showed that PhilHealth was actually “bankrupt.”
“COA said that for many years, at least three years (2021, 2022, 2023), the reserve fund of PhilHealth is much, much less than its actuarial estimate,” she said.
The associate justice also observed that PhilHealth is not complying with Section 11 of the UHC law, with the state insurer prioritizing investments over program benefits and lower member contributions.
“Your investment comes from all sources. And then you prioritize investment over the programs that will increase its benefits to the beneficiaries and decrease the amount of members’ contributions. That is what I gathered from your statement,” she said.
“It leaves no room for interpretation. It speaks of actual reserves, it speaks of reserve fund, it speaks of excess, that any excess reserve fund should be used to increase the program’s benefits and to decrease the amount of members’ contributions and if there is still an excess, excess of the excess, the same should be maybe invested. All right? So, investment is the least of the priorities,” she also pointed out.
The oral arguments tackled the three consolidated petitions challenging the legality of the transfer of PhilHealth unused excess reserve funds to the national treasury to augment unprogrammed appropriations.
The continuation of the oral arguments is set on Feb. 25.
PhilHealth however, refused to give a reaction on the issue that it is bankrupt.
Finance Secretary Ralph Recto dismissed claims that PhilHealth is bankrupt, saying that the state insurer has substantial resources.
Recto said that COA had never explicitly declared PhilHealth as bankrupt.
He pointed to Insurance Contract Liabilities (ICL) as a key issue in the financial assessments of PhilHealth.
In a 2023 review, COA said that PhilHealth’s surplus reserves cannot be considered excess funds because they are allocated to ICL, which amount to nearly double the reserves.
ICL refers to the financial obligations that an insurance provider expects to pay out in the future for covered claims. COA earlier said that PhilHealth had a capital deficit due to the recognition of ICL provisions amounting to P1.128 trillion as of Dec. 31, 2023.
While COA did not explicitly declare PhilHealth bankrupt, it warned that the agency could face financial distress if unfunded liabilities are not properly addressed, raising doubts about its ability to continue as a “going concern.”
The government corporate counsel and the solicitor general have earlier defended the legality of PhilHealth’s transfer of its excess funds, asserting before the SC that the move adheres to existing laws and does not violate Filipinos’ constitutional right to health.
Solicitor General Menardo Guevarra said the measure is a temporary but a practical solution to financing critical government programs while staying within legal boundaries.
Transition difficulties and politics have prompted former PhilHealth chief Emmanuel Ledesma Jr. to leave his post, President Marcos disclosed yesterday.
“Well, yes, he left his position already. He said he is having difficulties… He is not used to politics. Manny Ledesma very much comes from the private sector. So, I think he found the transition to be jarring, shall we say,” Marcos told reporters at Malacañang when asked whether Ledesma resigned from PhilHealth.
Ledesma, who was appointed president and chief executive officer of the state-run health insurer in July 2023, was replaced by US-trained orthopedic surgeon and hospital executive Edwin Mercado. According to Marcos, Mercado is “very, very well-versed” in hospital administration and insurance.
“His (Mercado) whole life has been devoted to health care,” the President said.
PhilHealth said that pneumonia, both moderate and high risk, is number one among the top 10 medical cases it reimbursed last year with claims amounting to over P11 billion.
Data provided by PhilHealth showed that total reimbursement for pneumonia reached P11,914,876,697 for 648,355 benefit claims made from Jan. 1 to Dec.31, 2024.
Following pneumonia is dengue fever (mild and severe) for a total of 306,413 claims amounting to P3,549,926,818.
Also on PhilHealth’s Top 5 is acute gastroenteritis with 288,625 claims (P1,926,836,487); hypertensive emergency/urgency with 231,494 claims (P2,316,433,542); and urinary tract infection admissible with 205,727 claims (P1,673,868,298).
Meanwhile, in the 6th to 8th spots are peptic ulcer disease with/without hemorrhage with 195,126 claims (P1,483,746,484); upper respiratory tract infection with 122,397 claims (P545,329,466); and asthma in acute exacerbation with 100,160 claims with reimbursement amounting to P1,178,397,353.
PhilHealth data also showed that at 9th place is stroke infarction hemorrhagic/non hemorrhagic with 99,418 claims (P4,949,579,602) while last on the list is anemia with 86,245 claims (P1,031,416,265).
In a statement issued last Monday, the Department of Health assured the public that PhilHealth has the financial capacity to pay for the health benefits of all its members for 2025. – Rhodina Villanueva, Keisha Ta-asan, Alexis Romero