Tuesday, October 16, 2012

Health Financing: Who Pays for Health Care in the Philippines?

by Gideon Lasco, MD

Mang Torio, a farmer in Central Luzon, was in his middle 50s when he began to feel a lump on his throat. At first, he thought it was just a passing malady, but after a few months, the symptoms worsened. He decided to consult a doctor, and he was diagnosed with nasopharyngeal cancer - a rapidly spreading tumor that carries a poor prognosis: it can be fatal within several months or a few years. Even though there was little chance of recovery, his family put together what little funds they have to pay for the chemotherapy, surgery, and several weeks of hospitalization. Five months after the
diagnosis, Mang Torio was dead, his rice fields had been mortaged, and his five children were left without any funds to continue their education.

The sad story of Mang Torio is an everyday reality in many public hospitals in the Philippines. And it demonstrates how disease is not only a health problem, it is also a major financial burden. This is particularly true for diseases that require drastic measures and hundreds of thousands of pesos at short notice. Most people simply do not have enough funds to cover the expenses, yet life, priceless that it is, must be saved at all costs, and Filipinos will do everything to raise the required amount - from selling or mortaging farmlands to making emergency loans. The social and financial cost of these diseases, such as cancer, stroke, and heart attack, is so tremendous that they are called "catastrophic illnesses".

Addressing this vulnerability is one of the goals of universal health care. And one of the tangible solutions is a national health insurance program - this is what PhilHealth has been striving to be since its inception in 1995. In the Kalusugan Pangkalahatan program launched by the Aquino administration in 2010, "financial risk protection" is also listed as one of the three strategic thrusts towards Universal Health Care.

Who pays for health care in the Philippines? The answer to this question is always a combination of government, private sector, and individuals, but what underscores the importance of universal health care is that the proportion of what individuals shell out is too much. In health policy parlance, this is termed "out of pocket expenditure" (OOP). According to the World Health Organization, 20-30% OOP of health care is the healthy proportion. In the Philippines, the rate is a staggering 57%. This 57% does not only represent catastrophic illnesses, but also daily health expenditures. Patients purchase drugs, consult their doctors, and pay opportunity cost for their consultations and hospitalisations.

The rest of the health expenditure is spent by the government, through various agencies, including public hospitals that are subsidized. Politicians also dispense of government money, through their congressional allocations, to help their constituencies. Charity organizations, including the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Amusement and Gaming Corporation (PAGCOR) actively engage with tertiary hospitals like the Philippine General Hospital; social workers usually facilitate how health care is subsidized, how much is subsidized, and who gets subsidized. These donor-individuals and agencies perpetuate the notion of health as a form of charity and as a tool of political and corporate patronage, and does not move towards a social consciousness of health as a shared responsibility of the people.

The move for governments to take an increasing role in health, and an increasing share in paying for health care, is justified whether one sees health as a means or an end. Those who see health as a means invoke the role of health in development and economic productivity. On the other hand, those who see health as a end in itself focus on “health as a right”. These perspectives are in agreement in seeing out-of-pocket expenditure as something that must be decreased if we are to achieve Universal Health Care.

On the other hand, it is not enough to ask how we finance the healthcare of individuals. The other side of health financing, which is probably more challenging, is how to get the funds in the first place, for government to be in the position to assume a greater share of health spending? There are two schools of thought in this matter, one advocating for a social health insurance scheme, in which voluntary contributions are given by its beneficiaries, usually according to their ability to pay (the rich pay more; the poorest of the poor pay nothing). The recently-enacted health care scheme in the United States, popularly known as “Obamacare”, is a move towards this direction, and through PhilHealth, this is where the Philippines lies as well. On the other hand, there are also those believe that this system should be rejected in favor a tax-financed system;  just get the necessary health costs from taxes. Countries that have adopted this scheme include the United Kingdom and Thailand. Although we are pursuing a socialized health insurance scheme, there are those that suggest that we move towards a tax-based system.

Within the current policy framework, however, how can we thus improve health financing? Let us discuss the solutions that are on the table.

The three dimensions of universal coverage 
The World Health Organization speaks of three dimension of universal coverage. These dimensions are also means by which out-of-pocket expenditure can be lowered. The three dimensions are: Who gets covered, What is covered, and how much is covered.

Expanding population coverage, particularly to populations without ready access to health care, would obviate the need for them to consume their own resources for health care. However, the amount of coverage needs to be sufficient for all the expenses involved. In countries such as Thailand, even the transportation expenses of patients are reimbursed, since they have identified access to health facilities as a major reason for not seeking medical consult. This is true for the Philippines as well, and we need to adopt innovative strategies to make people more comfortable with health care. Finally, coverage should extend to catastrophic illnesses. This has already been launched by PhilHealth in July 2012, with the unveiling of the “Z Benefits for Catastrophic Illnesses”. Drawing from the illustration I used at the beginning of this article, Mang Torio's diagnosis of nasopharyngeal cancer is not yet covered in the benefits package of PhilHealth. This means that even if he were a PhilHealth member today, his illness would still be a heavy financial burden.

Efficiency through regulation and rational health care
An efficient health care system means that the money spent on health translates to beneficial gains in individual and public health. When people spend so much money on drugs and supplements of little or no evidence of benefit, we can call it a form of inefficiency. The government can solve this problem by regulating these pharmaceutical and 'nutriceutical' products and approving only those with clear indications and proven efficacy and safety. The technicality that supplements that do not seek any 'therapeutic claims' is exempt from the stringent testing that drugs are subjected should be rejected on the grounds that therapeutic claims are implicit on any product that associates itself
with illness or wellness. The Food and Drug Administration is mandated to implement these regulations, but it needs political backing of the government if it is to succeed.

Equally important in achieving efficiency in health is the avoidance of unnecessary procedures and hospitalizations. Fortunately, there is an increasingly growing body called “evidence-based medicine” that subscribes to the primacy of rigorous scientific evidence in guiding clinical and hospital policies and practices. Procedures such as CT scans, MRI, and laboratory tests are validated according to their ability to diagnose. Also, concepts in clinical epidemiology, which looks at disease patterns and distribution, such as “number needed to treat” . The weight of these studies notwithstanding, one must acknowledge that there are also economic motivation to pursue excessive health care. Thus, these tendencies have to be kept in check by professional societies as a self-regulatory measures, and by the Department of Health. The PhilHealth, which is becoming the major payor of health care, is also in a position to push clinical practice towards rationality by scrutinizing how patients were managed, given the diagnosis and the patient's history and physical examination findings.

Moreover, regulation of hospitals should also take into consideration the economics of health care. For four CT scan machines in one small town is obviously too many; investors seeking to return their investments would resort to coaxing doctors that practice there to over-prescribe a CT scan, either directly or indirectly; this would lead to unnecessarily procedures and the toll will ultimately be paid by the patients themselves.

Reforming the pharmaceutical and healthcare industries 
Reforms on drug pricing also have to be made, as drugs comprise a major amount of health expenditure. If the cost of drugs in the Philippines were as low as that in neighboring Thailand, it would cut spending on drugs into half, slicing the out-of-pocket spending by several percentage points. But why are we not able to do this? The answer lies in weaknesses in the regulatory infrastructure, as well as a weak local pharmaceutical industry that fails to provide any competition to multinational companies. The trend towards generic drugs and the rise of generics-only drugstores might change this, but four years after the Affordable Medicines Act of 2008, little has changed in the cost of many essential drugs.

On the other hand, healthcare, too, has to be regulated. Again, PhilHealth can leverage its influence. Already, it is implementing case payments which fixes the amount of cash that a doctor (or a hospital) gets for specific procedures. This move forces health care providers to work within certain

Legislative and political action
Restoring a health-promoting environment requires legislation in many areas. In raising revenues, the “sin tax bill” will be a key component, but the political debates about this bill are still ongoing, and it is likely that the outcome of this bill will be less than that for which it has been intended. In expanding coverage to reproductive health, an RH bill must be pursued. In strengthening regulatory agencies such as the Food and Drug Administration, new laws and amendments need to be introduced, although at times, the current legal framework is sufficient; but what is lacking is political support in carrying out these laws.

Ultimately, the health reform is a political process, and public clamor for health care is the catalyst that will move our leaders to act on it. Equally important, thus, are activities that raise awareness on health, such the Secretary's Cup of the Department of Health and its partners – a series of debates, talks, and town hall meetings that aim to build a constituency around Universal Health Care. The media should also participate in giving health issues a fair share of the public discourse.

Health financing remains a pressing challenge in reforming the Philippine health sector. Today, a majority of health care is still paid for by patients and their families, and this leads to catastrophes that ultimately affect economic productivity, and reduce overall quality of life in the country.

The general measure of a well-financed health care system is by looking at how much individuals spend for health care, an index termed “out of pocket expenditure”. Consequently, the problems in health financing can be augmented by moves that will (1) decrease out-of-pocket spending and/or (2) increase government spending, which is in turn enabled by generating revenues.

Under these two major domains, we have identified the following solutions: Expanding coverage according to the three dimensions of universal health care; Implementing reforms in pharmaceutical and healthcare industries; Pursuing measures that will raise efficiency and rationality of health care; and finally, legislative and political action.

As we end this discussion, it is important to state the one truism in health policy that cannot be ignored: that development itself is an antidote to health care; in general, as a country develops, so does its health care. While difficult to prove, the point here is that there are complex factors affecting health care that goes beyond the purview of public health or health economics. Also termed as “social determinants of health”, these factors are an invitation for multi-sectoral, interdisciplinary collaborations.

Ultimately, the conclusion we can make is that health financing in the Philippines requires a comprehensive approach that supports regulatory and legislative reforms aimed at raising revenue and reducing inefficiency; a commitment to expand the 'three dimensions of universal coverage', and a mechanism to increasing the capacity of the government to pay for health care, through raising revenues, and a strengthened, comprehensive, and sustainable health insurance system.

October 16, 2012