Supreme Court Justice Amy Lazaro-Javier’s Statement on PhilHealth’s Financial Stability: A Closer Look
During the oral arguments held on February 4, 2024, concerning the controversial P89.9 billion fund transfer from the Philippine Health Insurance Corporation (PhilHealth) to the national treasury, Supreme Court Associate Justice Amy Lazaro-Javier revealed alarming insights about the financial state of PhilHealth, specifically its reserve funds. According to Lazaro-Javier, a report from the Commission on Audit (COA) indicated that the reserve funds of PhilHealth for the years 2021 to 2023 were substantially lower than its actuarial estimates, raising serious concerns about the organization’s financial health. This revelation comes amid growing scrutiny of PhilHealth’s fund management and its adherence to the Universal Health Care (UHC) Act.
The UHC Law and PhilHealth’s Reserve Fund
Under the UHC Act, PhilHealth is required to allocate a portion of its accumulated revenue as reserve funds to cover at least two years’ worth of projected expenditures. These reserve funds are meant to ensure the financial stability of the state-run insurer. However, according to Lazaro-Javier, the state insurer has failed to comply with this provision. Despite the law’s guidelines, she pointed out that PhilHealth has been prioritizing investments over the core purpose of maintaining sufficient reserves to benefit its members and to reduce their contribution costs.
“Your investment comes from all sources, and then you prioritize investment over the programs that will increase benefits to the beneficiaries and decrease the amount of members’ contributions,” Lazaro-Javier observed. “Investment is the least of the priorities.”
The Actuarial Estimates and Fund Management Concerns
Lazaro-Javier’s concerns are further compounded by COA’s findings, which indicate that PhilHealth’s reserve fund has consistently fallen short of its actuarial estimates for the past three years. This substantial discrepancy between the reserve funds and actuarial projections, she argued, signals a severe financial mismanagement issue within the corporation. Her statements also highlighted that PhilHealth has been using the reserves in ways that deviate from the law’s stipulations, raising questions about the allocation and prioritization of funds.
Furthermore, Lazaro-Javier expressed disbelief over PhilHealth’s investment practices, questioning why they are investing reserve funds when such investments are meant to be made only from excess reserves—funds that go beyond what is needed for current expenditures. According to the UHC Act, only funds that exceed the required reserve amounts should be considered for investment, yet it appears that this condition has not been adhered to.
The COA Report and PhilHealth’s Financial Situation
The COA report has revealed a significant concern about PhilHealth’s overall financial status. While the agency did not explicitly declare PhilHealth as bankrupt, it pointed to a capital deficit due to the recognition of Insurance Contract Liabilities (ICL). These ICL provisions amounted to over P1.128 trillion as of December 31, 2023. The ICL refers to the expected financial obligations for future covered claims, and COA’s review suggested that the funds set aside for these liabilities far outstrip the corporation’s available reserves.
Despite these issues, PhilHealth has continued to generate revenue, with Deputy Treasurer Eduardo Anthony Mariño III reporting that by the end of 2023, the insurer’s accumulated revenue stood at P464.29 billion. However, this raised additional concerns during the oral arguments, with Lazaro-Javier questioning the legality and priority of PhilHealth’s investment practices.
Recto Dismisses Bankruptcy Claims
In contrast to Justice Lazaro-Javier’s claims, Finance Secretary Ralph Recto has dismissed the notion that PhilHealth is bankrupt. Recto clarified that COA never formally declared the corporation bankrupt and instead pointed to its significant resources. He emphasized that the issue lies not with PhilHealth’s financial capacity but with its liabilities related to ICL, which have caused complications in the agency’s financial assessments.
Moreover, Recto explained that PhilHealth’s reserves should not be considered excess funds since a large portion of them is earmarked for these future liabilities. While COA’s warnings about potential financial distress remain valid, Recto reassured the public that PhilHealth’s finances remain stable, with sufficient resources to meet current obligations, including health benefit reimbursements for 2025.
The PhilHealth Fund Transfer Controversy
One of the key issues discussed in the oral arguments is the legality of PhilHealth’s transfer of unused reserve funds to the national treasury. This action has sparked significant debate, with critics questioning whether it violates the rights of Filipinos to access affordable healthcare under the Constitution. However, Solicitor General Menardo Guevarra defended the transfer, asserting that it was a temporary but legal measure to support critical government programs.
Leadership Changes at PhilHealth
Amid the financial discussions, there have also been leadership changes at PhilHealth. Former CEO Emmanuel Ledesma Jr. resigned from his post, citing difficulties in transitioning from the private sector to a government role. President Marcos confirmed Ledesma’s resignation, revealing that he had struggled with the political dynamics at PhilHealth. Ledesma’s departure was followed by the appointment of Edwin Mercado, a US-trained orthopedic surgeon, who is now tasked with leading PhilHealth through these challenging times.
PhilHealth’s Role in Reimbursing Medical Claims
In addition to the financial concerns, PhilHealth continues to play a vital role in reimbursing medical claims. According to recent data, pneumonia was the most common medical condition reimbursed by PhilHealth in 2024, with over P11 billion in claims. Other significant conditions included dengue fever, acute gastroenteritis, and hypertensive emergencies, highlighting the ongoing demand for health services covered by PhilHealth.
Conclusion: Financial Challenges and Future Outlook
As the ongoing debates around PhilHealth’s financial stability continue, the future of the corporation remains uncertain. While there are concerns over its reserve funds and investment practices, government officials like Finance Secretary Recto remain optimistic about the state insurer’s capacity to meet its obligations. Nevertheless, the Supreme Court’s decision regarding the legality of the fund transfer and the broader issue of PhilHealth’s financial management will likely have long-term implications for the agency and its members.
The next set of oral arguments on this issue is scheduled for February 25, 2024, where more details will be discussed regarding PhilHealth’s financial future and the legality of its actions.
