One of the inaugural commitments made by the Philippines` new administration is the provision of quality and affordable health care for each and every Filipino. To achieve this, a strategic health agenda is needed. This Policy Note offers a few new ideas that may help the administration achieve its health agenda.health sector, health care, health insurance, hospitals, health care financing, Philippines, health

Lavado, Rouselle F.

English

Research Papers in Economics

New ideas to help the Aquino administration
achieve its health agenda
Rouselle F. Lavado
Philippine Institute
for Development Studies
Surian sa mga Pag-aaral
Pangkaunlaran ng Pilipinas
Policy Notes
No. 2011-03 (February 2011) ISSN 1656-5266
PIDS Policy Notes are observations/analyses written by PIDS researchers on cer-
tain policy issues. The treatise is holistic in approach and aims to provide useful
inputs for decisionmaking.
The author is Senior Research Fellow at the Institute. The views expressed are
those of the author and do not necessarily reflect those of PIDS or any of the
study’s sponsors.
O ne of President Benigno S. Aquino’s
inaugural commitments is to ensure quality
and affordable health care for each and every
Filipino during his term. Indeed, a healthy
citizenry makes for a healthy nation. But
trekking the road toward this goal is not easy.
For despite the gains in many areas in the
country’s health care situation, certain
bottlenecks remain. As such, the Aquino
administration must work hard on its health
agenda and come up with a strategic  plan to
address the constraints.
This Policy Notes offers a few new ideas that
may help the new administration achieve its
health agenda. Three major areas are discussed,
namely: (a) access to primary care; (b) upgrading
of the hospital system; and (c) focus on
province-wide health systems. In each of these
areas, certain schemes are being proposed.
New ideas offered
Ensure access to primary care for all Filipinos. A
potential step in attaining the Department of
Health’s (DOH) universal health care is to assign
every individual to a primary care provider
which will be paid by PhilHealth through
capitation. In areas where public health units
cannot service all patients, private providers
could be contracted to provide the service.
There are several advantages to this scheme.
One, it would solve problems in terms of access
since a defined primary care provider is
accountable for each individual. This would
address the breakdown of the referral system
because primary providers can serve as the
gatekeeper of the health system. Patients
should be allowed to access higher-levelPN 2011-03
2
Policy Notes
facilities only after securing referrals from their
primary care provider.
Two, it would help address some issues in
financing. While the National Health Insurance
Program (NHIP) was passed way back in 1995,
universal coverage is still far from being
achieved.1 The varying degrees of local
government unit (LGU) participation in the
Sponsored Program (SP) subject the poor to
catastrophic expenditure during episodes of
illness. The national government (NG) should
therefore guarantee the coverage of the poor by
taking the responsibility of paying for the
health insurance premium of the poorest of the
poor, particularly those who are recipients of
the Pantawid Pamilyang Pilipino Program (4Ps).
The responsibility of LGUs should be shifted
toward enforcing the mandatory enrollment of
the informal sector. Uninsured individuals
primarily come from the informal sector.2 This
sector comprises a wide spectrum of people
ranging from professionals (i.e., lawyers), self-
employed entrepreneurs, contractual workers,
and jeepney drivers.
Among the reasons cited in focus group
discussions as to why those in the informal
sector do not enroll or sustain their membership
in PhilHealth is the perception that they do not
get anything from the insurance program unless
they are very sick (PIDS 2009). If every enrolled
member will have one primary care provider
assigned to and responsible for them, the
members will feel the tangible benefit of
joining PhilHealth. These primary care providers
could be tapped for health promotion and
delivery of public health programs, ensuring
that DOH programs are delivered even to far-
flung areas. And by acting as the gatekeeper of
the health system, the current practice of
bypassing lower level facilities for simple
ailments could be curtailed and hospitals could
shift their focus to patients who really need
higher level of care. This will lead to a more
cost-efficient health care system.
Lastly, the proposed scheme would address
issues on monitoring and quality of care. It
would be easier to collect health information
since there is an assigned provider for each
person. The information collected would also
solve the reliability problem of the Field Health
Service Information System (FHSIS) since
reporting would be based on the actual status
rather than reported incidence of diseases.
There should also be expected improvements in
the quality of care since the patients would be
able to “vote with their feet,” that is, if they
feel that the quality of service by their assigned
providers is not at par with others, they can opt
to be taken out of the providers’ registry and go
to other providers. This could spur competition
among health workers.
This option is viable because there is already an
existing primary care network composed of rural
health units (RHUs), city health offices (CHOs),
and barangay health stations (BHSs). The
barangay health workers (BHWs) could be
______________
1 While PhilHealth reports 85 percent coverage, the 2008
National Demographic Health Survey (NDHS) reports only 38
percent coverage.
2 All those who are formally employed are mandatory
members of PhilHealth.PN 2011-03
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Policy Notes
mobilized for registration of those who live in
far-flung areas. PhilHealth, through its SP, also
has the experience with the capitation
approach. The private sector would also be
expected to join the scheme since the setup is
similar to health maintenance organization
(HMO) physician networks that currently exist in
major urban areas. The scheme will be
particularly attractive for fresh graduates
because this implies guaranteed clients. Health
worker deployment would also be easier since
there are incentives to locate in areas where the
number of registered clients is high but health
worker penetration is low.
To test the viability of this proposal, PhilHealth
could expand the capitation scheme in its SP to
government employees. Civil servants would
provide a good test for the scheme since their
membership to PhilHealth is guaranteed by the
national government.
Promote the upgrading and integration of hospitals.
Improvements in primary care should be supported
by a parallel effort at improving hospital services.
Renationalization of hospitals should not be
allowed anymore since this fragmentation in
hospital assignments has led to a situation where
some provinces free ride in DOH facilities. Delivery
of hospital services will be improved if DOH-
retained hospitals could serve as a hub of the
referral network of the provincial health system.
Patients flock to tertiary hospitals primarily
because they are the only facility in the area where
physicians are accessible. Since decentralization
destroyed the system where all hospitals were
integrated, the career track of physicians was
also lost. Thus, a physician with a permanent
plantilla position in a primary hospital cannot
look forward to being promoted to a higher-
level facility. In the same manner, there is no
incentive for physicians in tertiary level
hospitals to be assigned to lower-level facilities.
The fragmentation in the hospital system is
inconsistent with the structure of physician
training. Residency training is conducted in
teaching hospitals like the Philippine General
Hospital and Quezon Medical Center which
utilize consultants to be in charge of training
residents to become specialists. These consultants
normally do not occupy permanent positions
and are paid with small honoraria. They pursue
private practice outside their work at teaching
hospitals and their main incentive is the
prestige of being a consultant in their profession.
Residents, on the other hand, are the ones
staying at the hospitals full-time. These
residents stay in the hospital for two to three
years and are bound to follow whatever their
consultants instruct. This two- to three-year
residency period is the window for primary and
secondary hospitals to have a chance of having
specialists. If the hospitals in a province would
again operate as an integrated system, the
consultants at the tertiary level teaching hospital
could rotate their residents to lower-level
facilities. This arrangement is currently being
practiced at the Surgery Departments of Davao
Medical Center (DMC) and Davao Regional
Hospital (DRH). The arrangement ensures that
DRH will have ample number of specialists; at
the same time, the residents find the arrangementPN 2011-03
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Policy Notes
favorable since the time at DRH provides them
breaks from strenuous workload at the DMC.
To address financing problems, all hospitals
under the province should be given economic
enterprise status so that hospitals will be able
to manage their own resources and will have
incentives to provide better services. Rather
than imposing flat bonuses like the Magna Carta
which are unfunded mandates, bonuses should
be tied to performance. One possible source of
bonuses is through Philippine Health Insurance
Corporation (PHIC) reimbursements. Performance-
related pay to hospital workers can be sourced
from professional fee reimbursements from
PhilHealth. While this is already the current
practice in most public hospitals, a more standard
rule on how professional fees are to be distributed
to hospital staff should be issued by the DOH.
Well-run ambulances should be put in place to
mitigate problems on access, especially for
geographically isolated and depressed areas. A
paradigm shift in assessing the adequacy of health
facilities is also needed: the more important issue
may not be meeting the 1:1000 bed per population
ratio but having timely access to health facilities.
The experience in Andra Pradesh in India shows
that maternal mortality decreased significantly
when the state put its emergency rescue in place.
In the Philippines, rather than building more public
hospitals, Davao City implemented the Rescue 911
project which led to more patients reaching
hospitals during their most critical hours.
Bring back the focus on province-wide health
systems. The literature on fiscal decentralization
gives four general measures to bridge vertical
fiscal gaps, namely:
1) expanding local own-source revenues;
2) reducing local expenditure responsibilities;
3) adjusting the intergovernmental alignment
of expenditure responsibilities; and
4) providing fiscal transfers from central to
local governments (Bird and Villancourt 1998).
Given that options (1) to (3) are difficult to
achieve in the short run, some fiscal gaps can
be addressed by the DOH by providing transfers
to local governments. In Fourmula 1, DOH
linked money to performance through the
Service Level Agreement (SLA), introducing a
form of performance-related pay. Since the fund
is tied only to outcome achievements, SLA is
essentially a move toward global budgeting,
which many studies have shown to be more
efficient than line item budgeting as fund
management for the health sector. A closer look
at the outcome indicators being tracked reveals
that these services are delivered by cities and
municipalities. This pay-for-performance scheme
might improve further if provinces are also
trained to enter similar contracts with their
component city and municipalities. Assuming
that the scheme where each Filipino is assigned
to a primary health care provider is adopted,
the role of the LGUs will then be to manage its
network of primary health care providers and to
ensure the compliance of these providers to
DOH protocols. The past experience of the DOH
with matching grants had limited success because
it was only able to secure the firm commitment
of provincial governors but not the mayors of
component cities and municipalities (CapunoPN 2011-03
5
Policy Notes
2008). To avoid this problem, provinces should
be given an option to contract out services (to
health providers other than the city health
office/municipal health office) when there are
areas that refuse to cooperate and are lagging
behind. Experience in other countries shows
that contracting is efficient for some public
health programs such as immunization and
nutrition programs (Harding and Preker 2002).
The success of the SLA hinges upon a reliable
source of information which tracks achievements.
Ten of the 19 indicators of the LGU scorecard
rely on the FHSIS, which is accomplished by the
LGUs themselves. There appears to be a conflict
of interest if the LGU is evaluated based on the
data that it generated by itself. The current
practice of data collection through the FHSIS is
subject to attrition. When one BHW neglects to
fill up his/her records, the average for the whole
municipality will not be accurate anymore. This
problem is aggravated in the aggregation of
data at the provincial level because if one
municipality opted not to submit its data, the
data for the whole province would not be reliable
anymore. Generating data through sampling might
therefore produce a more accurate report and
could help free up time that health workers spend
in accomplishing reports. In every province,
there are nationally paid DOH representatives
called Provincial Health Teams (PHT) who
oversee three to five municipalities. These PHTs
could be trained to conduct household surveys
sampled at the barangay level. To ensure that
the data generated by these PHTs are accurate,
DOH can commission a third party to validate
the results in randomly selected areas.
And finally, as the DOH moves toward performance-
related pay, the need for a monitoring and
evaluation survey that is sampled at the provincial
level is urgent. At present, the health-related
surveys conducted by the National Statistics Office
(NSO) are sampled at the regional level. Since the
health sector is devolved at the LGU level, those
surveys could not be used as guides to policy
decisions. While it might entail costs to increase
sample sizes, one way to rationalize the cost is
to consolidate the health surveys into one.
Right now, the major surveys that collect
health-related information are: Family Planning
Survey, Annual Poverty Indicator Survey,
National Demographic and Health Survey, and
Multiple Indicator Cluster Survey. The DOH and
its development partners also conduct surveys
for their projects. Rather than having all these
surveys, one major health survey sampled at the
provincial level and conducted at the right time
(before or after elections) might thus even help
improve accountability of LGUs. 
References
Bird, R.M. and F. Vaillancourt (eds). 1998. Fiscal
decentralization in developing countries.
Cambridge: Cambridge University Press.
Capuno, J. 2009. A case study of the
decentralization of health and education
services in the Philippines. HDN Discussion
Paper Series 2008/2009 No. 3.
Harding, A. and A. Preker (eds). 2002. Private
participation in health services. Washington,
D.C.: The World Bank.
Philippine Institute for Development Studies (PIDS).
2009. Improving local service delivery for the
MDGs in Asia: the case of the Philippines. PIDS
Discussion Paper No. 2009-34. Makati City: PIDS.PN 2011-03
6
Policy Notes
For further information, please contact
The Research Information Staff
Philippine Institute for Development Studies
NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City
Telephone Nos: (63-2) 894-2584 and 893-5705
Fax Nos: (63-2) 893-9589 and 816-1091
E-mail: rlavado@mail.pids.gov.ph; jliguton@mail.pids.gov.ph
The Policy Notes series is available online at http://www.pids.gov.ph. Reentered
as second class mail at the Business Mail Service Office under Permit No. PS-
570-04 NCR. Valid until December 31, 2011.
Annex 1. Links of the suggested policy options to the Aquino Health Agenda*
Aquino Health Agenda
Financing Service Regulation Governance Human Resource Health Information
Delivery
Expanding Universal coverage LGUs to enforce Quality
PhilHealth achieved through mandatory assurance
coverage and - NG enrollment of enrollment of the through PHIC
benefit 4P beneficiaries informal sector accreditation
- mandatory
enrollment of
informal sector
Ensuring primary PHIC capitation as Gatekeeper of the “Voting with feet” Foster competition Health worker Easier collection of
care access for all a source of fund referral network patients could and cooperation deployment would health information
- reduced cost due register with among public and also be easier: i.e., since there is an
to lower incidence another provider private sector incentives to locate assigned provider
of bypassing  if not satisfied providers in areas where the for each person.
with the service number of registered
clients is high but
health worker
penetration is low.  
Converting User fees and Restoration of Incentives for hospital
provincial hospitals reimbursements referral network managers and health
into economic could be used for workers
enterprises hospital upgrading
and Magna Carta
payments
Strengthening the Facilitation of Contracting with Ensure M&E surverys Consolidation of
Province-wide the Sector component LGUs compliance with conducted before health surveys into
Health System Development to deliver essential DOH standards or after elections to one, sampled at the
Approach for Health public health through help improve provincial level
(SDAH) services performance- accountability of
based grants  local chief
executives (LCEs)
* DOH Administrative Order No. 2010-0036 dated 16 December
2010, “The Aquino Health Agenda: Achieving Universal Health Care
for All Filipinos.”

A case study of the decentralization of health and education services in the Philippines.

Fiscal decentralization in developing countries. Cambridge:

Improving local service delivery for the MDGs in Asia: the case of the Philippines. PIDS Discussion Paper No.

Private participation in health services.

New Ideas to Help the Aquino Administration Achieve its Health Agenda

http://dirp4.pids.gov.ph/ris/pn/pidspn1103.pdf

New Ideas to Help the Aquino Administration Achieve its Health Agenda

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