Why Health Should Be the Defining Election Issue of 2016

Part of an #Election2016 series called “Public Choice”

A survey conducted by Pulse Asia back in December 2015 found that health was the leading personal concern among voters with 62% of respondents saying staying healthy and free of illness was a most urgent personal concern of theirs, ahead of finishing school or providing an education for their children (48%), securing a well-paying job or source of income (43%), and having enough to eat everyday (41%).

Health is so fundamental to our personal well-being and ability to become productive members of society. And yet, at the second presidential debate in Cebu, questions covering the health system were bumped off by other topics. It wasn’t due to the late start that time ran out, but because candidates were allowed by the format to and did engage with each other more thoroughly than they were able to in the first debate.

A World Bank study in May 2015 noted that achieving universal health care is not just about improving health services, but achieving “a situation where all people who need health services (prevention, promotion, treatment, rehabilitation, and palliative) receive them without undue financial hardship”. The WHO/World Bank Group proposes that by 2030 everyone should have 100 percent financial protection from out-of-pocket payments.

In the Philippines, the WB  found that real spending on health increased by 150% between 2000 and 2012 (see chart above), “with the sharpest increases occurring in recent years”. It found that

The percentage of people impoverished by health spending has also increased and, in 2012, out-of-pocket spending on health added 1.5 percentage points to the poverty rate.

This was more than enough to offset the 1.4% point reduction of poverty in 2013 due to the Pantawid Pamilya program. The WB also found that the incidence of catastrophic payments trebled since 2000, perhaps a reflection of the obesity epidemic that is spreading even to low and middle income countries. According to the World Health Organization (WHO).

At least 1 in 4 Filipinos die from heart disease, stroke or another noncommunicable disease (NCD) before the age of 70. Many of those deaths can be prevented, provided people can obtain the health services they need.

Medicine was the primary driver of health spending, which accounted for “almost two-thirds of total health spending, and as much as three-quarters among the poor,” in spite of the enactment of the “Universally Accessible Cheaper and Quality Medicines Act” of 2008 (R.A. 9502) and the “Food and Drug Administration Act” (R.A. 9711) of 2009. A government review prepared by the Philippine Institute for Development Studies (PIDS) into the Cheaper Medicine Program in 2011 identified several weaknesses in the application of the price regulation of drugs, as made possible by these laws. It further suggested that

The most important factor (to explain costly medicine) is the sheer lack of supply of generic alternatives to households wanting them, a situation that persisted until past the middle part of 2000s when generics finally emerged on their own, thanks in part to the initiatives (such as the parallel drug importation, village pharmacies, drug franchises, drug treatment packs, and the like).

The dominance of some drug companies in the manufacture and distribution of drugs, lack of awareness on the part of households regarding generics, and the influence of advertising and promotion through prescribing doctors by the pharmaceutical industries also could have contributed to the problem, according to PIDS. The WB suggests a review of the industry is needed. This could probably be handled by the newly created Philippine Competition Commission.  

It remains to be seen whether recent policy developments initiated by the government have helped. In December 2012 the indexation to inflation of excise taxes imposed on tobacco and alcohol products was signed. The revenue increase generated by the sin tax reform law allowed the government to provide healthcare to an additional 14 million families or 45 million Filipinos and expand PhilHealth coverage from 72% of the population in 2011 to 84% of the population in 2014, according to the WHO.

Coverage was expanded further in 2015, when a 2014 law mandating the coverage of people over 60 years of age came into effect. Another set of policies increased the generosity of the PhilHealth benefit package to include (as stated in the WB report):

  • a wide range of medical cases and surgical procedures at accredited public and private providers;
  • maternity care and newborn care benefits;
  • a few specific outpatient interventions (such as treatment for tuberculosis, rabies, and leptospirosis);
  • a so-called catastrophic “z-benefit” package which includes certain types of cancers, some cardiovascular surgeries, dialysis and kidney transplants, among others; and
  • a primary care benefit package which has recently been expanded to include also screening and treatment for some noncommunicable diseases (such as breast cancer and cervical cancer) and a small medicines benefit.

Poor/indigent members have the added benefit of “no balance billing” which is meant to be observed by all PhilHealth-accredited providers whether government or private. No fees or charges over and above what is reimbursed by the PhilHealth benefit package should be billed, under this policy.

Despite these improvements, programmed spending on health in 2016 is meant to decline to Php 135.3 billion in 2016, compared to Php 195.9 billion in 2015, according to the Department of Budget and Management. In 2013 public health expenditure was 1.5% of GDP. The prescribed level of health spending according to the WHO is 5% of GDP.

THE IDEAL HEALTH POLICY MIX

Here is what a considered health policy mix would look like based on these studies. The solutions essentially fall under three categories. These are on the availability of services, cost of health services, and cost of medicine, to which I add the cost of funding health. Here is a brief discussion of each of these areas of concern (see also table summary below):

Lowering the Private Cost of Health Services. Out-of-pocket expenses can be reduced with the following:

  •  Increase awareness about Philhealth member benefits.

  • Expand Philhealth coverage by issuing health insurance cards to the poor.

  • Enforce no balance billing for poor patients.

  • Introduce a fixed co-contribution for non-poor Philhealth members. Allowing private and public hospitals to charge unlimited fees for non-poor patients above what Philhealth will reimburse defeats the purpose of health insurance, the WB says. A fixed co-contribution will limit the financial burden they will have to bear.
  • Expand the benefits package of Philhealth members.
  • Provide capitation for primary health care. Capitation is a payment for health care services, in which a physician, hospital, or other health care provider is paid a contracted rate for each member assigned, regardless of the number or nature of services provided. The lack of capitation to offset the private cost of primary health care is a “severe shortcoming” according to PIDS because “89% of pharmacy sales made on outpatient settings” where  a lot of patients don’t consult a doctor, in part to avoid consultation fees.
  • Replace the current fee-for service funding model for hospital care with case-based funding. Under the present system, private hospitals have no incentive to use cheaper generic drugs, according to PIDS because “the higher the value of their claims, the more reimbursements they obtain, and the better off they would be.” Under case-based funding, hospitals are paid a fixed amount based on the type of treatment and number of patients treated. This would force them to seek the most cost-effective way of treating patients.

Increasing the Availability of Services. To meet the rising demand for health services, the WB says that the government needs to ramp up “supply side readiness” in the medium term. This is just economist-speak for hiring more pharmacists, doctors, and nurses, and building more hospitals, clinics, village pharmacies, especially in the poorest provinces, towns and communities.

Lowering the Cost of Medicine. The main cost-driver according to the PIDS study was the lack of alternative/generic medicine, and the government’s parallel drug importation program coupled with other interventions such as the village pharmacies, drug franchises, treatment packs served only to increase the ubiquity of generics, forcing innovator drug companies to lower their prices. Keeping these in place is essential. Other ways to lower prices is by removing VAT on medicine and expanding the coverage of the government’s cap on drug prices.

Raising revenue to pay for health care. The rising demand for medical services can be traced to increasing rates of obesity in developing countries. The Philippines is part of this trend. Unhealthy nutrition and diet and sedentary lifestyle are its cause. A tax on sugary drinks and unhealthy (salty and fatty) food can help address this by taxing unwanted behavior. A study published in the British Medical Journal suggests that such a tax would need to be set at a minimum of 20% to influence behavior. I have previously tried to develop the scope and estimate the revenues that could be generated by such a tax. I conservatively place it now at Php15 billion a year, or about a third of what the reformed sin taxes have generated.

Summary of the Ideal Health Policy Mix

Area of Concern Policy Tool Type of Intervention
Cost of health services Increase awareness about benefits Information
Enforce no balance billing Monitoring and penalties
Expansion of coverage Budget allocation
Expansion of benefits Administrative action

Public finance

Fixed co-contribution for non-poor patients Administrative action

Monitoring and penalties

Capitation Funding model
Case-based funding Funding model
Availability of services Supply side readiness Budget allocation
Cost of medicine Maintain parallel drug importation, Village Pharmacy and drug treatment packs programs Budget allocation
Make the list of medicine under price regulation more comprehensive Administrative action
Exempt medicine from VAT Legislation
Review pharmaceutical market Regulation (Philippine Competition Commission)
Health funding Impose a tax on sugary drinks and fast food and remove VAT exemption to sugar industry Legislation

 

WHAT SOLUTIONS ARE THE CANDIDATES PROPOSING?

Now we can compare and contrast what the candidates have offered in terms of a policy response to what the experts have advised. Here they are in no particular order.

MarMar Roxas

He was one of the authors of the cheap medicines act and some have said responsible for weakening certain provisions in it for price regulation after consulting with the pharmaceutical industry. In addition, Mr. Roxas was credited with extending VAT exemptions to sugar planters as his family traces its origins to the sugar industry. Here is what Mr. Roxas’ health policy platform looks like (taken from his comprehensive policy document) with an assessment based on the preceding discussion:

Policy response Evidence-based assessment
Reduce out-of-pocket expenses, and address gaps in utilization of health care services provided by the government. A bit vague and too broad: It could mean any number of things, and is more a statement of the ultimate outcome, not the means to achieving it.
Further reduce drug prices through bulk procurement. Nothing new and insufficient: Using government’s purchasing power to help bring down drug prices has been shown to help encourage the use of generics, but since then innovator brands have lowered their prices. Keeping this program in place is needed to keep drug companies honest, but improvements to procurement process are also required.
Ensure the availability of appropriate health facilities and human resource for health (HRH) at different levels of care, with the goal of ensuring that every barangay has a health station with sufficient primary health care providers, equipment, and medicine. Necessary but at what cost? This is a medium-term measure. Expanding health services requires additional funding. How will he pay for these services?
Continue the establishment of PhilHealth-accredited women and child centers in isolated barangays. See above.
Sustain the provision of complete immunization from infancy to adolescence, and to senior citizens. Nothing new. He is merely saying he won’t de-prioritize or de-fund the programs.
Supply free maintenance medicines for the poor through the Rural Health Units or Urban Health Centers for the following conditions – diabetes, symptomatic gout, leukemia, tuberculosis, breast cancer, and colorectal cancer. Possibly premature: The WB has advised further study of the primary care medicines for twelve conditions included in the expansion of the primary care benefit package before expanding pharmaceutical benefits.

Grace

 

Grace Poe

The senator considers herself a champion of the poor, and has themed her campaign for president around a caring form of governance. She released her 20 point agenda at the launch of her campaign. It contained the following statements on health:

Policy response Evidence-based assessment
Everyone’s health is important. No family should be driven to bankruptcy by illness or be made to choose between food or medicine for their sick loved ones. Motherhood statement. More of a statement of principle, rather than policy.
Our people should be able to rely on expanded health benefits through Philhealth. Too vague. It lacks detail as to what additional benefits would be included in the package.
I will ensure that each community has a proper hospital, staffed with enough doctors, nurses and midwives, and with all the necessary equipment, medicine and supplies. Necessary but at what cost? This is a medium-term measure. Expanding health services requires additional funding. How will she pay for these services?
According to Peter Wallace, she is proposing PhilHealth vouchers, that would enable poor patients to access healthcare from private providers. Unnecessary. Philhealth membership allows patients to seek treatment from private accredited hospitals.

Rody

 

Rody Duterte

The Duterte campaign released a policy platform, which includes a plan to “intensify and improve social services” (including health). The following has been gathered from news reports.

Policy response Evidence-based assessment
He will expand charity wards by requiring all private hospitals to allocate 20 to 30 beds for the poor for free, with government paying for their hospital bills. Unnecessary. The no balance billing policy for poor patients which is already in place, and distribution of health cards to the remaining poor population not yet covered, would achieve this outcome. Better enforcement and implementation of existing policies is all that is needed.
He will push for a stronger promotion of family planning methods,both natural and artificial. A bit vague. How will this happen? The reproductive health law is already in play. It just requires adequate funding.
He will conduct a review of the government’s health insurance policies. Non-committal. This is sort of a plan to come up with a plan, which is no plan at all.

Jojo

 

 

Jejomar Binay

The vice president and former mayor outlined his platform which included improving the quality and accessibility of health services. The following was sourced through media releases:

Policy response Evidence-based assessment
He has vowed to increase public health spending to at least five percent of the country’s gross domestic product as recommended by the World Health Organization. Necessary but how? The veep has indicated the level of spending for health that he intends to allocate. He is the only candidate to do so. Based on 2013 GDP figures total health spending (both private and public) was 4.4% of GDP. An allocation of 5% of GDP for health would have covered all public and  private costs and then some, to deal with currently unmet needs. The current level of public spending represents about 1.4% of GDP (based on WB data). The goal of 5% of GDP is appropriate, but from where will he source this level of spending, and what is his timeline for achieving it?
He will implement a program similar to the Yellow Card initiative of Makati to minimize health-related expenses by the people. The Yellow Card program includes free maternal, child and elderly care, free outpatient consultations and medicines and government-subsidized hospitalization on top of PhilHealth benefits. Desirable. Since the Yellow Card initiative is well-documented as being “best practice”, and is the most comprehensive healthcare package around. Philhealth already includes the services specified, but what the veep intends to do is increase the extent of subsidy even further. The only remaining question is how closely will his national health plan mirror the Yellow Card.
Coverage and benefits under PhilHealth will be expanded. See above.

This is where the candidates stand so far. The analysis above is not meant to provide an endorsement to anyone. As can be deduced, health is a highly complex policy area. A candidate’s ability to master it, and effectively take the lead in reforming it, would be a litmus test of the executive capacity of that individual. This, and its centrality to our sense of well-being, is perhaps why health ought to be a defining issue for the coming presidential elections.

The author works as an economic policy analyst in Adelaide, South Australia. He is also the founder of the 2Klas Program in Manila, which equips inner city youth with 21st Century skills. He tweets as @thecusponline.

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