MANILA, Philippines – There have been discussions over the social and political impacts of the almost P90-billion fund transfer of the Philippine Health Insurance Corporation (PhilHealth) to the National Treasury.
But, in the first place, is it legal under Philippine laws?
The sin tax laws
Associate Justice Alfredo Benjamin Caguioa noted that sin tax laws state how taxes should be funneled into the country’s health care programs.
These include:
- Republic Act (RA) 9334 passed in 2004 – Increasing Excise Tax Rates Imposed on Alcohol and Tobacco (Section 288)
Under RA 9334, 2.5% of the incremental revenue from tax collected will be “remitted directly” to PhilHealth for “meeting and sustaining the goal of universal coverage of the National Health Insurance Program (NHIP). Another 2.5% from the earnings will be sent to the Department of Health as a “trust fund for its disease prevention program.”
- RA 10351 passed in 2012 – Restructuring the Excise Tax on Alcohol and Tobacco Products (Section 288c)
The historic law significantly increased taxes imposed on alcohol and tobacco products at a time when the Philippines was selling the products, with prices that are considered among the cheapest in the world. The law specifically states that earnings from the law “shall be allocated for the universal health care under the [NHIP],” the attainment of the Millennium Development Goals, and health awareness programs.
- RA 11346 passed in 2019 – Increasing the Excise Tax on Tobacco Products and Imposing Excise Tax on Heated Tobacco Products and Vapor Products
The law mandates that a majority of sin taxes collected from sweetened beverages, alcohol products, tobacco, heated tobacco, and vapor products should be “allocated and used exclusively” for PhilHealth to implement the Universal Health Care Act (UHCA).
Despite these, however, the national government believes that laws should particularly say how collected excise taxes will be set aside in a special account in the National Treasury’s general fund. Without a special account, these funds cannot be deemed untouchable and will instead go to the general fund.
The government also notes that funding for the programs for universal health care and premium subsidies of indirect contributors of PhilHealth — senior citizens, persons with disabilities, indigent members of the population — will be sourced through the General Appropriations Act (GAA) under the UHCA.
Does it depend on Congress?
Solicitor General Menardo Guevarra on April 2 said Congress has the “discretionary power” to determine how PhilHealth will get in terms of funding, citing Section 37 of the UHCA:
- “The amount necessary to implement the provisions of this Act shall be included in the GAA and shall be appropriated under the DOH and National Government subsidy to PhilHealth. In addition, the DOH, in coordination with PhilHealth, may request Congress to appropriate supplemental funding to meet targeted milestones of this Act.”
This prompted Caguioa to ask: “So to you, it is still Congress that determines the amount to be appropriated or whether any amount should be appropriated at all, correct?”
“It’s what Section 37 actually says, Your Honor,” Guevarra said.
“And that is where I have problems with your reasoning,” said Caguioa. “Your interpretation of these provisions totally destroys the mandates of sin tax laws and the Universal Health Care Act to deliver such funds to PhilHealth for the specific purpose of implementing universal health care.”
It is Congress that mainly works on the country’s national budget — a process which even PhilHealth counsel Solomon Hermosura noted may be political: “If I were in the PhilHealth board, I would not set a high reserve fund if I am confident that I can get political support for a bigger subsidy for PhilHealth.”
In the 2024 GAA, lawmakers inserted a new “special provision” to fund the government’s unprogrammed appropriations, which a budget analyst called a “new scheme to massively fund pork barrel.”
The new provision allows the government to tap government-owned and -controlled corporations’ (GOCCs) excess funds, which is what led the Department of Finance to order PhilHealth to remit P89.9 billion in the first place.
“We have seen the many years — from 2003 all the way up to 2019 of discussions, staff work, interpellations, deliberations, extensive and thorough study in order to come up with the Universal Health Care Act, a law in my view has a particularly good design in establishing funding and sustainability,” Caguioa said.
“And all of that, all of it gets undone by a one-sentence insertion in the 2024 GAA? Don’t you think there is something wrong [with] that?”
Exclusively earmarked
In Article 6, Section 29 of the 1987 Constitution, any funds collected from taxes for a specific purpose should automatically be “treated as a special fund and paid out for such purpose only.”
For Caguioa, this means that even without a law specifying the creation of a special account, sin tax collections should be allocated for PhilHealth and the UHCA implementation only.
He also noted that the National Treasury has 60 existing special accounts — none of which were created because a law specifically directs their existence.
“The way I see it is that the sin tax collections are still exclusively earmarked for the specific purpose of funding the UHCA,” the associate justice said.
“Its release is done through the GAA precisely because the process must be undertaken to determine the actual amount collected and the proper percentage allocation and that brings me to my conclusion — the provisions relied upon by the Solicitor General do not really give Congress any discretion to determine the amounts to be appropriated for PhilHealth.”
Aside from the GAA insertion, lawmakers stripped PhilHealth of government subsidies in the 2025 national budget, with Senator Grace Poe noting that the state insurer still has a lot left in its pockets to work with.
Despite assurances from Health Secretary Teodoro Herbosa, health advocates have pointed out that PhilHealth’s finances may not be enough to cover the Filipino people’s health needs. – Rappler.com