Has the Department of Finance even done an actuarial analysis of PhilHealth to ensure its long-term viability given the controversial order to effectively draw blood and deplete itself?

Ignoring the advice of bankers, finance men and economists, hellbent and deaf, the government of Ferdinand R. Marcos Jr. forged ahead and bullheadedly created a fund from existing albeit committed capital pilfered from financial institutions it controlled. Emboldened by the absence of effective grassroots opposition due to the complexity of the modus, other vulnerable sources were scoured as appointees tasked to safeguard our precious funds yielded.

This is the story of one of those funds.

In another life and writing for a different news and public affairs medium, during a discussion with Senator JV Ejercito on what was still then a draft Universal Health Care (UHC) Act, on the issue of funding through a pooling of separate pre-need sources, we had the rare opportunity to raise the issue of fund adequacy and fiduciary propriety and responsibility.

Ejercito was the principal author, and we were impressed with his zeal, openness, and good intentions. 

As we discussed off-cam, we realized the fiscal limitations of the sources that could be pooled to build up the necessary amount given that the universality requisite of the membership would be an astronomical number far beyond those currently served by the Philippine Health Insurance Corporation (PHIC or PhilHealth). Likewise, the universality of retail health services would be overwhelming and would place incredible pressures on those tasked with tremendous fiduciary responsibilities to protect the fund.

The UHC was created as a super PhilHealth on steroids. Unfortunately, the basic model has been the subject of numerous instances of downright political plundering. Recalling its recent history, we see that the problem lies with the constitution of its politically appointed board. Questions of competence, independence, and professionalism hounded PhilHealth.

A necessary task was establishing the number, frequency, and amount of constant fund inflows to keep the pre-need coffers viable. That said, there was also the need to be honest about bureaucratic realities. The inconvenient truth was that net-fund requirements included the outflows and leakages that the bureaucracy is notorious for as the government was in a perpetual state of deficit-spending. This compelled either increased taxes, fees and other virtual tolling, or infusions from state subsidies – the latter essentially a virtual universal tax on everyone. 

On a much darker note, and this is culled from lessons learned from PhilHealth’s past, we also needed to realize that corruption and the possibility of malversation through forced and predesigned savings from over-appropriations, deliberately bloated budgets and omnipresent corruption, pilfering, pillaging, and plundering still remain part of the equation.

On those possibilities, in the last few years, viewing the hunting grounds beyond PhilHealth, we have come to realize that un-vetted bureaucratic appointees are legion in a milieu where novel ways to plunder capital from financial institutions have been disingenuously devised.

The bureaucracy has patented and institutionalized the modus operandi for small-scale pilfering to bigtime plundering. From the executive department, a deficit-spending budget is proposed and presented. The lower house approves the appropriations and Congress passes the General Appropriations Act (GAA). The executive does not line-veto and the budget is signed into law.

Mid-stream into the fiscal year, spending is held back, projects and programs are either cut short, culled or cancelled, and from the unprogrammed, underutilized, and un-used appropriations – then promptly and prematurely considered surpluses or savings – billions are re-channeled to unvetted expenditures elsewhere in the executive bureaucracy. 

Even as the fiscal year has yet to close, note the unbelievable bloating in the remittances of surplus from most government-owned and -controlled corporations (GOCCs) and government financial institutions (GFIs). Scouring each and drawing even from fundamental Tier-One core capital, the bureaucracy can now suddenly fund what would not otherwise be funded had the executive-to-legislative-to-executive budgetary processes been prudently practiced. 

For those gaming the system, they should have realized that PhilHealth as a pre-need fund was not an ordinary GOCC or GFI. Its balance sheet, from its assets and liabilities to its capital, and its operating expenses, its cashflows, and all its other existential financials, are all dependent on actuarial science and annuity arithmetic.

Given a slew of unknown and unquantifiable variables in any risk management enterprise, what needed to be computed by a fully vetted, competent, and accredited actuary, and this is where serious quantification was needed, was the necessary arithmetic critical in any fund build-up. 

Actuarial numbers do not require any complex calculus. There are less than a handful of annuity formulae. However, for the billions entrusted and surrendered to PhilHealth from membership dues, physician fees and state subsidies, a credible fully licensed and completely vetted professional actuarial scientist is basic. After all, how does one differentiate between an extraneous surplus and a necessary reserve without computing for annuities and pay-out rates against the diverse demographics and specific needs of a universal membership?

The secretary of finance is a member of the PhilHealth board. Has the Department of Finance (DOF) even done an actuarial analysis of PhilHealth to ensure its long-term viability given the controversial order to effectively draw blood and deplete itself?

Under government balance sheet protocols, liabilities are charged against assets while uses are drawn from sources. In the case of PhilHealth, how are cash or bank deposit asset outflows (current assets) compelled by an order of the DOF directing the remittances to the treasury of surplus subsidies reflected on the liability column (current liabilities)? Are subsidies advances considered as payables to the Bureau of Treasury or are these considered as debts? 

Once a subsidy enters the balance sheet of a fund like PhilHealth, according to the late Senator Joker Arroyo, when appropriated via the GAA, it requires an amendatory act to the GAA to re-route and repurpose unspent subsidies regardless of whether they are strictly for the DOH’s public healthcare programs, PhilHealth’s personal medical services, or, heaven forbid, for the frivolous and whimsical non-budgeted uses of the Maharlika caste. – Rappler.com

Dean de la Paz is a former investment banker and managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance, and Mathematics professor. He collects Godzilla figures and antique tin robots.