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2015/SFOM/S/016 Session: 4

Sustainable Health Financing: The Philippine Experience

Purpose: Information

Submitted by: Philippines

Special Senior Finance Officials’ MeetingClark, Philippines

21-22 January 2015

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MARIA EDITA Z. TANAssistant Secretary, Department of FinanceRepublic of the Philippines

Sustainable Health Financing: The Philippine Experience

Outline of Presentation

I. Background

II. Sneak Preview of Wins of

Philippine Sin Tax Reform

III.Concluding Remarks

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BACKGROUND Fiscal space and sustainability is a constant

refrain in APEC finance ministers discussion. Fiscal space a necessary requirement for financial resiliency.

Financing of health, education and other social services is a key concern of APEC sectoralministers.

Strong political commitment for addressing health issues, including Universal Health Care (UHC) in the APEC region.

Need for a whole of government approach, where appropriate. Finance Ministers process need to work closely with their sectoralcounterparts.

4

• economic growth and increases in government revenue

Conducivemacroeconomic and

fiscal conditions

• of health in the government budgetRe-prioritization

• such as earmarked taxesHealth sector-specific resources

• health sector-specific grants, foreign aid or loans

Development assistance

• through better use of existing fundingEfficiency gains

Sources of Fiscal Space for Public Health

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Republic Act No. 10351

• An Act Restructuring the Excise Tax on Alcohol and Tobacco Products (RA 10351)

(Signed into Law - Dec. 19, 2012)

• Landmark Legislation under the Aquino Administration.

• Primarily a health measure with revenue implications.

• Fundamentally a good governance measure with positive impact on both public health and fiscal health.

Section 8 (C): After deducting the allocations under Republic Act Nos. 7171 and 8240,

Eighty percent (80%) for:

National Health Insurance Program

Attainment of the Millennium Development Goals

Health awareness programs

Twenty percent (20%):

Medical assistance

Health enhancement facilities program

Incremental revenues earmarked for health

Republic Act No. 10351

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RATIONALE FOR REFORM

Help finance Universal Health Care (UHC).

Address public health issues relating to alcohol and tobacco consumption.

Simplify the current excise tax system on alcohol and tobacco products and fix long standing, structural weaknesses: Remove price/brand classification freeze. Level the playing field. Reduce number of tiers. Make tax system more buoyant by indexing tax rates

to inflation.

REFORMED TAX STRUCTURE FOR CIGARETTES

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

2013 2014 2015 2016 2017

In P

hilip

pin

e Pe

sos

Excise Tax Rates of Cigarettes

Tier 1

Tier 2

2013 2014 2015 2016 2017

Tier 1 12.00 17.00 21.00 25.00Unitary PhP30.00

Tier 2 25.00 27.00 28.00 29.00

2012

Tier 1 2.72

Tier 2 7.56

Tier 3 12.00

*Tier 4 28.30

Prior to Reform

After the Reform

*Tier 4 no production

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REFORMED TAX STRUCTURE FOR FERMENTED LIQUOR

0.00

5.00

10.00

15.00

20.00

25.00

2013 2014 2015 2016 2017

Excise Tax Rates of Fermented Liquor

NRP 50.60 or Less NRP more than 50.60

2013 2014 2015 2016 2017

NRP < 50.60 15.00 17.00 19.00 21.00Unitary 23.50

NRP > 50.60 20.00 21.00 22.00 23.50

2012

Less than Php 14.50 10.42

Php 14.50 – Php 22.0015.49

More than Php 22.00 20.57

Brewed and sold at microbreweries and micro brew pubs

After the Reform

Prior to Reform

WINS OF THE SIN TAX REFORM

Credits to: Manix Abrera, GMA News Online

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WIN FOR FISCAL HEALTHShare of tobacco and alcohol excise collections

to GDP in 2013 highest since 2000.

FITCH RATINGSUpgraded to BBB- /Stable from BBB+; Investment Grade (March 27, 2013) Affirmation (March 25, 2014)

JAPAN CREDIT RATING AGENCY (JCRA)

Upgraded to BBB /Stable from BBB- /Positive; Investment Grade(May 7, 2013)Affirmation (May 30, 2014)

STANDARD & POOR’S

Upgraded to BBB-/Stable from BB+/Stable; Investment Grade (May 2, 2013)Upgraded to BBB /Stable from BBB- /Stable; Investment Grade(May 8, 2014)

RATING & INVESTMENT (R&I) INFORMATION, INC.

Upgraded to BBB /Stable from BBB- /Positive; Investment Grade (July 9, 2014)

MOODY’SBaa3 PositiveInvestment Grade (Oct. 3, 2013)

WIN FOR FISCAL HEALTH

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Increased funding for Department of Health – 2014 budgetup 57% over 2013 levels, from Php 53.3 billion to Php 83.7billion. Bulk of this will be used to finance Philhealthpremiums.

WIN FOR PUBLIC HEALTH

In Billion Pesos

National Government Allocation for Health Insurance Premiums for the Poor

WIN FOR THE POOR

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WIN FOR THE YOUNG AND THE POOR

Results of the Smoking Prevalence Study of Dr. Antonio Dans based on National Nutrition Health Survey 2013 data:

Prevalence of smoking among adult Filipinos went down from 31.0% in 2008 to 25.4% in 2013.

There are 3.2 million less smokers in the country because of the Sin Tax Law.

The drop is partly from people who stopped smoking. It is mostly from people who avoid starting to smoke.

Approximately 32,000 deaths were averted.

Health benefits were greatest in price sensitive populations – the poor, rural folk, the very old, and the very young.

WIN FOR TOBACCO FARMERS

Significant increase in earmarks for tobacco growing regions.

5,251

3,839

5,849

3,998

5,640

10,695

‐

2,000 

4,000 

6,000 

8,000 

10,000 

12,000 

2010 2011 2012 2013 2014 2015

Total EarmarksIn Million Pesos

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Sustainable Financing for Health from Alcohol and Tobacco Excise Tax

WIN FOR UHC

CONCLUDING REMARKS

Reforming tobacco and alcohol taxation can be a sustainable financing source for Universal Health Care.

Political support at highest levels is key. Constructive engagement with various

stakeholders, including civil society. Importance of whole of government

approach – constructively engaged other ministries such as Health, Trade, Agriculture as well as Budget and Management.

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CONCLUDING REMARKS

More collaboration between APEC Finance Ministers process and their sectoralcounterparts in the sustainable financing of health, education and other social services.

We can start with the Health Ministers because of political commitment to health among APEC Leaders.

An APEC Dialogue on Sustainable Health Financing (Education and other Social Services can be included) can be an avenue for sharing experiences and best practices.

CONCLUDING REMARKS

Help sectoral ministers understand the mindset of Finance Ministry officials to achieve common objectives. Predictable revenues are important to them.

How to balance the financing demands from various sectors, i.e. education, health, infrastructure etc.

UHC can be a bottomless pit, thus the need for cost effectiveness and efficiency measures. Looks at value for money.

Generally against earmarking as preference is One Fund concept which allows flexibility.

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THANK YOU!