Earmarking Revenues for Health: A Finance Perspective on the Philippine Sintax Reform. Jeremias N. Paul Jr.

Transcription

1 Earmarking Revenues for Health: A Finance Perspective on the Philippine Sintax Reform Jeremias N. Paul Jr.

2 CONTEXT Aquino Administration Social Contract with the Filipino People including Universal Health Care. No new taxes promise of President Aquino. Philippines among top smoking countries in Southeast Asia. Tobacco taxes and prices among lowest in the world. Strong tobacco lobby with deep business and political connections. Tobacco lobby hindered previous excise tax reform efforts. Alcohol: Deadline for Philippine compliance to WTO decision on distilled spirits. Tight deadline during Aquino Administration one year to make it happen. The Philippines ratified the WHO Framework Convention on Tobacco Control in 2005.

3 REPUBLIC ACT NO 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. Fundamentally a good governance measure with positive impact on both fiscal and public health.

4 Philippine Tobacco Tax Reform Path at a Glance Premium In Philippine Peso Tier 1 Unitary High Tier Medium Low 341% Key Features Removal of price classification freeze/tax advantages of legacy brands. Unitary tax structure by Tax rates indexed to inflation starting Health impact/who FCTC compliance a major consideration in rate setting. Bulk of incremental revenues earmarked for UHC. Safety nets for tobacco farmers/others. Projected Incremental Revenue (Tobacco) Projected Incremental Revenue (Alcohol) Projected Incremental Revenue (Total) Estimated Earmark for Health as of

5 REPUBLIC ACT NO Incremental revenues earmarked for health Section 8 (C): After deducting the allocations under Republic Act Nos 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

6 Sintax Reform Win for Revenues Generated US$ 3.9 billion in incremental excise tax revenues during the first three years of implementation, far exceeding government projections. About 80% of this increase is accounted for by tobacco. Tobacco and alcohol excise tax revenues as a percentage of GDP, increased from 0.5% of GDP in 2012 to 1.1% of GDP in Sintax Reform reversed the declining trend of share of these excise taxes to GDP beginning The incremental revenues does not yet consider VAT and additional fiscal space generated resulting from the investment grade rating following passage of law.

7 In billiion Pesos Win for Revenues Projected vs. Actual Incremental Revenue from RA $ $0.15 $ $ 1.21 B $ 1.13 B $ 1.61 B $ 0.80 B $ 0.97 B $ 1.11 B $ 1.29 B $ 1.46 B Projected Actual BIR VAT

8 1.2% 1.1% Win for Revenues Share of tobacco and alcohol excise collections to GDP highest in Tobacco & Alcohol Excise Collection 1.1% 1.0% 0.9% 0.8% 0.7% 0.6% 0.5% 0.9% 0.8% 0.8% 0.8% 0.7% 0.8% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.5% 0.5% 0.9% 0.9% 0.4% Tobacco & Alcohol Excise Collection Source: BIR and NSCB

9 Earmarking Sintaxes Win for Health DOF primary responsibility is revenue. Did its homework to ensure that all risks that will affect revenue are properly evaluated. DOF supported earmarking as a political imperative. As a result sintax reform was framed as a health measure and not a revenue measure. DOF chaired the interagency team that drafted the Sintax Implementing Rules and Regulations to ensure PFM safeguards were incorporated. Soft earmarking - While DOH is assured of funding from the Sintax Law, details of its expenditure program still have to go through the annual General Appropriations Act. Earmarking for health is not time bound.

10 Framing Sintax Law as a health measure than a revenue measure paved way for significant tax increases. One time, 12% increase in 2000 (RA 8240) 2012 Sin Tax Law (RA 10351) 36% Sin Tax Law (RA 9334) Bi-annual tax increases ( ) Tax rate rose 150% Weighted Average Tax Rate (Peso per Pack) Volume of Removals (Billion Packs) 0

11 Earmarking Sin Taxes Win for Health DOH budget in 2016 (P122.6 billion) almost triple its budget in 2012 (P42.2 billion). If you use 2013 as the baseline, DOH budget increased by 57.3% in 2014, 63.5% in 2015 and 130.4% over 2013 levels. Earmarking enabled the National Government to subsidize the health insurance premiums of 15.4 million poor primary members in 2015, up from only 5.2 million registered primary members in Philhealth has also expanded its services and now implementing case rates, no balance billing for indigents, more Z packages for cancer patients and has introduced primary care benefit package for the poor. Sintax Law also now covers 2.8 million senior citizens with free Philhealth insurance coverage.

12 Win for Public Health $ 2.0 B $ 1.9 B $ 1.3 B $ 1.0 B $ 0.2 B $ 0.4 B $ 0.5 B $ 0.5 B $ 0.7 B Source: GAA, DBM

13 Sin Tax Revenues for Health Prescribed Allocation Universal Health Care Expenditure Medical Assistance & HEFP 80% % 13.9 Total Baseline Sin Tax Rev for Health

14 Win for the Poor National Government Allocation for Health Insurance Premiums for the Poor $.06 B $.08 B $0.01 B $0.01 B $0.01 B $0.01 B $0.02 B $.10 B $.10 B $.11 B $.08 B $.30 B $.79 B $.30 B $.82 B $.92 B Source: PhilHealth, DOH, GAA

15 Physical Accomplishment Targets Particulars National Health Insurance Program Php 35,338 M Php 37,060 M Php 43,836 M No. of NHTS-PR Indigents covered 14.7 M 15.4 M 15.4 M No. of Senior Citizens enrolled 2.8 M Health Facilities Enhancement Program Php 13,829M Php 13,356 M Php 26,984 M No. of Barangay Health Stations upgraded Birthing Facilities 1,754 1,661 3,886 PHIC-TSEKAP Accredited BHS 17, Rural Health Units/ City Health Centers 1,028 2,617 2,623 School-Based BHS 3,200 3,200 Preventive and Promotive Health Program Health Human Resource Php 2,970 M Php 4,256 M Php 7,073 M Doctors Nurses 11,292 13,500 15,727 Midwives 2,700 3,100 3,100 Dentists Public Health Associates Medical Technologists National Immunization Program Php 2,542 M Php 3,884 M Php 3,990 M No. of children fully immunized 2.07 M 2.2 M 2.2 M No. of pneumococcal vaccines provided infants 429, ,000 senior citizens 1.4 M 1.2 M Source: DBM

16 Physical Accomplishment Targets Family Health and Responsible Parenting Php 2,539 M Php 3,274 M Php 3,275 M of which: Micronutrient Supplementation No. of children below 5years old provided with vitamin A Family supplement. Planning 4.4 M 4.4 M No. of clients provided with FP commodities & services 2.2 M 2.7 M 2.7 M TB Control Program Php1,062 M Php1,094 M Php1,080 M No. of cases treated 257, , ,381 Treatment of Public Health Diseases Php M Php M Php793.0 M No. of persons treated: Particulars Malaria (No. of Diagnosed & Treated cases) 6,962 4,365 3,885 Schistosomiasis (No. of mass drug treatment) 2 M 2.58 M 2.48 M Filariasis (No. of mass drug treatment plus ICT and disability kit) 17 M 17.6 M 17.9 M Other Infectious Diseases Php M Php 744 M Php1,058 M No. of HIV/AIDS cases diagnosed and given treatment 8,030 16,000 35,000 Hospital Staffing Standards Php 2,900 M Php 5,800 M Php4,336 M No. of Positions 2,152 6,686 3,488 Source: DBM

17 Challenges Remain Improving absorptive capacity and budget execution. Managing political expectations and effectively communicating wins on the ground. Strengthening Philheath s information systems and risk management capabilities. Enhancing health systems delivery under a decentralized system.

18 CONCLUDING REMARKS Raising tobacco taxes is a low lying fruit for raising revenues for health. Without additional revenues, there is nothing to earmark. Think Political and Win-Win. Listen and understand the mindset of finance officials. Finance ministries generally do not like earmarking but politicians do. Take advantage of this political reality and get the support of your finance colleagues by demonstrating you can spend wisely. They look at value for money, outcomes and concerned that UHC can be a bottomless pit, if left uncontrolled.

19 CONCLUDING REMARKS Money can t buy health. It is a necessary but not sufficient condition for increasing spending on health. Efficiency, effectiveness and execution capacity are key to delivering services on the ground. Perfection is the enemy of the good. Focus on the substance rather than the form. Importance of strategic communications and coalition building. Legislative earmarks are not a guarantee that there will be more resources for health. Need to monitor budget execution closely.

20 CONCLUDING REMARKS Work with finance and other ministries to adopt a systems and whole of government/society approach. Avoid Silos. Compartmentalized thinking must change. Think Convergence. Work with other sectoral agencies to achieve a common goal and an integrated response to cross cutting issues. e.g. water and sanitation. Actively look for synergies. Work towards achieving synergies with other sectors. eg. Tobacco taxation and prevention of NCDs/Support for WHO FCTC implementation.

21 THANK YOU

22 Any excess over projections is carried over to the next year Baseline Projected Balance from Actual Collection Sin Tax Balance 2014 Balance Balance 8.8 Total 23.0 Allocation of Balance DOH 2015 MBPF 9.1 PGH 2015 GAA 3.2 Total 12.3 Remaining Balance 10.7