PIDS Launches Health Financing Reform Drive

A new research initiative launched by the Philippine Institute for Development Studies aims to close persistent gaps in the country’s healthcare financing system and strengthen the delivery of universal health care.

The Health Economics and Finance Program (HEFP), launched in partnership with the Department of Health and PhilHealth, seeks to address systemic inefficiencies in payment systems, costing practices, and data transparency that continue to undermine patient protection and institutional trust.

“PhilHealth’s declining financial leverage over hospital revenues threatens its ability to drive efficiency, quality care, and patient financial protection,” said Dr. Valerie Gilbert Ulep, Senior Research Fellow at PIDS and Program Director of the HEFP, during the program’s March 20 launch.

Citing PIDS analysis of hospital financial statements, Ulep reported a downward trend in PhilHealth’s influence on provider operations, pointing to inaccurate payment rates, unpredictable healthcare costs, and institutional mistrust as critical issues.

“For patients, this translates to lower financial protection,” he added.

Despite the Universal Health Care (UHC) Act’s passage in 2019, many Filipinos still shoulder high out-of-pocket expenses, a leading cause of poverty in the country.

A 2022 Philippine Statistics Authority survey showed that 44% of total health expenditures came directly from household pockets, underscoring the urgent need for more equitable and efficient financing mechanisms.

Ulep emphasized the need for key reforms, including a clear system for patient classification, robust payment formulas, and accurate and transparent data.

The HEFP is designed to advance evidence-based research while fostering collaboration among stakeholders, from medical professionals and local governments to development agencies and patient advocacy groups.

“The HEFP is an invitation and opportunity to strengthen collaboration and engagement for health financing research with implementing partner agencies and stakeholders,” said PIDS President Dr. Aniceto Orbeta Jr.

He added that implementing the UHC Act demands more than theoretical recommendations.

“UHC cannot be accomplished in isolation by researchers in front of a computer screen providing motherhood statements and simplistic recommendations,” Orbeta said.

National Economic and Development Authority Secretary Dr. Arsenio Balisacan echoed the call for data-driven reform, noting that the creation of the HEFP is a response to the sector’s urgent need for high-quality research.

“Given the scale of challenges in this sector, the need for evidence-based health reforms has never been more urgent,” Balisacan said. “The creation of the HEFP not only addresses this need for high-quality research but also stands as a testament to the sector’s importance and the commitment to data-driven policy integration.”

PhilHealth President and CEO Dr. Edwin Mercado confirmed the agency’s ongoing collaboration with PIDS to identify the 10 to 20 most cost-effective health benefit packages.

“We are shifting PhilHealth’s direction towards a more value-based approach where we will prioritize high-burden and high-cost diseases,” Mercado said. “However, we can only identify these priorities through rigorous studies and research.”

The HEFP will focus on three strategic areas: provider payment reform, development of data-driven systems, and forward-looking policy research.

Provider payment reform aims to reduce high out-of-pocket expenses, aligning with PhilHealth’s goal to improve financial protection.

Data system enhancements will support the shift to diagnosis-related group (DRG) payment models, as mandated by the UHC Act, while also institutionalizing better costing and claims standards.

The research program also plans to explore innovative models such as global budgeting and use of claims data to guide policy reforms.

Ulep pointed to PIDS’ track record in evaluating programs such as Pantawid Pamilyang Pilipino, social protection, education, and infrastructure.

“In collaboration with various agencies, we have assessed key programs… leading to meaningful policy changes,” Ulep said. “The HEFP builds on this legacy, paving the way for deeper insights and solutions in the health sector.”