This week, I got to watch in person the oral arguments at the Supreme Court about the legality of the government’s cash sweep of PhilHealth funds. I accompanied my good friend, Zy-za Suzara, a public budget expert who’s serving as an amicus curiae in this important case.
I’m invested not just as a PhilHealth contributor myself — just like the vast majority of Filipinos — but also as an economist who wants to see how economic reasoning plays out in Supreme Court deliberations.
The oral arguments lasted for about four hours (you can listen to the entire proceedings here). Most of the questions came from Associate Justice Amy Lazaro-Javier, one of the only two female justices of the Supreme Court.
Justice Javier asked tough questions directed at representatives of the government, including the Office of the Government Corporate Counsel (who’s lawyering in behalf of PhilHealth), a senior vice-president of PhilHealth, and Solicitor General Menardo Guevarra.
Judging by the answers of these people to Justice Javier’s line of questioning, it’s clear there’s something anomalous with the PhilHealth cash sweep.
For instance, around the Supreme Court’s hallowed Session Hall, Justice Javier’s staff flashed on the screens the financial reports of PhilHealth since 2021, showing that the liabilities of PhilHealth greatly exceeded its assets, meaning negative equity. She also flashed the adverse findings of the Commission on Audit (COA) that put into question the financial health of the state health insurer.
In 2021, for instance, COA said, “In our opinion…the accompanying financial statements do not present fairly, in all material aspects, the financial position of PhilHealth as of December 31, 2021 and 2020, and its financial performance and cash flows for the years ended…” In other words, the true finances of PhilHealth were likely direr than what the agency itself had reported.
The negative equity of PhilHealth comes from its huge “insurance contract liabilities” or ICL, which are nothing more than the present value of future inflows less the present value of future outflows. The huge ICL has been consistently a source of concern. In COA’s latest audit of PhilHealth, ICL in 2023 amounted to P1.128 trillion (trillion with a T), dwarfing the reserve fund of P464 billion at that time.
The government representatives tried to allay Justice Javier’s concern about ICL, but “tried” is the operative word. At one point, they said PhilHealth enjoys “sovereign guarantee” anyway — that is, whatever happens to it, the government is there to rescue it. It’s just the second day of oral arguments, but the government has already run out of good arguments to defend PhilHealth.
Feeling the pressure, the government representatives called Douglas Mallillin, a new ad interim commissioner of the COA, to speak before the justices and explain the adverse COA findings in previous years.
The problem is that COA is supposed to be an independent constitutional body, and at some point Mallillin already sounded like he was already defending PhilHealth. He was rightly called out by Associate Justice Benjamin Caguioa, after which Mallillin was promptly excused for potential conflict of interest.
Reserve funds are ‘sacred’
A lot of the discussion centered on a provision of the Universal Health Care Act, which provides that, “No portion of the reserve fund or income thereof shall accrue to the General Fund of the National Government or to any of its agencies or instrumentalities, including government-owned or -controlled corporations.”
I think this provision is clear as day: PhilHealth’s reserve funds cannot be touched to augment the funds of the national government to, say, finance important public works. In the words of Justice Javier, PhilHealth’s reserve funds are “sacred” where the law is concerned, and should not be meddled with for purposes other than serving the interests of PhilHealth and its members.
Justice Javier noted that the cash sweep of PhilHealth was done through a special provision added to the 2024 national budget law, which empowered the executive to extract surplus funds from government corporations. Solicitor General Guevarra admitted this is the first time such a special provision appeared in the budget law.
Ostensibly, the cash siphoned from government corporations will help fund budget items that were put in the unprogrammed appropriations. Justice Javier listed down such items, including the Special Road Fund, the Armed Forces of the Philippines Modernization Program, and the Panay-Guimaras-Negros Island Bridges that was financed by an existing loan from Korea. Justice Javier rightly asked, “Why is there an urgency to transfer [funds from PhilHealth] when the [PGN] project is already fully funded by the Export-Import Bank of Korea?”
Justice Javier also noted that part of the programmed funds would be the comprehensive peace process overseen by the Office of the Presidential Adviser on Peace, Reconciliation, and Unity. Then she delivered what I think was her best zinger during that day’s oral arguments: “Is the peace process part of the mandate of PhilHealth?”
At that point, Solicitor General Guverra was reduced to repeatedly invoking the “wisdom” of Congress in crafting the national budget for whatever purpose they see fit.
But I have a problem with that. Time and again, Congress has proven that it can channel collective stupidity, not wisdom. And in the case of the 2025 budget — it’s not even stupidity — it’s unbridled greed. The elections are coming up, and politicians prioritized in the budget pork projects that can help them or their relatives win. That’s the bigger picture here.
All in all, I like the sharp line of questioning of Justice Javier, and the future oral arguments prove exciting to watch (or listen to) as well.
Every year, there will be temptation on the part of lawmakers to abuse the national budget, so that it serves their interests and not the people’s. It’s now up to the so-called “gods of Padre Faura” to return the money of PhilHealth and, more importantly, put an end to similar shenanigans in future versions of the national budget. – Rappler.com
JC Punongbayan, PhD is an assistant professor at the UP School of Economics and the author of False Nostalgia: The Marcos “Golden Age” Myths and How to Debunk Them. In 2024, he received The Outstanding Young Men (TOYM) Award for economics. Follow him on Instagram (@jcpunongbayan) and Usapang Econ Podcast.