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Political will is the key to social protection
Dr. Eduardo Gonzalez
Social Watch Philippines
There has been a consistent decline in real per capita spending on social services, while coverage is incomplete and delivery diffused. The country’s social insurance programme is a benefit for the better-off, paid for in part by the poor. Merging the national programmes with community-based health care and improved physical access would immensely contribute to economic development.
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the face of it, the Philippines’ commitment to the right of people to live in
dignity with secure livelihood makes it one of the most socially progressive
countries in Asia. The Philippine Constitution guarantees full respect for
social, economic and cultural rights, and gives special attention to the rights
of women and workers, which it sees as a primary economic force whose welfare is
in need of advancement. The country has ratified key human rights international
treaties and has acceded to 33 international labour conventions, which bind it
to respect, protect and fulfil these rights.
Natural and human-made hazards
But political and economic – even geographic – realities suggest that the
Philippines has a long way to go in providing full social entitlements to all
its citizens, and in equal ways. Part of the country’s recent history is a
series of political crises, a record of economic growth that is prone to
boom-and-bust cycles, and an onslaught of calamities – both natural and
human-made. To begin with, the country is already geographically at risk, being
situated right in Asia’s ‘ring of fire’ (a zone of high volcanic and
earthquake activity) and tropical cyclone belt. Exogenous factors also
contribute to the country’s vulnerability. An increasing proportion of the
population, mostly poor, are vulnerable to the shocks of an outward-oriented
economy (e.g., volatile capital market, globalization of production lines that
require job informalization/flexibilization of labour, displacement of local
enterprises due to uncontrolled entry of tariff-free goods); high reliance on
overseas employment (which keeps the GNP buoyant but exacts a high social cost
due to the break-up of families); and structural adjustments (that interrupt
service delivery and lead to labour displacements). At the same time, the
Philippine government is so saddled by a budget deficit and its own
institutional weaknesses and governance vulnerabilities that little constructive
reform is taking place.
Of late, the economy has somewhat breached its own mediocre growth (largely due
to remittances of overseas workers and private consumption) but had little
impact in lifting the poor out of misery. According to 2003 figures from the National
Statistical Office and the National Statistical Coordination Board (NSCB), at least three out of
every ten Filipinos are still trapped in poverty.
Indeed, more than half of the population have consistently rated themselves as mahirap
(the Tagalog word for poor) in the last two decades. The official unemployment
rate hovers between 8% to 10%, but underemployment – people who want to work
more – can be as high as 22% (Altman, 2006), suggesting the persistence of
jobless growth.
The Philippines is unlikely to achieve the Millennium Development Goals (MDG
target of halving poverty by 2015 given the country’s current rate of
progress. In fact, average household income has declined and the incidence of
hunger has risen. Even if the Philippines manages to catch up on its MDG
commitments, the other half (almost a quarter of the population) will remain
poor. Moreover, the reduction of hunger and child malnutrition will stay below
the MDG target. A recent study indicates huge resource gaps, suggesting that the
government may not be serious in its MDG commitments, particularly given the
consistent decline in real per capita spending on social services (Manasan,
2006).
The Philippines has an array of social security programmes which have existed
for decades. These programmes are categorized into social insurance, pensions
and other forms of long-term savings, social safety nets, welfare and social
payments, and labour market interventions. But coverage is incomplete and
delivery is diffused. Financing remains uncertain and is vulnerable to
corruption.
Regressive contribution and benefit structure
The cost of social
security in the
Philippines is paid for by proportional contributions of
earnings from employers and employees within a public social insurance
system that is centrally managed and anchored on two programmes: social security
and industrial injury-related services. The Social Security System (SSS)
administers the programme for private sector employees; the Government Service
Insurance System (GSIS) handles it for government workers. The contribution
structure is generally regressive. Coverage is not strongly correlated with
level of development.
By and large, the country’s social insurance programme is a benefit for the
better-off, paid for in part by the poor. Gonzalez and Manasan (2002) find that
among those covered – about 28.2 million workers, or 84.5% of the employed
population – the poor workers benefit disproportionately little from social
security services. Indeed, the better-off have greater access to social
insurance because they live in urban areas where most services are accessible,
and they know how to use the system. The cross-subsidization pattern points to a
number of cases where poorer groups and regions, women and older workers are the
sources, rather than the recipients, of subsidy.
Non-enrolment and evasion are commonplace in the private sector, leaving
coverage ratios wanting. The value of benefits is low compared to cost of
premiums, and sorry experiences such as the inability of contributing workers to
obtain benefits when needed (due to non-remittance or underpayment by employers)
hound the programme.
Repeatedly, the actuarial health of the social security system has been marred
with issues of leakage and financial sustainability, owing to bad investments,
poor management, internal inefficiencies, overly high administrative costs,
corruption and unreasonably high salaries and perks for top managers. Moreover,
the government has ignored calls to merge SSS and GSIS as a way of injecting
more efficiency and liquidity into the system.
The pension system, which is an adjunct of the public insurance system, usually
provides lump sum benefits, but may offer an annuity purchase. Contributions
already do not cover current outflows. Yet short-term fiscal pressures are not
motivating a major reform. The country’s pension insolvency problems trace
more to issues on the proper investment of retirement funds, and politicization
of the management of benefits and contributions (Habito, n.d.).
The security package offered by the social insurance system does not include
unemployment insurance. Such a safety net to cushion against temporary
joblessness is often sidestepped because of the huge benefit funding required;
however, the economy has not been generating enough jobs for the growing
workforce either, compounding the problem.
Social health insurance: the poor
subsidize the rich
The national health insurance programme, which grants Filipinos access to
inpatient and outpatient services in accredited medical facilities nationwide,
is run by the Philippine Health Insurance Corporation, or PhilHealth.
Alternatively called Medicare, the PhilHealth programme covers a wide expanse:
the employed sector, indigents, individually paying entrepreneurs, self-earning
professionals and farmers, paying elderly members, and overseas workers.
PhilHealth has an estimated 16.26 million members or 68.4 million beneficiaries,
including indigents. For the moment, the programme for indigents seems to be
well-funded, receiving 2.5% of the expected government revenues from taxes on
‘sin products’ (alcohol and tobacco) for the next five years and 10% of the
local government share in the expanded value-added tax.
While
PhilHealth has been quite successful in enrolment, it lags behind in other
areas, such as quality and price control (Wagstaff, 2007). The health insurance
scheme does not necessarily deliver good quality care at a low cost, partly
because of poor regulation of its purchasers. The PhilHealth benefit package is
focused on hospital care and benefits the health care providers more. One study
(Gertler and Solon, 2002) shows that Medicare fails to finance health care
because health care providers capture the benefits through insurance-based price
discrimination. In fact, hospitals extracted 84% of Medicare expenditures in
increased price-cost margins. As a consequence, expanding Medicare increased
rather than decreased the government’s financial burden for health care. Such
distortion has made social health insurance vulnerable to fraudulent claims.
PhilHealth has recorded about PHP 4 billion (USD 87.4 million) in losses since
1995, ostensibly because of claims on unnecessary operations, overpriced
medicine, and even ghost patients. Although the issue is now the subject of an
investigation, it raises questions on PhilHealth’s actuarial wellness.
Earlier studies suggest that not unlike social insurance, Medicare also
exemplifies wide inequities: poor workers subsidizing well-off employees (who
have a higher incidence of catastrophic illnesses requiring more expensive
treatments), and poor regions subsidizing Metropolitan Manila.
Of late, the programme for indigents has become a political commodity. There
have been claims that politicians have sought to use it to influence the
outcomes of elections by appointing allies to jobs within the agency and having
them allocate free insurance cards to marginal voters (Wagstaff, 2007).
Informal
workers: neither poor nor well-off enough
Vendors, home workers, and self-employed agricultural, rural, and other informal
sector workers are estimated to comprise about 49% of the labour force or 15.5
million people. Many of them have no adequate social protection. Precisely
because these workers are outside the formal economy, and operate outside the
scope of regulations, the provision of health and other social protection
programmes has remained highly problematic.
In
the Philippines, only 14% of this sector is voluntarily enrolled with PhilHealth
(Nguyen, 2006). Low enrolment plagues public social insurance as well. This
undoubtedly reflects the lack of attractiveness of the terms on which the
insurance schemes are framed. The contribution is flat-rate, and therefore
represents a burden for the near-poor (Wagstaff, 2007). Gonzalez and Manasan
(2002) also observed that the coverage gap occurs due to statutory exclusions.
Domestic workers, day labourers, farmers, fisherfolk, and many urban
self-employed are often excluded from many of the provisions. According to
health experts, a major gap exists in the social health insurance programme in
the case of beneficiaries who are neither poor enough to qualify as indigents
nor well-off enough to pay regular PhilHealth premium contributions.
Overseas workers: high contribution, too little protection
The total number of overseas Filipinos may be as high as eight million. Often
called OFWs (overseas Filipino workers), they sent USD 10.7 billion in earnings
back to their families and friends in the Philippines in 2006 – a whopping 12%
of GDP (Altman, 2006). Although overseas employment has led to significant
reductions in national productivity – many of those abroad are the more
productive elements of the population – there is little reason to expect any
dramatic shift in the country’s overseas work policy because of the OFWs’
huge contribution to the economy.
But are they at the very least receiving social protection? Recent government
measures indicate some form of insurance coverage for OFWs – PhilHealth’s
expanded programme and SSS’ voluntary social security coverage, for example.
However, it is the Overseas Workers Welfare Administration (OWWA) which has been
expected to provide most of the social protection needed by OFWs and their
families. Overseas workers have been contributing USD 25 every time they leave
the country. Since OWWA has been collecting this amount for over 25 years, its
sum should be substantial. Yet, its welfare assistance has been too little and
too selective, leaving most overseas workers virtually unprotected while abroad
and when they eventually come back. A study done by the Centre for Migrant
Advocacy (CMA, 2005) showed that OWWA has been operating (and very
inefficiently) using these contributions. Commission on Audit reports show that
every year, it spends over three times more for its personnel and operations
compared to the social benefits it gives out to overseas Filipinos.
Ironically, it is the remittances sent by overseas migrants that serve as social
insurance for recipient households, shielding them from environmental risks. In
a study that focuses on income shocks driven by local weather changes (called
rainfall shocks), Yang and Chou (2007) discover that in Philippine households
with overseas migrants, changes in income lead to changes in remittances in the
opposite direction, consistent with an insurance motivation. That is, roughly
60% of declines in income are replaced by remittance inflows from overseas that
serve as insurance in the face of aggregate shocks to local areas, which in turn
make it more difficult to access credit or inter-household assistance networks
that normally help households cope with risk.
Local civil society insurance
Social assistance ideally complements well-organized social security packages.
Many government agencies provide social assistance to their sectoral
constituencies in line with their mandates. The government’s main delivery
vehicle for social assistance is the Comprehensive and Integrated Delivery of
Social Services (CIDSS), a grant-giving,
community-based development project programme. The majority of the projects
covered involve water systems, farm-to-market roads, post-harvest facilities,
school buildings, and health centres, centred in the country’s 42 poorest
provinces.
Government social assistance programmes may be directed and focused – they
address a wide range of risks from human-made to natural, economic and political
to social and health-related – but they may have foregone efficiency gains out
of a broader scale of implementation and delivery (Torregosa, 2006). As
Torregosa notes, the number of beneficiaries reached is limited, and the level
of benefits low. The government also does not know exactly who or where the poor
are, and is thus helpless in preventing leakages to the non-poor. Given the
limited resources of the government and the rising demand for social programmes,
most of the programmes have become heavily reliant on foreign grants and
funding. Yet continued dependence does not imbibe stakeholdership among
beneficiaries and creates the wrong incentives.
A saving grace is the fact that micro-insurance products, specifically designed
with the poor in mind, are gaining favour among the poor, albeit without
government involvement. Local-level life insurance and health insurance are
thriving in some urban and rural localities, despite actuarial weaknesses, and
do help mitigate risks and reduce the vulnerability of poor households. Llanto et
al (2007) have identified cooperatives, NGOs and mutual benefit associations
as vehicles of micro-insurance programmes in the country.
Final note
The long-term solution to poverty in the Philippines is robust,
equitable and broad-based sustainable economic growth. Even if the
Philippine economy seems to be shifting to a rapid-growth track, there are few
social mechanisms in place that could pull the rest of the population out of
economic and social deprivation. The reality for the vast
majority of poor people is that social services are unavailable, or are skewed
towards the needs of the rich, or are dauntingly expensive – and this drives
up social inequality.
Yet social protection contributes immensely to economic development, and the
nice thing about it, according to Obermann et
al (2006), is that it can be implemented independently of the current
economic situation. For starters, they suggest merging the national programmes
with community-based health care financing schemes, and creating the environment
for high quality care and improved physical access. Aside from reforms in
contribution and benefit structures to remove inequities and expand coverage to
the informal sector, tighter oversight in the management of social insurance
funds would be necessary.
As the Human Development Network observes, the government has a huge job to do
in terms of facilitating reliable information, standard-setting and
rationalization of involved government agencies, more vigorous encouragement of
private insurance and pension plans for overseas workers, and pushing for
bilateral agreements that protect Filipino workers’ interests abroad (UNDP,
2002).
Social protection for all Filipinos is well within grasp: money and know-how are
not what is lacking. Rather, the commitment to act is needed to challenge the
status quo. The will to reform is key to making social protection work, and to
do this the government must feel the heat. Civil society organizations and
private companies can pick up some of the pieces, but only the government can
reach the scale necessary to provide universal access to services that are free
or heavily subsidized for poor people and geared to the needs of all citizens
– including women and minorities, and the very poorest. Sadly, it is failing
to meet this essential need.
References
Altman, D. (2006). “Managing Globalization: Costs of Exporting Labor”. The
International Herald Tribune, 3 April.
Gertler, P. and Solon, O. (2002). “Who Benefits from Social Health Insurance?
Evidence from the Philippines”. (n.p.).
Gonzalez, E. and Manasan, R. (2002). “Social Protection in the Philippines”. In
Adam, E., von Huff, M. and John, M., Social Protection in Southeast and East
Asia. Singapore: Friedrich Ebert Stiftung, p. 180-229.
GSIS Annual Report.
Habito, C.F. (n.d.). “Comment on Hans Fehr, Sabine
Jokisch and Laurence Kotlikoff’s Simulating the Demographic, Fiscal and
Economic Transition Paths of the US, EU, Japan and China”.
Llanto, G., Almario, J. and Llanto-Gamboa, M. (2007). “Microinsurance
in the Philippines: Policy and Regulatory Issues and Challenges”. Discussion
Paper Series No. 2006-25 (Revised). Philippine Institute for Development
Studies.
Manasan, R. (2006), “Financing the
Millennium Development Goals: The Philippines”. Report submitted to the
National Economic and Development Authority (NEDA).
Nguyen, T. K. P. (2006). “Extending Social Health Insurance to Informal
Economy Workers –The Case of Vietnam”. Presentation at Conference on
Extending Social Health Insurance to Informal Economy Workers. Manila,
Philippines 18-20 October.
Obermann, K., Jowett, M., Alcantara, M.O.,
Banzon, E.P. and Bodart, C. (2006). “Social Health Insurance in a
Developing Country: The Case of the Philippines”. Social Science & Medicine, Vol. 62, No. 12, p. 3177-3185.
PhilHealth Annual Reports 2001, 2002, 2003, 2004, 2005.
Piggott, J. (2007). “Pension Reform and the Development of Pension Systems: An
Evaluation of World Bank Assistance”. Background
Paper Regional Summary: Asia. Independent Evaluation Group.
Washington, D.C.: World Bank.
SSS Annual Report.
Torregosa, C.L. (2006). Looking into
Social Protection Programs in the Philippines: Towards Building and Implementing
an Operational Definition and a Convergent Framework. Philippines: National
Anti-Poverty Commission.
UNDP (United Nations Development Programme) (2002). Philippines Human Development Report 2002. Work and Well-Being.
Wagstaff, A. (2007). “Social Health Insurance Reexamined”. World Bank Policy
Research Working Paper 4111, January.
Yang, D. and Choi, H.J. (2007). “Are
Remittances Insurance? Evidence from Rainfall Shocks in the Philippines”. World Bank Economic Review (n.p.).
Note:
This figure is based on PHP 34 a day which is below USD 1 a day. According to
the World Bank’s USD 2 a day poverty line, the poverty incidence was 43% in
2003.
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