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Year Anniversary 20th

Vol. XV No. 3

n the last ten years, the Department of Health (DOH) has actively assumed a new form of leadership in the health sector in response to changes in the policy environment. It has reexamined the focus of the public delivery system, improved targeting of public spending,


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ISSN 0115-9097

the Department to rethink and recast its roles as provider, financier, regulator and coordinator of an increasingly decentralized and private health care system. The Department has been remarkably successful as can be seen through its various programs and ini-

Emerging Concerns of Health Policy reconsidered better protection of consumers, sought out alternative sources of health care financing, decentralized the system and relied more on private market solutions. Thus, the rapidly changing policy environment has led

W hat's I nside 3 4 5 10 11

Addressing Research Needs A New Environment for the Health Sector PIDS and its Commitment to Health What to Expect After a Reduction in Tariff PIDS Senior Staff Outreach Activities

tiatives which were designed to secure funding and improve the performance of core public health programs. The national drugs policy, for instance, was a major step in moving the regulatory role of DOH beyond licensing. The National Health Insurance Act (NHIA) was a bold move toward alleviating the financial burden of paying for health care services. The Comprehensive Health Care Agreements (CHCAs) entered into by provinces and the DOH, on the other hand, helped ensure that national health objectives would be achieved in a decentralized system. Part of the Department’s success in handling these changes are its research-based policies and decisions. It has initiated and supported research


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E ditor's N otes A

djustment is a natural reaction to change. It allows people and organizations to survive an inevitable process. But to make the appropriate adjustment requires information and knowledge about basic conditions and probable impacts of the impending change. In preparation for the next millennium, the Department of Health (DOH) pauses to assess its many new roles and the adjustments called for by such new roles in the face of emerging concerns in the health sector. In so doing, it employs a relatively underrated yet powerful tool to cope with the changing policy environment: research. In this DRN issue, the reader will be apprised of the current issues facing the DOH, the kind of information needed to address these issues, and the steps/measures being undertaken to be able to gain a better understanding of these issues. Relatedly, the PIDS' commitment through the years in helping shape a research agenda that would look into these concerns (as noted on page 5) is proof of the research community's ready support to address the health sector's cares. Meanwhile, a different set of responses is likely to take place as the Philippine government pushes for further tariff reforms. What to expect from a tariff reduction is explained in a separate article on pages 10 and 12. Finally, beginning in this issue, we will feature some of the PIDS Senior Staff's advisory and professional activities outside of their principal research projects at the Institute. We begin with the outreach activities of PIDS president, Dr. Ponciano S. Intal, Jr. as enumerated on page 11.


Emerging Concerns... from Page 1

efforts to generate information that identify problem areas requiring reforms as well as define and evaluate alternative solutions. There are two factors that are basically followed in this process: j the continuous interaction between policymakers, stakeholders and researchers; and j the increasing capacity of the Department's technical staff and of the research community as a whole to undertake scientific research that generate information useful to policy and decisionmaking in the health sector. Health care reform is a continuing process. There are both unresolved and emerging issues as well as new priorities and programs. To ensure that there is indeed a continuing mechanism for interaction among policymakers, researchers and stakeholders, a roundtable discussion was organized by the DOH and the Philippine Institute for Development Studies (PIDS) to identify emerging issues on health policy, the kind of research demanded by these issues and the additional research needs of ongoing health care reform initiatives. The objectives of the discussion were to design a research agenda aimed at advancing the gains from policy measures undertaken in the last 10 years so as to define new policy reforms to address emerging issues and concerns in the health sector, and to identify the steps, resources, people and organizations to undertake the health policy research.


Issues Confronting the Health Sector and Information Needs According to Health Secretary Dr. Carmencita Reodica, three factors are shaping the health policy environment. These are globalization, privatization and decentralization. It is thus important to develop a research agenda that will focus on how the trends towards these factors could be harnessed to provide greater access to effective and efficient health care. The agenda should also help in sustaining gains from the national health insurance program and even move the program ahead. There are likewise other issues such as those concerning health financing, e.g., the amount spent on health, the shares of government and private sectors in health financing, and the different forms of financing, that require more research. Globalization and international competitiveness Globalization and a more open economy will bring about benefits, risks and opportunities. On the positive side, this trend may mean increased inflows of medical goods and services, first-world technology, provision of better medical insurance, better quality of and relatively less expensive medical care, and higher returns for the country’s competitive health personnel. On the other hand, globalization may heighten the bias for high technology tertiary facilities in our delivery system thereby limiting the capability of the health sector to address infectious and communicable diseases effectively, especially in underserved areas. Health personnel could also be drawn away from these areas and cost escalation may be a possible consequence.

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These risks associated with globalization require the formulation and promotion of policies which reduce the possible adverse effects of globalization as well as the development of institutions and policy instruments that will make such policies effective. The issue of globalization naturally raises the question on how the health sector is to position itself for global competitiveness. One way, according to some sectors, is to develop centers for excellence with the support of public investment. But the critical issue is to be able to come up with policies that: j define the appropriate role of the government in promoting global competitiveness, j promote global competitiveness through the pursuit of a greater private sector participation and a reduced but effective bureaucracy, and j encourage private investments for global competitiveness without retarding or distorting private sector initiatives. Privatization and increased private sector participation in the health sector The trend toward privatization and greater private sector participation in the health sector arose from a national economic policy that proposed increased private sector participation in the economy and the privatization of government corporations. It also arose from the recognition that government needs to put greater priority to preventive and promotive primary health care programs, leaving the largely facility-based personal care services (including hospital-based tertiary care services) to the private sector. As a result, the existence of a hospital system being funded and operated through public funds was put into question. Privatization of these hospi-


tals is thus being considered as part of an overall health sector reform strategy now. It is expected to significantly relieve the financial pressure on public health care delivery system since public resources freed-up as a consequence of privatization can be used to increase the funding of public health and disease control programs. And


since a privatization plan for the health sector is to be presented to President Fidel Ramos at the end of the year, the Department has made this issue a priority concern. Some sectors, however, caution that privatization efforts should ensure that it:

Addressing Research Needs Institutionalize data/information systems The issues raised are concerned with ways and instruments which will enable the DOH or the PHIC to cope with the changing environment. One of the current deficiency areas identified is in the institutionalization of data collection or information systems that will support all subsequent efforts at formulating, critiquing and refining policies. Past efforts at data collection were designed when the concerns and policy environment were geared toward more operational matters such as public health concerns. These past efforts are not meant to address the new roles of the DOH and the new policy environment. There is a need for a more complicated data and information system that answers how the population and providers respond to policy changes. The PHIC, for instance, needs a stronger information base on LGUs and its beneficiaries which encompasses their sociodemographic and economic profiles and utilization, among others, in order for a better design of NHIP features. A probable reason for this lack of information base is the communication gap between policymakers and data-collecting agencies tasked with reviewing and designing data collection systems. Presenting the information needs to these agencies may be a start of the process. Institutionalization of a data or information system may follow re-

cent efforts in the generation of national health accounts (NHAs). After training and coordination between researchers, policymakers and the National Statistical Coordination Board (NSCB), a set of estimates of the national health accounts is now being generated by the NSCB. Institutionalize policy and research agenda formulation Several of the issues confronting the health sector were designated as priority issues. However, there may be other issues which were not discussed and certainly, more issues will emerge in the future. How would future policy and research priorities be then determined? While annual workshops or meetings may be organized for specific purposes, the task may be assigned to a private sector organization, think tank or research group that has sufficient and continued funding from levies on health care providers. A private organization may ensure neutrality and objectivity in identifying priorities in its research and would continually assess new developments, environments and concerns 5 to 10 years in the future. It will set up data collection efforts and research in anticipation of these new developments and concerns and thus ensure less concern with day-to-day activities, less bias in data collection and approach, and perhaps better methodologies and answers. DRN

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j does not deny access to the poor; j does not defeat the purpose of some hospitals established for research and training; and j addresses the concern of some health workers on security of tenure. Freed-up resources from privatization can be used to address some of these concerns. For instance, a fund could be put up to support research and training in privatized facilities, partially addressing the second concern. The issue of privatization, particularly with respect to equity, cannot be separated from the National Health Insurance Program (NHIP). A wellfunctioning NHIP will ensure the poor access to health care even with the privatization of public hospitals. Freed-up resources may even be used to provide additional sources of subsidies for NHIP premium. However, there is the question of what appropriate model to adopt since there are many types aside from the outright sale of hospitals. Thus, there is a need to determine the right mode that would ensure effectiveness, efficiency and equity in the delivery of health care. Of course, another major concern with privatization is the possible response of the private sector regarding how the implementation would affect the quality and quantity of health care and the combination of services and costs. With privatization and increased private sector participation in the health sector, the Department assumes a new role as regulator of privatized services. This new role brings to light new questions: What policies are nec-


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A New Environment for the Health Sector T

Nowadays, it is fashionable to engage in meetings like this and frame the discussions in the context of preparing for a new millennium. The fixa———————— *Secretary of Health. Speech delivered during the roundtable discussion on“Issues and Answers: Emerging Concerns and Information Needs of Health Policy,” May 16, 1997 sponsored by the Department of Health (DOH) and PIDS.

be fruitful. The other approach, which I hope we will take, is for us to develop an agenda that would help us identify ways to harness these trends so that our people will have greater access to effective and efficient health care.

Allow me to frame our discussions around three tendencies shaping the health policy environment: j globalization; j greater role for the private sector; and j a smaller decentralized but more effective bureaucracy.

Globalization could mean a more open flow of medical goods and services including technology, drugs and supplies, and even health insurance services. The promise of globalization includes cheaper and better quality medical care, and, possibly, higher returns for our competitive resources, manpower and facilities. Of course, there are also risks associated with these opportunities. One example is the concern that globalization will bring about a more pronounced bias for high-tech tertiary facilities in our delivery system. This could easily limit our ability to address infectious and communicable diseases effectively as well as lead to cost escalation. Another example is that globalization could withdraw our doctors and nurses further away from underserved areas. What policies can we promote to reduce possible adverse effects such as these ones? What institutions and policy instruments do we have to develop in order to make such policies effective?

I recognize that our discussions can take one of two approaches in defining a research agenda to deal with these concerns. We could develop a research agenda that would inform a debate on whether these trends are good or bad for the health sector’s ability to provide for our people’s needs but I do not think this approach would

The other set of risks associated with globalization has to do with what we should be doing to position ourselves for global competitiveness. Proposals to develop centers of excellence are beginning to proliferate—calling for public investment. What is the appropriate role for government to promote global competitiveness in our

Carmencita N. Reodica* hank you for taking time off from your busy schedules to join us in our deliberations. With your presence, I expect nothing less than success in meeting the two main objectives of this roundtable discussion. At the end of the day, we should be able to accomplish at least two things. First, we should be able to frame the beginnings of a research agenda aimed at advancing the gains from policy reform measures initiated during the last 10 years, and in defining new policy reform initiatives needed to address emerging issues and concerns in the health sector. Second , we should be able to identify the steps, the resources, and especially, the people needed to undertake health policy research in the manner which our previous works in the Philippines are now identified in the international community—research conducted in close interaction among policymakers, stakeholders and competent researchers.

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tion with the year 2000 is nothing new to us in the health field—we probably started the trend in Alma Ata decades ago. But stripped of banners and slogans, occasions like this one could provide us the opportunity to remove ourselves from day-to-day concerns to look back and assess what we had accomplished, examine what work remains, and define what adjustments we have to make to face the challenges ahead.

The government needs to put greater priority on preventive, promotive primary health care programs.


health sector? How can we promote global competitiveness while pursuing greater private sector participation and a reduced but effective bureaucracy? What policies can we introduce to private investments for global competitiveness? How do we make sure that such policies do not retard and distort private sector initiatives? There seems to be strong agreement between public health advocates and our country’s economic managers that government needs to put greater priority on preventive, promotive primary health care programs (as opposed to hospital-based tertiary care services). We now also have a widespread and vibrant private sector providing largely facility-based personal (as opposed to community) health care services. The existence of publicly

n behalf of the Philippine Institute for Development Studies (PIDS), I would like to welcome all of you to this roundtable discussion on emerging concerns in and information needs of health policy. I am certain that with your participation, our discussions will be fruitful in identifying the health policy issues and concerns that will confront us in the next few years. It is our hope that these discussions will also be helpful in providing social scientists and policy analysts with important directions that the new generation of social science research should take to address these emerging concerns and issues.


———————— *Acting Vice-President and Director for Project Services and Development, Philippine Institute for Development Studies (PIDS). Opening remarks delivered during the roundtable discussion on“Issues and Answers: Emerging Concerns and Information Needs of Health Policy,” May 16, 1997 sponsored by the DOH and PIDS.


funded and operated hospital system is now being questioned. An option which we are now carefully considering is privatization. Thus far, our position has been to consider privatization as part of an overall health sector reform strategy. Privatization is expected to significantly relieve financial pressure on the public health care delivery system. We could then use freed-up resources to: j increase funding for public health and disease control programs; j provide additional resources for premium subsidies to the poor under the National Health Insurance Program (this should help address the concern that privatization could reduce access to hospital services by the poor); and

PIDS and its Commitment to Health Mario C. Feranil* For the Philippine Institute for Development Studies, this meeting represents our continuing commitment to health policy research in the Philippines. Health policy has been in the Institute’s research agenda for more than half of its nineteen years of existence. Our health policy program formally started in the mid-1980s when we undertook with our partners in the academic and research commu-

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j put up a fund to allow us to support research and training in privatized facilities. There is one aspect of privatization (and of public policy in general) that needs our careful consideration. How will the private sector respond to privatization? My concern is not much about whether offers to take over public hospitals will materialize. It is more about how the quantity, quality, mix of services, and service costs would change once privatization occurs. How do we ensure that privatization will actually lead to greater competition in existing health care markets? Can the National Health Insurance Program, which stands to become the largest single


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nity a number of state-of-the-art reviews focusing on what we considered important aspects of the health sector using a much more academic framework. Those studies took stock of health policy research which have been carried out in previous years. More importantly, it identified the research gaps and suggested social science research which needed to be carried out to address those gaps. It was in a meeting like this among policymakers, researchers and other stakeholders in the health sector where we forged a consensus on a research program on health policy that the Institute should implement. We started to implement our modest health program with six studies focusing on a number of concerns. These included small studies looking at issues on health manpower, drug prescription and consumption behav-


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Emerging Concerns... from Page 3 essary to ensure that privatization results in increased competition in existing health care markets and provide incentives for the private sector to participate? What institutions can best carry out the policies? In considering the institutions which the DOH could adopt, it is important to study the transaction modes of delivery and the costs associated with these modes. The modes built-in in the NHIP present some examples, namely: private and public entity interaction, and national and local government interaction. The transaction costs involved in each should be considered as they will determine the extent of welfare gains and losses. The NHIP could itself be considered a tool for regulation through its procurement system since it stands to become the largest single buyer of health care services. How this can be carried out is an area for further research. In addition, incentive structures need to be examined when considering what institutions to adopt. There is always a problem in regulating both the private sector and the bureaucracy because of the human factor. Thus, it may help to look at some incentive structures adopted in other public or private agencies. Furthermore, more information is needed on the disciplinary mechanisms existing in the providers market so as to ensure a sense of professionalism. In this regard, provider groups should exert more efforts to "police" or discipline their own ranks. On the other hand, information on existing regulations and how the


regulatory environment provides incentives or disincentives to participants are needed in formulating policies that will increase private sector participation in health sector delivery and financing. An example of this is the observation that value-added tax on premiums may be hindering the growth of private insurance. Decentralization and devolution With globalization, privatization, devolution of services and expanded social health insurance, the DOH will have to redefine and restructure itself if it wants to continue its leadership in the health sector. It has to prepare for its new roles as insurance manager, coordinator of a highly decentralized delivery system, promoter of competitiveness in health care markets, and the leading authority in research and training in its field.

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responsible for shouldering part of the premium subsidy for the health care of indigents. Thus, new policy instruments and new institutions may be necessary to enable LGUs to fulfill their new and expanded roles in the delivery and financing of health care services. Research addressed towards formulating these new policies and adopting new institutions is therefore needed. Pervading issues in the devolution of services may be addressed through research. First, there are still questions on the low levels of health services spending at the local level, attributed by some LGUs to the insufficiency of the funds alloted by the national government for devolved health services. Second, there are observations that health spending at the local level are determined by the priorities

There are observations that health spending at the local level are determined by the priorities of the local chief executives.

Health policy research is necessary to determine what institutions and policy instruments could be employed so that the department can play its new roles effectively and with reduced bureaucracy. These institutions and policies should be able to help the department preserve the gains from decentralization, maintain coherence between national and local health priorities, and provide needed information to manage a decentralized and privatized health system. With the devolution of health care services, the responsibility for both preventive and curative care was turned over to cities, provinces and municipalities. With the NHIP, local government units (LGUs) also became

of the local chief executives. Variations in the performance of LGUs are also attributed to the lack of standards or criteria from the DOH or the Department of Interior and Local Government (DILG) which assign these roles to the LGUs. Without these standards, it is therefore difficult to determine the level of spending. Thus, research could focus on determining the standards, the level of funding necessary to meet these standards, the sufficiency of national government allocations, and consistency of LGU priorities with the standards. There are pervading concerns about the acceptance and understanding of the LGUs on their expanded roles in both service delivery and fi-


nancing. A sign of this lack of understanding and acceptance, for one, was the pinpointing of responsibility during recent disease outbreaks. Another was the initial resistance met by the Philippine Health Insurance Commission regarding the NHIP. Only after explanation and networking with the LGUs was the PHIC able to convince them to commit to the indigent program of the NHIP. Thus, information and education campaigns aimed at local chief executives may be warranted in order to make them aware of and accept their responsibilities under the devolution process and under the NHIP and make them support the efforts of both the DOH and the PHIC. Research could likewise focus on information such as the profile of LGUs, their total budget and leadership. Related to the above concern is how to reduce the uncertainties brought about by political factors on the delivery of devolved health services and on the commitment of LGUs to the indigent program of the NHIP, as well as in the alignment of local health priorities of the NHIP and the health sector. The PHIC is therefore involving local opposition parties in the discussion of the NHIP in order to drum up support for the program and ensure its continuation even if political fortunes are reversed. Information is required to formulate the kinds of incentives that will stimulate LGUs to meet the priorities of both the health care sector and the NHIP. National Health Insurance Program (NHIP) Aside from the devolution of health care services, a major shift in the paradigm in health care delivery system is the enactment of the NHIP under RA 7875. By shifting the financing away from public facilities and institutions (which subsidize both those who can and cannot afford health care)


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There is also a clamor for the equalization of benefits between GSIS and SSS members.

to indigent households, the NHIP will probably establish, over the long term and through proper implementation, the necessary condition so that meager resources available to the government would go where they are needed. The NHIP is based on several pillars. It provides for universal health insurance coverage under two systems: j a subsidy system for those who cannot afford to pay, and j a system of payment for those who can afford to pay. Unlike the previous Medicare, it provides quality assurance of health care by giving enough clout to the PHIC to serve as both a guarantor of quality health care and a regulator of health care institutions. Fraud control is another main pillar of the NHIP, as a reaction to the Medicare’s alleged history of overutilization and abuses. There are several concerns and areas for further research with respect to the program. These are: j how to achieve universal coverage; j how to ensure quality for a given cost; j how to ensure efficiency in utilization; j the impact of LGU financing capabilities on the indigent program and expansion in benefits; j expansion and equalization of benefits; j the merger of health insurance funds; and j ways to improve benefit and premium setting.

The priority concern identified by the PHIC is how to ensure the sustainability of the program. There are two issues in the implementation of universal coverage. One concerns the funding requirements to pay for the health care of the indigent part of the population. While Administrative Order No. 277 provides for coverage of the lowest 25 percent of the population over a period of 5 years, the level of indigency may be beyond this level. Thus, studies are needed to determine additional sources of financing for this portion of the population. The other issue is the difficulty of covering the self-employed sector. Although members of the sector can be identified, it is difficult to determine their incomes and collecting from them. Information and research along these lines will be welcomed. While the PHIC is mandated to purchase quality yet affordable services, it is having difficulty in doing so because quality services are costly. Thus, it welcomes research which would address the issues of increasing the efficiency and effectiveness of the health care system especially those provided by hospitals. Other areas which require research are in the control of overutilization of services, prevention of irrational prescription of drugs, and cutting of costs such as in caesarean deliveries. Another area of concern requiring research inputs is the assessment


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Emerging Concerns... from Page 7 of the financial capabilities of LGUs, including their revenue-generating capabilities, which have implications on the ability of LGUs to fund part of the premium subsidies for indigents. This concern is important since in the next six years, an increasing part of the subsidy will be shouldered by LGUs. Of course, LGUs will only enroll indigents as long as they are able to do so. The LGUs' revenue-generating capabilities also have implications on their ability to finance expansions in program benefits such as increased support values for enrolled indigents. Another issue which has to be studied because of its impact is the merger of paying and nonpaying sectors of the NHIP which will result in the equalization of benefits across paying and nonpaying sectors, and across members of the paying sector. There are questions on the feasibility of merging the Social Security System (SSS), the Government Service Insurance System (GSIS) and the indigent funds, on whether the paying sector would be unduly burdened by this, and whether the merger can be done. There is also a clamor for the equalization of benefits between GSIS and SSS members. While the removal of the income ceiling (previously P3,000) for the 3.5 percent contribution of employers and employees would increase the revenues of the PHIC, the implementation of this provision is hindered by the lack of data on the incomes of workers in the government and the private sectors. Lack of data on the socioeconomic profiles of the population prevents the PHIC from setting appropriate benefits and premiums in the program.


There is also the issue of sustainability of the NHIP in the long term, which is a priority concern. This sustainability issue has an impact on other major issues in the health sector as well. A well-functioning NHIP will allow the poor access to health care even with the privatization of public hospitals. The NHIP will also ensure the financial viability of devolved public hospitals and reduce the clamor for re-nationalization of these hospitals. The sustainability of the NHIP depends on adequate funding specially of the indigent program. However, the budget allotted to the NHIP is insufficient when compared with the

A well-functioning NHIP will allow the poor access to health care even with the privatization of public hospitals.

estimated requirements. Research that will aid legislative and administrative actions to ensure the needed sustainability of the program are therefore needed. As stated earlier, sustainability of the program also depends on the LGUs' financial capabilities and commitment. This emphasizes the need for studies which would assess capabilities of LGUs and the right incentives which would reduce uncertainties brought about by the political fortunes of local leaders and ensure consistency between national and local health priorities. Health care spending Is the country providing adequate resources to address the health needs of the people? It has been observed that the budget alloted for health programs is insufficient, specifi-

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cally the incentives for local health workers and the indigent program of the NHIP. In addition, even the most well-funded hospital has inadequate facilities. These suggest that not enough resources are being spent on health needs. Whether adequate resources are spent or not presupposes that there exists a measure of how much resources are needed. This raises two technical issues: the required basic minimum package of preventive and curative services; and the cost of the basic minimum package. The first issue can be answered by health experts and the second by economists through research. Another issue with respect to health care spending is the national government's willingness to spend for health care services or decisions on the allocation of funds. This is a political issue and decisions on fund allocation may not be answerable through research. The availability of foreign funding also has an impact on the health sector and possible distortionary effects on the allocation of health funds. The tendency to borrow money to be spent on the social sectors has been linked to the increased tendency of funding institutions to finance more social projects and the bias of the finance department toward bringing in more dollars to finance current loans. On the other hand, administrators are biased against foreign funding because of the built-in delays in utilizing foreign funds. However, there are social projects which have high social returns. Thus, for these projects, it makes sense to borrow money. Borrowing money from foreign sources brings in some stability of


funding for long-term health programs such as the tuberculosis program since these are protected from congressional and other budgetary uncertainties. However, when legislators observe that preventive programs are already being funded, the extra financing is allocated to hospitals. Thus, a distortion in the allocation of real public funds occurs as these funds are directed to hospitals rather than to primary care. Further study on the impact of foreign borrowing may therefore be warranted. Interrelationships between issues During the question-and-answer portion of the PIDS-DOH roundtable discussion on emerging health policy issues and concerns for research, a recurring theme that pervaded the discussion was the interrelationships between the key issues identified by the DOH for the health sector in general

PIDS commitment... from Page 5 ior, health care financing through health maintenance organizations, hospital costs, impact of housing policy on health, and demand for health care. Beyond doing these studies, we also set up at that time a joint program committee with the Department of Health as a mechanism to ensure that the studies under the program had a strong policy focus and to facilitate use of the research results in health policy formulation and planning. This initial collaboration with the Department led to the launching of a major research project on health care financing in the early 1990s. Under this project, more than 20 studies looking at various aspects of health care financing were carried out. It also provided


and by the PHIC regarding health insurance. As stated earlier, the privatization and decentralization issues cannot be divorced from issues confronting the NHIP, specifically its indigent program. How the DOH can align national and local priorities is also an issue which the PHIC faces in its dealings with local chief executives. Although the issues can be discussed in a conceptually fragmented manner, they are really integrated and interrelated, something which should be taken into account in the research agenda.

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much to policy research. The DOH indicated that privatization is its priority while the PHIC has sustainability as its priority. Aleli Kraft

References Fabia, Jose. “Current and Emerging Issues in National Health Insurance and Research Needs.” Talk delivered during the roundtable discussion on “Issues and Answers: Emerging Concerns and Information Needs of Health Policy,” May 16, 1997. Herrin, Alejandro N. Roundtable Discussion Summary of “Issues and Answers: Emerging Concerns and Information Needs of Health Policy,” May 16, 1997.

Given the limited resources available for health research, it was noted that a prioritization of the issues would help focus the research agenda and make the results fit the interests of policymakers. An example is the DOH-PIDS project on health care financing which was able to contribute

Reodica, Carmencita. "Emerging Policy Issues in the Health Sector and Research Needs: The Department of Health Perspective." Speech delivered during the roundtable discussion on“Issues and Answers: Emerging Concerns and Information Needs of Health Policy,” May 16, 1997.

an umbrella for the provision of technical assistance to the Department for a number of researchers involved in the project.

ments in overall policy. At the same time, we should be able to determine the kinds of research inputs needed to deal with these difficult issues and concerns.

Since the time the initial program was launched, several changes have occurred in the overall policy environment and in the health sector itself. Major economic reforms have been successfully pushed forward and we now see greater reliance on the market and its mechanisms and the private sector. It is the same forces that have shaped a more global perspective in policymaking. We now find this way of thinking weaving itself into the health sector. It is our hope that our discussion will focus on this, particularly in identifying the policy concerns and issues that are attendant to these develop-

Tapes of proceedings. ”Issues and Answers: Emerging Concerns and Information Needs of Health Policy,” May 16, 1997. DRN

Hopefully, our past work and experience in health policy has better equipped us for the task ahead. To begin with, I could sense that compared to before, “think policy” is much more pervasive now. Second, with the surge of research done in the past years by the academic and research community, we also know more now. But more importantly, more people know more now. We certainly have a deeper bench of social scientists and policy analysts now who focus their work on health issues. I think this is the most important and most durable contribution that we have made to the health policy process. DRN



What to Expect after a Reduction in Tariff


ow will the Philippine economy on a macro scale be affected if tariff rates were reduced?

Initial Findings Based on a study entitled “Macroeconomic Impact of a Tariff Reduction: A Three-Gap Analysis with Model Simulations,” the direct impact of a reduction in tariff levels is an unambiguous decline in investment as a proxy to output growth rate. This is because of an increase in the government deficit (or a reduction in the surplus), greater demand for foreign exchange brought about by an increase in the propensity to import, and a fall in aggregate savings. The paper was presented by Dr. Josef T. Yap, Research Fellow at the Philippine Institute for Development Studies (PIDS), during the Pulong Saliksikan sa PIDS last May 22, 1997. He showed that lowering the tariff levels would lead to a fall in tariff revenue despite an increase in the volume of imports. The reduction in customs collections will result in a decline in the budget surplus that will be followed by a drop in the growth rate. A second round of impact would mean a greater propensity to import since lower tariffs makes imports cheaper. The greater volume of imports will result in a deterioration of the trade deficit. This will put a strain on foreign exchange reserves.

While it can be inferred that the influx of imports might compensate for the decline in tax revenues or the primary budget surplus of the government, in practice this does not happen. Because most of the imports are necessary for production, a reduction in tariff does not seem to be beneficial to the economy on a macro scale.

On A Closer Look Dr. Yap added that such findings should be qualified to make for a more comprehensive analysis. First, tariff reforms are actually designed to improve efficiency and resource allocation management leading to a fall in the incremental capital/output ratio (ICOR) instead of a

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like the excise tax, income tax and others. Third, the decline in investment because of a tighter foreign exchange constraint, can be offset by a higher influx of foreign exchange inflows. Sources of capital inflows are overseas contract workers’ (OCWs) remittances, portfolio investment and foreign direct investment (FDI). The first two sources should be reduced because of the attendant social cost of OCW remittances in terms of family ties, and the risky nature of portfolio investments. This leaves the FDI as the most beneficial source of foreign exchange.

Foreign Exchange Impact The foreign exchange constraint is more relevant than the savings constraint and fiscal constraint because foreign transfers have bigger impact on the growth rate of foreign exchange-constrained economies like the Philippines. The savings constraint shows how investment is limited by private and public savings; fiscal constraint shows how public investment

The decline in investment can be offset by a higher influx of foreign exchange flows.

constant ICOR. The ratio measures the productivity of a unit of capital used in production, which is the efficiency of investment. Thus, even if investment falls, output growth rate can still be maintained or even increased if this investment is more efficient. Second, trade taxes are not the only source of government funds. The loss in tariff revenue can be offset by increasing the collection of other taxes

has positive impact on private investment; and the foreign exchange constraint proves how developing countries early on had difficulty generating foreign exchange for their import needs. Thus, the foreign exchange rate policy of the government is a very important tool in encouraging capital in-


Page 12



May - June 1997

PIDS Senior Staff

Outreach Activities Vol. XV No. 3 Dr. Ponciano S. Intal, Jr. j Undertook a study tour of Vietnam, financed by the International Development Research Centre (IDRC)-Canada, as a member of the Program Advisory Committee of the Economy and Environment Program for Southeast Asia (EEPSEA), February 19-26;

ening Dilemma in an APEC Way" in a conference in Brussells hosted by the Institute for European Studies, UniversitĂŠ Libre de Bruxelles, May 23; l Served as a panelist in a conference in

Berlin hosted by the Japanese-German Centre Berlin (JGCB), May 28. j Participated in the following conferences:

j Attended the annual workshop of the Micro Impact of Macroeconomic and Adjustment Policies (MIMAP) Project as resource person and member of the MIMAP Program Committee and presented a brief paper entitled "Institutional Environment for Implementing MIMAP: A Short Note," IDRC, Canada, May 5-8; j Attended the biannual workshop of EEPSEA as resource person and member of the Program Advisory Committee of EEPSEA, Singapore, May 13-15; j Presented a number of papers on perspectives on East Asia, Europe, APEC and the ASEM Process in Tokyo, London, Brussells, Paris and Berlin in May 1997 as a member of a small and high-level group of academics in East Asia:

l National Development Summit at

PICC on June 9; l Conference on General Parameters for

Long-Term Planning hosted by the National Economic and Development Authority (NEDA) in Mandaluyong, June 18; l Conference on Forest Policy Directions

as part of the anniversary celebration of the Forest Development Center, UP Los BaĂąos; and l International Conference on the

Affordability and Equity of Health Services hosted by the Kaiser Family Foundation and the Ateneo School of Government at the Manila Hotel and Batangas, June 29-July 5.

l "Beyond Liberalization of Trade in

Goods: Alternative Strategies for Regional Trade and Investment Facilitation" co-authored with Christopher Findlay in the Tokyo conference cosponsored by the Keidanren and the Australian-Japan Research Centre of the Australian National University (ANU) on May 16; in London during a two-day conference hosted by the Centre for Economic Policy Research and the Economic and Social Research Council of UK, May 20-21; and in Paris sponsored by the Centre d'Etudes Prospectives et d'Informations Internationales (CEPII) on May 27; l "Addressing the European Union Wid-

j Helped in the evaluation of the outputs of the Congressional Commission on Agricultural Modernization and the proposal on a modification in the framework for the Agricom Report led by Dr. Cristina David. j Attended meetings of the Presidential Commission on the Urban Poor National Advisory Committee, the Philippine Economic Society Board of Directors, the Philippine Sustainable Development Network Board of Directors and the Philippine PECC Advisory Council. j Attended meetings of the Technical Board on APEC Matters. DRN

May - June 1997

Editorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Ms. Jennifer P.T. Liguton Director for Research Information Mr. Mario C. Feranil Director for Project Services and Development Ms. Andrea S. Agcaoili Director for Operations and Finance Atty. Roque A. Sorioso Legal Consultant

Staff Jennifer P.T. Liguton Editor-in-Chief Genna J. Estrabon Issue Editor Corazon P. Desuasido, Edwin S. Martin and Liza P. Sonico Contributing Editors Valentina V. Tolentino and Rossana P. Cleofas Exchange Delia S.Romero, Galicano A. Godes, Necita Z. Aquino and Federico D. Ulzame Circulation and Subscription Jane C. Alcantara Lay-out and Design


A New Environment... from Page 5 buyer of hospital services, assume a regulatory role through its procurement processes? With globalization, privatization, devolution, and expanded social health insurance, the Department will have to define, restructure and even retrain itself if it wants to continue to assume leadership in the health sector. Admittedly, we still have the mindset of direct health care provid-

DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights the findings and recommendations of PIDS research projects and important policy issues discussed during PIDS seminars. PIDS is a nonstock, nonprofit government research institution engaged in long-term, policyoriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings. The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments are welcome. Please address all correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village, 1229 Makati City, Philippines Telephone numbers 892-4059 and 893-5705 Telefax numbers (632) 893-9589 and 816-1091 E-mail address: Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P150.00 for local subscribers; and US$20.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.


ers, worrying about day-to-day facility and program operations, firefighting disease outbreaks and grappling with the remaining inefficiencies of our logistical and procurement systems. But we recognize that we have to prepare ourselves in assuming new roles—as insurance manager, as coordinator of a highly decentralized delivery system, as promoter of competitiveness in health care markets, and as the leading authority in research and training. The kind of health policy research needed to address these issues is not so much about defining these

What to Expect... from Page 10 flows to counteract the negative effect of the fall in revenues.

FDI as Primary Source of Foreign Exchange Foreign direct investment is the key to a dynamic export sector as evident in the economies of recent Asian tigers like China, Indonesia, Thailand and Malaysia.

May - June 1997

new roles but about: j what new institutions need to be put in place; j what policy instruments can be employed to play these new roles effectively; j how we manage to undertake all these while reducing the size of our bureaucracy; j how we preserve the gains from decentralization while maintaining coherence between national and local health priorities; and j how we can ensure to have the information needed to manage a decentralized and privatized health system. DRN

Foreign investors, as direct sources of FDI, may look at the reduction in tariff from different points of view. It can encourage them to invest in the Philippines due to the more liberal business climate or consider it a sign of instability because of the government revenue loss. Dr. Yap emphasized that macroeconomic stability, specifically the trade balance and political stability of the country, are the key determinants of attracting capital investments from abroad. Thus, any trade-offs between a more liberal business environment and macroeconomic stability must be weighed carefully. DRN


Recent data on the Philippine economy and an updated on-line listing of PIDS publications can now be accessed for free at:

20 Years

of Service through Research

A New Environment for the Health Sector  

A djustment is a natural reaction 11 PIDS Senior Staff May - June 1997 ISSN 0115-9097 = Page 2 n the last ten years, the De- partment of Hea...

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