Problem Solving the Philippines: Whose Money? The PhilHealth Reserve Rule, the Supreme Court and the Numbers

Posted by giancarloangulo on October 12, 2026 · Leave a Comment 

By Giancarlo Angulo

In August 2024 I agreed with then-Finance Secretary Recto that PhilHealth’s “idle” money should go back to the treasury. In December 2025 the Supreme Court said the transfer was void. This post sets out what the law says about PhilHealth’s money, what the Court decided and why, and what the numbers for 2023 to 2025 show. This is part 3 of 4 in The UHC Series. In part 1 I covered what the Act promises, and in part 2 the rules under it.

TLDR

  • Section 11 of the UHC Act caps PhilHealth’s reserves at two years of projected spending, sets the actuarial method, and says the excess must go to higher benefits and lower contributions.
  • The DOF used a different method. PhilHealth’s own actuary put the ceiling at P560.55 billion. The DOF’s average gave P280.6 billion. The Court held that the law requires the actuarial one.
  • All twelve justices who wrote separately said the transfer could not stand. Five did not want to void the budget provision as a whole.
  • In 2025, households paid 41.2% of current health spending out of pocket (PSA), down from 44.2% in 2024 as revised.
  • Between 2023 and 2025, PhilHealth’s claims paid more than doubled (P122 billion to P289 billion), mostly through higher rates on existing benefits. YAKAP, Konsulta and GAMOT were about 4.5% of 2025 benefit expense.
  • My position: the ruling is right on the law. I want the reserve rule to keep premiums paid by private individuals apart from the government’s money for indigents and other indirect members, with PhilHealth holding them as separate accounts, and to ring-fence any excess above a conservative ceiling for new benefit programs.

Where the money comes from

Section 37 of the Act lists six sources:

  1. Incremental sin tax collections under RA 10351.
  2. 50% of the national government’s share of PAGCOR income.
  3. 40% of the PCSO charity fund.
  4. Members’ premium contributions.
  5. DOH appropriations in the yearly budget (GAA).
  6. A national government subsidy to PhilHealth in the GAA.

A budget line is not cash. PhilHealth’s 2025 financial statements say the PAGCOR and PCSO shares for 2023 and 2024, P42.34 billion, had been remitted to the Treasury but no Notice of Cash Allocation had yet been issued to release them to PhilHealth. The 2026 budget appropriates P129.8 billion for PhilHealth, of which P60 billion is the amount the Court ordered returned.

Premiums for direct contributors were scheduled to rise from 2.75% in 2019 to 5% by 2024–2025, with the income ceiling going from P50,000 to P100,000 (Section 10). The same section says every increase in premiums or in the subsidy for indirect contributors must come with “a corresponding increase in benefits.”

The reserve rule

Section 11 is the rule behind the 2024 fight. PhilHealth sets aside reserves up to “two (2) years’ projected Program expenditures.” If reserves go above that ceiling, “the excess… shall be used to increase the Program’s benefits and to decrease the amount of members’ contributions.” And no part of the reserve may go to the national government, “including government-owned or -controlled corporations.”

What happened, and what the Court decided

In 2024 the DOF ordered PhilHealth to send P89.9 billion to the national treasury, citing a provision in the 2024 budget. PhilHealth remitted P60 billion. On December 3, 2025, the Supreme Court (G.R. Nos. 274778, 275405, 276233, ponente Justice Amy Lazaro-Javier) ruled:

  • Unanimously: the P60 billion must go back to PhilHealth through the 2026 budget, and the remaining P29.9 billion may not be transferred.
  • By a majority: the budget provision and the DOF circular are void. The Court said the provision was a rider that impliedly repealed Section 11 and the sin tax earmarks, and that changes to the UHC law must come “through separate legislation.”

The number behind the fight. PhilHealth’s own actuary put the Section 11 ceiling at P560.55 billion. The DOF instead averaged past spending and got P280.6 billion, and the Solicitor General agreed the DOF’s figure “was based on disbursements for the past three years and not the actuarial” (decision, pp. 58, 66, 70). The decision’s own table shows how: the DOF averaged five rolling two-year totals of PhilHealth’s expenses, from 2018–19 to 2022–23 (p. 66). PhilHealth’s reserves at the end of 2023 were P464.3 billion: below the actuarial ceiling, above the DOF’s. So whether there was any “excess” depends on which ceiling is right, and the Court held that the law requires the actuarial one. The Court also wrote that “the issue was never about ‘idle’ funds” (p. 130), though it did say PhilHealth’s management of its reserves was poor.

The Court does not print a vote count. Twelve justices wrote separate opinions. Five (Lopez, Dimaampao, Marquez, Villanueva and Zalameda) did not want to void the budget provision as a whole: they would have limited the ruling to the PhilHealth transfer, since Section 11 and the sin tax laws are special laws that prevail for PhilHealth. None of them defends the transfer itself, and all agree it cannot stand. Others went further: Justices Leonen, Caguioa and Dimaampao would also have ruled on the size of the budget’s unprogrammed appropriations, and Leonen alone would have voided the whole 2024 budget. The P60 billion was reported returned to PhilHealth in the spring of 2026.

Where I stand

In my 2024 post I agreed with then-Secretary Recto. The Court answered the legal question I left open (“Does the GAA 2024 really allow the fund transfer?”), and the answer was no. On the law, I was wrong: a budget provision cannot override Section 11, and the sin tax money is earmarked for the UHC program. I accept the ruling.

What I still believe is that PhilHealth has a spending problem, and the numbers for 2023 to 2025 show it, though not in the way I expected. Claims paid went from P122 billion in 2023 to P289 billion in 2025. About two-thirds of that rise went to case rates that already existed, mostly medical and surgical packages, and a third to hemodialysis. PhilHealth’s board raised select case rates by 30% on February 14, 2024 (Circular 2024-0001) and by another 50% from January 1, 2025 (Circular 2024-0037), and its financial statements credit those increases for the jump. The new programs I care about (primary care, medicines, mental health, rehabilitation) took a small share: YAKAP, Konsulta and GAMOT together were about 4.5% of 2025 benefit expense, and I could not find peso amounts for mental health or rehabilitation at all. For scale, PSA’s national health accounts put rehabilitative care from all payers at P28.9 billion in 2025, under 2% of national health spending. That is the whole country’s spending, not PhilHealth’s.

This is not a story of surplus collections being spent on the wrong things, and it is two different stories depending on whose money you mean. Premiums paid by direct contributors (employees, the self-employed, overseas workers) rose from P139.5 billion in 2022 to P209.4 billion in 2025, about 50% more. Not all of that is private money: P55.2 billion of the 2025 figure was paid by government as an employer. The government’s own premiums for indirect members (indigents, senior citizens and others) went the other way: P80.1 billion in 2022, P78.8 billion in 2023, P40.4 billion in 2024 and almost nothing in 2025. Added together, premium income was P219.5 billion in 2022 and P209.4 billion in 2025. Member-paid premiums rose by about P70 billion while claims paid rose by about P160 billion. The rest came out of reserves.

The subsidy side deserves its own line. Benefit expense for indirect members was P87.1 billion in 2024 and P170.0 billion in 2025, against government-paid premiums of P40.4 billion and almost nothing. Put those two years next to the Court’s table, where 2021 to 2023 left a P89.9 billion surplus, and benefits for indirect members came to about P127 billion more than the premiums paid for them over 2021 to 2025. The “unused subsidy” was a surplus only for the first three years. (This is my arithmetic from the Court’s table and PhilHealth’s benefit expense notes, which are on an accrual basis.)

So here is my position. I want the rule to keep two kinds of money apart: premiums paid by private individuals, and money that comes from the treasury and the sin taxes for indigents and other indirect members. Today both sit in one reserve fund, and no one can say how much of any “excess” is whose. PhilHealth should always hold the two as separate accounts, each reported on its own line every year, so that a ceiling and any excess can be worked out for each.

The P89.9 billion the DOF swept was calculated as the unspent part of the government’s own premium subsidy: P239.1 billion collected for 2021 to 2023 against P149.2 billion of those members’ claims (decision, pp. 25 and 66). PhilHealth’s management told its Board at the time that this P89.9 billion did not include premiums from direct contributors (COA’s 2025 audit report). That is a different thing from the premiums of people who pay for themselves, and the law should treat the two differently and openly.

Section 11 is right that excess reserves belong to benefits and members, not to the Treasury through a budget rider. If I could design the rule, I would set the ceiling with the more conservative, method-based figure, and I would ring-fence anything above it for new benefit programs that Congress named in advance, instead of letting it flow to higher payments on benefits that already exist.

I say this knowing that, by the end of 2025, there was no such excess left to ring-fence. Applying the DOF’s method to the latest five two-year windows, 2020–21 to 2024–25, gives roughly P327 billion to P344 billion, depending on how 2023 is counted. A forward-looking actuarial estimate would be higher still, because 2025 expenses alone were P337 billion. The Reserve Fund on PhilHealth’s books at the end of 2025 was P309.0 billion. Of that, P280.6 billion is the program reserve, which the Board kept at the DOF’s figure on October 3, 2025, and P28.4 billion is set aside for lifetime members. The room existed, and it was used up by payment increases, not by the programs the Act promised.

How it’s going

From the Philippine Statistics Authority’s National Health Accounts for 2014–2025, as reported in June 2026. PSA revised the earlier years, so the numbers below replace the ones PSA published for 2024 in July 2025. Percentages in the first table are shares of current health expenditure (CHE: what is spent on health care itself, not on buildings and equipment). The DOH’s own monitoring framework (Administrative Order 2021-0026, indicator 38) defines out-of-pocket spending as a share of total health expenditure (THE, which also includes capital spending), so I show both.

2023 (revised)2024 (revised)2025
Current health expenditureP1.24 trillionP1.51 trillionP1.73 trillion
Total health expenditure (with capital)P1.37 trillionP1.63 trillionP1.87 trillion
Government schemes and compulsory insurance42.1%43.8%46.5%
Household out-of-pocket, share of CHE44.4%44.2%41.2%
Household out-of-pocket, share of THE (the DOH’s indicator)40.1%40.9%38.1%
Voluntary schemes (HMOs and others)13.5%12.0%12.3%
  • The two denominators differ by about 3 points (41.2% of CHE vs 38.1% of THE in 2025), so a target only makes sense once you know which one is meant. PhilHealth’s president, Beverly Ho, called her 41% starting point a share of “total health expenditure” at a Senate briefing on September 4, 2026, and so did Senator Joel Villanueva, but 41.2% is PSA’s share of current health expenditure. On total health expenditure PSA’s figure is 38.1%. I read her 37% target for 2028 as being on the same current-expenditure basis, but she did not say so. PhilHealth’s own performance report gives 36.7% for 2025 on its own estimate, and the Philippine Development Plan’s baseline (41.5% in 2021) is on the current-expenditure basis. The THE figures are my arithmetic from PSA’s workbook values (out-of-pocket P550.1, P666.2 and P714.6 billion over total health expenditure of P1,370.3, P1,628.1 and P1,873.9 billion).
  • In pesos, out-of-pocket spending still rose, from P666 billion in 2024 to P715 billion in 2025. Its share fell because total spending grew faster.
  • The part PSA calls compulsory contributory health insurance, which is mostly PhilHealth but also includes employees’ compensation and SSS and GSIS medical claims, went from P124 billion (2023) to P201 billion (2024) to P337 billion (2025). Direct government schemes were flat at P459 billion in 2024 and P468 billion in 2025.
  • In April 2025 PhilHealth said it aimed to bring the out-of-pocket share to around 25–35% within three years. On September 4, 2026, Ho told the Senate that the “realistic” target is 37% by 2028.
  • PhilHealth received no government subsidy in the 2025 budget.

What I’m still unsure about

  • I read the Court’s decision and its twelve separate opinions through summaries I checked on the key points (the dispositive portion, the ceiling figures and the quotes above), not line by line. The Court’s own text is the authority.
  • PSA’s tables do not name PhilHealth. They report “compulsory contributory health insurance schemes.” PSA’s own methodology presentation (June 2025) lists PhilHealth’s claims database and financial statements as inputs, together with employees’ compensation and the medical and rehabilitation claims of SSS and GSIS, so the line is mostly PhilHealth but not only PhilHealth. Its size is close to PhilHealth’s own figures: P337 billion in 2025 against PhilHealth’s P324 billion of benefit claims expense. PSA’s own page was blocked to me, so I rely on the workbooks, which carry a creation date of June 18, 2026, and on a Daily Tribune report of June 19, 2026.
  • The 2026 budget figures for PhilHealth differ between reports, so I have left out the ones I could not match to the budget documents.
  • The claims statistics do not separate higher rates from more claims (claims paid rose 136% from 2023 to 2025, the number of claims 48%). I read the two circulars that set the 30% and 50% increases. Both apply to select case rates, not all of them, and I did not work out how much of the rise each one explains.
  • COA gave a qualified opinion on PhilHealth’s 2025 statements, including benefit claims expense, so the 2025 figures may change. The reserve fund figures (P280.6 billion at the end of 2024 and P309.0 billion at the end of 2025) appear in both PhilHealth’s 2025 financial statements and COA’s 2025 audit report.
  • Hemodialysis is an outpatient benefit, not inpatient care, so “existing benefits” is the accurate description for most of the increase, not “inpatient.”
  • The P327 to P344 billion is my own arithmetic. It applies the DOF’s method to PhilHealth’s reported benefit claims and operating expenses, using either the audited 2023 figure or the DOF’s own 2023 figure (the audited one is lowered by a one-off P40.9 billion accounting adjustment). It is not an actuarial estimate.
  • PhilHealth publishes premium income by who pays (direct contributors, indirect contributors) but not its reserve fund by source, so I can split the money coming in, not the money sitting in the fund. The P239.1 billion and P149.2 billion figures are the Court’s, from the DOF’s calculation.
  • I’m not a lawyer or a health economist. If I got a section or number wrong, please comment.

What I’d like to do next

Part 4 looks at the outpatient benefit the Act promised within two years.

Sources

The UHC Series

Problem Solving the Philippines: The UHC Series.

Lovingly made with Claude.

Filed under Philippine Government

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