PhilHealth Officials Face P15-Billion Fraud, Other Allegations; Funds Seen To Run Out By 2022

A “mafia” involving the whole of Philippine Health Insurance Corp.'s executive committeee has stolen some P15 billion from the agency using different fraudulent schemes, resigned PhilHealth anti-fraud legal officer Thorrsson Montes Keith alleged during a Senate investigation on Tuesday, Aug. 4.

At the same time, a PhilHealth official said the agency is projected to run out of funds by 2022, with its 10-year actuarial life being cut drastically short by decreased collections and increased payouts due to the coronavirus disease 2019 (COVID-19) pandemic.

“We expect that by 2021, we will be in the red already, so it’s only one year… in terms of the actuarial life,” acting senior vice president for actuarial services Nerissa Santiago said.

She said the agency projected a net operating loss of P90 billion in 2020 and P147 billion in 2021 should the pandemic persist. Senate Minority Leader Franklin Drilon pointed out that during the first quarter of this year – the COVID crisis exploded only in March – the reported loss was just P2 billion.

“The government has the responsibility to keep it afloat,” Santiago said. But the government provides a yearly subsidy of only P71 billion. When Drilon asked if “without additional subsidy in 2021, PhilHealth will collapse,” Santiago said yes.

The health care crisis was compounded by the “widespread corruption in PhilHealth” cited by Keith in his resignation letter dated July 23. He also cited his opposition to the mandatory payment of contributions by overseas Filipino workers (OFWs), the alleged unfairness in the promotion process, and the failure to receive his salary and hazard pay on time since he started investigating the agency’s officers.

On July 24, PhilHealth issued an official statement asking Keith to “substantiate his accusations so proper procedures can be initiated.” It said his issue with promotion “can be resolved through its grievance machinery.”

On July 27, upon the resumption of Congress’ session, Senate President Vicente Sotto III and Sen. Panfilo Lacson, along with most of their collagues, filed Senate Resolution No. 475 to convene the Senate Committee of the Whole and investigate the “alleged rampant corruption, incompetence and inefficiency” in PhilHealth.

Because this comes “amidst the COVID-19 pandemic,” this issue “may lead to the financial collapse of the institution to the prejudice of the Filipino people,” the resolution read.

It recounted numerous issues already unearthed in a series of Senate hearings last year. These include:

• Undue overpayments to healthcare institutions under the All Case Rates scheme 
• The alleged P154-billion scam involving the “ghost” patients of WellMed Dialysis & Laboratory Center Corp. 
• The conflict of interest manifested in PhilHealth’s lease of a building owned by the family of Health Secretary Francisco Duque III

ICT overprice

The resolution also cited Keith’s resignation letter, as well as the March 15, 2020 letter of PhilHealth board member Alejandro Cabading informing President Duterte of the discovery of major discrepancies in projects involving the agency’s information technology sector.

Cabading referred to an internal audit report showing that P734 million worth of technology resources were included in the PhilHealth budget proposal for 2020 despite the lack of approval by the Department of Information and Communications Technology (DICT).

The report also revealed P98.05 million in allegedly overpriced items and P132.2 million worth of items that had been subjected to the splitting of contracts to avoid the requirement of holding a public bidding.

Testifying online on Tuesday, Aug. 4, Cabading said PhilHealth president and chief executive officer Ricardo Morales indeed approved the purchases of the ICT equipment and software without clearance from the DICT, and these were the same devices purchased by PhilHealth in 2018 and 2019.

 The resolution also cited the alleged manipulation of financial statements by senior vice president Renato Limsiaco, who was accused by the senators of overstating PhilHealth’s income by some P9.4 billion by reducing the amount of benefit claims.

It also questioned PhilHealth’s lack of money to pay its creditors in the event of liquidation, since its P109-billion equities are slightly less than its P111-billion liabilities. Taking the alleged manipulation of the financial statements into account, the equities would be reduced to a more dire P95 billion.

IRM

The resolution likewise questioned the implementation of the Interim Reimbursement Mechanism (IRM), through which advance payments of up to three months are made to healthcare institutions amid the COVID-19 pandemic.

It said that compared to the Typhoon Ondoy disaster in 2009 and the Marawi City siege in 2017, there was no serious damage to infrastructure or demand for emergency payment arrangements to justify the implementation of the IRM for the public health crisis.

The resolution also noted the fact that collections fell to only about 10 percent of last year’s amount and that the IRM was disbursed even to institutions that were not accredited by PhilHealth or were facing pending cases for violations of warranties of accreditation. It questioned why institutions with no COVID-19 cases were given advance payments.

It flagged the lack of concrete guidelines for the liquidation of the IRM disbursements, as shown by the fact that PhilHealth regional offices were given the option to determine how they would implement the program. Moreover, income taxes were not withheld from the IRM releases.

The resolution alleged that the PhilHealth board, “in a brazen display of grave abuse of discretion” lifted the suspension orders it had previously imposed upon erring healthcare institutions, notwithstanding the final and executory judgments of the Supreme Court and the Court of Appeals against these institutions.

The resolution also questioned PhilHealth’s attempt to prod OFWs to pay the balance above the P2,400 they already paid before leaving the country, citing an increase in the premium rates.

On July 28, PhilHealth defended its IRM releases, saying that the amounts of advance payments were “based on the historical claims of hospitals” and that these went through “a process of application, evaluation, validation and recommendation at the level” of the PhilHealth regional offices, and approval at its head office.

As for the liquidation issues, Morales, a retired military general, argued that “since we are in unusual times, we made the timing of liquidation flexible, with such options left to the good judgment of the regions, given the situations that hospitals are in.”

The next day, PhilHealth cried foul about the leak of the internal report mentioned in the Senate resolution, and pointed out that it made no mention of the words “overpriced,” “corrupt” and “syndicate.”

“The items as reported in the news are not yet in the stages of procurement but rather are still in the review stages,” Morales said. “The report is intended for internal consumption and will surely result to misinformation if disseminated to unintended users.”

PhilHealth argued that it engaged the services of third-party IT experts to review the 2020 procurement items and develop a roadmap, and said the average market cost was used to set the approved budget for public bidding.

On July 31, PhilHealth described news reports about the issues as “either false, twisted half-truths or misinformation” and threatened to “exhaust all legal means against perpetrators of these malicious acts.”

Without discussing the issues at length, PhilHealth said: “We assure the public that the Corporation strictly follows all relevant laws, directives and standards in reporting in all its operational processes and that all funds entrusted to it are properly disbursed and accounted for.”

Crime of the year

The Senate hearing pushed through on Aug. 4, the first day of Metro Manila’s reversion to modified enhanced community quarantine due to the pandemic. Keith surfaced and proclaimed: “Ang aking natuklasan sa PhilHealth ay matatawag ko na krimen ng taon (What I discovered in Philhealth is something I can call the crime of the year).”

Keith also testified: “Naniniwala po ako na ang perang winaldas at ninakaw ay humigit kumulang P15 billion (I believe that the wasted and stolen money amounted to around P15 billion).”

According to Keith, the P15 billion covers the unauthorized release of IRM, or funds allocated for "fortuitous events" such as the pandemic, to hospitals that have not yet recorded COVID-19 cases. The amount also included the alleged overpriced IT systems the agency proposed to purchase. He said the anomalies were pandemic-like in scale.

To compare, the amount of Priority Development Assistance Fund or congressional pork barrel allocations allegedly diverted to ghost foundations linked to plunder convict Janet Lim-Napoles was estimated to be P10 billion.

Keith blamed the state corporation’s “culture” of corruption on a “sindikato o mafia ng kanilang kasamahan, kasabwat o kapwa sindikato sa mga matataas na posisyon na nakakatulong sa kanilang iligal operasyon (syndicate or mafia of their associates, cohorts or fellow syndicate members in the high positions that help in their illegal operations)."

Morales did not deny the existence of fraud in the state corporation and even admitted that based on a study, it could have lost P10.2 billion in 2019 alone. He warned that this could double to P18 billion by next year if the alleged irregularities were not addressed.

However, he sought to discourage criticism. “PhilHealth needs help. It has taken too many body blows. Tulungan ho natin ang PhilHealth. Kung maari ho, ’wag pagtulungan (Let us help PhilHealth. If possible, let us not gang up on it),” he said.

Keith also accused Morales of instructing him to talk to Commissioner Greco Belgica of the Presidential Anti-Corruption Commission “para hilutin (to massage)” a pending case involving alleged overpriced COVID-19 test kits.

“Inayawan ko po ang utos at sinabi ko po kay Brig. Gen. Morales, ‘Ano na lang po ang tingin sa akin ni Commissioner Greco Belgica kapag pakikiusapan ko siya hinggil sa kaso?’ Namula po si Brig. Gen. Ricardo Morales (I refused the order and told Brig. Gen. Morales, ‘What will Commissioner Greco Belgica think of me if I ask for favors regarding the case?’ Brig. Gen. Ricardo Morales turned red),” Keith said.

He also claimed that Morales pushed for the endorsement of the allegedly overpriced IT budget items worth P750 million.

Cabading, meanwhile, said the initial IT budget proposal of P2.1 billion was thumbed down after a review of the costs showed that multiple items were overpriced or redundant.

“There were numbers in the IT budget and financial reports that do not add up,” he testified, adding that the prices of some of the items were even quadrupled. He said two sets of purchases for brand-new laptops reached a total of P4.1 million and P115 million.

“I tried to find a solution by raising this with management, but the most frustrating part is it seems that management seems to be tolerating this act.”

Like Keith, Cabading directly implicated Morales in the issue by saying the PhilHealth chief authorized a P302-million “supplemental budget” for IT-related purchases, dwarfing the P25 million that the former approved. Regarding Keith’s allegation about the P750-million “overpriced” items, Cabading said it was Morales who approved the expenditure.

Morales said: “I don’t think there was an irregularity.”

He argued that the documents Cabading presented were just “budget proposals and not contracts.” He continued to use the justification that “information technology is a very complicated system.”

Cabading also named lawyer Rodolfo del Rosario, now senior vice president of the Legal Sector; corporate secretary Jonathan Mangaoang; Dennis Mas, senior vice president for Management Services Sector; and Limsiaco as the ones allegedly manipulating operations inside PhilHealth to block corruption investigations.

Destroying evidence?

Keith, meanwhile, said senior vice president Augustus de Villa, also a retired military general, ripped six pages of a procurement document because of the anomalies. De Villa denied doing this, saying: “Tinago ko po kasi I was informed by Colonel (Etrobal) Laborte na mataas nga raw ang presyo (I kept it because I was informed by Colonel Laborte that the prices are indeed high).”

De Villa told the committee that he was trying to recall where the documents are, prompting Sotto to subpoena them upon the recommendation of Lacson.

Morales and other PhilHealth officials turned the tables on Keith and Cabading, saying the two have axes to grind.

They said Keith, who reportedly has sexual harassment complaints against him and was removed from the Philippine Military Academy several years ago, was only sore for not being accepted to the post of head executive assistant to Morales.

Morales said Cabading was trying to get back at him as the PhilHealth did not buy a property in Zamboanga that Cabading was selling to the agency.

The officials also vowed to pursue legal action against their accusers.

What a mess

PhilHealth collects over P70 billion from contributions of members ad employers and obtained an infusion of P71 billion from this year’s General Appropriations Act, derived from sin taxes, to implement the Universal Health Care (UHC) Law. Expenses for the UHC are expected to increase to over P184 billion next year.

“We are in this mess because of PhilHealth’s non-compliance with rules, including a simple COA (Commission on Audit) rule. That is why we have all these problems, because you disregard all the rules designed to protect public funds,” Drilon told Morales.

Drilon was referring to a COA rule that no additional cash advances to any official or employee shall be allowed unless the previous cash advance given to him is first settled or a proper accounting thereof is made.

PhilHealth, Drilon noted, released about P15 billion to the hospitals from its IRM even if only P1 billion was liquidated by the healthcare institutions.

At the start of the hearing, Drilon lamented how nothing has changed in PhilHealth since the Senate conducted a thorough investigation on the allegations of fraudulent claims, overpayments and ghost dialysis last year.

“We are at war, yet it seems that the plague of PhilHealth corruption could be more fatal than any other virus,” he said. “How can you sleep well at night?”

Sen. Grace Poe questioned why some hospitals in Bicol and the Visayas were granted hundreds of millions of pesos under the IRM when some of them were not even accredited and had low or zero COVID-19 cases.

She lamented that PhilHealth management appeared to have turned a blind eye on the corruption and mismanagement happening in the agency, which led to a staggering P102 billion in overpayments to some hospitals and P154-billion loss to fraud.

Senate President Pro Tempore Ralph Recto, for his part, disputed Santiago’s warning, saying PhilHealth has P110 billion in contingency funds from retained earnings or equity on top of the premium contributions and subsidies.

Recto said PhilHealth-projected expenditures to implement the UHC should not be withdrawn from its contingency fund as the disbursements had been drawn up as its regular obligations with or without COVID-19.

He said what can be charged to the contingency fund would be the P22.5 billion for COVID-19 patients and P28 billion for testing for the disease. This still leaves P60 billion with PhilHealth.

‘Fake COVID cases’

Sen. Francis Tolentino bared that some hospitals have made claims to PhilHealth that were approved for expenses for COVID-19 when the patients were not initially confined or treated for the disease.

“These are called fake COVIDs. The PhilHealth system is in disarray because those not COVID-related are paid, so your expenses ballooned,” Tolentino said in Filipino.

Tolentino grilled Morales for not implementing Duterte’s order last year to have the PhilHealth senior vice president and board members resign to pave the way for the agency’s cleansing.

“There was a directive coming from President Duterte (to all) PhilHealth vice presidents to tender their courtesy resignation. Was there a consequential action from the PhilHealth board requiring the VPs to quit?” Tolentino asked Morales.

The PhilHealth chief replied that there was a board resolution regarding the resignation of key officials, but it only reached the board members and not the vice presidents.

Morales said he exercised discretion because the agency could not function if all vice presidents would resign, adding that no cases have been filed against them.

Tolentino said Morales must clarify matters as those supposed to be axed were actually promoted, adding that the non-implementation of a board resolution is a clear legal violation.

The senator pointed out that the resignation of key officials could have paved the way for needed reforms in PhilHealth amid serious allegations of corruption.

Tolentino also questioned the promotion of four PhilHealth officials involved in the Wellmed dialysis scam last year. He was referring to Cheryl Peña, Dr. Rizza Majella Herrera, Dr. Bernadette Lico and lawyer Recto Panti, who were promoted to department manager III on May 18.