**4. Social contract design elements to governance in the new UHC act**

We explored insights into the relational arrangements to find an appropriate conceptual 'fit' for the tenets of governance under a social contract. The 'state of nature' in the current market and hierarchical provisioning is failing and heightens the need for alternative governance mechanisms. Will the new UHC Act establish order and be the disruption the Philippine health system needs? Universal health coverage in general and the Philippine UHC Act, in particular, represents a new agreement drawn by citizens' representatives and the government. This section discusses governance issues that impinge on UHC implementation and the operational trajectories affecting those in the informal economy. The intention of the section is not so much as a technical discussion, but to pinpoint directions for a re-thinking that needs to take place alongside post-pandemic reflections on the new normal.

#### **4.1 Governance imperatives**

At the centre of governance, analysis is transaction cost minimisation. The new settlement or social contract on universal health coverage poses the following boundary issues.

#### *4.1.1 Primary institutions*

The law divides the fiscal resources and responsibilities into two key agencies—the Department of Health (DOH) for population health and the PhilHealth for personal health. Local government units (LGUs), the owners of public health facilities, were given roles and tasks but hardly any authority and funding allocations. They received their own mandate through Executive Order 135 known as the Mandanas 'law' [41]. This order simply affirms the additional funding as part of their internal revenue allocation (from national taxes). Amounts will vary depending on the scale and scope of health services that are under them. The funding source for this is from the new tax sources recently introduced. The additional funds, however, are not earmarked for health. This constitutes one of the peculiarities of Philippine politics, 'giving a little for everyone'. LGUs will now confront the question whether paying premiums to PhilHealth for coverage of its 'nonpaying' constituents present a better deal for its resources as opposed to providing free services in their 'owned' facilities. The added resources strengthen the position of local units in bargaining with the health funders and bargaining costs incurred should be factored as part of transaction costs to the implementation of the new UHC Act.

#### *4.1.2 Selective purchaser*

The current dominant purchaser of health services is the Philippine Health Insurance Corporation. Managed as a quasi-government body or a government corporation, it has enjoyed some autonomy in its operations, with the Secretary of Health serving as Board Chairperson. The new UHC Act has provisions for reforms on board qualifications and membership, currently filled by government finance and health institutions, as well as private and labour sectors. PhilHealth's financial position has been under threat, and with providers faced with persistent payment delays (a case study was presented in ref. [13]), non-participation in the new UHC is also a threat by private providers [42]. Internally, implementation glitches and court cases against its officers and among themselves have dented the credibility of the institution. The President's threat of abolishing PhilHealth reverberates (as documented in [34]). The scale might be an issue, with the institution being a case of 'too big to fail'. Insights from the health insurance system in Thailand may point on the way forward, where the institutions are managed across three separate groups—civil servants, private employees, and the rest of the population [43]. Cross-subsidisation is valued for social solidarity purposes. However, in the Philippine case, scale economies are not realisable given human, technological, and systemic incapacities demonstrated by the organisation. The system before 1995 was tripartite as in Thailand when the Philippine population was 68.18 million and not 110.8 million as of 2021.

Failure to design and manage an information system accounts in large part for this failure, relying instead on manual authorisations and adjudication of claims. The system requirements are substantial and the treatment of information system costs as part of capital investment will bypass the 12% cap on administrative costs. However, government infrastructure projects in health care are known for being slow and cumbersome [44], requiring an inter-agency investment committee, among other concerns.

### *4.1.3 Provider and provider networks*

Under the new UHC, every citizen will choose a General Practitioner (GP) for primary care, who will, in turn, be networked to diagnostic services and a tertiary hospital either at provincial or city levels. This introduces a novel element to the health system. Under the current system, anyone seeking care may go to any facility, doctor, or specialist so long as one is able to pay. Being tied to a GP entails availability or the supply of GPs in the first place. There is a viable public rural health system and stations spread across the archipelago. In more isolated and poorer areas, arrangements will need to be made for the outreach of public medical facilities or contracted private providers. In the towns and cities, private facilities will have to be willing to participate in the provider network to receive patients on referral. Participation will be on the application and submission of documentary requirements, including cost structure and subscription to the information system to be followed. This imposes costs to the private sector, as well as to local governments, the de-facto facility owners. Information technology (for example, telemedicine), including medical outreach, costs can be factored in for remote settings. Incentives are discussed in the UHC Act in the context of the private sector and LGU cooperation.

These governance options can inform whether the social contract embedded in the new UHC Act will minimise transaction costs and maximise benefits and health protection for the larger and more vulnerable groups. Mediating institutions and groups may be necessary to reach and navigate citizen engagement. The ability to contract would

*National Health Insurance, the Informal Sector, and Elements of a New Social Contract… DOI: http://dx.doi.org/10.5772/intechopen.103720*

strengthen implementation efficiencies. When monitoring and delivery systems are not fully in place, leakages abound, responsibilities overlap, and absorptive capacities of both recipients and implementers are compromised. Implementation issues, gaps, and program weaknesses highlight the need for a more responsive approach when it comes to universal coverage of health insurance, particularly to the informal sector.

#### **4.2 Other practicalities**

**Table 1** summarises the key concerns related to the health insurance coverage of the informal sector. This is not the place to be detailed as technical elements can be further studied. The table though captures the key elements of contributory schemes and how it relates to informal economy issues. It subsequently identifies strategic design and operating elements and how it can work out with UHC as the 'sweet spot' for the implementation of overall social protection programmes for the non-poor. The last column highlights what the system would be like if the schemes (social security, and health insurance) were to shift to and be under one platform of universal coverage.

There are high transaction costs involved in getting and maintaining participation of the informal sector. However, the new UHC Act considers everyone as a member. Even as their incomes and timing of receipt of incomes are not low enough to qualify them for national subsidies, transaction costs will be high trying to collect individually or tying individuals to a group. Localising subsidies from local tax sources will


#### **Table 1.**

*Elements of schemes for the informal economy, design elements, and universal coverage.*

bundle business registration with other businesses in the local city or municipality office, the usual point of entry for local business. This will encourage the informal economy to gain a foothold into formality with the enticement of free health insurance. Insuring the informal sector, based on the population discussed in section 2, and using the 10 year average and current PhilHealth premiums of P2,400, will amount to an estimated PhP51 billion (US\$1 billion). This amount is approximately 5.1% of the annual health budget of the government. These subsidies will tie the funding of the informal economy health insurance coverage with the gains and benefits of coverage, not only as revenues (to fund local health facilities) but also as social capital, enhancing the credibility of local institutions [45].

Since local governments also 'own' the facilities, it is within their jurisdiction to provide free care for those in need, especially those that are not in the means-tested poor, of which many in the informal economy may fall under. No balance billing should be for all in the locally owned facilities and some capped charges, if outside the catchment area. Assurance of annual health checks will promote health maintenance and health security. The health technology assessment bureau, newly established under the UHC Act will recommend what the basic health service package will be.

Portability is key to universal health coverage. A Thailand study showed the popular use of non-designated facilities by low-income members [46]. Among mobile populations, working across provincial and city boundaries, where designated facilities may be accessed, local budget systems must be interconnected. Navigators or guides will be needed at facility levels. The Philippines' use of navigators has been singled out for promoting equity among the sponsored members [47]. Additionally, information systems that interconnect provider and patient information with the health insurance office and a health passbook, physical record on members' hands where utilisation and coverage in terms of fees are recorded, has been the glue to Taiwan's health insurance system, which began around the same time as PhilHealth in the mid-90s. Taiwavn achieved universal health coverage within the decade of its founding.
