Non-passage of new sin taxes to make UHC ‘a third-class’ law

Date Posted : June 2, 2019

Non-passage of new sin taxes to make UHC ‘a third-class’ law

Date Posted : June 2, 2019

The Universal Health Care (UHC) Act will be downgraded from being a first-class law to a third-rate one, with its implementation either failing to equitably serve all Filipinos or its benefits severely limited, if the outgoing Congress is unsuccessful in passing legislation that will substantially raise the current excise tax rates on “sin” products, Department of Finance (DOF) Undersecretary Karl Kendrick Chua has said.

Chua said excise taxes on sin products such as cigarettes and alcoholic drinks need to be increased to levels that would help fill the P62-billion funding shortfall in the first year of implementation alone of the UHC program in 2020.

If Congress fails to pass a law mandating these sin tax increases, then the UHC program will be an ineffective tool in achieving the Duterte administration’s goal of ensuring equitable access to quality and affordable health care services for all Filipinos.

“These are the possible scenarios: the program will not be able to serve all Filipinos, which means some would get better health benefits, while others would not. Or, to be fair to all, everyone will be covered but the quality of service will be severely affected,” said Chua in a recent interview.

Chua issued the statement as he reiterated the joint call of the DOF and Department of Health (DOF) as well as appeals by various health advocacy groups and civic organizations, for the outgoing Congress to pass a new sin tax reform law to help fill the massive funding gap for UHC.

With only one session week left in the current Congress, the Senate, where the sin tax reform bill is pending, needs to act soon in passing the measure.

Senate Bill (SB) No. 2233, which was certified as urgent by President Duterte, provides for a P45 excise tax increase per pack on tobacco products in 2020, followed by a series of P5 hikes until the rate reaches P60 in 2023, and an annual 5 percent increase thereafter. The DOF said this phased increase is acceptable.

According to Chua, Speaker Gloria Macapagal Arroyo has committed the House of Representatives’ adoption of the Senate version to ensure the approval of the measure in the current Congress without the need for both chambers to first go through bicameral conference committee (i.e., bicam) negotiations.

If the current Congress gets to pass the law before it adjourns this month, Chua said that PhilHealth coverage for primary care will expand to cover 120 drugs and there will be no limit on primary care treatment conditions.

Barangay health care facilities will also be expanded and will be better equipped to render primary health care, he said.

But without a new sin tax reform law to cover the funding shortfall for UHC in 2020, Chua said that to get the program going in the first year, the government might just be able to cover only half of the 120 drugs, choose a few medical conditions to expand the seven currently covered by PhilHealth and patients will continue to shell out up to 90 percent of their money for their medicine expenses instead of just paying a fixed fee.

Finance Secretary Carlos Dominguez III has pointed out that from 2020 to 2024, all current sources of government funding can cover UHC at around P200 billion annually, while the cost of the program will start at P257 billion in 2020 and grow at an average of around P11 billion to P12 billion per year, amounting to a five-year total of around P1.44 trillion by 2024.

Without substantially adjusting the current sin tax rates, Dominguez said the cumulative funding gap by 2024 will reach P426 billion.

For 2020, the government can cover the cost of the UHC program from its current funding sources from the national budget, the Philippine Amusement and Gaming Corp. (PAGCOR) and the Philippine Charity Sweepstakes Office (PCSO) in the amount of P195 billion. Without sin tax reform, UHC will be left with a funding shortfall of around P62 billion.

The rise in incomes and slower increases in sin taxes over the past few years have made cigarettes and alcoholic drinks increasingly affordable to the average Filipino, which, in turn, has increased anew the number of smokers, especially among the youth, and made binge drinking more prevalent.

Raising tobacco taxes in 2012 succeeded in reducing smoking prevalence from 29 percent during that year to 22.7 percent in 2015. However, smoking has gradually been on the rise, reaching 23 percent in 2018, eroding the deterrent effects of the 2012 “sin” tax law.


Date Posted June 2, 2019

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