In 2019, the Philippines passed the Universal Health Care Act, which extended coverage to the entire population. Coverage is administered by the state-run Philippine Health Insurance Corporation, known as PhilHealth. Employees and employers are required to pay into the fund, while low-income, elderly, and unemployed beneficiaries have historically been covered through government subsidies.
Given that PhilHealth had to scale up to meet the universal coverage mandate, the 2019 law included a series of compulsory annual rate increases intended to ensure the fund was sufficiently capitalized to cover its expanded obligations. As a result, PhilHealth’s finances are looking quite healthy these days. In 2024, PhilHealth’s operating income was nearly $700 million, which caps several years of strong profits. They closed the year with $1.9 billion in bank deposits and cash, and around $7 billion in investment securities on the balance sheet.
PhilHealth is so flush with assets that the contribution hikes built into the legislation have been delayed a few times, and in the 2025 budget, the government did not allocate any spending for PhilHealth subsidies as it normally would. Clearly, the government believes PhilHealth is sufficiently profitable that it doesn’t need subsidies and can cover pay-outs to low-income or elderly beneficiaries from its existing reserves.
In fact, not only does the government not want to provide subsidies, it wants some of the money back. A tug of war has now developed over who controls how much of PhilHealth’s assets, as the government began ordering the transfer of surplus funds back to the Treasury in order to fund what are called Unprogrammed Appropriations. These are spending programs that are included in the budget but put on standby and only funded if there is excess revenue available.
Last year, PhilHealth transferred 60 billion pesos (around $1 billion) to the Treasury under this program. Another planned transfer in October of nearly 30 billion pesos was blocked by the Supreme Court. The legality of these transfers is currently being litigated before the Court, which concluded oral arguments in early April. If the Court rules against the government, it will have to transfer the money back to the state-run insurer.
As reported by the Philippine Information Agency, the government’s explanation during oral arguments was that the surplus was an accumulation of unused government subsidies. According to the law, these unused funds are distinct from PhilHealth’s reserve funds (its invested assets, which are held to ensure coverage for beneficiaries) and therefore should be rightfully returned to the government.
I’m not a legal scholar, so I won’t weigh in on the merits of the case. But I would note that it fits a broader pattern whereby the government is looking for innovative ways to mobilize and deploy state capital and financial resources for various purposes, including purposes other than those for which it was originally intended.
It’s hard not to draw some comparisons here with the creation of the Maharlika Investment Fund in the Philippines, which was funded by transferring assets from state-owned financial institutions to a centrally controlled government investment fund. It’s a trend that extends beyond the Philippines, with Indonesia shifting large sums in the 2025 budget in order to capitalize Danantara, a new state-run investment fund. Thailand contemplated using a state-owned agricultural bank to help fund its multi-billion-dollar “digital wallet” stimulus scheme last year.
The simple explanation is that many countries had to run large deficits during the pandemic, and as a result are now faced with fiscal constraints and high public debt levels. This is probably increasing pressure to come up with innovative mechanisms for raising capital that won’t show up as direct liabilities on the government’s balance sheet. Borrowing or transferring assets from a well-capitalized and profitable state-owned fund such as PhilHealth is one way of doing that.
In isolation, this tug of war between PhilHealth and the government brings up interesting questions about the profitability of state-run insurance funds, and where returns should rightfully accrue to. But it’s also part of a bigger story about the rise of state capital and the ways in which states are increasingly looking to control and deploy financial resources. And I think that story is only just beginning.