Health Transparency 5: Forum on Good Governance in Health

Government (local and national) procurement of medicines, medical equipment and other supplies, hiring of health professionals and consultants, are among the problematic and not-so-inspiring stories in the country.

During the MeTA 2nd National Forum in late January 2009 that I attended, I observed and posted this:'

.... Second, medicine storage and warehousing by local governments for their constituents. A presenter from the WB showed some of his findings, complete with pictures: dirty warehouses, rodents, garbage and medicines mix up in one room. Warehouse personnel who do not make a regular inventory of medicines, how many have been disposed, how many are left, how many and what drugs are expired. Warehouses that do not have temperature control; one warehouse has a thermometer, fine, but the room temperature is several degrees hotter than the required minimum temperature for proper storage of some medicines. Some local health personnel release and give away expired drugs.

My proposal on this is that those warehouses by local government units (LGUs) should be closed down, LGUs can issue vouchers to their poor and needy constituents, the latter will go to government-accredited Botika ng Bayan or Botika ng Barangay to get the medicines, and the LGUs will pay those drug outlets later. There will be no need for LGUs and DOH then to train personnel for medicine procurement, warehousing, storage and inventory as internally proposed (using WB loans or additional budget appropriations) as these skills are already available in those government-accredited drug outlets. The comparative advantage of LGUs is politics and more politics, not efficient health care provision....

See, Health Transparency 1: MeTA Forum January 2009, January 26, 2009.

I actually expected the WB to demand major reforms in LGU procurement of medicines as the WB is a major lender to the government's health programs. But until now, I did not see or hear the WB, or ADB and other multilaterals, or the Department of Interior and Local Government (DILG), installing strict checking mechanisms to prevent the above wastes.

Ensuring good governance in health is an important and continuing challenge for the DOH and LGUs. Of course my personal policy bias is towards less governance in health, to assign more personal and parental/guardian responsibilities in healthcare to focus more on preventive than curative healthcare. But I digress.

This coming March 26, 2012, two big centers at the Asian Institute of Management (AIM), the Dr. Stephen Zuellig Center for Asian Business Transformation and the Hills Program on Governance will jointly sponsor the Good Governance in  Health forum. This is what the organizers wanted to achieve:

The key to providing concrete solutions against corruption is to maintain a consultative and cooperative relationship between stakeholder representatives and the government. This involves building stronger ties between health regulatory agencies and institutions concerned with fighting corruption and promoting good governance.

Following the mapping exercise on corruption cases and ethical dilemmas present in the delivery of health services in the Philippines, the second phase of the GGH program will involve the formulation of solutions and gathering of best practices in response to the identified cases. These solutions will be translated to the health sector through an extensive advocacy campaign, which includes capability-building workshops directed toward the promotion of anti-corruption practices and good governance in the Philippine health sector.

Representatives and key players from five sectors were targeted to participate: (a) local governments, (b) health regulators, (c) social health insurance, (d) commercial enterprises, and (e) medical practitioners.

I'm sure other sectors and players, like the huge health NGO community, will get jealous why they will not be invited  in this activity. But the organizers are facing a budget constraint and can accommodate only a limited number of participants. It is a by-invitation only event and not open to the public.

Former National Treasurer and former UP NCPAG Dean Leonor "Liling" Briones will be one of the few speakers. The bulk of the activity will be the workshop among the participants.

I remember there was one meeting by MeTA Philippines, about the result of the WB-funded assessment of government procurement of medicines for selected hospitals (LGUs, DOH-affiliated, and the AFP hospital). Some of the figures presented were harrowing, as some government hospitals have procured at 10x or higher the given drug reference price. So if people think that central procurement by government of medicines and other medical supplies will result in lowering of prices, think again, it can be the opposite. The corruption culture in the government is still alive and kicking and so, cost maxmization instead of minimization, is what usually happens. The thieves and corrupt officials in various agencies will have little leeway to siphon off money to their pockets if they will procure at low prices, so the tendency to bloat the prices of procured medicines and/or other medical supplies.

Promulgating the rule of law -- the law against stealing and robbery in government and putting guilty parties to prison -- is the main solution to this and related problems. But this is easier said than done. So I hope that certain solutions and check-balance mechanisms that are more easily implemented, can be extracted from among the participants in this forthcoming forum.
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See also:
Health Transparency 1: MeTA Forum January 2009, January 26, 2009
Health Transparency 2: CHAT Discussion and Debates, June 15, 2009
Health Transparency 3: MeTA Forum January 2010 (Prevention vs. Medication), January 27, 2010
Health Transparency 4: Drug Promotions and Government, September 03, 2010

Abolish Income Tax 6: Income tax and VAT trade-off

The income tax system in the Philippines is one classic example of the absence of the rule of law. The rule of law says that rules, laws, regulations and prohibitions apply to all people, no one is exempted and no one can grant an exemption.

A quick look at how the law on income tax is being implemented would immediately show that it is one of the most hypocritical laws in the country. Many rich people do not pay the “correct” personal income tax of 32 percent top marginal rate. Among them are businessmen, professionals, corrupt government officials, those in the informal sector, and personnel and consultants of foreign aid bodies (UN, WB, ADB, IMF, USAID, etc.). The bulk of personal income tax collection by the government, especially the Bureau of Internal Revenue (BIR) comes from fixed-income earners.

So if those who are supposed to pay are not paying and the burden of heavy taxation falls on the helpless workers who are subject to mandatory withholding tax, might as well abolish income tax system. Or drastically cut it to a rate that is not burdensome to the people, rich and poor alike, in order to reduce the level of hypocrisy and the extent of tax evasion.

Taxes and government spending were among the major topics discussed by the 3 speakers on the panel, “Debt and Deficits” during the UP Academic Congress, Beyond 2010: Leadership for the Next Generation last Monday, February 1, at the UP College of Law, http://www.econ.upd.edu.ph/?p=906.

The speakers were Professors Felipe Medalla of the UP School of Economics (UPSE) and former NEDA Director-General from 1998-2000; Prof. Benjamin Diokno of UPSE, former DBM Secretary in 1998-2000, and Prof. Leonor Briones of UP National College of Public Administration and Governance (UP NCPAG).

The two former cabinet secretaries were suggesting that to avoid a fiscal crisis in the near future, revenues have to increase significantly, and one such measure is to raise the VAT from the current 12 percent to 15 percent, while reducing income tax from the current 32 percent (personal income) and 30 percent (corporate income) to 25 percent.

I support the move to shift government revenues from income to consumption. As discussed above, many rich people do not pay income tax and the BIR cannot fully implement that law anyway. People hide their income as much as possible, while they flaunt their consumption: their new cellular phone, new computer, new shoes and clothes, new car and appliances, and so on.

So if people voluntarily show off their consumption, even their profligacy, then collecting higher VAT would be easier. And with reduced income tax, fixed-income earners will have higher take-home pay, which means higher savings and/or higher consumption.

What can greatly compensate for the initial revenue losses of the government as income tax rates (personal, corporate, others) decline, will be the entry of thousands of entrepreneurs and businessmen from abroad who want to escape their high-taxes regime in their home countries and are looking for low-tax economies to put up new businesses, or to transfer their existing businesses.

Of total income tax collections by the BIR in 2008, personal income tax comprised 59 percent of total BIR collections; VAT comprised 22 percent, and other taxes 19 percent.

An earlier panel also on February 1 lecture, was a session on “Jobs and the Cost of Doing Business in the Philippines.” The speakers were Dr. Cielito Habito from the Economics Department of the Ateneo de Manila University and former NEDA chief from 1992-98, and Dr. Cayetano Paderanga of UPSE, former NEDA chief before Dr. Habito.

I noted during the open forum, that one major reason why there are not enough jobs in the country and the cost of doing business is high, is because there are many planners in the government, both at the national and local government units. Planners tend to create distortions in the incentives and disincentives system in society because it is simply impossible to predict how people would behave if certain regulations and restrictions were put in place by the government.

Thus, to remedy the situation, we might consider abolishing a number of planning agencies in the government, like NEDA and the Department of Agriculture (DA), for socio-economic and agriculture planning, respectively.

Consider the food sector. There is no government carinderia, no government restaurant, no government supermarket, and yet people are eating. There are no central planners suggesting or dictating how many thousands of pizza and hamburger, or how many kilos of “sisig” and “kaldereta”, to be produced everyday across the country at what price, at what servings and topping, and so on. Product differentiation and market segmentation allow food producers and sellers to target certain group of consumers and consumers do the same to the various food producers and sellers.

The two speakers were hesitant of course, to support my proposal to abolish, or at least drastically reduce the size and functions of those bureaucracies. What was important for me was to articulate the perspective of less government intervention to allow more competition in the market, to allow personal, parental and community responsibility in running their own lives.

Reforms in both taxation policies and government spending are necessary to combat the endemic corruption in Philippine public administration and to discipline, if not discourage, unwarranted expansion in the size and power of the various bureaucracies that tend to restrict individual freedom.
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See also:
Part 5, Consumption taxes, other government fees, November 25, 2009
Part 4, Ayn Rand and income tax, November 02, 2009, and
Part 2, VAT and tax extortion, August 01, 2008