Closing the health care funding gap via sin taxes
Better health care coverage for Filipinos. Improved public health, especially among the youth.
Beyond being a fundraising measure, the proposed second round of sin tax hikes under the Duterte administration’s comprehensive tax reform program will not only generate fresh funds that can sustain the government’s universal health care program—a first class law which will support inpatient and outpatient coverage of all Filipino families. But more importantly, the proposed tax hikes are also expected to promote better public health as the higher prices may help deter consumers from excessively consuming alcohol and tobacco products.
Higher taxes
To achieve these goals under the so-called Package 2+ or the sin tax reform, the government plans to slap higher excise taxes on alcoholic drinks as well as a levy on heated tobacco and vapes similar to the rates to be slapped on cigarettes starting next year.
The Duterte administration believes that imposing higher excise taxes on sin products remains the most effective policy tool to discourage consumption of these products, particularly among the youth and the poor who are the most sensitive to price changes.
It is, in fact, a view well supported by the World Health Organization, which lauded the Philippines’ efforts to impose higher sin taxes as an “international model for cost-effective promotion of health and reduction of noncommunicable diseases.” It called this move relatively cheap and cost-effective, while plans to allocate proceeds for universal health care makes the country “a forerunner in allocating sin tax revenue to health programs.”
More specifically, excise taxes on cigarettes will be raised to P45 a pack by 2020 from the current P35; to P50 in 2021; P55 in 2022; and P60 in 2023, which will be followed by a 5-percent annual indexation starting 2024. For alcohol products, the tax hikes will vary for fermented liquor (beer), distilled spirits (gin, brandy, vodka, whiskey, rum, and tequila) and wines. Incremental revenues from the additional sin taxes are expected to significantly plug the funding gap for the Universal Health Care Program beginning 2020.
“Package 2+ seeks to increase excise taxes on alcohol and e-cigarettes. At the heart of this measure is the promotion of public health, especially of the youth. What we call alcopops and vapes are so easily accessible to the youth. In fact, I just told Juul when they came here to limit the flavor.” Finance Secretary Carlos Dominguez III said.
“If we ever pass this, we do not want this thing to taste any other way than tobacco. If we do not intervene, we can expect binge drinking and nicotine addiction to increase, possibly destroying the future of the youth—our key asset in our demographic dividend,” he added.
Cost on health
Excessive alcohol drinking has long been proven to lead to diseases like cirrhosis or liver damage, pancreatitis, tuberculosis, colorectal cancer, hypertensive heart disease, and to a certain extent, even breast cancer. Alcohol consumption is likewise associated with dangerous behavior like drunk driving. And it is for this reason that the Highway Patrol Group staunchly supports the proposed tax measure.
“The Highway Patrol Group, a national support of the Philippine National Police, fully and strongly supports [the bill proposing higher alcohol taxes], which we believe reflects excise tax rates that are sufficient to be effective at promoting road safety. The HPG believes that the proposed reform, which promotes responsible alcohol consumption, will make our national highways safer and minimize road accidents across the country,” HPG said.
Meanwhile, the top four smoking-related diseases, which include lung cancer and heart disease, cost the country as high as P280.8 billion a year from health care expenditures, foregone income from getting sick and from premature death. This figure is way higher than the P106.1 billion and P133.7 billion in tobacco excise taxes collected in 2017 and 2018, respectively.
Closing the gap
Evidently, the public will significantly benefit from this reform. If this measure goes through, the additional funds to be generated will significantly improve accessibility, affordability and quality of health care in the country as well as the existing Philhealth coverage for all Filipino families.
For instance, the number of primary care drugs provided by the government’s universal health care program will increase to more than 120 from the existing limit of 18, whereas all conditions at the primary care level will also be covered as opposed to the current limitation of seven for health conditions. A fixed fee will be imposed as against the current practice of having the patients cover 90 percent of their medical and hospitalization fees.