“Sin Tax” expands health coverage in the Philippines

May 2015

New taxes on tobacco and alcohol enable the poorest and most vulnerable Filipinos to obtain health services

A baby in Bohol, Philippines receives a free check-up at one of the rural health units on the island
WHO/F. Guerrero

At least 1 in 4 Filipinos die from heart disease, stroke or another noncommunicable disease (NCD) before the age of 70. Many of those deaths can be prevented, provided people can obtain the health services they need.

Two years ago, finances to cover NCD care at both the individual and country-level were strained. Poor and indigenous populations had two options: skip treatment because they could not afford to pay for it, or seek care and be forced into deeper debt.

The problem was that Kalusugan Pangkahatan, the Philippine Universal Health Care programme aimed at ensuring every Filipino receives affordable and quality health services, was not reaching the most vulnerable and remote populations. It lacked resources to fund insurance premiums, recruit health-care workers and build additional health facilities in poor and remote areas.

But, in December 2012 the country’s health care financing system drastically changed. The newly passed Sin Tax Reform bill increased taxes on all tobacco and alcohol projects, providing a new injection of funding that enabled the Philippine Government to enrol more people in universal health care and scale-up NCD prevention services in primary care.

Increasing the health budget

The taxes are working. Within the first year, they raised more than USD$1.2 billion and allowed the Philippines to provide health care to an additional 14 million families or roughly 45 million Filipinos. Four years ago, roughly 74% of the population was enrolled in PhilHealth, the national health insurance programme. Today, 82% of the roughly 100 million people living in the Philippines are covered.

“Health is the right of all people. We’re confronting vices like smoking and drinking and turning them into good,” says Jeremias N. Paul, Jr., Undersecretary at the Philippine Department of Finance. “The sin taxes are not only a win for health care; they’re a win for the poor in our country who would not be able to afford health care otherwise.”

Within two years of passing the law, the Philippine Department of Health’s budget increased from US$1.25 billion to nearly US$2 billion.

Revenues from the sin tax are earmarked for specific programmes. Currently, 15% is allocated towards programmes to help tobacco farmers and workers find livelihood alternatives. The remaining 85% goes to fund universal health care, upgrade medical facilities, and train doctors and nurses.

The new taxes were not easy to pass. “Our government started working on reforming the tax structure to impose excise taxes on tobacco and alcohol in 1997, but the strong tobacco lobby hindered our efforts,” says Paul.

In 2012, a massive civil society communications campaign helped influence legislature and the public. As a result, the law passed.

Reducing tobacco, improving health

With an average of 240 Filipinos dying every day from smoking related diseases, the sin tax is also preventing young people from taking up the deadly habit and encouraging others to quit.

“Stopping people from taking up smoking and encouraging smokers to quit saves lives and saves money that can be spent tackling other health challenges, says Dr Julie Lyn Hall, WHO Representative in the Philippines. “We continue to work closely with the Government of the Philippines and strongly support their pioneering work in the country to end tobacco use.”

But challenges still exist. The Philippines still has one of the most affordable tobacco prices in the region reaching as low as $0.02 per stick and illicit trade is a challenge. While revenues are good, universal health care has not reached 100% of the population.

In the next year, the Philippine Department of Health will begin implementing additional health programmes funded by the sin taxes. "The resources generated from the sin tax will be instrumental in delivering high impact breakthrough plans, both in terms of health facility enhancement and provision of health professionals towards Universal Health Care," says Janette P. Loreto-Garin, Secretary of Philippine Department of Health. "These high impact breakthroughs will reduce maternal, infant and child mortality, HIV incidence, and strengthen our service delivery network."

WHO Global Coordination Mechanism on the Prevention and Control of NCDs

Funding for national efforts to prevent and control NCDs remains very limited and innovative financing approaches, like the Philippine sin tax, are just emerging. In 2013, only 50% of countries had national plans and budgets to prevent and control NCDs.

WHO’s financing working group under the Global Coordination Mechanism on the Prevention and Control of NCDs is assessing the current situation and recommending ways and means of encouraging governments and non-state actors to increase NCD financing.

Through innovate financing, more governments will be able to implement their national NCD plans, and the worldwide goal of reducing premature mortality due to NCDs by 25% by 2025 can be achieved.