In Philippines, coronavirus crisis led to massive PhilHealth corruption, whistle-blowers claim

As the Philippines battles a coronavirus emergency, the main state agency providing funds for patient care and Covid-19 testing could be bankrupt by next year, according to three whistle-blowers who have accused top officials of committing fraud of "pandemic proportions".

The whistle-blowers, two of whom recently resigned from the Philippine Health Corporation (PhilHealth), made the claims against their former bosses during three Senate hearings lasting 28 hours.

Senate President Vicente Sotto III told This Week in Asia that he believed the former staff members.

"Throughout the course of the hearings, none of the three faltered or changed their statements, unlike the officials in question. That led me to say in the hearing, 'the best thing about telling the truth is that you don't have to remember what you said'."

Just a year ago, President Rodrigo Duterte sacked PhilHealth CEO-president Roy Ferrer and told the entire board to resign after employees of WellMed Dialysis Centre in suburban Manila revealed they had submitted nearly 1 million pesos (US$20,000) worth of bogus claims using the names of dead patients as well as living ones who did not undergo dialysis.

Duterte appointed former army general Ricardo Morales as CEO to rid PhilHealth of corrupt practices and officials last July. Morales, however, retained the board and did not fire anyone implicated in the WellMed scandal. Instead, he hired lawyer Thorrsson Keith to be the agency's "anti-fraud legal officer".

Earlier this month, Keith told senators that a "mafia" consisting of members of PhilHealth's executive committee had used the coronavirus health crisis as a cover to steal billions of pesos using a new scheme called the "Interim Reimbursement Mechanism (IRM)".

During the Senate's third virtual hearing on Tuesday, August 18, Keith again testified, describing Health Secretary Francisco Duque III as "the godfather of the mafia" who approved "almost all" of the senior appointments, and is aware of the anomalies.

Duque, who was wearing a mask and face shield even though he was taking part in the hearing from his own home, replied: "I deny this. Absolutely malicious and without basis. I do not wish to dignify that allegation."

As health secretary, Duque is the non-voting chairman of the board, but he has served on the PhilHealth board as board chair and president for at least 12 years.

Keith earlier said 14.9 billion pesos (US$306 million) was advanced unevenly to 771 hospitals starting from April, with two hospitals in Davao City getting the biggest payments even though they treated fewer Covid-19 patients than those in Metro Manila - which not only got smaller amounts, but have also not been paid by PhilHealth for their coronavirus-related expenses.

Cash advances of such excessive amounts are illegal, Keith said. To date, only 1 billion pesos has been liquidated.

A hospital entrance in Pasay city, south of Manila, is blocked during the coronavirus pandemic. Photo: EPA-EFE alt=A hospital entrance in Pasay city, south of Manila, is blocked during the coronavirus pandemic. Photo: EPA-EFE

Morales justified the board's decision to approve the IRM on January 31, saying "we knew how [coronavirus] hit the other countries and so we were in a state of panic, so we wanted to be pre-emptive".

But this explanation did not wash with Senate minority leader Franklin Drilon, who branded it as a "cover up" since the virus had not yet spread that widely by January 31. At that time, the outbreak was centred in China, with Wuhan having nearly 10,000 cases while the Philippines and Italy had recorded one each, and the US and Thailand had 14 cases each.

Morales also came under fire for the purchase of overpriced PCR testing kits. When Drilon pointed this out during an earlier Senate hearing on the pandemic, the cost dropped from 8,150 pesos (US$167) to 3,409 pesos (US$70) each, "which on the basis of the projected 2 million tests, saved the government over 9 billion pesos", Drilon said.

Keith, who resigned shortly before testifying on August 4, said he came forward because he "pitied" overseas foreign workers (OFWs) after PhilHealth announced plans in May to require them to pay a double premium - their share plus their employers' share - equal to 2.75 to 3 per cent of annual salary, even though they could not use PhilHealth while abroad. This plan was later suspended following an outcry from OFWs.

"I believe the syndicate or mafia inside PhilHealth was hoping to cover up the stolen amount using money contributed by the overseas Filipino workers," Keith said.

PhilHealth CEO Morales vehemently denied Keith's accusations, saying the legal officer was merely getting back at him because he had refused to promote him.

Morales said he had encouraged whistle-blowing by hiring Keith, but then realised that because the agency processed 32,000 claims a day, fraudulent ones like the WellMed claims would be better detected by installing a new information technology system with anti-fraud safeguards.

When asked by Senator Francis Tolentino why the PhilHealth database still carried 50,000 names of "super centenarians" aged from 100 to 121, Morales replied that the agency recognised this "as an anomaly". But instead of removing the names, they are tagged and if any claim PhilHealth benefits, their identities are counter-checked.

It was for these reasons, Morales said, that he had approved the purchase of 2.1 billion pesos (US$43 million) worth of IT equipment. "There is no overprice," Morales insisted.

However, Morales' head executive assistant Etrobal Laborte contradicted his boss in the same hearings, revealing that a tender for Cisco network switches was "grossly overpriced", with 15 Catalyst 9200-24P switches being bought for 420,000 pesos each when the market price in May was only 62,000 pesos a piece.

Jovita Aragona, PhilHealth's senior vice-president and chief information officer, countered that PhilHealth was buying the more expensive Cisco 2960XR 24 Port switches at 348,000 pesos per unit, and that the tender price included warranty and after sales support.

But Laborte, who once worked as an IT officer in the United Nations and is a certified Cisco network associate, described this as an excuse to cover up fraud. He pointed out that PhilHealth could not have bought the more expensive switches as Cisco had already stopped issuing bug fixes on security issues for this series and had announced "end of life" support by 2022, rendering it obsolete.

On Tuesday, Aragona admitted she lied when she said PhilHealth was buying the more expensive Cisco 2960XR 24 Port instead of the cheaper Catalyst 9200-24P. This was after Senator Panfilo Lacson threatened to have her detained for lying.

A third whistle-blower, PhilHealth board member Alejandro Cabading, an accountant by profession, estimated the excess spending for IT projects and equipment at 734 million pesos (US$15 million). Besides the Cisco switches, Cabading found six other items were overpriced.

For instance, he said, the Adobe Master Collection software was priced at 21 million pesos (US$432,000) but when PhilHealth submitted its Information Systems Strategic Plan to the Department of Information and Communications Technology, this was priced at 168,000 pesos (US$3,400).

Asked about these "discrepancies", Morales still insisted, "I don't think there was any irregularity."

The Senate probe appears to be taking its toll on PhilHealth officials. The agency announced on Monday that executive committee members and six regional vice-presidents would go on leave, while Morales applied for medical absence due to lymphoma.

The Department of Justice has also begun a parallel probe.

But if last year's PhilHealth scandal is any gauge, there may not be any action. Ferrer, whom Duterte fired as PhilHealth head, was quietly appointed as Department of Health assistant secretary in February.

PhilHealth, however, may not fare as well. Senior vice-president Nerissa Santiago calculated that operating losses would rise to 147 billion pesos (US$3 billion) by 2022 if the pandemic persists without a vaccine, as this would reduce members' contributions and its share in national taxes.

In accounting terms, PhilHealth would go "bankrupt", Cabading said. It is a marked turnaround from March this year when assets totalled 230 billion pesos (US$4.7 billion), liabilities were 119 billion pesos (US$2.4 billion), and the agency was poised to take on its new role of giving health care to all Filipinos.

This article originally appeared on the South China Morning Post (SCMP).

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