Local government units (LGUs) in the Philippines are spending far below what is needed to deliver basic primary health care (PHC) services, according to state-run policy think tank Philippine Institute for Development Studies (PIDS).

A PIDS discussion paper titled “Are Philippine Local Governments Spending Enough on Primary Health Care?” published last March 26 found that while LGUs are mandated to deliver frontline health services under a devolved system, their current spending levels fall significantly short of estimated requirements.

The paper was authored by PIDS senior research fellow Valerie Gilbert T. Ulep, senior consultant Alejandro N. Herrin, technical research associate Solomon R. Sarne, senior research specialist Pauline Joy M. Lorenzo, and former research analyst Jake D. Calubayan.

Using a conservative bottom-up costing approach anchored on national service standards, the study estimated that delivering a comprehensive PHC package requires around ₱1,800 to ₱1,900 per capita annually.

However, actual LGU health spending averages only about ₱850 per person—less than half of the estimated requirement.

“This gap is widespread and systemic: in nearly all provinces and highly urbanized cities, estimated PHC costs exceed current expenditures, suggesting that most LGUs would need two- to three-fold increases in health spending to meet mandated service levels,” the study added.

Data from the report showed that even among higher-income LGUs, per capita health spending rarely exceeds ₱800, while poorer and geographically isolated areas spend less than ₱300 per person.

In fact, in 109 out of 120 provinces and highly urbanized cities, the estimated cost of PHC exceeds current health spending, underscoring the scale of underinvestment across the country.

Despite wide differences in fiscal capacity, the study found that higher-income LGUs do not necessarily spend more on health, suggesting that PHC is not consistently prioritized in local budgets.

The study noted that many LGUs continue to post operating surpluses, indicating that limited health spending is not solely due to lack of resources but also reflects spending priorities.

The paper also examined whether increased fiscal transfers following the Supreme Court’s Mandanas-Garcia ruling—implemented in 2022—translated into higher health spending.

“Our regression model shows inelasticity, that is, increases in NTA… led to only modest and insufficient gains in health spending, suggesting that unconditional transfers do not necessarily translate into higher PHC investments,” the authors said.

While the ruling significantly expanded LGUs’ fiscal space, the study found that the resulting increase in health spending was limited and insufficient to close the financing gap.

The study estimated total PHC financing needs at around ₱1,827.8 per capita, equivalent to about ₱211.2 billion nationwide annually.

Diagnostics accounted for the largest share of costs at ₱925.9 per capita, followed by medicines at ₱714.5, highlighting the resource-intensive nature of primary care delivery.

In many provinces, the estimated cost of PHC represents 15 to 30 percent of operating income, indicating that meeting health mandates would require a substantial share of local budgets.

Given the persistent financing gap, the study pointed to the need for structural reforms in how PHC is funded.

“These findings suggest… a shift toward demand-side financing through social health insurance [state-run Philippine Health Insurance Corp. (PhilHealth)] capitation for individual-based PHC services as the most sustainable system to ringfence and promote equity in PHC financing,” the paper said.

It added that national government (NG) support—such as matching grants—may be needed to fund capital investments and address health workforce gaps in low-resource LGUs.