Are Philippine Local Governments Spending Enough on Primary Health Care?

This paper examines whether local government unit (LGU) health spending in the Philippines is adequate to deliver mandated primary health care (PHC) services under a devolved system, how PHC spending varies with fiscal capacity, and whether the increase in intergovernmental transfers following the Mandanas–Garcia ruling has led to higher local investment in health. Using a conservative bottom-up costing method anchored in national PHC service standards, it is estimated that delivering a basic yet comprehensive PHC package requires approximately PHP 1,800–1,900 per capita annually. This amount significantly exceeds the average local government unit (LGU) health spending, which is less than half of this cost. The gap is widespread and systemic; in nearly all provinces and highly urbanized cities, estimated PHC costs surpass current expenditures, indicating that most LGUs would need to increase health spending by two to three times to meet mandated service levels. Substantial variation in per capita health spending across LGUs is evident, and this variation is weakly associated with fiscal capacity, despite operating surpluses, indicating that PHC is consistently underprioritized relative to other local expenditures. A regression model indicates inelasticity: increases in the National Tax Allotment (formerly the Internal Revenue Allotment, or IRA) following the Mandanas–Garcia ruling resulted in only modest, insufficient gains in health spending. This implies that unconditional transfers do not necessarily lead to higher PHC investments. These findings highlight deficiencies in PHC financing under decentralization and suggest a shift toward demand-side financing through capitation under social health insurance (PhilHealth) for individual-based PHC services. This approach may provide a more sustainable system to safeguard and promote equity in PHC financing, complemented by a more strategic use of national resources, such as matching grants, to fund capital investments and address health workforce gaps in low-resourced LGUs. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.