Philhealth-Red Cross agreement questioned

MANILA, Philippines — Health Secretary Francisco Duque III and officials of Philippine Health Insurance Corp. (PhilHealth) may be indicted for graft and misuse of public funds for entering into a “highly irregular” agreement with the Philippine Red Cross (PRC) to conduct COVID-19 testing, according to two separate legal opinions of the state insurer’s own lawyers.

In a report presented to the state-run insurance firm’s board, PhilHealth legal counsel Alfredo Pineda II said the memorandum of agreement (MOA) that former PhilHealth president and CEO Ricardo Morales signed with the PRC on May 5 had no legal basis and provided preferential treatment to the humanitarian organization headed by Sen. Richard Gordon.

The nine-page executive briefer dated Oct. 13, a copy of which was obtained by the Inquirer on Sunday, echoed the contents of the Sept. 25 review issued by Rogelio Pocallan Jr., senior manager of PhilHealth’s internal legal department.

It said PhilHealth, which was established specifically to provide medical insurance coverage to Filipinos, was not mandated to pay for the cost of the COVID-19 tests and bankroll the PRC’s testing program.

“Considering the apparent flaws and even irregularity or potential illegality of the MOA, the possibility of rescinding the MOA should also be considered by top management and the legal sector … as discussed and suggested by … Pocallan,” Pineda said in his report, which was also submitted to Morales’ successor, Dante Gierran.

“Temporarily suspend the provisions and further implementation of the MOA, and hold in abeyance any and all further payments and disbursement of corporate public funds relative to the MOA,” the report added.

A source, who asked not to be named for lack of authority to talk to the media, said Pineda’s report prompted Gierran to seek the legal opinion of the Department of Justice (DOJ) on the questionable contract.

Last week, Justice Secretary Menardo Guevarra confirmed that the DOJ had already sent its own review of the agreement to PhilHealth. “But we’d rather let them disclose the DOJ opinion themselves if they must,” he said.

Pineda said PhilHealth’s advance payment of P100 million to the PRC was considered “illegal disbursement and malversation of public funds” since the huge amount was released without the mandated authorization from the board.

Highly irregular

“[T]he MOA between PhilHealth and PRC is highly irregular as there was no clear legal justification within the specific provisions of the PhilHealth charter to enter into the MOA and grant [PRC] with advance payments,” Pineda said.

“There is no legal justification within the specific provisions of the PhilHealth charter to … grant advance payments if only to ensure the liquidity of the PRC—a private nonprofit institution organized for supposed altruistic objectives,” he said.

“PhilHealth is not legally mandated under its charter to seek and convince private entities to engage in the provision of health-care services, including the mass testing of Filipinos for COVID-19,” he reiterated.

Besides, Pineda said Republic Act No. 11469, or the Bayanihan to Heal as One Act, and the subsequent memorandum issued by Executive Secretary Salvador Medialdea explicitly stated that “any engagement with the PRC shall be subject to reimbursement.”

“[The law] did not allow for any advance payment to be issued to PRC … ‘Reimbursement is the act of repayment for expenses or losses incurred … There is no other legal and/or technical definition of reimbursement that may be interpreted and twisted to justify advanced payment,” he said.

Pineda noted that the PhilHealth board, headed by Duque as ex-officio chair, belatedly issued Board Resolution No. 2521 on May 14, which allowed Morales to represent the state insurer in the deal with the PRC.

“The eventual ratification/confirmation … after the fact of release of public funds … is, at the very least, highly irregular, if not outright ‘ultra vires’ and illegal,” the report said.

“The post facto approval by the PhilHealth board in fact, can be taken as an indirect admission of the lack of authority and illegality of the P100-million advance fund disbursement,” it added.

Duque liable

He said while Duque did not sign the board resolution and other similar orders, it would not absolve him from any liability.

“Notwithstanding the fact that the chair is a nonvoting member of the PhilHealth board, the same neither justifies nor exempts the signature of the board chair in PhilHealth board resolutions and share in its decisions and its corresponding accountabilities,” Pineda said.

He noted that Morales, who resigned amid the Senate inquiry into the mounting corruption allegations against him and other PhilHealth executives, approved the deal without first seeking a review of the contract as required by the agency’s internal rules and procedures.

PhilHealth’s legal department also did not issue a contract certification before the arrangement with the PRC was finalized, he added.

He said PhilHealth’s negotiating panel, led by then Legal Sector Senior Vice President Rodolfo del Rosario Jr., tried to introduce amendments to the original agreement to “rectify its defective provisions,” but the PRC “already took an adamant position in maintaining the existing MOA” and demanded full payment of PhilHealth’s remaining financial obligations.

“Even assuming for the sake of argument that PhilHealth may legally enter into the questioned MOA with the PRC, a perusal of the specific provisions of the MOA would readily show that the … provisions of the MOA was crafted to be highly favorable to the PRC,” he said.

Graft case

“Hence, the PhilHealth board may potentially expose themselves to an antigraft case … for entering into a contract highly disadvantageous to the government, malversation and other criminal violations for misuse and mismanagement of public funds,” he said.

In his separate legal opinion, Pocallan said the PRC had already collected P1.6 billion from the state insurer for conducting hundreds of thousands of swab tests, including those done on returning overseas Filipino workers.

“This means that of the supposed P910-million limit provided in the PhilHealth board-ratified MOA, the corporation again issued the amount of P690 million without prior board approval and hence, yet another act of malversation of public funds,” Pineda said.

Before the submission of the legal opinion, President Duterte last week promised that the P930 million owed by PhilHealth to the PRC for swab-testing services would be paid, and requested that the nonprofit resume testing.

The PRC had suspended testing until it was paid, stranding many returning overseas Filipino workers in quarantine hotels and affecting the Department of Health’s monitoring of the COVID-19 situation.

Gov’t debt now P1.1B

On Sunday, Gordon said the government’s debt to the PRC was P1.1 billion, not P930 million.

“The debt of PhilHealth now is P1.1 billion, so that [P930 million] is not enough. That’s not even including interest. But we need to be paid in order to get new supplies,” Gordon said in a radio interview.

He said the PRC would accept payment of P930 million but the balance should be paid “within three days.”

Surigao del Norte Rep. Robert Ace Barbers on Sunday said the PRC should “stop blackmailing” the government because the nonprofit had “no right to impose on the government and demand payment for the alleged testings done on people.

“For one, it was learned that the PRC has no valid contract with PhilHealth [for] the alleged mass testing done on people,” Barbers said in a statement. —WITH REPORTS FROM DJ YAP AND NESTOR CORRALES INQ