MANILA, Philippines — In a landmark decision, the Supreme Court En Banc has declared unconstitutional the government’s move to divert PHP 89.9 billion from the Philippine Health Insurance Corporation (PhilHealth) to the National Treasury, ruling the action violated multiple constitutional safeguards, particularly the people’s right to health.
In the consolidated petitions, including those filed by Senator Aquilino Pimentel III and various labor and civil society groups, the Court, through a Decision penned by Associate Justice Amy C. Lazaro-Javier on December 3, 2025, struck down Special Provision 1(d) of the 2024 General Appropriations Act (GAA) and Department of Finance (DOF) Circular No. 003-2024.
The Court ordered the Executive Department to immediately return the PHP 60 billion already remitted to the National Treasury back to PhilHealth and permanently prohibited the transfer of the remaining PHP 29.9 billion.
The Diversion of Dedicated Health Funds
The controversy centered on the classification of PhilHealth’s funds. The Executive Department, through the DOF, instructed PhilHealth to remit its excess “fund balance,” calculated primarily from unutilized government subsidies intended for indirect contributors from 2021 to 2023. These funds were intended to be used as a source for the government’s Unprogrammed Appropriations in the 2024 budget, which finance various projects, including infrastructure.
The Court decisively rejected the premise of the transfer, finding that the diversion was implemented with grave abuse of discretion and was unconstitutional for four major reasons.
1. Violation of the Right to Health
The SC held that the diversion directly infringes upon the constitutional commitment to affordable and sustainable public health care (Article II, Section 15 and Article XIII, Section 11). The decision emphasized that illness forces working-class Filipino families to pay nearly 44% of healthcare costs out-of-pocket, resulting in debt and suffering. The Court ruled that the transfer of PHP 89.9 billion, which was meant to increase PhilHealth benefits and ensure its viability, was a breach of this commitment.
Justice Lazaro-Javier wrote, “The right to health is not abstract philosophy. It is the heartbeat of the right to life… When health becomes a privilege, life itself becomes a commodity. And in any society worthy of justice, neither should it ever be for sale.”
2. Illegal Amendment of Substantive Law (Prohibited Rider)
The Court found that Special Provision 1(d) was an unconstitutional rider (Article VI, Section 25(2)) because it was ambiguous and effectively amended the Universal Health Care Act (UHCA) and the Sin Tax Laws through the budget process—a legislative act explicitly prohibited by the Constitution.
The SC ruled that the “fund balance” was a euphemism for PhilHealth’s “reserve funds,” which Section 11 of the UHCA strictly mandates to be used only for two purposes: to cover unexpected obligations and, if in excess of the actuarially estimated ceiling, to increase the NHIP’s benefits and decrease member contributions. The UHCA explicitly states that “no portion of the reserve fund or income thereof shall accrue to the general fund of the National Government.” The GAA provision, by compelling the remittance, directly repealed this critical protection.
3. Transfer of Special Funds
The Court categorized the PhilHealth funds, which are sourced largely from earmarked excise taxes under the Sin Tax Laws, as special funds (Article VI, Section 29(3)). Special funds must be paid out only for the specific purpose for which the tax was levied—the implementation of the UHCA. Since the goal of providing comprehensive and universal health care remains “far from being fulfilled,” the purpose has neither been fulfilled nor abandoned, rendering the diversion unconstitutional.
4. Unauthorized Augmentation Power
The Court further ruled that the transfer mechanism violated the constitutional requirement that the power of augmentation (transfer of funds) can only be exercised by the President and specified constitutional heads from savings within their own respective offices (Article VI, Section 25(5)). The DOF Secretary, as an alter ego, cannot exercise this power, and the PhilHealth funds are not considered “savings” from the Office of the President.
SC Orders Restoration and Compliance
As a direct consequence of the unconstitutionality, the Court ordered the return of the funds and prohibited further implementation of the void measures.
The House of Representatives, Senate, DOF, and Office of the Executive Secretary were ordered to include PHP 60 billion as a specific item in the 2026 General Appropriations Act for return to PhilHealth.
PhilHealth itself was directed to strictly comply with Section 11 of the UHCA in managing its funds to accelerate the improvement of the National Health Insurance Program, noting that years into the 10-year implementation plan, benefits remain insufficient to protect Filipinos from financial risks. The Court stated that the “grand design of the UHCA” cannot be set aside for budgetary convenience.
