A Brief Background
Starting FY 2025, qualified civilian government employees are entitled to a Medical Allowance of up to ₱7,000 per year.
This benefit, authorized under Executive Order (EO) No. 64, s. 2024, is designed to help government workers access health maintenance organization (HMO)-type benefits.
The Department of Budget and Management (DBM) issued Budget Circular No. 2024-6 on December 12, 2024, to lay out the complete rules and regulations governing this allowance.
If you are a government employee, a human resources officer, or simply someone wanting to understand what this new benefit means, this guide breaks down everything you need to know — straight from the circular itself.
Background: Why Was the Medical Allowance Created?
The Medical Allowance was established through Section 7 of Executive Order No. 64, s. 2024, which updated the salary schedule for civilian government personnel.
Under this provision, the government authorized the grant of a Medical Allowance not exceeding ₱7,000 per annum to each qualified government civilian employee.
The purpose is to provide a subsidy so that employees can avail of HMO-type health care benefits.
The Medical Allowance is categorized under the Standard Allowances and Benefits component of the Total Compensation Framework, as established in Congress Joint Resolution No. 4, s. 2009, and Republic Act (RA) No. 11466.
The specific conditions and guidelines for granting this allowance are to be issued by the DBM or the Governance Commission for GOCCs (GCG), depending on the type of agency.
Who may be granted Medical Allowance?
The Medical Allowance applies to all civilian government personnel in the following agencies:
- National Government Agencies (NGAs), including State Universities and Colleges (SUCs);
- Government-Owned or -Controlled Corporations (GOCCs) not covered by RA No. 10149 and EO No. 150, s. 2021;
- Local Government Units (LGUs); and
- Local Water Districts (LWDs).
It includes employees regardless of appointment status — whether they are regular, casual, or contractual; appointive or elective; and whether they work on a full-time or part-time basis.
Who Is Excluded?
Not every government employee qualifies. The following are excluded from the coverage of the Medical Allowance:
Employees Already Receiving HMO Benefits Under Special Laws
Government officials and employees who are already receiving HMO-based health care services by virtue of special laws are not entitled to the Medical Allowance under Budget Circular No. 2024-6.
Legislative, Judicial, and Fiscally Autonomous Offices
Officials and employees in the legislative and judicial branches, as well as other offices vested with fiscal autonomy, are excluded from coverage.
This doesn’t mean however that they are precluded from granting medical allowance to their respective employees.
Military and Uniformed Personnel
Military personnel of the Armed Forces of the Philippines (AFP) under the Department of National Defense, and uniformed personnel of the following agencies are excluded:
- Philippine National Police (PNP)
- Philippine Public Safety College
- Bureau of Fire Protection
- Bureau of Jail Management and Penology (under DILG)
- Philippine Coast Guard (under DOTr)
- Bureau of Corrections (under DOJ)
- National Mapping and Resource Information Authority (under DENR)
GOCC Employees Under the GCG Compensation System
Officials and employees in GOCCs covered by RA No. 10149 and EO No. 150 are excluded, as they fall under the Compensation and Position Classification System (CPCS) established by the GCG.
Non-Employee Personnel
Those hired without an employer-employee relationship and funded from non-Personnel Services (PS) appropriations are also excluded. This includes:
- Consultants and experts hired for a limited period
- Laborers hired through job contracts (pakyaw) or paid on a piecework basis
- Student laborers and apprentices
- Individuals or groups engaged through job orders or contracts of service
Key Definitions You Need to Know
Understanding the following terms is important when reading through the guidelines on medical allowance:
Geographically Isolated and Disadvantaged Areas (GIDAs)
These are communities that are disadvantaged due to both physical factors (such as distance, weather conditions, and transportation difficulties that limit access to health services) and socio-economic factors (such as social, cultural, and economic characteristics that limit the utilization of health services).
HMO Provider
A legally organized entity that provides or arranges for the provision of pre-agreed health care services to enrolled members for a fixed pre-paid fee over a specific period of time.
HMO-Type Product
An agreement issued on an individual, family, or group basis, approved pursuant to Insurance Commission (IC) Circular Letter No. 2017-19, and issued by a duly licensed HMO company.
How Much Is the Medical Allowance?
The Medical Allowance for full-time government service is set at a maximum of ₱7,000 per annum.
For employees working on a part-time basis, the Medical Allowance is calculated in direct proportion to their hours of service compared to the standard eight (8) hours of full-time service.
If an employee works part-time in two or more agencies, they receive proportionate amounts from each agency — but the total cannot exceed ₱7,000.
Formula:
Medical Allowance (Part-Time) = ₱7,000 × (Hours of Part-Time Service per Day ÷ 8 Hours of Full-Time Service)
For subsequent years, the Medical Allowance amount will be based on the authorization found in the annual General Appropriations Act (GAA).
Rates of Medical Allowance through the years
Starting FY 2025, qualified civilian government employees are entitled to a Medical Allowance of up to ₱7,000 per year.
For FY 2026, the medical allowance remained at ₱7,000.00 per employee per annum.
What Forms Can the Medical Allowance Take?
The Medical Allowance can be granted in the following ways:
As an HMO-Type Product
The allowance can be used to purchase HMO coverage. This can be done either by the government agency itself or through the employees’ organizations or groups. However, individual employees are free to opt out of group purchases and choose their own HMO product.
In Cash Form (For Paying or Renewing an Existing HMO Benefit)
Employees who wish to avail of their own HMO product or renew an existing one may receive the allowance in cash. In this case, the Medical Allowance must be used to cover the HMO product for the fiscal year — in whole or in part — when the allowance was granted.
In Cash Form (For Paying Medical Expenses Due to Difficulty in Acquiring HMO Coverage)
In certain situations, the allowance may be granted in cash to cover actual medical expenses such as hospitalization, emergency care, diagnostic tests, and medicines. This applies when an employee has difficulty acquiring HMO coverage for any of the following reasons:
- Their locality is identified as a GIDA, as certified by the head of the agency
- Their locality has no adequate HMO branch or office of a licensed HMO company, as certified by the head of the agency
- The employee’s application for HMO coverage was denied by an HMO company
Conditions and Guidelines for Availing the Medical Allowance
The following rules govern who qualifies for the grant of medical allowance and under what circumstances:
Eligibility Requirements
- The employee must be occupying a regular, contractual, or casual position.
- The employee must render at least six (6) months of service (totaling 180 days) in a particular fiscal year. This includes leaves of absence with pay and services rendered under alternative work arrangements prescribed by the Civil Service Commission.
Newly Hired Employees
A newly hired employee may qualify for the Medical Allowance only after rendering six (6) months of service.
Transferred Employees
- If an employee transferred to a new agency and was not granted the Medical Allowance by the former agency, the new agency shall grant it — provided a certification is submitted.
- If the employee was already granted the Medical Allowance by the previous agency within the same year, the new agency shall not grant it again.
Employees on Detail or Secondment
- Employees on detail to another agency shall receive the Medical Allowance from their mother agency.
- Employees on secondment shall receive it from the recipient agency.
Compulsory Retirees with Extended Service
A compulsory retiree whose services have been extended may still be granted the Medical Allowance, subject to the conditions in this circular.
Employees Facing Administrative or Criminal Cases
Those who are formally charged with administrative and/or criminal cases that are still pending shall remain entitled to the Medical Allowance until found guilty by a final and executory judgment. However:
- Those found guilty shall not be entitled to the Medical Allowance in the year the decision becomes final. They must also refund the Medical Allowance received for that year.
- If the penalty imposed is only a reprimand, the employee remains entitled to the Medical Allowance.
Employees on Study Leave or Scholarship Grants
- An employee on study leave or a study/training/scholarship grant (locally or abroad) is entitled to the Medical Allowance if they render at least six (6) months of service in the same year, before and/or after the study leave.
- If the employee is on study leave or a scholarship for the entire year, they are not entitled to the Medical Allowance.
HMO Product Below ₱7,000
If the HMO-type product availed costs less than ₱7,000, the employee is not required to refund the difference to the government.
Tax Exemption
The Medical Allowance — including actual HMO premiums paid in compliance with EO No. 64 — is classified as a “de minimis” benefit and is therefore exempt from income tax and withholding tax, pursuant to Revenue Memorandum Circular No. 107-2024 of the Department of Finance-Bureau of Internal Revenue.
Where Does the Funding Come From?
For NGAs (Including SUCs)
The Medical Allowance shall be charged against the available Personnel Services (PS) allotments of the respective agencies. If funds are insufficient, it may be charged against the Miscellaneous Personnel Benefits Fund or other available appropriations under the annual GAA.
For Covered GOCCs
The amount shall be charged against the approved Corporate Operating Budget (COB) of the GOCC for the fiscal year. If funds are insufficient, a lower but uniform amount shall be granted to all qualified employees.
Medical Allowance for LGU Officials and Employees
Local Government Units may also grant the Medical Allowance to their employees, including those in barangays. The rate shall be determined by the respective sanggunians (legislative councils), depending on the LGU’s financial capability, at a uniform rate not exceeding ₱7,000 per annum.
Key rules for LGUs include:
- The allowance shall be charged against local government funds, subject to the Personnel Services limitation in LGU budgets under the Local Government Code (LGC) of 1991.
- The guidelines in the circular must be followed, along with applicable budgeting, accounting, and auditing laws.
- The grant must be authorized through an appropriation ordinance enacted by the sanggunian.
- If funds are insufficient to cover the maximum rate, a lower but uniform amount shall be granted to all qualified officials and employees.
- The sanggunians must exercise prudence and judicious use of government funds, ensuring that the expenditure does not adversely affect service delivery.
Medical Allowance for Local Water Districts (LWDs)
LWDs may grant the Medical Allowance to their employees at a uniform rate determined by their Boards of Directors (BOD), not exceeding ₱7,000 per employee. The funding shall be charged against the BOD-approved Corporate Operating Budget. If funds are insufficient, a lower but uniform amount shall be granted to all qualified employees.
Policy Guidelines for Excluded Employees
For employees in NGAs and GOCCs who are already receiving HMO-type benefits through special laws, or those in offices with fiscal autonomy, the circular offers two options:
Continue their existing practice of providing HMO-type health care services, OR
Grant the Medical Allowance under EO No. 64, s. 2024 instead.
However, there is a strict rule: no employee may receive both the HMO-type health care services authorized by special laws and the Medical Allowance under EO No. 64 for the same period.
For GOCCs excluded under Item 4.3 (military and uniformed personnel agencies), their health care benefits shall continue to be governed by the rules under the CPCS, including EO No. 150, s. 2021 and relevant GCG issuances.
Medical Allowance for Agencies Exempted from RA No. 6758
NGAs and GOCCs that are exempted from the coverage of RA No. 6758 (as amended) may also grant the Medical Allowance at a uniform rate not exceeding ₱7,000 per annum, as determined by their agency heads or governing boards. The funding shall be charged against the NGA’s available funds or the GOCC’s COB, subject to the conditions in this circular.
Reporting Requirements
To maintain transparency and accountability, the DBM guidelines imposes the following reportorial obligations:
Proof of Enrollment
All government personnel who have been provided with a Medical Allowance must submit proof of enrollment with an HMO provider. Acceptable documents include:
- A certified copy of the HMO agreement or identification card
- A certification of membership issued by the HMO provider
- An official receipt for the payment of the HMO membership fee
Cash Form Documentation
If the Medical Allowance was granted in cash form, the employee must submit supporting documents for the medical expenses incurred, such as receipts of medical services.
Annual Report
Each NGA, SUC, GOCC, and LWD must submit an annual report on the grant of the Medical Allowance to the DBM’s Budget and Management Bureau or Regional Office concerned, not later than one (1) month after every fiscal year, using the template provided in Annex “A” of the Budget Circular No. 2024-6.
Responsibilities of Agencies
Agencies bear the responsibility for the proper implementation of the guidelines. Specifically:
- Agencies must establish and issue their own internal implementing rules, guidelines, and procedures on the release, use, and monitoring of the Medical Allowance.
- Agencies shall be held liable for any grant of the Medical Allowance that does not comply with this circular. This is without prejudice to the requirement for employees to refund any excess or undue payments.
Resolution of Cases
Any cases not explicitly covered by the provisions of Budget Circular No. 2024-6 shall be referred to the DBM for resolution.
Effectivity
Budget Circular No. 2024-6 officially took effect on January 1, 2025.
Frequently Asked Questions (FAQ)
Q: How much is the Medical Allowance for government employees?
A: The maximum Medical Allowance for full-time government employees is ₱7,000 per annum.
Q: Who qualifies for the Medical Allowance?
A: All civilian government personnel in NGAs, SUCs, and covered GOCCs — regardless of whether they are regular, casual, or contractual — qualify, provided they render at least six (6) months of service in the fiscal year.
Q: Can the Medical Allowance be given in cash?
A: Yes, in certain situations — such as when the employee lives in a GIDA, has no access to an HMO branch, or was denied HMO coverage.
Q: Is the Medical Allowance taxable?
A: No. It is classified as a “de minimis” benefit and is exempt from income and withholding taxes.
Q: What if I work part-time in two agencies?
A: You will receive a proportionate amount from each agency, but the total cannot exceed ₱7,000.
Q: What if the HMO product I chose costs less than ₱7,000?
A: You are not required to refund the difference to the government.
This blog post is based on Budget Circular No. 2024-6, issued by the Department of Budget and Management (DBM) on December 12, 2024. For the full text of the circular, visit the DBM website.
