NHIF vs private medical cover: What comes first?

Nearly two decades ago, President Mwai Kibaki rejected a Bill by then Health minister Charity Ngiu that proposed a Universal Health Coverage (UHC) that would have seen taxpayers foot an Sh11 billion medical bill yearly.

This would spell the end of the socialist push by Ms Ngilu to deliver the National Social Health Insurance Fund Bill which proposed to use the National Hospital Insurance Fund (NHIF) to meet the insurance costs for the poor.

President Uhuru Kenyatta is making another attempt to give all Kenyans health cover by 2022 under the UHC but the question of bears  the burden remains.

The plan involves requiring every home to pay Sh500 a month to be members of the NHIF while it offers to pay the Sh6,000 annual premiums for one million poor families.

This will allow the government to offer a basic package for outpatient and inpatient services covering maternity, dialysis, cancer, surgery among others.

The government-backed NHIF is the biggest health insurer in the country with a coverage of 15.8 percent, which is equivalent to more than 80 percent of the total population with any form of health insurance in Kenya.

NHIF membership had grown from 4.4 million in 2013 to 8.4 million in 2019, according to the latest Economic Survey which is 70 percent of the 12.1 million households.

The funds receipts grew by 22 percent to Sh58.1 billion in 2018/19 while the payouts increased by 36.8 percent to Sh53.4 billion, underlining the costs of providing the cover.

Analysts say that this approach may deliver the numbers to NHIF and solve its perennial liquidity problems but by offering additional services, the government may subsidise at a cost to taxpayers.

Churchill Ogutu, head of research at Genghis Capital, said administering a fund with a wider NHIF membership base of around 13 million will bring in additional expenses — claims payments — on the fund itself, which may dent its operations.

CHRONIC ILLNESSES

“Further, there is still no government fund for chronic illnesses which thus puts a strain on NHIF and even the illnesses under NHIF coverage,” he said.

Kwame Owino, an economist and CEO of the Institute of Economic Affairs (IEA), says by requirping all households to pay Sh6,000 annually to NHIF, the government will have solved the insolvency problems at NHIF.

“However, the government needs to cost the extra services being offered because when you expand services the Sh6,000 will not be enough,” Mr Owino said.

Taxpayers, he says, may end up footing the bill and even subsidising private players. While it has been assumed that private sector players have always sought to frustrate efforts to expand the national insurer’s mandate fearing loss of revenue, Mr Owino says they may actually benefit from the UHC. 

It took years of lobbying for the NHIF to raise workers’ contributions from Sh320 to a graduated scale of between Sh500 and Sh1,700 per month based on monthly pay, introducing outpatient cover for contributors and enhanced benefits for specialised treatment such as cancer and kidney dialysis.

Private sector players soon discovered they could offload part of their costs by forcing their clients to first use the NHIF card before they come in.

“While private sector may not want it because they would resist anything that competes with them, they realise that some people might opt to buy NHIF instead of private sector and so they might be substituted but it may not be a big number,” Mr Owino said.

“On the other hand, the private sector may take advantage like what we have witnessed when you go for treatment, private insurance insists that you exhaust what is on NHIF first, which subsidises their costs,” he said. “Unless this part is regulated and people are exempted from being forced to use NHIF first, private sector will see this as an advantage,” he said.

But even if Kenyans do not directly foot the medical bills, taxpayers will still need to fund building of hospitals which will come under a lot of pressure once more people are insured.

A Knight Frank study on Healthcare in Africa showed that Kenya needs Sh16.6 billion investment to build additional hospitals that will take care of the 70,000 bed capacity gap in line with the global average.

“The government needs to put in deliberate efforts to support the setting up of low-cost/community hospitals which most Kenyans visit. This will reduce the strain on the few Level 5, Level 6, referral and national hospitals currently in operation as well as afford patients the much needed preventive healthcare services,” Dr. Julius Kipng’etich- Jubilee Holdings Regional CEO.

But for a country with low insurance penetration, with a quarter of all Kenyans healthcare bills baing paid out of pocket according to the World Bank leaving families vulnerable relying on donations or selling assets like animals and crops and incurring huge debts the government feels the befits outweighs the costs.

The government is even mulling a post-retirement health cover for the 663,000 workers as part of the new self-funded pension scheme to take care of retirees when they leave public service.

Director of Pensions at the Treasury Michael Kagika said they are at the initial stages of looking at a post-retirement health insurance arrangement since government knows that at old age our senior citizens are affected by diseases when they are not in active employment and have difficulty in accessing health services.

Even Americans who are very private sector led have implemented their program by through private providers but taxpayers still foot the bill so that no one is left behind.

America’s Obamacare program used the Affordable Care Act (ACA) requires everyone to have a health cover imposing a tax penalty for those that did not purchase a health insurance plan.

It however offered subsidies to those who could not afford a plan on their own through tax credits and paying insurance companies to keep their deductibles low.

Mr Owino said the push to provide UHC is noble but serious reforms must first be done on NHIF to enable not just access but quality healthcare at an affordable cost.

NHIF has been riddled by allegations of corruption, fraud with fund said to have lost billions of shillings in false medical claims as hospitals exaggerated claims which NHIF could not verify.

Manual handling of claims and low capacity has also crated inefficiencies and delays in paying hospitals that has led to some denying services to members.

NHIF did not make timely payments to providers attributed to the manual claim process that was demanding, the limited number of NHIF claims and benefits officers, and reports of limited financial resources within the NHIF.

“The issue is that the government has not solved the problem of fraud at NHIF we have seen reports about patients going to hospitals for three days but being charged for weeks. So it will basically be removing the money from social insurance and handing it to some doctors,” Mr Owino said.

Dr Kipng’etich the government needs to undertake is to spearhead the consolidation of a database of all Kenyans that is shared between NHIF and the private insurers.

He said sharing of patient history goes a long way in managing illnesses in a more efficient manner. It therefore means that there will be no need for patients to go through a new round of tests when visiting health facilities. Additionally.

“The success of this will depend on the setting up of a transparent and accountable system that will be able to enhance checks and balances of the various activities within the ecosystem,” Dr Kipng’etich said.

The Jubilee Holdings Regional CEO said private sector welcomed the proposals by government as they see it as opportunities for health insurance to expand exponentially.

He said the current set up we have in place does not adequately serve the health needs of majority Kenyans who are bogged down by high medical costs.

“The reason for the support of this initiative is that through it, we shall be able to have a baseline for provision of basic health protection at an affordable rate while the private insurance companies will come in as an add-on for specialised treatment through the various hospital cadres,” he said.

Mr Ogutu said from a demand-side perspective, informal sector workers are seen to benefit the most from NHIF cover. But structural weaknesses in the informal sector means that this pool of potential beneficiaries may not yield intended fruits.

But even if Kenyans do not directly foot the medical bills, taxpayers will need to fund building of hospitals which will come under a lot of pressure once more people are insured.

70,000 BEDS

A Knight Frank study on healthcare in Africa showed that Kenya needs Sh16.6 billion investment to build additional hospitals that will take care of the 70,000 bed capacity gap in line with the global average.

“The government needs to put in deliberate efforts to support the setting up of low-cost/community hospitals, which most Kenyans visit. This will reduce the strain on the few Level 5, Level 6, referral and national hospitals as well as afford patients the much needed preventive healthcare services,” Julius Kipng’etich, Jubilee Holdings Regional CEO, said.

But for a country with low insurance penetration, with a quarter of all Kenyans healthcare bills being paid out of pocket, according to the World Bank, leaving vulnerable families relying on donations or selling assets like animals and crops and incurring huge debts, the government says benefits outweigh costs.

The government is even mulling a post-retirement health cover for the 663,000 workers as part of the new self-funded pension scheme to take care of retirees.

Michael Kagika, the director of pensions at the Treasury, said they are at the initial stages of looking at a post-retirement health insurance since government knows that in old age, senior citizens feel a bigger weight of diseases because they are not in active employment and have difficulty in accessing health services.

AFFORDABLE CARE

Americans have implemented their programme through private providers but taxpayers foot the bill so that no one is left behind.
America’s Obamacare used the Affordable Care Act (ACA) requiring everyone to have a health cover and imposing a tax penalty for those that did not purchase a health insurance plan.

It, however, offered subsidies to those who could not afford a plan through tax credits and paying insurance companies to keep their deductibles low.

Mr Owino said the push to provide UHC is noble but serious reforms must alter NHIF to enable not just access but quality healthcare at an affordable cost.

The NHIF has been riddled with  allegations of corruption and fraud with the fund said to have lost billions of shillings in false medical claims as hospitals exaggerated figures that the NHIF could not verify.

Manual processing of claims and low capacity have also created inefficiencies and delays in paying hospitals, pushing some to opt out of the arrangement.

The NHIF did not make timely payments to providers, attributing the snail pace to manual claim processing that was demanding and made worse by the limited number of claims and benefits officers.

“The issue is that the government has not solved the problem of fraud at NHIF. We have seen reports about patients going to hospitals for three days but being charged for weeks. So, it will basically be removing the money from social insurance and handing it to some doctors,” Mr Owino said.

Dr Kipng’etich said the government needs to spearhead the consolidation of a database of all Kenyans that is shared between the NHIF and the private insurers.

He said sharing of patient history goes a long way in managing illnesses in a more efficient manner. 
It, therefore, means that there will be no need for patients to go through a new round of tests when visiting health facilities. 

TRANSPARENT SYSTEM

“The success of this will depend on the setting up of a transparent and accountable system that will be able to enhance checks and balances of the various activities within the ecosystem,” Dr Kipng’etich said.

He said the private sector welcomes the government proposals since they see it as an opportunity for health insurance to expand exponentially.

He said the current set up, however, does not adequately serve the health needs of majority Kenyans who are bogged down by high medical costs.

“The reason for the support of this initiative is that, through it, we shall be able to have a baseline for provision of basic health protection at an affordable rate while the private insurance companies will come in as an add-on for specialised treatment through the various hospital cadres,” he said.

Mr Ogutu said from a demand-side perspective, informal sector workers are seen to benefit the most from the NHIF cover.

But structural weaknesses in the informal sector means that this pool of potential beneficiaries may not yield intended fruit.