Can People Afford to Pay Out of Pocket for Health Care in Kenya?
Category: Health
By: Darmi Jattani, Oscar Ochieng,
Anyone who lives in constant worry of what would happen to them if they get ill, of whether they will be able to afford care or time off work, lives in a state of un-freedom[restriction]. Any model of society that makes this worry inevitable is itself diseased (William Shoki, 2021).
The Covid-19 pandemic has not only painfully exposed the gaps in health systems and infrastructure (most hospitals lack requisite facilities), but also the high levels of vulnerabilities of individuals, and households. Most poor and vulnerable people in Kenya have limited resources to cope with the economic and health impacts of the pandemic. According to the 2019 Kenya Population and Housing Census there are about 19.5 million poor people in Kenya with the pandemic worsening the number of poor people. The World Bank reports that by November 2020, 2 million Kenyans had been pushed into poverty due to loss of income as a result of reduction in sources of livelihoods.
During times of economic uncertainty, citizens look up to the government to provide essential services such as health and food. Furthermore, the right to equal health care is embedded in the Constitution of Kenya, 2010. Article 43 (a) states that “Every person has the right to the highest attainable standard of health, which includes the right to health care services, including reproductive health care”. Where health systems fail to provide adequate financial protection, people may not have enough money to pay for health care or to meet other basic needs.
Kenyans at the base of the pyramid experience financial hardship when out-of-pocket payments, formal and informal, is enormous in relation to a household’s ability to pay for health care. As a result, lack of financial protection reduces access to health care therefore undermining the health status and exacerbating health and socioeconomic inequalities. Globally, over 100 million people are pushed below poverty line annually as a result of Out of Pocket (OOP) health expenditure. Out-of-pocket payments are defined as direct payments made by individuals to health care providers at the time-of-service use. Out of pocket health care payments increases the financial burden of a household especially where households have to borrow funds from financial institutions.
With the aim to ensure access to affordable quality health services and reduce the out-of-pocket cost by Kenyans, several initiatives have been enforced. In 2004, the elimination of user fee at primary health care facilities, with the exception of registration fee, was introduced. The user fees at health facilities were used as additional source of revenue to fund healthcare services. This was improved in 2013 when all user fees including registration fees were abolished. This was necessitated by the finding that there was low adherence to the policy at most health facilities and Kenyans continued to pay higher fees. The National Government compensates County Governments for the user fees foregone in form of conditional grants and is budgeted for in each financial year.
The National Health Insurance Fund (NHIF) is the main insurer in the health sector. The National Health Insurance Fund (NHIF) was established in 1966 to provide mandatory health insurance to formal employees who pay an income rated monthly contribution through statutory deductions. This was later expanded to cover informal sector employees in 1998 through voluntary contributions. Statistics show that NHIF covers 18 percent of Kenyans (estimated at 8.5 million Kenyans), whereas the 32 private health insurers collectively cover only 1 percent of the Kenyan population. This means that majority of Kenyans depend on out of pocket to pay for health expenditure. According to the Kenya National Health Accounts report, sources of revenues for financing schemes is the government, corporations, households and donors. As shown in table 1, government and households are the largest sources of revenue for health expenditure. The share of household’s expenditure on health has been increasing, from 30% in financial year 2009/10 to 33% in financial year 2015/16. It is evident that households’ expenditure on health is equal to the government’s expenditure on health, additional indication that the allocation towards health is not sufficient. However, the share of donor funds has reduced from 32% to 22% in 2015/16, signaling a shift from donor reliance to government and household for health expenditure.
Table 1: Health Expenditure by institutions providing revenues for financing schemes
Financial protection by NHIF is quite weak since it only offers limited financial protection – with the poor, those over 60 years’ old and patients with chronic illnesses having lowest access. Insured members (non-civil servants) still need to pay out of pocket fees for treatment, diagnosis, and pharmaceuticals. Statistics show that in 2018, high out of pocket health care expenditures led to 7.1 percent of households that used health care facing catastrophic expenditures, an increase from 5% in 2014. Two indicators are used to track the extent to which out of pocket healthcare payments present households with financial difficulties. The first is the incidence of catastrophic expenditures and the second is impoverishment. Incidence of catastrophic expenditure measures the levels OOP healthcare payments that present financial difficulties to households whereas impoverishment measures the levels of OOP payments that push households into poverty. In 2014, 39% of households reported that OOP payments pushed them into poverty, an increase from 32% in 2008. This illustrates that Kenya still lags behind in protecting its people against financial risks associated with ill health and health care seeking behavior.
In instances where citizens prefer to use public health facilities, the situation of the facilities are discouraging. Most resources in public hospitals or meant for public hospitals are mismanaged and misappropriated for corrupt ends, with stories regularly surfacing about horrific malpractice. One distressing story in recent history is that of the Covid-19 millionaires at Kenya Medical Supplies Authority (KEMSA) where tenders were awarded to fictitious companies to supply Covid-19 equipment’s (PPEs) at inflated prices. These supplies were never delivered to most public hospitals and if they were delivered, they were of low quality which led to strikes by health workers and death of patients. The leasing of medical equipment (Managed Equipment Services-MES) project was initiated in 2015 as an alternative health care financing option to scale up health infrastructure for provision of specialized medical care has been associated with multiple audit queries and cases of no value for money is another distressing story.
Chart 1: Budgetary Allocations to the Health Sector (Ksh. Billion)
The Kenyan government is making strides in increasing budgetary allocation to the health sector but more needs to be done on the oversight side to ensure the allocated funds are efficiently used in service delivery. As illustrated in Chart 1, the budgetary allocation towards health sector has been increasing. In financial year 2017/18, Ksh. 75.4 billion was allocated to the ministry of health and Ksh. 105 billion towards county governments, with the total allocation increasing to Ksh. 209.5 billion in financial year 2018/19. The allocation to the health sector in financial year 2019/20 was revised twice to accommodate the increased expenditure due to the pandemic, with the final revision of Ksh. 103.4 billion for ministry of health and Ksh. 124 billion for county governments. Despite the continuous increase in budgetary allocation, as a share of the total government budget, the allocation translates to 7-9%. This means that Kenya still lags behind to meet the Abuja Declaration target of 15 percent.
Kenya has also made a commitment to achieve Universal Health Coverage by 2022 as a health policy priority, and is also one of the key agenda items in the BIG 4 Agenda. This is commendable and a step in the right direction as UHC focuses at reducing catastrophic expenditure on health. To attain this “Dream” there is need to increase budgetary allocations to reduce the Out-of-Pocket expenditures to the recommended rates of 12 – 15 percent as issued by the World Health Organization (WHO). Due to the limited fiscal space to allow for increased allocation to health, and the increasing public debt, increase in budgetary allocation is unlikely. Therefore, the available funds can be directed towards realization of the National Health Insurance Fund reforms and universal health coverage. The reforms include the introduction of the civil servants’ scheme, introduction of a stepwise quality improvement system, health insurance subsidy for the poor, revision of monthly contribution rates and expansion of benefit packages and upward revision of provider reimbursement rates. The reforms are well intentioned but the design of implementation should be interrogated to speed up the realization of providing financing risk protection to Kenyans.
In conclusion, it is clear that out of pocket is not affordable for majority of Kenyans. Increasing availability and access to health insurance is the most efficient in reducing financial risks associated with out of pocket health expenditure. The annual increase in the budgetary allocation towards the health sector should be evidence based and targeted towards attainment of universal health coverage.
Photo Credit: Sam Moqadam (Unsplash)
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Can People Afford to Pay Out of Pocket for Health Care in Kenya?
| Post date: Thu, Jul 15, 2021 |
| Category: Health |
| By: Darmi Jattani, Oscar Ochieng, |
Anyone who lives in constant worry of what would happen to them if they get ill, of whether they will be able to afford care or time off work, lives in a state of un-freedom[restriction]. Any model of society that makes this worry inevitable is itself diseased (William Shoki, 2021).
The Covid-19 pandemic has not only painfully exposed the gaps in health systems and infrastructure (most hospitals lack requisite facilities), but also the high levels of vulnerabilities of individuals, and households. Most poor and vulnerable people in Kenya have limited resources to cope with the economic and health impacts of the pandemic. According to the 2019 Kenya Population and Housing Census there are about 19.5 million poor people in Kenya with the pandemic worsening the number of poor people. The World Bank reports that by November 2020, 2 million Kenyans had been pushed into poverty due to loss of income as a result of reduction in sources of livelihoods.
During times of economic uncertainty, citizens look up to the government to provide essential services such as health and food. Furthermore, the right to equal health care is embedded in the Constitution of Kenya, 2010. Article 43 (a) states that “Every person has the right to the highest attainable standard of health, which includes the right to health care services, including reproductive health care”. Where health systems fail to provide adequate financial protection, people may not have enough money to pay for health care or to meet other basic needs.
Kenyans at the base of the pyramid experience financial hardship when out-of-pocket payments, formal and informal, is enormous in relation to a household’s ability to pay for health care. As a result, lack of financial protection reduces access to health care therefore undermining the health status and exacerbating health and socioeconomic inequalities. Globally, over 100 million people are pushed below poverty line annually as a result of Out of Pocket (OOP) health expenditure. Out-of-pocket payments are defined as direct payments made by individuals to health care providers at the time-of-service use. Out of pocket health care payments increases the financial burden of a household especially where households have to borrow funds from financial institutions.
With the aim to ensure access to affordable quality health services and reduce the out-of-pocket cost by Kenyans, several initiatives have been enforced. In 2004, the elimination of user fee at primary health care facilities, with the exception of registration fee, was introduced. The user fees at health facilities were used as additional source of revenue to fund healthcare services. This was improved in 2013 when all user fees including registration fees were abolished. This was necessitated by the finding that there was low adherence to the policy at most health facilities and Kenyans continued to pay higher fees. The National Government compensates County Governments for the user fees foregone in form of conditional grants and is budgeted for in each financial year.
The National Health Insurance Fund (NHIF) is the main insurer in the health sector. The National Health Insurance Fund (NHIF) was established in 1966 to provide mandatory health insurance to formal employees who pay an income rated monthly contribution through statutory deductions. This was later expanded to cover informal sector employees in 1998 through voluntary contributions. Statistics show that NHIF covers 18 percent of Kenyans (estimated at 8.5 million Kenyans), whereas the 32 private health insurers collectively cover only 1 percent of the Kenyan population. This means that majority of Kenyans depend on out of pocket to pay for health expenditure. According to the Kenya National Health Accounts report, sources of revenues for financing schemes is the government, corporations, households and donors. As shown in table 1, government and households are the largest sources of revenue for health expenditure. The share of household’s expenditure on health has been increasing, from 30% in financial year 2009/10 to 33% in financial year 2015/16. It is evident that households’ expenditure on health is equal to the government’s expenditure on health, additional indication that the allocation towards health is not sufficient. However, the share of donor funds has reduced from 32% to 22% in 2015/16, signaling a shift from donor reliance to government and household for health expenditure.
Table 1: Health Expenditure by institutions providing revenues for financing schemes
Financial protection by NHIF is quite weak since it only offers limited financial protection – with the poor, those over 60 years’ old and patients with chronic illnesses having lowest access. Insured members (non-civil servants) still need to pay out of pocket fees for treatment, diagnosis, and pharmaceuticals. Statistics show that in 2018, high out of pocket health care expenditures led to 7.1 percent of households that used health care facing catastrophic expenditures, an increase from 5% in 2014. Two indicators are used to track the extent to which out of pocket healthcare payments present households with financial difficulties. The first is the incidence of catastrophic expenditures and the second is impoverishment. Incidence of catastrophic expenditure measures the levels OOP healthcare payments that present financial difficulties to households whereas impoverishment measures the levels of OOP payments that push households into poverty. In 2014, 39% of households reported that OOP payments pushed them into poverty, an increase from 32% in 2008. This illustrates that Kenya still lags behind in protecting its people against financial risks associated with ill health and health care seeking behavior.
In instances where citizens prefer to use public health facilities, the situation of the facilities are discouraging. Most resources in public hospitals or meant for public hospitals are mismanaged and misappropriated for corrupt ends, with stories regularly surfacing about horrific malpractice. One distressing story in recent history is that of the Covid-19 millionaires at Kenya Medical Supplies Authority (KEMSA) where tenders were awarded to fictitious companies to supply Covid-19 equipment’s (PPEs) at inflated prices. These supplies were never delivered to most public hospitals and if they were delivered, they were of low quality which led to strikes by health workers and death of patients. The leasing of medical equipment (Managed Equipment Services-MES) project was initiated in 2015 as an alternative health care financing option to scale up health infrastructure for provision of specialized medical care has been associated with multiple audit queries and cases of no value for money is another distressing story.
Chart 1: Budgetary Allocations to the Health Sector (Ksh. Billion)
The Kenyan government is making strides in increasing budgetary allocation to the health sector but more needs to be done on the oversight side to ensure the allocated funds are efficiently used in service delivery. As illustrated in Chart 1, the budgetary allocation towards health sector has been increasing. In financial year 2017/18, Ksh. 75.4 billion was allocated to the ministry of health and Ksh. 105 billion towards county governments, with the total allocation increasing to Ksh. 209.5 billion in financial year 2018/19. The allocation to the health sector in financial year 2019/20 was revised twice to accommodate the increased expenditure due to the pandemic, with the final revision of Ksh. 103.4 billion for ministry of health and Ksh. 124 billion for county governments. Despite the continuous increase in budgetary allocation, as a share of the total government budget, the allocation translates to 7-9%. This means that Kenya still lags behind to meet the Abuja Declaration target of 15 percent.
Kenya has also made a commitment to achieve Universal Health Coverage by 2022 as a health policy priority, and is also one of the key agenda items in the BIG 4 Agenda. This is commendable and a step in the right direction as UHC focuses at reducing catastrophic expenditure on health. To attain this “Dream” there is need to increase budgetary allocations to reduce the Out-of-Pocket expenditures to the recommended rates of 12 – 15 percent as issued by the World Health Organization (WHO). Due to the limited fiscal space to allow for increased allocation to health, and the increasing public debt, increase in budgetary allocation is unlikely. Therefore, the available funds can be directed towards realization of the National Health Insurance Fund reforms and universal health coverage. The reforms include the introduction of the civil servants’ scheme, introduction of a stepwise quality improvement system, health insurance subsidy for the poor, revision of monthly contribution rates and expansion of benefit packages and upward revision of provider reimbursement rates. The reforms are well intentioned but the design of implementation should be interrogated to speed up the realization of providing financing risk protection to Kenyans.
In conclusion, it is clear that out of pocket is not affordable for majority of Kenyans. Increasing availability and access to health insurance is the most efficient in reducing financial risks associated with out of pocket health expenditure. The annual increase in the budgetary allocation towards the health sector should be evidence based and targeted towards attainment of universal health coverage.
Photo Credit: Sam Moqadam (Unsplash)
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Introduction The Finance Bill 2024 in Kenya sparked a wave of collective action primarily driven by Gen Z, marking a significant moment for youth engagement in Kenyan politics. This younger generation, known for their digital fluency and facing bleak economic prospects, utilised social media platforms to voice their discontent and mobilise protests against the proposed […]
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The credibility of Monetary Policy in Kenya is compromised at present by two factors: As we anticipated mid-year, inflation is headed below the target range for the first time; The 7-member Monetary Policy Committee (MPC) has four vacancies. In light of the former prospect, the MPC reduced the Central Bank of Kenya (CBK) Policy Rate, […]
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Adjusted IMF Program Demands on Kenya
In the IMF WEO published yesterday, the IMF elaborated its macroeconomic framework for the ongoing IMF program. The numbers clarify how the program, derailed by the mid-year Gen-Z protests, has been adjusted to make possible the Board meeting for the combined 7th and 8th Reviews scheduled for October 30. The adjustments, unfortunately, again raise profound […]
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