NHIF rot rings the death knell for universal health coverage

The front entrance of the NHIF building in Nairobi. Corruption, bungled recruitment of members and mismanagement of contributors' monies sum up mess at NHIF. FILE PHOTO | NATION MEDIA GROUP

What you need to know:

  • During the year under review, the report shows that active members contributed Sh36.49 billion to the fund.
  • Further, the comprehensive income statement of NHIF for the year under review resulted in a net loss of Sh3,671,996,374.

The rot at the National Hospital Insurance Fund (NHIF) is not about to end any time soon as documents tabled in Parliament paint a picture of a government institution that is on its deathbed.

In the documents obtained by the Nation, corruption, bungled recruitment of members, mismanagement of contributors’ monies, inflated procurement costs that are saddled with irregularities, and stints in counter-productive commercial insurance schemes sum up the mess at NHIF.

LOST SH16 BILLION

The mess explains a systemic problem and the new Health Cabinet Secretary Mutahi Kagwe will have a heavy responsibility to convince Kenyans that all is well.
Mr Kagwe will need time, the right management and a board that is committed if President Uhuru Kenyatta’s Universal Health Coverage (UHC) is to be realised.

NHIF lost about Sh16 billion after Treasury CS Ukur Yattani blocked it from providing commercial medical insurance and recruitment of members is the only sustainable strategy the insurer could use to strengthen its survival amid dwindling revenue streams.

According to the NHIF annual management report for the 2018/19 financial year, of the 47 million Kenyans as per last year’s census results, the insurer had enrolled 8,456,761 members — 4,294,687 formally employed while 4,162,074 are self-employed.

The report shows that, as of June 30, 2019, only 3,755,519 (44.41 per cent) of the members were active contributors, out of which 2,831,967 (65.94 per cent) were formally employed and 923,552 (22.19 per cent) self-employed.

FORMAL EMPLOYMENT
In a snapshot, NHIF’s vibrant marketing activities have only resulted in an enrolment of 923,552 citizens since 2,831,967 are in formal employment, which does not require much input from the activities.

Furthermore, the 923,552 contributors, which is way below the required enrolment threshold, could have pre-existing conditions (sickness) and may have enrolled purposely to seek medication (anti-selection against the fund).

Dagoretti North MP Simba Arati notes that the mess may have kept away millions of potential members. “With all these scandals at the fund, no member will be willing to contribute their hard-earned cash to be embezzled by a management that has no clue what it’s supposed to do,” says Mr Arati.

During the year under review, the report shows that active members contributed Sh36.49 billion to the fund.

Assuming that NHIF recruited all the adults as per the census report — 27,154,135 — it was likely to generate about Sh291 billion per year at a basic minimum of Sh500 per month, which is enough to manage the UHC plan smoothly. But because of recruitment failure, NHIF is finding it hard to manage its budget.

COMMERCIAL SCHEMES

While the fund argues that the loss of the commercial scheme will dwindle its financial base, it’s actually the latter that is eating into its revenue base.

A close scrutiny of the performance of civil servants, National Police Service (NPS) and Kenya Prisons Service (KPS) schemes reveals that NHIF utilised contributions to subsidise the commercial premiums.

Further, the comprehensive income statement of NHIF for the year under review resulted in a net loss of Sh3,671,996,374.

A keen eye would note that if the 2019 total statutory contributions of Sh36,502,988,785 were fortified in a secure account and protected from the preying hand of rogue managers, NHIF would have made a profit. This means that contributions were not expensed as claims, which raises questions of how prudently the subsidised cash was utilised.

According to the NHIF comprehensive income statement, NPS and KPS medical scheme was in underwriting profit of Sh1,260,521,106 while the civil servants scheme made a marginal loss of Sh643,071,154.

INSURANCE SCHEMES
This is different from the figures given in the utilisation reports, which show total claims of Sh6,248,181,654 and Sh5,497,212,763.

So, where did the money allocated to subsidise the schemes go as the same is not reflected in the comprehensive income statement?

The documents also show that NHIF spent Sh1.9 billion for drafting contracts with healthcare service providers.

These contracts were as a result of NHIF acceptance of the commercial insurance schemes, which required a network of hospitals. This is not only a waste of UHC resources but an abuse of contributors whose benefits are bed rebates in most of the cases.
Procurement irregularities.

The procurement for the provision of integrated revenue collection system awarded to M/s Web Tribe Limited is another loophole that siphoned NHIF money.

The initial three-year contract signed between NHIF and M/s Web Tribe on August 25, 2014 was valued at Sh49,613,440, where the contractor was required to provide an integrated revenue management system at NHIF.

The report of the Public Procurement Regulatory Authority, however, notes that the contract price was in excess of the budgeted estimate by Sh19,513,440.

NHIF EXPENSES

The NHIF annual report and financial statement for the year ending June 30, 2019 indicates that 11 members of the NHIF board consumed Sh32 million.

This translates to at least Sh2.6 million a month, with each member taking home about Sh242,424 a month or Sh12,121 per day for 20 working days, meaning they are in NHIF meetings every day.

The board is required to sit quarterly unless there is an urgent matter to be transacted.

According to nominated MP Godfrey Osotsi, some of the issues the incoming CS should address is to clean up the fund and embark on the recruitment drive for new members while ensuring that those already on board contribute.

“The CS can consider lowering the threshold of informal sector members to realise 100 per cent compliance,” he says.

Mr Osotsi, an ICT expert, notes that Mr Kagwe should also consider engaging Kenya Revenue Authority, telcos and banks to ensure the contributions get to NHIF accounts, including use of recruiting agents to get more contributors on board.