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Creating medical insurance scheme for civil servants fraught with danger

Tuesday October 18 2011

 

By JAINDI KISERO

The government should cancel and rethink plans to create a medical scheme for civil servants.

The idea of including the National Hospital Insurance Fund belatedly into the scheme was not well thought-out.

As it is, the whole arrangement has run into major contractual issues because the NHIF did not participate in the tender and was merely roped into the deal by the consortium of insurance companies awarded the contract.

Now, the insurance companies want the NHIF to be the one to sign with the government and to take the largest chunk of the risk.

How can the government sign with a party which did not participate in the tender in the first place? This matter could end up in court with one of the bidders challenging the legality of it all.

Nor does the idea of letting the NHIF carry most of the risk of providing medical insurance to civil servants a sound idea.

We must remember that the NHIF is still in the middle of a court case filed by Mr Francis Atwoli over its plans to provide out-patient medical services.

If the government proceeds to sign contracts with the NHIF as the major player and the insurance firms as minor stakeholders, the Fund risks being accused of trying to provide out-patient services through the back-door.

It is risky to plunge the NHIF into doing so before an independent actuarial study is conducted to determine how such a risk is likely affect the financial health of the body.

The NHIF should not just be lured by the huge premiums at stake.

What if the scheme runs into problems before the end of the year? The whole scheme could tumble under the weight of huge unforeseen claims.

The government risks ending up with a huge contingent liability which will eventually be transferred to the taxpayer.

The NHIF is currently not in such a great shape as far its long-term financial sustainability is concerned.

I recently came across a new audit of the financial sustainability of the NHIF by the consulting firm, Deloitte East Africa.

The conclusion by the consultants, who were brought in by the government and the International Finance Corporation of the World Bank, is that without an increase in contribution rates, and a drastic reduction in administrative expenses, the NHIF will soon face financial difficulties as it starts to use its reserves to meet recurrent expenditures.

Clearly, the NHIF will need to undergo some major financial restructuring before it is allowed to undertake the huge task of providing out-patient services to 215,000 civil servants and their families.

I am not against medical insurance for civil servants. In this country, the greater majority of citizens fund healthcare from out-of-pocket spending.

I know several households which have been driven to poverty due to financial shocks arising from unforeseen medical bills.

We don’t have enough risk-pooling mechanisms. That is why, when the government announced that it was introducing a medical insurance scheme for civil servants, we all applauded it as a move in the right direction.

Civil servants form a huge proportion of the formal labour force in this economy. Yet the majority still rely on out-of-pocketing spending to finance health services.

Indeed, the medical benefits which the government gives civil servants is woefully inadequate. Currently, they are paid a monthly out-patient medical cover ranging from Sh375 to Sh2,400 per month, with the rates being pegged on job groups.

Worse still, the money comes together with your pay which means most of that money ends being spent on things other than medical services.

Thus, the proposal to pool all the money paid to civil service into a medical insurance fund made a great deal of economic sense.

Consider the following statistics. The government spends an average Sh4.5 billion per annum in monthly allowances for civil servants.

If you include teachers, the figure comes to Sh7.3 billion per year. Pooled, this money is enough to create a giant fund.

But the approach must be scientific. The government needs to do more work before jumping to implement the scheme.