December 13, 2022

Healthcare Financing: Mobilizing resources for the Kenyan Healthcare System

Shailja Sharma

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Millions of people in Africa do not have access to healthcare services. Globally, countries have policies which outline the services their populations are entitled to and how they are financed. Health financing policies can bridge this gap and enable progress towards universal health coverage to be made. Health financing is, therefore, a core function of health systems. Public financing is still considered the best vehicle to achieve universal healthcare coverage and ensure no one is left behind.

In his opening remarks at the Annual Health Summit 2022, Professor Gilbert Kokwaro, the Director of the Institute of Healthcare Management (IHM) at Strathmore University Business School (SBS), explained the importance of aligning health systems with the needs of the people they are created to serve, “Function determines structure and structure determines resources.” Professor Kokwaro put the discussions on healthcare financing into context by discussing the challenges faced by the Kenyan health system.

The health sector in Kenya is comprised of the public system, the private sector which includes private for-profit, non-governmental organizations (NGOs) and faith-based organizations. Following devolution, Kenya shifted from a centralized to a decentralized health system. A well-performing public healthcare system is necessary for Kenya to continue its journey towards achieving Universal Health Coverage (UHC). Over the last decade, Kenya’s determination to achieve UHC has not been futile; there has been a reduction in childhood deaths, improvement of access to maternal care, availability of anti-retroviral therapies, and an expansion of health insurance coverage.

Kenya, like other low and middle-income countries faces two major obstacles: insufficient domestic funding and inefficient use of available resources. As the country is now perceived by foreign donors as capable of financing its health system, the country must transition from donor dependency to self-sufficiency. The challenge remains to manage this transition effectively without losing health gains achieved in the last decade.

Donor dependency measures the extent to which a country can absorb the shock of a decline in donor funding. Kenya faces serious donor dependency in several key subsectors of its health system. External financing makes up more than half of all funding for immunizations, tuberculosis (TB), and HIV.

Additionally, Kenya has a concentrated donor landscape. In 2017, four donors made up nearly 90 percent of all health official development assistance (ODA): the United States (62 percent), the Global Fund to Fight AIDS, Tuberculosis and Malaria (18 percent), the United Kingdom (5 percent), and Gavi (4 percent).

Professor Kokwaro suggested that strong policies, strong oversight, and strong systems hold the key to successfully weaning Kenya off donor dependency. The healthcare system must be evaluated holistically and inefficiencies in the system must be addressed to mobilize resources. He urged that available resources should be scrutinized and used efficiently and the promotive arm of the health system that supports the curative arm must not be overlooked and underfinanced.

Adding to the discussion regarding mobilization of resources, Professor Edwine Barasa, the Director of the Nairobi branch of the KEMRI-Wellcome Trust Research Programme and a well-respected health economist said, “When we think of revenue mobilization for healthcare, we have to think of what the fiscal space in the country from which we can mobilize resources, Kenya has a constrained fiscal space.” He suggested that there are several ways to assess a country’s fiscal space, the country’s expenditure to GDP ratio, the tax to GDP ratio and the debt to GDP ratio and that all three ratios suggest that Kenya faces substantial fiscal constraints. Although there has been an upward trend for the Kenyan budget allocation for healthcare, achievement of the 15 percent target set by the Abuja Declaration which is bound to accelerate Kenya’s journey towards UHC still requires a significant amount of funds.

In Kenya, the budget and budgetary process is provided for by the country’s constitution and is elaborated in the Public Finance Management Act of 2012 (PFMA). Each government ministry, department and agency at the national and county level develop their budget annually following set guidelines. These budgets are then reviewed and approved by the respective bodies. However, a key drawback to the enhanced revenue mobilization in the country is the spiraling public debt which is approaching 60per cent of the country’s GDP. With the debt issues and fiscal constraints, the country is experiencing, there are considerable obstacles to be overcome before the country can realise its vision to achieve UHC.

County governments face substantial constraints and bear the responsibility of delivering health services to the people they serve. Government policies targeted towards reducing corruption and wastefulness of public resources can play an indispensable role in boosting the fiscal space for health in Kenya. Resources must also be released on time and executed efficiently.

Overall, the counties have increased their contribution to the health sector although this is deemed to be insufficient to meet the needs of the population. Total health expenditure and government allocation to healthcare has also increased, but out of pocket costs and donor dependence is still high. Kenya will need to mobilize additional domestic resources to replace donor funds as key priority areas in the health sector will be under increased fiscal stress. The health system could mobilize additional resources through efficiency gains.

The mean overall budget efficiency is 70% on average for the health sector. This suggests that the Kenyan health system can mobilize an additional 30% through efficiency gains. There is also considerable variation in budget efficiency across counties. Furthermore, taxation measures aimed at enhancing the government’s revenue mobilization will play a key role in expanding the fiscal space for not only the public healthcare sector but also other sectors of the economy.

Although the need for UHC is well documented, the measures to increase mandatory prepaid funds to progress toward UHC are faced with several challenges including inefficiencies in revenue collection and use of health resources, inequitable access and utilization of health services and large populations working in the informal sector. Providing health insurance coverage for people outside the formal employment sector poses a key hurdle for this approach. It is administratively difficult to collect premiums from the informal sector as it is not organized, and many rely on low and irregular sources of income.

The informal sector employs over 80 percent of Kenyans in jobs that often expose them to hazards and illness, thereby increasing their need for healthcare. Currently, NHIF enrolment is mandatory among workers in the formal sector, but voluntary for the informal sector. Extending government coverage to the informal sector presents many difficulties.

Globally, voluntary contributions lead to low coverage. Many are more likely to pay for NHIF when they are sick leading to adverse selection. Mobilizing resources from the informal sector through mandatory NHIF enrolment could increase coverage and revenues. The government can also use tax revenues to subsidize enrolment for the informal sector.

Beyond actual increase in expenditure, the government should also consider other innovative ways to enhance the fiscal space for health in Kenya. The government should consider expanding public-private partnerships (PPP) in the health sector. Through dialogue, creativity, commitment, and efficiency the health sector in Kenya will continue to develop and become more inclusive.

Article by Shailja Sharma, SBS Faculty and Leadership and Career Coach

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