By Jevans Nyabiage

Claims that the Sh4.3 billion civil servants medical scheme could have been abused by National Hospital Insurance Fund (NHIF) officials raises questions about the Fund’s integrity to be entrusted with contributors’ millions.

Even as the ministry of Medical Services launches investigations into fraud allegations, questions have been raised on whether NHIF can roll out a corrupt-free comprehensive medical cover under it’s current state and structure.

New NHIF rates that were suspended a week ago for three months were earmarked to finance an outpatient scheme for regular members, and a pilot project for envisaged universal healthcare for all Kenyans. The Fund is also administering a Sh5.2 billion scheme for Kenya National Union of Teachers.

Under the civil servants and teachers scheme, the Fund offers outpatient and inpatient insurance services.

Financial Journal has established that a policy gap may have opened up NHIF to abuse in which millions of shillings are claimed to have been siphoned.

Under the current set-up, NHIF is both a regulator and an administrator. Its mandate is to register and receive contributions, settle members’ bills in hospitals and set criteria for accrediting hospitals. NHIF also regulates contributions payable to the Fund.

The Fund was established in 1966, under Cap 255, to be run by an advisory Council appointed by minister of Health. In 1998, Cap 255 was repealed and replaced by the NHIF Act, which transformed the Fund to a State corporation managed by a Board representing various bodies and interest groups.

wide consultations

The plan to provide medical cover to civil servants and teachers, analysts say, is noble, but may be seen as jumping the gun or trying to pre-empt change and wide consultations in development of the healthcare financing sector.

NHIF chief executive officer Richard Kerich maintains Fund had conducted a successful pilot run prior to the implementation of an outpatient services. “The project was bound to succeed as we had operated it for eight months in Mumias and Nairobi before rolling it out nationwide,” he said. “We were ready since 2009 and we knew that the services will be enjoyed by all members.”

“This is in line with the new Constitution which guarantees everyone the right to health care,” Kerich said, adding that his firm is committed to offering quality outpatient and inpatient services.

NHIF is currently under probe for allocating funds to Clinix Healthcare and Meridian for non-existent medical facilities. 

Dr Kanyenje Gakombe, the vice chair of the Kenya Association of Private Hospital, told the Parliamentary Committee on Health that the mistake the national insurer made was to launch the scheme before enlisting service providers.

“Ordinarily if you are starting a service, you set up your service infrastructure then you go and look for customers. Civil Servants were signed up when negotiations with providers were still on. There was no elaborate provider network to talk about at the time that the scheme was being signed up,” Gakombe told Financial Journal in an exclusive interview.

He said the association held several meetings with Medical Services minister Anyang’ Nyong’o and the NHIF board to advice prior launching of the scheme but failed to reach any conclusions.

Gakombe said the main reason why most private hospitals refused to sign up to the outpatient scheme because of the amount allocated per NHIF member under the capitation model.

Capitation is a system where a health facility is given a fixed amount of money by the insurer to offer services.

NHIF proposed to allocate Sh2,850 per member per year to offer outpatient services. However, some of the private hospitals said this was not adequate and demanded for between Sh6,000 and Sh9,000, said Gakombe.

“It is almost impossible to quote for outpatient services without a scope of the services because outpatient services could even include day surgery, and they could be limited to consultation and dressing so we found it very hard to give any form of financial proposal to NHIF,” he told the parliamentary committee that is probing irregular allocation of funds to ghost and non-existent clinics.

Civil servants were expected to receive unlimited inpatient and outpatient services after joining the scheme which began in January this year.

Gakombe proposed a review of the amount offered to hospitals and also said that there needed to be a strong system to ensure that members got quality service that they were entitled to even under capitation model of payment.

“In the absence of a very strong and aggressive quality assurance system, capitation simply puts money into the pockets of service providers without guaranteeing that they will render any service because any patient who turns up for treatment is actually a nuisance. They are coming to spend money, so they are not welcome,” he stated.

first payment

Kerich defended the capitation system saying it is the most appropriate for outpatient whereas the “Fee For Service” is the most appropriate for in-patient care.

“So far, the Fund made the first payment to cover the month of January, February to March. On outpatient we had a budget of Sh1.58 billion and the actual we have paid so far is Sh635 million and therefore we still have got more than Sh934 million for the next three months,” Kerich said when he released the First Quarter Report for Civil Servants and Disciplined Services Medical Scheme that begun in January

Lack of adequate regulation and proper external oversight of NHIF as an expanding social health insurance scheme is a major policy lapse that is bound to be abused.

Experts say efforts by NHIF to expand cover in the absence of the policy and regulatory framework is fraught with many risks.

For example, who will regulate key decisions that NHIF will make about contribution rates, benefit packages, provider contracting and purchasing of benefits, insured members interests, financial performance of NHIF (particularly payout ratios, administration expenses and investments) and customer complaints?

The push from many quarters is to see, in terms of organisational capacity, NHIF make major transformational changes before it can be an effective vehicle in delivering universal health insurance. The changes are necessary at the level of its legal framework, governance, management processes, and accountability to insured members and consumer responsiveness.

Also, the challenge of reliable and credible service delivery providers must also be addressed.

These issues can only be addressed in a comprehensive policy and regulatory reform process and involve all those involved including other government ministries.

no clear mandate

The policy and regulatory framework for healthcare financing in Kenya is still unclear and uncertain.

And from a policy perspective there is still no clear mandate for universal health insurance coverage other than brief statements in Vision 2030 and the National Health Sector Strategic Plans.

The ministry of Health and other healthcare players, including financiers, have been debating a healthcare financing strategy for several years now since the 2004 National Social Hospital Insurance Fund (NSHIF) failure. A draft policy was done in 2009.

However there were a few sticking points that led to disagreements — from NHIF, private sector and the ministry of Health.

Among other things that the policy had recommended was the splitting of various social health insurance functions that would have seen a different body collect the health insurance contributions and NHIF concentrate on purchasing of healthcare services for members.

The policy had also created an overall regulator for NHIF and other insurance schemes and a fund to pay contributions for indigents and poor households.

However, some opposed these changes probably because it meant radical transformation of existing institutions and greater oversight of health insurance funds.