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Bitter reality of NHIF cash crunch and attempt to navigate through financial maze

Health & Science
 National Hospital Insurance Fund (NHIF). It boasts over 16 million members and approximately 30 million dependents. [Jonah Onyango, Standard]

Nelson Korir, a Nairobi resident, visited a private hospital in the city for a routine check-up.

To his surprise, when he mentioned having National Health Insurance Fund (NHIF) as his mode of payment, he was informed that it was no longer accepted, despite being up to date with his remittance.

Civil servants in a government telecommunications department disclosed that they were unable to access services because the government had not remitted their statutory deductions to NHIF, despite deducting the amounts from their salaries.

Health CS Susan Nakhumicha this week acknowledged the financial challenges faced by NHIF. She attributed the difficulty in disbursing funds from the treasury to the government’s financial constraints, which have had a significant impact on NHIF’s operations.

Nakhumicha said she had discussed the cash crunch at the national health insurer with the President and had written to her counterpart at the treasury to expedite the process of disbursing funds.

“The reports are accurate, and I have been informed about the issues at NHIF regarding funds. However, NHIF does not operate independently; we rely on the Exchequer,” said the CS.

And on Saturday, the CS caid the Treasury released funds to the national health insurer, but she did not specify the amount.

“This morning (Saturday) I received a call from National Treasury telling me that NHIF has received the pending funds,” Nakhumicha said during the opening of the Paediatric Ophthalmology Centre and the Training Centre at the Sabatia Eye Hospital in Vihiga.

Earlier, Nakhumicha had said the state owed NHIF Sh20 billion, and if this amount were released, it would enable NHIF to function effectively.

“I recently informed the President of the situation, and he has agreed to ensure the problem is solved as soon as possible. As we speak, Treasury CS Njuguna Ndung’u has informed me that he has released the funds, and hospitals should be receiving their capitation soon. We, therefore, assure Kenyans that the situation will be resolved in this very month of June,” said Nakhumicha.

When responding to the question of where the premiums paid by Kenyans go, the CS said NHIF covers a wide range of costly medical conditions and even pays for medical premiums for those seeking treatment in countries like India.

“It should be noted that monthly deductions and contributions alone cannot sustain the operations of NHIF. NHIF has expanded its coverage to include diseases such as cancer, which are expensive to treat, and with the increased cases, as well as the recent Covid-19 situation, it is technically impossible for monthly contributions and deductions from members alone to cater for the healthcare needs of Kenyans under NHIF. This is why we need the national treasury to provide its capitation,” she said.

Pending bills

The CS also mentioned that she is implementing reforms and conducting a cleaning exercise at NHIF, similar to what she has done at KEMSA, to ensure the fund operates efficiently.

“I am implementing comprehensive reforms in NHIF. We have appointed a new chairperson of the board, Eng Kamau, and we are currently in the process of recruiting a new CEO who will be responsible for driving President William Ruto’s vision of universal health coverage by offering affordable and quality healthcare,” she said.

She further emphasised that these new reforms will restore NHIF’s lost glory and foster greater trust among Kenyans.

As NHIF fails to disburse funds owed to hospitals for up to a year, many healthcare facilities are now rejecting NHIF covers to avoid accumulating further pending bills.

The capitation provided by NHIF is crucial for the functioning of these hospitals, and the delays in payments have paralyzed the services they provide.

Kenyans have taken to various online platforms to express their dissatisfaction with NHIF, sharing stories of being denied services at different levels of care in various hospitals.

The challenges faced by NHIF did not arise overnight; they have been gradually accumulating until reaching a breaking point. Starting from May 30, rural hospitals began demanding cash payments from patients. The Rural Private Hospital Association of Kenya (RUPHA) said NHIF had violated the terms of their agreement by failing to make the required payments for the April-June 2023 quarter.

Brian Lishenga, chairman of RUPHA, said: “Due to the board’s failure to fulfill its financial obligations, health facilities under RUPHA have been compelled to issue an immediate notice stating that beneficiaries of NHIF Capitated Schemes must make cash payments to access services, effective from May 31, 2023.”

An audit report conducted two months ago revealed that NHIF was grappling with unpaid bills totalling billions of shillings. The report, commissioned for the parastatal, highlighted that the National Health Insurance Fund had amassed a growing backlog of unpaid hospital claims, which had increased by Sh5 billion in the six months leading up to December 2022.

“The indications of the fund’s deteriorating solvency include the escalating unpaid hospital bills, which rose by Sh5 billion from Sh10 billion to Sh15 billion over the six months,” stated a section of the report prepared by Kenbright Actuarial & Financial Services, NHIF’s actuarial firm.

The report also cautioned that the fund was at risk of transitioning from technical insolvency to actual insolvency.

These challenges arise at a time when the Kenyan government relies on NHIF to lead the achievement of universal health coverage. However, despite reducing the remittance amount to the fund from Sh500 to Sh300 for low-paid workers starting in July, it is unlikely that the issues afflicting NHIF will be resolved soon.

Last year, the former NHIF chief executive Peter Kamunyo said the fund was losing Sh10 billion annually due to fraudulent claims, including impersonation and fictitious claims by both public and private hospitals. He added that such practices have deprived millions of Kenyans of access to quality healthcare.

Dormant accounts

In addition to these challenges, NHIF has encountered financial difficulties stemming from dormant accounts, further aggravating the funding shortfall of the fund. NHIF boasts over 16 million members and approximately 30 million dependents, with nearly half of the members defaulting on their payments.

“As of the end of March 2023, only 44% of these members remained active. The informal sector has been hit the hardest, with only 22% being active, while the formal sector stands at 77%. It’s important to note that these active members, especially from the informal sector, have ongoing medical needs, which puts the sustainability of the Fund in a precarious position,” explained Samson Kuhoro, the acting NHIF chief executive.

When questioned about the delays in disbursing owed funds to hospitals, the NHIF boss said subsequent payments have been made to hospitals.

“To ensure the fund’s sustainability, everyone has a role to play in making timely contributions and payments so that we can effectively cover eligible medical claims.”

The Kenya Association of Private Hospitals has urged NHIF to promptly disburse the owed funds to hospitals to ensure they can continue delivering quality healthcare to NHIF members and their clients.

Dr Timothy Olweny, the Secretary-General of the Kenya Association of Private Hospitals, said: “Most hospitals are burdened with debt, and they can only sustain the provision of quality healthcare to NHIF members and their clients if the payments are made.”

Many hospitals heavily rely on NHIF to support and sustain their operations. However, due to the delays, most hospitals are facing financial strain and are requesting cash payments. The delayed capitation from NHIF has adversely affected service delivery. The NHIF boss mentioned that some hospitals have yet to submit their utilisation reports, while others’ reports are still under review before the funds can be disbursed to them.

“For providers to qualify for capitation, they must submit utilisation reports for the previous quarter. In the current quarter, some hospitals failed to submit their reports, and others are still under review. For those who have submitted the reports, NHIF has started the payment process in accordance with the contract provisions,” said the NHIF boss.

NHIF capitation involves the pre-purchasing of healthcare services, allowing NHIF to secure health services in advance for members to access outpatient healthcare.

The government, under the leadership of President Ruto, relies on NHIF, despite its financial challenges, to spearhead universal health coverage. However, Kenyans are concerned about when they will experience the full benefits of their contributions. NHIF maintains that it remains committed to the well-being of its members by ensuring that their contributions result in tangible and high-quality healthcare services.

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