Mr Bernard Muchere, a former Internal Auditor at the National Treasury, has been summoned by the National Assembly over his claims that Sh21 billion was siphoned from the National Health Insurance Fund (NHIF) coffers in “fictitious” claims.
Mr Muchere, a Fraud Risk Assessment consultant, is required to appear before the Public Petitions Committee following his petition to the House over the dubious Incurred But Not Reported (IBNR) claims by the NHIF.
“The committee invites you to a meeting to provide information to facilitate consideration of the petition,” Mr Jeremiah Ndombi, Senior Deputy Clerk in the National Assembly, says in the letter of August 27, 2024, to Mr Muchere.
Mr Muchere’s petition was conveyed to the House by Speaker Moses Wetang’ula on December 6, 2024, and committed on the same day to the Public Petitions Committee chaired by Kitui East MP Nimrod Mbai in line with the House Standing Orders.
While committing the petition to the Mbai-led Committee, Speaker Wetang’ula directed the committee to expedite the investigations.
“Having established that the matter raised in the petition is well within the authority of this House, I hereby commit the petition to the Public Petitions Committee for consideration,” directed Speaker Wetang’ula.
“The Committee is required to consider the petition and report its findings to the House and the petitioner in accordance with the Standing Orders.”
Other than the Ministry of Health, the petition also puts the NHIF board and National Treasury in a tight spot on account that the irregular payment “caused a major crisis in the contributors’ medical coverage resulting in most patients being denied treatment with vital consequences.”
Mr Muchere admitted receipt of Mr Ndombi’s letter and said that he is ready to “substantiate the facts in my petition.”
“I am ready to appear before the MPs as invited to set the record straight. I will defend every claim in my petition and at the end, Kenyans will know how NHIF has been used as a cash cow for a few people,” Mr Muchere said.
In his petition, Mr Muchere claims that upon undertaking a fraud examination on NHIF financial statements, he established that during the preparation of financial statements for the 2021/22 financial year, the NHIF management fraudulently created IBNR claims aggregating to over Sh21 billion.
The creation he says, was done with the help of an actuarial firm- Kenbright Actuarial and Financial Services- and backdated to the 2019/2020 and the previous financial years.
The petitioner notes that the unbudgeted claims were then charged to the NHIF members’ contributory schemes like Health Insurance Subsidy Programmes for Orphans and Vulnerable Children, and the poor, Older Persons and Persons with Severe Disability (HISP- OVCs and OPPSD).
The dubious payments, Mr Muchere notes, include Sh9.7 billion being proceeds from the National Health Scheme, Sh4.01 billion from the National Police Service (NPS) and Kenya Prisons Service (KPS), Sh2.9 billion from the civil servants' scheme, Sh2.3 billion meant for Linda Mama program and Sh780.7 million from the parastatal scheme.
The others include Sh683.92 million from the EduAfya scheme, Sh525.3 million from the county scheme, Sh190.2 million being proceeds from the retirees’ scheme, Sh31.3 million from HISP- OVCs and Sh6.5 million from HISP- OPPSD.
In 2014, the government, through NHIF, rolled out HISP to cushion OVCs and OPPSDs through a cash transfer programme under the State Department for Social Protection.
What raises suspicion is that the NHIF CEO and the chairperson of the board in their reports contained in the NHIF’s annual report and financial statements for the 2021/22 financial year, “respectively, consciously avoided mentioning and explaining the basis for the IBNR claims.”
“The NHIF CEO and chairperson's noncommittal on IBNR claims is proof of their improbability,” the petition reads.
Further, the petitioner notes that there is no evidence of how Kenbright Actuarial and Financial Services was procured and how it determined “the so-called claim-generating events.”
What will be of interest to the petitions committee is that in the NHIF audited financial statements for 2020/21, 2019/20, and the preceding financial years, IBNR reserves were non-existent and only “propped up in the financial year ending June 30, 2022.”
The petitioner claims that he established that the audited financial statements for the financial year ended June 2021 were deceitfully restated, “whereby”, part of the Sh18.7 billion cumulative retained earnings, Sh12.31 billion was converted to IBNR claims reserves.
The committee will also be seeking to establish whether an “unorthodox restatement” of retained earnings was done citing the National Treasury requirements “where the retained earnings for 2019/20 were restated from Sh18.25 billion to Sh2.9 billion fictitiously to create Sh15.37 billion IBNR claims reserves.”
He notes that since there is no evidence of a sinking fund bank account wherein the retained earnings were supposed to be deposited, “it follows then the retained earnings were only book entries.”
Mr Muchere says that the irregular payment caused a huge financial crisis that made NHIF unable to pay hospital bills for genuine contributors’ medical coverage “resulting in most patients being denied treatment.”
“This amounted to payment of fictitious patients at the expense of pathetically sick Kenyans,” says Mr Muchere urging the MPs to be harder on the persons of interest who may have aided the siphoning of the public and where possible have them cited for culpability.
The NHIF is in the process of being renamed Social Health Insurance Authority (SHIA) following an amendment to the law.
Speaking to Nation yesterday, Mr Muchere promised to demonstrate before the MPs how NHIF is “bedeviled with systemic fraud risks, which unless managed properly, will remain exposed to fraud schemes and patient woes will escalate despite a name change.”
The Fraud Risk Assessment expert notes that upon analysis of the annual reports and financial statements, there was a lack of evidence supporting the IBNR claims and that the IBNR claims reserves were “fraudulently created to enable the siphoning out of NHIF funds.”
“The facts enumerated in the petition provide proof that IBNR claims were deliberately created to siphon out NHIF funds,” Mr Muchere says adding: “Parliament should establish whether the Health Cabinet Secretary approved the ineligible claims.”
IBNR, Mr Muchere explains, is a type of reserve account used in the insurance industry as the provision for claims or events that have transpired but have not yet been reported to an insurance company.
IBNR is therefore used by insurance companies, “particularly along the eastern Gulf Coast of the United States where Hurricanes and other natural disasters are common.”
The process of incurring, reporting, and submitting claims to NHIF is done manually and through the Electronic Health Management Information System (EHMIS).
In the case of the manual, a patient presents an NHIF card and national identification card to a registered health facility empaneled by NHIF.
The contracted health facility provider then requests for pre-authorization by NHIF before treatment can be administered.
It's only upon approval by NHIF that the contracted health facility provider undertakes services and immediately submits its claim to the NHIF for payment.
For the EHMIS, a patient presents their national identification card and biometrics taken by the registered health facility.
In this system, the request for pre-authorization and authorization is in real-time and the claims are also made in real-time through the EHMIS portal upon completion of services.
The petitioner, however, reveals that NHIF’s incurring, approval, and submission of claims’ systems or processes are established in such a way that claims are reported before treatment, “hence IBNR cannot arise in NHIF claims.”
To get to the bottom of the matter, the petitioner wants the National Assembly to compel the NHIF CEO and the board to prepare financial statements “that give a true and fair view of the state of affairs and consequently” identify which healthcare providers benefited from IBNR claims and whether they were authentic.
In the event the claims are found inauthentic, he wants the amount paid to be recovered from the beneficiaries.
The MPs will be keen to establish whether the NHIF board formulated and approved the ineligible IBNR claims “as this was a major policy change” and the “claim-generating events” that elicited the multibillion-shilling claims.
The petition claims that the payment of the claims violated the Public Finance Management (PFM) Act, State Corporation Act, and the NHIF Act, which require the board to prepare financial statements that give a true and fair view of the state of affairs.
What puts the National Treasury in trouble is that “it required the creation of ineligible IBNR claims as stated in the NHIF annual reports and financial statement for the year ended June 30, 2022.”
This is even as the petitioner blamed the Office of Auditor-General for failing to confirm whether NHIF funds were applied lawfully and effectively in the payment of the IBNR claims as required by the constitution.
The petitioner claims that offsetting the “fictitious unbudgeted IBNR claims” with the members' scheme contributions created a huge shortfall to NHIF funds “causing serious financial difficulties experienced in the latter part of 2022 to date.
This, he says, led to NHIF drastically scaling down patient benefits and even failing to adequately cover comprehensive benefits, putting most Kenyans in a “serious health quagmire where most are languishing at home only looking up to their God.”
