Poor services at NHIF linked to corruption, mismanagement

Mismanagement of funds, fraud and abuse of office are some of the major bottlenecks hindering provision of quality services at the National Hospital Insurance Fund (NHIF).

A Health Financing Reforms Expert Panel (Hefrep) report exclusively obtained by the Sunday Nation indicates that the fund has several organisational weaknesses that affect its operations.

“The current arrangement does not adequately cover all core functions that are needed to make the NHIF a strategic purchaser. Second, the structure is hierarchical and functionally fragmented. As a result, the different departments and units operate in silos with very little coordination and communication. This results in bureaucratic inefficiencies,” reads the report.

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The problem is further compounded by lack of a substantive chief executive since 2018, when the fund’s board sent the then boss Geoffrey Mwangi and acting Finance Director Wilbert Kurgat on compulsory leave to pave the way for investigations into the loss of billions of shillings. Mr Nicodemus Odongo, who has been serving as the director in charge of strategy, planning and marketing, has been leading the agency in acting capacity since then, and did not apply for the position.

A senior manager at the fund, who did not want to be named because he is not authorised to speak for the firm, told the Sunday Nation that Health Cabinet Secretary Sicily Kariuki has been rejecting names presented to her by the board for unknown reasons.

“The position was advertised in July last year and to date no one has been confirmed,” the source said.

Even with the arrest of the former CEO and other senior officials over mismanagement of funds, the health insurer has been struggling to shed off the tag of corruption. For instance, in November last year, the Ethics and Anti-Corruption Commission (EACC) listed the fund as the third most corrupt institution in the country after the Kenya Power and the Kenya Police Service.

The report outlined avenues through which the NHIF lost cash, including inflation of medical bills by private health providers through collusion. Political interference and corruption are just the tip of the iceberg when it comes to haemorrhaging of funds by the social health insurer.

The report indicates that 17 per cent of all the contributions made is spent on advertising, salaries and accommodation, among other administrative costs.

This means for every Sh1,700 or Sh500 paid as monthly contributions, NHIF spent Sh289, and Sh85, respectively, on administrative costs. Out of Sh45 billion collected in 2018, Sh8.3 billion was gobbled up in administration.

The fund paid Sh4.48 Billion in salaries, Sh1.9 billion in advertising, Sh83 million in accommodation and Sh498 million on transport.

Dr Samuel Nyandemo, an Economics lecturer at the University of Nairobi, said the administrative cost is too high, reflecting inefficiencies in the system.

“This is evidence that there are redundancies and wastages within NHIF,” he said.

His statement is backed by the expert committee appointed by CS Kariuki who said in their report that upon reviewing administrative costs of health insurance schemes in 58 countries, the average was 4.7 per cent.

“This shows that it is feasible to achieve much lower administrative costs if efficiency enhancing interventions are adopted,” the report states.

The report also indicates that should the administrative costs remain high, the fund will start running on deficit from this year. This is despite its 2018 to 2022 strategic plan targeting a surplus of Sh7.7 billion.

“This is simply overshooting because their surplus is dwindling at the current Sh2 billion, and they can only get to their target  through magic,” said Dr Nyandemo.

Seme MP James Nyikal, who also served as Permanent Secretary in the Health ministry during the Grand Coalition government, told the Sunday Nation that the major problem bedevilling NHIF is policy and administrative issues.

“We have NHIF taking up special medical schemes for commercial purposes while there is no proper management in place to oversee them,” Dr Nyikal said.

Concerns have also been raised on a larger percentage of NHIF pay-outs going to private facilities, which are mostly frequented by the rich in the society.

According to the report, NHIF benefit payout as a percentage of contributions was 86 per cent in 2018. Out of this, private providers were the main beneficiaries, receiving over 80 per cent of all claims pay-outs. Inpatient claims constitute the largest share of claims (48 per cent), with an average cost per claim of about Sh22,000. Specialised surgery and major surgery recorded the highest average cost per claim of Sh263,000 and Sh86, 592 respectively.

Our source at the fund said lack of quality assurance officers made it possible for hospitals to inflate their bills as well as order patients to take up unnecessary tests.

“Elective surgeries are high and we have seen an exponential growth in the region of 600 per cent. People are taking radiology procedures like selfies not knowing that not only is it expensive but they are exposing themselves to various dangers,” the source said.

This sentiment was also supported by Dr Nyikal, who said that “there is collusion with insiders on issues of claims.”

In a bid to streamline NHIF and make it more efficient, Dr Nyikal says there is need to revise the policy framework, especially if the intention is to use the NHIF as a basis for Universal Health Coverage (UHC).

He added that to end the fictitious claims, there is an urgent need to investigate the claims made by health facilities on the number of patients treated.

“We must make sure that all the institutions that get paid are paid for the work they do. I suspect that there may be many institutions that are making more claims than the people they have treated,” Dr Nyikal said.

For the outpatient treatment, which is based on capitation, Dr Nyikal said there should be clear numbers associated with the clinics that are being paid on capitation. The move, the lawmaker said, would help in accounting for the money given for capitation and the services given to the people under those health facilities.

“We should also find a clear relationship between commercial insurance components and make sure that the services given are in line with the insurance amount paid,” Dr Nyikal said.

He also warned against adverse selection, a term used to refer to a situation where people who are already sick take up insurance, pay a small amount and then consume a lot of money through treatment.

Singapore, for instance, has universal coverage and large healthcare expenses are covered by a government-run insurance system called MediShield, which is similar to NHIF.

Everyone contributes between seven and 9.5 per cent of their income to a MediSave account. When patients need routine medical care they can take money out of their MediSave accounts to pay for it, but the money can only be used for certain expenses such as medication on a government-approved list.

Lawmakers of the National Assembly Health Committee last October raised concern on the high number of rich Kenyans going abroad to seek treatment under NHIF at the expense of the poor.

For instance, in the 2018/2019 financial year, private hospitals received Sh22 billion from the insurer while government and mission hospitals received Sh7 billion and Sh8 billion respectively, out of its Sh37.7 billion expenditure.

In the same period, NHIF spent 17.7 billion for specialised treatment, which included flying some patients abroad for medical attention.

The figure was higher than what it spent on inpatient and outpatient treatments that stood at Sh11.8 billion and Sh8 billion respectively.

Despite all these, NHIF has been tasked with the role of steering the Universal Health Coverage (UHC) in the country, which is one of President Uhuru Kenyatta’s Big Four agenda.

This even as NHIF membership has stagnated at 7.1 million principal members.

Even more worrying is the fact that the total number of current active members, according to the NHIF, is a paltry 3.7 million.

The Hefrep report indicates that active membership is low compared to cumulative membership because of low retention rates caused by attrition on the part of informal sector registered members.

The report also indicates that while premium contributions have increased three-fold, benefit pay-outs have increased five-fold over the same period, meaning that growth in benefit pay-outs has outpaced growth in premium contributions.

This means that NHIF’s financial sustainability will be compromised by 2023.

The fund is also on the verge of starting to run on deficits from as early as this year based on its projections of revenues and expenditures.