New report questions waste, secrecy at NHIF

Lack of transparency in managing billions of shillings allocated to the national health insurer is revealed in a new report.

The report indicates that the organisation spends nearly half of its revenue on administration expenses and lavishes funds on suspect projects such as a controversy-ridden Sh3.3 billion car park.

The brief by the Nairobi office of the International Budget Partnership (IBP), an organisation which works to improve transparency in public budgeting, indicates that the National Hospital Insurance Fund (NHIF) spends far less on its core mandate of delivering healthcare to citizens than similar schemes around the world.

In 2010, it allocated more than 45 per cent of its budget to personnel and administration expenses. This is a staggering figure compared to the Medicare programme in the US which spends only 1.7 per cent of its budget on administration.

Other similar programmes such as the Estonia Hospital Insurance Fund spends only 1 per cent on managing the fund.

The NHIF has been in the news for the wrong reasons in the past few weeks after it emerged the fund paid hundreds of millions of shillings to two health providers which did not have a network of clinics that could cover civil servants across the country.

The NHIF board was dissolved and its chief executive, Mr Richard Kerich, suspended after questions emerged over the way the scheme was being managed. (READ: New twist as Raila sacks NHIF board)

Medical Services minister Anyang’ Nyong’o, who mounted a vigorous campaign to keep the controversy-ridden board in office, has come under pressure to resign over the scandal.

The IBP report – Healthy ambitions? Kenya’s NHIF must become more transparent if it is to anchor universal health coverage – exposes the culture of secrecy and questionable financial management in which scandals such as the civil servants health coverage scheme were bred.

The report’s authors indicate they were repeatedly thwarted in efforts to get information about NHIF which should be easily accessible to the public despite numerous requests.

Jason Lakin, programme officer and research fellow at the IBP, said one of the objectives of the report which will be officially launched tomorrow is to encourage greater transparency in managing state corporations.

“What our brief emphasises is that, in spite of the new constitutional order, it is still not possible for ordinary citizens to access basic information about how the government spends public money.

“Without even minimal transparency standards in place at state corporations like NHIF, public confidence in the decisions that these bodies make will always be low, and the whiff of scandal will always be near.

“Why should the public trust organisations that manage billions of shillings but refuse to make public their accounts? The logical conclusion is that such agencies have something to hide.”

One of the things managers at the NHIF would prefer to keep well hidden is the saga of the construction of a multi-storey car park which was initially supposed to cost Sh900 million.

The project, which was initiated in 2002, was finally completed in 2008 at a total cost of over Sh3.3 billion. Auditors found that an additional Sh626 million was later spent on the car park, effectively quadrupling the initial budget.

Auditors from the Kenya National Audit Office observed that “the escalation of costs … has not been justified, while at the same time, the final completion certificate for the project had not been issued to the Fund as of 30 June 2010,” two years after it was completed.

The IBP brief says quite apart from the loss of public resources indicated in the project, the health fund should be concentrating on payment of money to those seeking healthcare rather than engaging in expensive infrastructure projects.

“Obviously, citizens have an interest in knowing when and why NHIF spent nearly Sh4 billion, more than it spent on all beneficiary claims in 2010, on a car park that was supposed to cost less than Sh1 billion.”

The failure to focus on its core mandate of paying out claims by beneficiaries is one of the things highlighted in the report. “Like many insurance funds, NHIF has a history of taking in a high level of contributions relative to the amount that it pays out in benefits.

“This has been due in part to very high levels of spending on administrative costs and failure to provide sufficient coverage,” says the report.

In 2005, for example, the Fund spent 22 per cent of its revenues on benefits, and over 50 per cent on administration and personnel.

These numbers appear to have improved over time: in 2010, the Fund paid out nearly 52 per cent of its revenues on claims to beneficiaries, but they still compare poorly with other funds around the world.

“Clearly, taxpayers have an interest in monitoring how the Fund behaves to ensure a high ratio of benefits to revenues.

“Moreover, under the new scheme introduced in 2012, NHIF is employing prepaid contracts based on a per capita (‘capitation’) payment to health facilities.

“Such contracts must be negotiated carefully to ensure that the payments are fair: they should not pay providers too much for the services they provide, or too little.

“To assess this, information is needed about how the per capita rates are set, and whether beneficiaries receive the intended benefits over time.”

The report calls for the NHIF and other state corporations to improve their levels of transparency and to make information on their finances accessible to the public.

“This brief contains some information about NHIF, but none of it was actually received from the NHIF. In fact, an average citizen attempting to access information from NHIF would find it impossible …” it says.

The report calls for the NHIF to post on its website its audited financial statements for the past 10 years to allow citizens to readily assess how the scheme is run.

“The truth is that Kenya needs strong and competent state corporations like NHIF to finance vital services. But unless these corporations strike a deal with the public in which they promise transparency and accountability in exchange for public support, they will never be able to deliver on their potential,” the report’s authors say.

The NHIF’s role in health spending has been growing over the last few years. The value of resources spent by the Fund increased by 53 per cent between 2005 and 2010, from Sh3.8 billion to about Sh5.8 billion.

The NHIF is the dominant player in health insurance provision in the country. It covers many more people than all the private health insurance providers combined. The government has been seeking to implement a universal social health insurance scheme for the last few years.

The proposed programme has been mainly lauded by opinion shapers but there has been considerable concern about whether the increased contributions demanded of taxpayers will serve the interests of the intended beneficiaries or whether the money will be misappropriated.

In an advertisement in the newspapers on Friday, the NHIF caretaker board said the civil servants healthcare scheme, which is viewed as a precursor to universal coverage, was still on-going but that investigations would be carried out on the controversies that have dogged it.

The new report will serve to indicate that the Fund requires major structural reforms and not just investigations into two service providers.