Kenyan government and private sector roll out plans to reform education sector

The state of health care in Kenya presents both challenges and opportunities. The public health system has grappled with underfunding and low staffing ratios, but there is hope that the ongoing devolution of services will improve the equitable delivery of quality health care, alongside the roll out of more private sector services. Currently, private provision mainly focuses on higher-income urban residents, but this is set to change. Indeed, there are opportunities to provide care to the middle-income segment of the market and formalise the low-cost insurance model that is already practiced on an ad hoc basis by local communities. Such moves could help to shift the country’s poor basic health care indicators.

Sector Transformation

The government has committed KSh38bn ($418m) to the sector under the Healthcare Transformation Programme as part of its wider Vision 2030 plan. This strategy will see heavy investment in the country’s health care infrastructure including the modernisation of 98 state-owned hospitals across the country’s 47 counties. In February 2015, the government announced that GE Healthcare would be a strategic partner in this modernisation programme. The company will be responsible for the implementation of radiology technology in 94 county hospitals and four national referral hospitals. The government believes this is a priority area for building up preventative health services and strong diagnostic capabilities for the public system.

James Macharia, cabinet secretary for health, stated that, “Disease patterns in Kenya are evolving, as are the needs of the health care system. In response to this, a central pillar of the health transformation strategy is aimed at strengthening preventative health services to help improve the long-term health outlook of the general population.”

Indicators

The need for this programme is clear, given the increasingly weak performance in key health indicators. There were more deaths in the public health system in 2014 than in any of the five previous years, according to the “Economic Survey 2015”. Between 1993 and 2008, both the maternal mortality rate and the neonatal mortality rate have increased, suggesting that even in basic provisions Kenya’s health care sector has failed to improve and has in some cases even moved backwards.

Communicable diseases, including HIV/AIDS, malaria and tuberculosis, account for nearly half of all deaths in the country, and overall life expectancy was 64 years in 2015, up from around 60 years in 1990.

Funding

Part of this sliding performance on broad indicators is related to an underfunding of the public system. The country committed to allocating 15% of its national budget to health care under the 2001 Abuja Declaration. Yet in the 2015/16 budget, the government allocated KSh59bn ($649m) to health care, or just 2.8% of the total budget.

Spending in Kenya remains well below its regional peers Uganda, Tanzania and Rwanda. In 2013, the country spent 4.5% of GDP on health care, compared to figures of between 7% and almost 11% for these other East African economies.

Historically, secondary and tertiary facilities have absorbed 70% of the health budget, even though in remote rural areas primary care facilities serve a crucial function. With around 75% of Kenyans living in rural areas, a shift of investment towards rural areas could produce a dramatic improvement in health care outcomes. At the moment, the quality of health provision is heavily dependent on location.

Devolution

The devolution programme introduced as part of constitutional changes in 2010 should also help to address the disparity between health care services in rural and urban areas.

However, there are a number of fundamental problems – for example some county governors complain that they have not been consulted on the national KSh38bn ($418m) modernisation programme. Furthermore, devolved investment decisions do not necessarily lead to the immediate improvement of health care services. While county governments can build infrastructure and procure equipment, the development of a capable workforce in rural locations is also likely to be a long-term project.

Indeed, while the WHO has a recommended minimum requirement of 23 doctors, nurses and midwives per 10,000 people, the ratio in Kenya stands at nearly half this, at 13 per 10,000. In rural areas, staff shortages can reach 80% of requirements, according to Transparency International.

Private Sector Participation

In the medium to long term, devolution – along with the Vision 2030 plans – should help improve access to quality public health care. However, space is also opening up in the private sector for new institutions and services.

Indeed, in urban areas the private sector accounts for 56.8% of medical visits, according to the 2013 Kenya Household Health Expenditure and Utilisation Survey, while the private sector accounts for only 34.7% of rural visits. When it comes to inpatient services, over 50% of visits are to public sector facilities.

This has attracted the interest of investors. Indeed, private equity firms have been looking at small affordable hospital systems as a growth area. For example, in 2011, Aureos Capital, which is now owned by Dubai’s Abraaj Group, invested $2.5m in the Avenue Group, a local provider with a network of small private hospitals. Abraaj is not alone. Many other local and international private equity firms are eyeing the market, including the locally based Fanisi Capital, which has already invested in the Haltons Pharmacy chain. About 9% of private equity deals in East Africa between 2007 and 2014 were directed towards the health care sector, according to KPMG.

For Kenyan households, however, the cost of private health services is high. According to the World Bank, out-of-pocket spending accounts for $77 of every $100 spent on health care in Kenya.

Between 2007 and 2013, out-of-pocket spending on health care increased by 42% to KSh62.1bn ($683.1m). However, on a per capita basis, the picture is more favourable. The average per capita household spending on health services decreased from KSh1913 ($21) in 2003 to KSh1609 ($17.70) in 2013. Of the total, per capita spending on outpatient services averaged KSh1254 ($13.79) in 2013.

Despite the decreasing per capita out-of-pocket spending, the risk of catastrophic health expenditure in Kenya remains high. The Ministry of Health estimated that in 2013 some 6.2% of the population spent more than 40% of their non-food expenditure on health care. An alternative measure of catastrophic health expenditure is the percentage of the population that spends more than 10% of their total expenditure on health care, and by this measure the ministry identified 12.7% of the population.

Health Insurance

The government is looking to help address this situation through improved insurance coverage and more holistic care. Less than 20% of Kenyans had health insurance in 2013.

While coverage did increase by 7.4 percentage points in the decade to 2013, uptake remains low by international standards. Of those people who are insured, some 88.4% are covered by the National Hospital Insurance Fund (NHIF), 9.4% by private insurers and 2.3% by community insurance and other forms of coverage. The wealthiest quintile in Kenya had 41.5% health insurance coverage in 2013, while the poorest quintile had just 2.9%.

The government has been trying to expand the coverage and quality of care through the NHIF. The fund, which was established in 1966, provides coverage in three tiers, from comprehensive coverage at state hospitals to limited co-coverage at a range of private facilities. Membership to the scheme is compulsory for all salaried employees in the country, with the majority of members paying premiums ranging from KSh30 ($0.33) to KSh320 ($3.52) per month depending on income.

The government has also tried to expand coverage to informal workers in the country. In 2010, the fund signed a partnership with mobile operator Safaricom to offer premium payments through the mobile payment system, the M-Pesa platform.

There are also other moves to enhance coverage. In May 2015, for example, the Teachers Service Commission announced that as many as 288,000 teachers in public schools will be entitled to medical insurance. The benefits of the KSh5.9bn ($64.9m) annual coverage scheme are comparable to the private sector, with inpatient coverage ranging from KSh300,000 ($3300) to KSh1m ($11,000) depending on the teacher’s professional grade.

Covering Private Services

The NHIF has also tried to improve the quality and range of services available to members. The fund offers an enhanced service with higher premiums that gives members access to a wider range of hospitals and outpatient services. In June 2015 the scheme released a list of 1128 facilities accessible under enhanced coverage. However, the NHIF is still in negotiations with leading private facilities to offer services to their customers.

The financing mechanism is a key point of discussion. According to Phil Dastur, former CEO of M P Shah Hospital, the fund will pay a maximum of KSh712 ($7.83) per participant. “It does not make economic sense unless you have a database of over 15,000 to 20,000 patients. This is well beyond our capacity. So it is not that high-end hospitals refuse to be part of it, it is more that it does not make economic sense,” Dastur told OBG. Business Daily Africa reported in July 2015 that the NHIF was willing to offer KSh1200 ($13.20) as an annual fee for outpatient care. However, given that an outpatient consultation at Kenya’s top hospitals ranges from KSh1400 ($15.40) to KSh2000 ($22), private health care providers are unlikely to view this as adequate compensation. At a typical non-profit hospital such as M P Shah, based in Nairobi, the breakdown of customers would be approximately 60% corporate and insured and 40% cash payers.

Pharmaceuticals

As with many emerging markets, affordable access to drugs and medicine is a priority. Kenya is the largest producer of pharmaceutical products in the East and Southern Africa regions, supplying about 50% of the market. Furthermore, it is estimated that over 9000 pharmaceutical products have been registered for sale in Kenya.

Despite Kenya’s strong local production, there are some imported drugs that demand a higher price in Kenya than in other countries. For example, an antibiotic called Augmentin costs KSh1320 ($14.85) wholesale in the UK, but KSh8360 ($91.96) in Kenya. Similarly, Amaryl, a drug to treat diabetes, costs KSh1144 ($12.58) per packet in Kenya, but KSh90 ($0.99) per packet in Turkey, the country in which the drug originates. James Macharia, cabinet secretary of health, has attributed these higher prices to a lack of parallel importations – the import of branded medicine from a country in which it sells at a cheaper price.

The pharmaceutical industry has stated that it is not opposed to parallel importations following existing regulations. However, local producers must already compete with large volumes of imports, with these accounting for approximately 70% of pharmaceutical sales in Kenya. To help boost the local industry, the government gives local products a 15% preference margin in public procurement, but this is in part offset by a 10% preference margin for local distributors, who often sell imported products. Given the high costs of medicine in Kenya, the government hopes to help facilitate parallel importation.

Outlook

Much work is needed to strengthen the public health care system and reduce the out-of-pocket burden on individual Kenyans. The cost of hospital care often falls on individuals, and given the limited income levels and low insurance coverage, this can have potentially catastrophic outcomes. However, in medium term, the situation should improve. The government is investing in medical infrastructure to improve health outcomes and the quality of care.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Kenya 2016

The Guide

Table of Content

Education & Health chapter from The Report: Kenya 2016

Education & Health chapter from The Guide

Education & Health chapter from Table of Content

The Report: Kenya 2016

The Report

This article is from the Education & Health chapter of The Report: Kenya 2016. Explore other chapters from this report.