Kenya’s current administration has placed a great emphasis on the health care sector. Given that the country has one of the youngest populations in the world by average age, Nairobi is aware that investment in social services will be a key component of supporting growth and development in the coming years. Yet while the health industry performs solidly in comparison to its regional peers, there are substantial obstacles standing in the way of rapid progress.
Health Indicators
The general indicators in the country present a mixed picture. There are high levels of communicable diseases, and at the same time noncommunicable diseases (NCDs) are on the rise, creating a dual problem. The leading causes of death are HIV/AIDS, diarrhoea, stroke and tuberculosis, and the system still struggles to cope with providing basic services. Indeed, in the 15 years to 2008, both the maternal mortality rate and the neo-natal mortality rate increased, bucking the general trend of decline in the region. At the same time, the rise in NCDs is adding an additional burden on the health care system. These conditions contributed to a health loss of 10.6 percentage points between the years 2000 and 2013. This was largely the result of an increase in stroke and heart disease. Cancer is also on the rise, with deaths from the disease increasing by 69% between 1990 and 2013.
However, in more recent times the sector showed signs of improvement. By 2012 the maternal mortality ratio stood at 400 per 100,000 live births, compared to a figure of 490 in 1990. The under-five mortality rate also fell, declining from 99 per 1000 live births in 1990 to 71 in 2012. The effects of HIV/AIDS and malaria have also been mitigated. Deaths from the former fell from 383.9 per 100,000 people in the year 2000 to 126.3 in 2012, while malaria deaths fell from 36.9 per 100,000 people in 2000 to 27.7 in 2012.
While this presents a mixed picture for the country, a range of indicators show that Kenya performs better than its peers despite spending substantially less per capita than the regional average. Kenya spends around $78 per capita on health care, against the sub-Saharan average of $97.7 per capita, according to the World Health Organisation (WHO). Indeed, in terms of contraceptive prevalence, measles immunisation, tuberculosis intervention, and the incidence of high blood pressure and obesity, Kenya performs better than the regional averages as well. Although this is encouraging, significant challenges still exist. The life expectancy rate in Kenya, at 61 years, falls just below its World Bank income peers at 62; although it again surpasses the regional average, which hovers at 58 years.
Public Spending
The country has much to do to push its overall health upwards and reflect its position as a middle-income country, and the current administration has promised that health care will be a priority area moving forward. In its latest budgetary plans the Treasury said it was committed to focusing on enhancing support for social protection, health and education, with these sectors receiving the bulk of budgetary resources at 29.8% of total discretionary expenditures.
However, despite these strong claims, public spending on health care falls far below expectations. For FY 2016/17 the health sector was allocated KSh60bn ($585.4m), up from KSh59bn ($575.7m) in FY 2015/16. This represents a 0.1 percentage point increase from the previous year, putting total expenditure allocated to health at 3.6%, well short of the country’s commitment under the 2001 Abuja Declaration, which promised to reserve 15% of the national budget for the health sector by 2015. The country has not come close to reaching this target, consistently falling below the 8% mark between 2001 and 2009.
Public health expenditure in Kenya is further complicated by underutilisation of public funds and by supplementary funding from donor agencies. Indeed, budget allocations do not always represent spending patterns across the system. In April 2016, for example, KSh4.2bn ($41m) from the 2015-16 budget had yet to be disbursed to county governments despite only two months remaining in the fiscal year. This is a recurring problem; in FY 2012/13 only 81% of the actual budget allocation for health was spent.
Furthermore, the allocation of funding sometimes does not get used for its intended purpose. In September 2015 the head of the Ministry of Health’s Directorate of Policy, Planning and Health Care Financing, Peter Kimuu, told Reuters that half of the country’s health budget is lost to systemic inefficiencies and corruption. This compares to global figures ranging between 20% and 40%, according to the WHO.
However, the misuse of resources in the sector is mitigated by donor agency funding. In total, donors fund 35% of health care in the country, with the government funding 28% and the rest funded by patients. As much as 60% of donor funding is off-budget and targeted at a specific intervention. For example, the Danish International Development Agency stated in April 2016 that it has allocated KSh6bn ($58.5m) over six years to support 313 health facilities across the country by providing power and running water.
While such moves alleviate the burden on government spending programmes, the drop in public budgetary allocations for the sector presents a challenge to health outcomes at a time when the public health care system is coming under increasing stress. This is not only the result of the dual disease burden, but also a consequence of strong demographic growth. The population stood at 44.2m people in 2015 and is growing at a rate of 1.9% per year. Furthermore, with an extremely young population, the dependency ratio in the country is over 80%, which places an additional burden on social and public services while offering limited revenue generating potential.
Public Policy
Despite these challenges the government is continuing to promote an ambitious reform programme as part of the country’s Vision 2030 and its Health Care Transformation Programme. “Priority areas include public hospitals equipment, free maternity programmes, public health programmes, immunisation and combatting malaria, tuberculosis and HIV/AIDS,” Elkana Ong’uti, chief economist at the Ministry of Health, told OBG. Over half the budget, KSh31.4bn ($306.9m), will be allocated for development, which largely focuses on the rehabilitation of health care infrastructure. As part of this process, the government has been modernising 98 state-owned hospitals across 47 counties. As this suggests, while the 2010 constitution enshrined the principle of devolution – with county governments taking over responsibility for health care services in 2013 – the federal government still takes a leading role in spending decisions, planning and oversight. This has led to some friction between county governors and the central government over spending priorities.
However, the federal authorities are maintaining their position. The Ministry of Health, for example, is looking to reduce inefficiencies and waste in the funding of health care across the country. “At the ministry there are now attempts to move towards performance financing as a way of cutting costs and improving the quality of care. There is a process to come up with a health financing policy that will move funding based on outputs,” Ong’uti told OBG.
This is already beginning to happen with the ministry’s maternity programme. Traditionally, facilities were reimbursed based on the number of deliveries performed. Through the National Hospital Insurance Fund (NHIF) – the state-owned health insurance provider – reimbursement will now be based on the actual specifics of cases and their outcome.
Private Sector
Although the government is looking to make the public system more cost-effective and to improve quality, the sheer demand for services means that private health facilities hold a prominent position in Kenya. “The government services are very good, but the number of people needing care is high and space is limited. So private health care has a role to play,” Ravi Bowry, medical director at The Nairobi Hospital, told OBG. According to the 2013 Kenya Household Health Expenditure and Utilisation Survey, 56.8% of health visits in urban areas were to private facilities. In rural areas the figure was 34.7%. The World Bank estimates that 61.8% of total health expenditure in the country is taken by private sector providers. Individual patients spend the most money on health care in Kenya, accounting for 37% of all expenditure, placing a heavy burden on individuals and suppressing demand for services. Out-of-pocket spending on health care increased nominally by 42% to KSh62.1bn ($605.9m) between 2007 and 2013.
Insurance
The main source of financing in Kenya is the NHIF, which accounts for 88.4% of all covered patients. However, while overall insurance coverage in the country rose by 7.4 percentage points between 2004 and 2013, penetration remains low. Indeed, as of 2013, less than one in five Kenyans had any health insurance. Coverage is also a reflection of systemic inequalities that effect health provision. In 2013 over 40% of health coverage was held by Kenya’s wealthiest quintile, while the poorest segment held less than 3% .
The major challenge for the government is that the insurance system largely caters to the formal sector. Founded in 1966, the NHIF is compulsory for all salaried employees in the country. However, membership stands at just 5.9m, including almost 2.2m self-employed members. The fund offers three levels of coverage, including comprehensive coverage in state hospitals and limited co-payment coverage at private facilities, with premiums determined by income and topping out at KSh1700 per month ($16.60). “Private hospitals are willing to accept patients covered under the NHIF, but there are many procedures that are not feasible for private operators under this plan,” Kanyenje Gakombe, CEO of Metropolitan Hospital, told OBG. In recent years the government has made a significant effort to increase insurance penetration. This includes attempts to extend coverage to outpatient services and play the micro-insurance market (see analysis).
The fund is hoping to collect KSh25bn per year ($243.9m) over five years from 2016 to2021 to finance the expanded coverage. The government has also allocated KSh4bn ($39m) through the NHIF to cover maternity care for poor and underprivileged mothers. The programme will offer free care worth KSh6000 ($59) per woman to cover four prenatal check-ups, delivery, and post-natal check-ups. In January 2016 the NHIF announced that it was doubling inpatient coverage in its network, paying KSh1200 ($11.70) for inpatient services in public hospitals and KSh4000 ($39) for such services in private hospitals. As this suggests, the NHIF has worked to expand the network by negotiating with private providers to offer coverage. This has not only improved access, but has provided additional volumes for private care providers. At one of the capital’s major private, non-profit facilities, Nairobi Hospital, for example, approximately 50% of patients are now covered by insurance. Certain grades of the civil service have Nairobi Hospital included in their network under the NHIF system. While such hospitals still rely heavily on cash payments from wealthy patients, expanding insurance networks helps to increase occupancy rates.
Pharmaceuticals
The biggest challenge for operators is not demand, but rather controlling costs. Indeed, across the system, in both the public and private spheres, the cost of medicine is a major challenge. The pharmaceuticals industry is dominated by imports that charge a premium price. In many instances drugs cost more in Kenya than in their market of origin. Local producers struggle to compete with imports, and even though they receive a 15% preference margin in public procurement, its efficacy is reduced by a 10% preference margin for local distributors of imported pharmaceuticals. The government is trying to address the issue of pharmaceuticals through a number of policies, including plans for new regulations on parallel imports. This should help address the cost of imports, while an agreement with India – a major producer of cheap drugs – to build a local pharmaceutical plant should support domestic production.
Outlook
The country is certainly making strides in health care. Many basic indicators are improving, while the government boosts access and quality across the system. However, with the burden on public services at an all time high, more still needs to be done as funding and financing remain key challenges. While insurance coverage is slowly improving, government funding remains low. Health outcomes to spending are, however, extremely competitive compared to the wider region. Nonetheless, if the country wants to push its standard of care up towards developed nations, significant investment and developmental policy will need to be focused on the sector in the coming years.
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