Kenya Country Report

Transcription

1 Kenya Country Report African Health Markets for Equity Dr. Nirmala Ravishankar, Dr. Amit Thakker and Joel Lehmann June 2013 This report documents the results from the inception phase activities of the AHME project in Kenya led by the International Finance Corporation (IFC) and Pharmaccess. It was prepared by a team of consultants hired by IFC and Pharmaccess. The landscaping study conducted by the consultants, the demand-side financing options that AHME will pursue in Kenya, and recommended next steps for the project are summarized in this document.

2 Table of Contents List of acronyms... 3 Executive Summary Introduction Country Context The Health Financing Landscape Evolution of Health Financing Policy Service Delivery and the role of Social-Franchise Networks Existing Pro-Poor DSF Mechanisms in Kenya Opportunities for Enhancing DSF in Kenya DSF Options for AHME in Kenya Recommendations from the AHME Steering Committee Conclusion Citations Annex A: Country Literature Review Annex B: Analysis of Stakeholder Interviews... 58

3 List of acronyms AEF AHME CBHI CBO CCT DFID DKHFS DSF FBO FP GBV GIZ GOK HAKI HBRA HENNET HISP HIV/AIDS HMO HPP HSSF ICC ICT IFC IRA JICA KCBHFA KEPH KfW Access and Equity Fund African Health Markets for Equity Community Based Health Insurance Community Based Organization Conditional Cash Transfer program Department for International Development (UK) Draft Kenya Health Financing Strategy Demand Side Financing Faith Based Organizations Family Planning Gender based violence Deutsche Gesellschaft für Internationale Zusammenarbeit (German) Government of Kenya Health for All Kenyans through Innovations Health Benefits Regulatory Authority Health NGO Network of Kenya Health Insurance Subsidy Program Human Immunodeficiency Virus / Acquired Immunodeficiency Syndrome Health Maintenance Organization Health Policy Project Health Sector Services Fund Inter-agency Coordination Committees Information Communication Technology International Finance Corporation Insurance Regulatory Authority Japanese International Cooperation Agency Kenya Community Based Health Financing Association Kenya Essential Package for Health German Development Bank

4 KNBS Kenya National Bureau of Statistics Ksh Kenyan Shilling MCH Maternal and Child Health MDGs Millennium Development Goals MFI Micro Finance Institution MHI Micro Health Insurance MIP Medical Insurance Provider MOG Ministry of Gender, Children and Social Development MOH Ministries of Health MOMS Ministry of Medical Services MOPHS Ministry of Public Health and Sanitation MSA Medical Savings Account MSI Marie Stopes International NGO Non-Governmental Organization NHA National Health Accounts NHIF National Hospital Insurance Fund NHS National Health Service OBA Output Based Aid OOP Out Of Pocket OVC Orphans and Vulnerable Children PBF Performance-Based Financing PBS Provider-Based Scheme PPP Public Private Partnership PSI Population Services International PwC PriceWaterhouseCoopers Q1 Quintile 1 Q2 Quintile 2 RH Reproductive Health SACCO Savings and Credit Cooperative SFN Social Franchise Network SHI Social Health Insurance SMH Safe motherhood

5 THE TPA UCT UHC UNICEF USAID VMA Total Health Expenditure Third Party Administrator Unconditional Cash Transfer Universal Health Coverage United Nations Children s Fund United States Agency for International Development Voucher Management Agency

6 Executive Summary Payments for health services at the point of use constitute a critical financial barrier to access and cause financial hardship amongst the poor in Kenya. This is closely related to the fact that the percentage of the Kenyan population that is covered by insurance mechanisms featuring pre-payment and risk pooling is low. The Government of Kenya (GOK) has so far not put in place a health financing strategy to address these issues as part of a comprehensive plan to move the country towards the goal of universal coverage. In the absence of strong strategic leadership from the GOK in this area, several health financing interventions are currently being implemented in parallel. While each of these schemes has its merits, they are collectively contributing to the further fragmentation of risk pools in the country. The core vision for the demand-side financing (DSF) component of the African Health Markets for Equity (AHME) project is to reduce financial barriers to access experienced by the poor using approaches that leverage the private sector. This report documents the activities and outcomes from the inception phase of AHME DSF in Kenya, which was led by the International Finance Corporation (IFC) and Pharmaccess. Between December 2012 and May 2013, consultants hired by the two institutions undertook a comprehensive study of the health financing landscape in Kenya. This information fed into the development of the following three DSF options for AHME in Kenya: Option 1: Work with the National Hospital Insurance Fund (NHIF) to develop and implement the health insurance subsidy program (HISP) HISP is a program proposed by NHIF whereby the government will subsidize the costs of a comprehensive health insurance package for the poorest households in the country. NHIF proposes to launch a 1-year pre-test in July GOK will use a $1.5 million subsidized loan for the World Bank to purchase insurance for 5000 poor families (30,000 individuals) identified through a proxy-means test from across the country. The scheme will provide comprehensive coverage for both inpatient and outpatient services. NHIF intends to use this initial trial phase to test and improve the program before scaling it up to cover 9 million of the poorest people in the country by Under this option, it is proposed that AHME provide technical support to NHIF as it designs, implements and scales-up HISP, including the development of a long-term financial sustainability plan for the scheme; leverage the social marketing skills of AHME partners to assist NHIF market its SCHEMES to the poor more broadly;

7 work with NHIF to integrate social franchise network (SFN) facilities into NHIF s network; and introduce technological innovations to further reduce NHIF s administrative and program costs. Option 2: Develop a health insurance product for the informal sector distributed by SFNs Under this option, it is proposed that AHME forms a consortium with SFNs, a third-party administrator (TPA), private insurers, and telecommunications companies to develop a low-cost health plan covering outpatient services. AHME would play a catalytic role in bringing together the consortium and financing product development costs. The SFNs will play a critical role in delivering services as well as in the design, marketing and management of the health plan. The TPA will provide a platform for plan administration and could in time work with multiple insurers and sources of subsidies for the plan. One or more private insurers would carry the risk of the product. Mobile solutions and other technologies will be used to make product marketing, member enrolment, premium collection and product administration both effective and efficient. Community networks and opinion leaders will be used to boost enrollment in the plan. Option 3: Work with GOK to expand the voucher program Since 2006, GOK has been implementing the Output-Based Aid (OBA) voucher scheme with support from the German Development Bank (KfW). The program offers low-income households vouchers at highly subsidized rates for accessing services related to reproductive health, family planning, and gender-based violence in select districts and cities in Kenya. Under this option, it is proposed that AHME work with GOK and other development partners to develop and execute a plan for expanding the program, which includes both scaling-up the program to new areas and introducing vouchers for child health services and other high priority interventions. The AHME DSF partners presented the three aforementioned options to the AHME Steering Committee in order for the Committee to make a final determination regarding the interventions that the project should pursue in Kenya in the next phase of the project. On the first option, the Committee endorsed the idea of AHME supporting NHIF in extending insurance cover to the poor. While AHME providing premium subsidies could be unsustainable, AHME can play a strategic role in assisting NHIF extend insurance coverage to the poor. Hence, the

8 Committee encouraged the AHME DSF team to work closely with NHIF to develop a detailed plan of work to guide AHME support to NHIF. With respect to the second option, the Committee expressed some reservations about starting a new health micro-insurance product but was keen to further explore the idea of e-wallets as a way to promote health savings and secure discounted prices for health services for subscribers. The Committee asked the AHME DSF team to further explore the idea of e-wallets, both in conjunction with a health insurance product as well as a stand-alone scheme, and present them at the next Steering Committee meeting. On the third option, the Committee was of the view that AHME would be well served to see how plans to expand the OBA program in the future, which are currently being discussed by GOK, KfW and other development partners, evolve in the coming months. AHME could play a strategic role in the scale-up of the program to new areas and/or in the introduction of vouchers for additional services. The team was encouraged to present detailed plans and progress updates for all three options at the next Steering Committee meeting for a final determination on AHME-funded DSF activities in Kenya.

9 1. Introduction African Health Markets for Equity (AHME), a five-year project that is being implemented by a consortium of partners led by Marie Stopes International, is focused on implementing health marketenhancing strategies to increase coverage of priority health technologies and interventions amongst the poor in the three focus countries of Ghana, Nigeria and Kenya. The core strategies of the AHME project include strengthening the supply of low-cost health services through social franchise networks, promoting the use of demand-side financing (DSF) mechanisms 1 that empower and incentivize consumers to access care, and creating a policy environment that promotes health markets. This report relates to the DSF component of the AHME project, which is being jointly-led by the International Finance Corporation (IFC) and Pharmaccess. During the inception phase of the project from December 2012 to May 2013, the two institutions hired consultants to undertake landscaping studies in each of the three AHME countries to better understand the health financing context, review ongoing DSF programs, and identify promising opportunities for the AHME project. The consultants undertook a detailed desk review and interviewed over 45 stakeholders and technical experts in Kenya. Based on the information collected, the consultants made preliminary recommendations for DSF interventions that AHME could pursue in Kenya. These were further discussed and refined by the AHME partners at a meeting in Accra in April A final set of options for each country was presented to the AHME Steering Committee at a meeting in Abuja in May Following a detailed discussion of the options, the Committee gave the AHME DSF partners guidance on key next steps for the design phase of the project, which is to extend until December of The findings from the landscaping study in Kenya, the proposed options for the country, and key decisions by the Steering Committee regarding the Kenya options are documented in this report. Sections 2 to 4 of the report summarize information from the landscaping study on the health financing context in Kenya, the current use of DSF schemes in the country, as well as planned schemes and donor priorities. Section 5 presents and discusses the DSF options for Kenya. Section 6 documents the final recommendations of the Steering Committee, while section 7 offers concluding remarks. 1 For the purposes of this project, DSF refers to pro-poor schemes that reduce the direct and indirect costs of health care services to the poor by either channeling subsidies directly to poor beneficiaries or by having their agent pay providers on their behalf based on services delivered, thereby offering financial incentives to the poor to access health services and empowering them to do so.

10 Annexes A and B that contain the country literature review and an analysis of the key informant interviews respectively are available as separate supporting documents. 2. Country Context The Health Financing Landscape Private financing is the largest source of health spending in Kenya. The most recent National Health Accounts (NHA) report for 2009/2010 showed that private financing, which includes both individual out-of-pocket (OOP) expenditures and insurance premiums, was responsible for 36.7% of total health expenditure (THE) (GOK 2011). OOP spending in Kenya includes user fees at public facilities and payments to private providers, pharmacies and laboratories. While OOP spending decreased from 44.8% in 2002/2003 to 24.4% of THE in 2009/2010, it still presents a key financial barrier to access (GOK 2011). Public resources and external financing contributed 28.8% and 34.5% of THE respectively. Government health expenditure as a percent of total government expenditure in 2009/10 was estimated to be 4.6%, which is both lower than the 15% stipulated in the Abuja declaration and down from 8.0% in 2002/03. In contrast to low domestic spending on health, the share of THE from donors doubled from 16.4% in 2002/2003 to 34.5% in 2009/2010 (GOK 2011). A majority of pooled funds for healthcare services in Kenya currently flows to public providers through supply-side subsidies, while the penetration of insurance mechanisms that use DSF remains low. The two Ministries of Health (MOH) the Ministry of Medical Services (MOMS) and the Ministry of Public Health and Sanitation (MOPHS) -- have hitherto managed the bulk of pooled resources in Kenya, which finance service delivery at public facilities, public health programs, and health sector management. This system is currently changing as a result of devolution, which is discussed below. Government funds for health are allocated through input-based budgets to health facilities (Draft Kenya Health Financing Strategy [DKHFS] 2008). Approximately 7.77 million (or 20% of the population) Kenyans are covered by insurance, of which the publicly-mandated National Hospital Insurance Fund (NHIF) is responsible for covering 6.6 million Kenyans (85% of the population that has insurance) (Deloitte et al. 2011). Private insurance and community-based financing schemes cover an estimated 700,000 and 470,000 lives respectively (9% and 6% respectively of the population that has insurance) (Deloitte et al. 2011). In terms of volume of resources, 7.7% and 11.4% of THE were managed by NHIF and private insurers respectively in 2009/11 (GOK 2011).

11 NHIF runs one of the oldest social health insurance (SHI) schemes in Africa, but its coverage has traditionally focused on the formal sector. Kenya established NHIF in 1966 as a mandatory scheme for formal sector workers covering inpatient services. Following reforms in 1998, NHIF made the inpatient scheme available to informal sector households on a voluntary basis (MOMS 2012b). In 2012, NHIF introduced an outpatient scheme for civil servants; however its launch was overshadowed by public controversy over the selection of providers. After a period of uncertainty, NHIF proceeded to implement the scheme, but a parallel proposal by NHIF to raise contribution rates has been halted until a case challenging the proposal is resolved by the Kenyan courts. Evolution of Health Financing Policy GOK policies for financing service delivery at public facilities have undergone several changes in the past five decades. The country s public healthcare delivery system has its roots in the national health service (NHS) model. In 1989, user charges were introduced at public health facilities to mobilize greater resources for service delivery (DKHFS 2008). Recognizing the negative effects this had on utilization, GOK adopted the 10/20 policy in 2002 that abolished user fees in health centers and dispensaries, leaving only registration fees of 20 and 10 shillings respectively. However, user fees still account for a large share of the operational budgets (i.e. not including staff salaries) of provincial, district and rural health facilities respectively (DKHFS 2008). GOK has introduced waivers and exemptions for target population groups and priority health interventions. In 2009/10, GOK introduced the Health Sector Services Fund (HSSF) as a way to transfer resources directly to rural health facilities, thereby by-passing provincial and local administration (DKHFS 2008). Achieving equity in health and health financing is a policy priority for GOK. The Government introduced the Kenya Health Policy Framework in 1994, which emphasized equitable allocation of GOK resources to address health disparities (GOK 1994). Successive Kenya Health Sector Strategic Plans have introduced programs to achieve these goals (GOK 1999; GOK 2005; GOK 2012). In 2004, the Kenyan Parliament passed a bill to introduce a national health insurance scheme that would cover the entire population, but it did not receive presidential approval (MOMS 2012b). Vision 2030, Kenya s long-term national development agenda adopted by GOK in 2008, lists the creation of a national health insurance scheme to promote equity amongst its goals (GOK 2007). Sessional Paper 6 on the Kenya Health Policy is the latest policy statement to assert universal coverage, equitable access, and adequate financial protection as key priorities for Kenya (MOPHS & MOMS 2012).

12 Kenya currently lacks a comprehensive health financing strategy. In 2008, a task force drafted the DKHFS that proposed wide ranging reforms to the institutional design of health financing in Kenya. However, the document was never finalized due to disagreements over the proposed reforms. Several interviewees noted that there is general agreement among key health sector stakeholders that Kenya needs universal and mandatory health insurance, but there continues to be disagreement over how this should be implemented. Relatedly, some interviewees mentioned that the proliferation of uncoordinated, parallel health financing schemes in the absence of a single, comprehensive health financing strategy is both risky and costly for Kenya. Additionally, several respondents noted that GOK has grown tired of having multiple donor-driven pilot schemes. Ongoing policy debates in the health sector in the past year have focused on several health financing issues. Sessional Paper 7 tabled by MOMS in Parliament, which is yet to be approved, proposes a range of reforms including increased payroll contributions from formal sector employees and their employers; the introduction of a subsidy from GOK to cover the premiums for indigents; measures to strengthen governance and improve administrative efficiency; and increased enrollment of individuals in the informal sector by partnering with community organizations and micro-finance institutions (MFIs) (MOMS 2012b). The Health Benefits Authority Act proposes the establishment of a Health Benefits Regulatory Authority (HBRA) that would take over regulatory functions in the health domain from the Insurance Regulatory Authority (IRA). Legal and institutional mechanisms set up to facilitate greater coordination between state and nonstate actors, and between GOK and development partners play an important role in shaping health financing policy in Kenya. Public private partnership (PPP) features prominently in Vision 2030, and is expected to be given a legal framework through the PPP Bill. PPP - Health Kenya is a coordination body that has representation from MOH, NGOs, FBOs, and the commercial private sector. The Joint Framework of Work and Financing introduced by the Kenya Health Sector Strategy Plan II is the basis for the Kenya Health Sector-Wide Approach and basket funding in the health sector (KHFS 2008). There are various technical Inter-agency Coordination Committees (ICC) led by GOK, including one focused on health financing. The Development Partners for Health in Kenya is a coordinating mechanism for partners active in the health sector.

13 Discussions around health financing in coming months will take place against the backdrop of farreaching government reforms introduced by the new Constitution. Adopted in 2010, the Kenyan Constitution mandates the devolution of government functions in several sectors including health to newly created county governments that will replace the previous structure of provincial administrations, district administrations, and local authorities. The counties will have the responsibility of delivering essential health services, while the national government will retain control over formulating health policies and oversee referral health facilities (World Bank 2012). Health insurance is not in the list of devolved functions, therefore in principle the function is retained by the national government. However, the counties may choose to create their own pools, the implications of which for NHIF are not entirely clear. Kenya held elections for national and county government offices in March, The immediate health financing priorities of the new government led by President Uhuru Kenyatta include providing free maternal health services, progressively removing user fees at public facilities starting with free primary health care services, consolidating and expanding all health subsidy mechanisms towards achieving universal health coverage (UHC), and initiating governance reforms within NHIF. Discussions are currently ongoing about how free maternal services could be financed; options being considered include reimbursing facilities through HSSF, NHIF, or a hybrid of the two. How this and other health financing measures will be implemented in the coming months will depend critically on the new leadership at the Ministry of Health. Service Delivery and the role of Social-Franchise Networks The service delivery system in Kenya is mixed, with a roughly equal share of public and private facilities. The public sector owns 52.3% of all health facilities in the country, while the private sector accounts for the remaining 47.7% percent (MOMS 2012a). The private sector includes both private for-profit units (34.9% of health facilities) and not-for profit facilities run by faith-based organizations (FBOs) and NGOs (12.8% of health facilities). Extending coverage through social franchise networks (SFN) is a key focus for the AHME project. Several SFNs are operating in Kenya, including two organized by key AHME partners. The Tunza network led by Population Services International (PSI), which waslaunched in 2008 and includes nearly 286 facilities, and the Amua network organized by Marie Stopes International (MSI), which was launched in 2004 and encompasses over 300 clinics, are fractional franchise models that focus on delivering reproductive health (RH), maternal and child

14 health (MCH), and HIV/AIDS services through franchise facilities across the country. Other examples of SFN networks operating in Kenya are the Child and Family Wellness network by the Healthstore Foundation; the Gold Star Network by fhi360, and Huduma Poa by Kisumu Medical and Education Trust. 3. Existing Pro-Poor DSF Mechanisms in Kenya Below, we summarize DSF mechanisms that are in use in Kenya. All information in this section has been synthesized from the country literature review and key informant interviews conducted by the team. Details on both can be found in the annexes. Voucher Schemes: The most well-known voucher scheme in Kenya is the Output-Based Aid (OBA) voucher program for safe motherhood (SMH), family planning (FP) and gender-based violence (GBV) implemented by MOPHS with support from the German Development Bank (KfW). A special programs unit within MOPHS has been implementing the OBA program since 2006 in 5 districts and two informal settlements in Nairobi. PwC, an international accounting firm, is the voucher management agency (VMA) that sells vouchers for a nominal fee to poor women, who can then use the vouchers to access services in accredited public, private, and FBO facilities. An independent evaluation of the program has shown that the program has improved utilization of SMH and FP services, and a reduction in OOP expenses. Respondents within GOK and from partner agencies, who are involved with the implementation of the program, were in favor of scaling it up to the rest of the country and expanding it to include additional interventions to accelerate Kenya s progress towards Millennium Development Goals (MDG) 4 and 5. However, many other policy-level interviewees expressed reservations regarding the sustainability and scalability of vouchers, which is seen as a project and not a systems intervention. Other voucher schemes mentioned by interviewees include coupons tested by PSI and Changamka. Cash Transfer Programs: With support from the World Bank, UK s Department For International Development (DFID) and the United National Children s Fund (UNICEF), the Ministry of Gender, Children and Social Development (MOG) implements several unconditional cash transfer (UCT) programs in Kenya targeting vulnerable population groups including orphans and vulnerable children (OVC), the urban poor, and the elderly. Some programs (e.g. the OVC program) are already operating in all parts of the country, albeit in a small number of sites in each area. GOK plans to scale-up the

15 programs in coming years, with considerable investment coming from GOK. Evaluations of the UCT programs have linked them to positive health gains. There is a pilot ongoing to test the introduction of requirements that would transform the UCT into a conditional cash transfer (CCT) program. Private sector actors have played an important role in the programs, specifically in supplying technologies to facilitate electronic financial transfers and in program monitoring. Several interviewees highlighted the poor linkage between the UCT programs run by MOG and other MOH programs. A key concern is that social protection and health programs continue to use different methods to identify poor households. User Fee Waivers: GOK has been offering user fee waivers to the poor at public facilities for several years, but the scheme has not operated well according to two respondents (e.g. the waivers are granted by the facility, which is problematic given that the waiver represents lost revenue for the facility). With DFID funding (which is expected to end in early 2013, at which point KfW will provide continued support), GIZ recently introduced a fee-waiver program in the Coast as part of the Health for All Kenyans through Innovations (HAKI) initiative. Poor households are identified through meanstesting methodology, and given cards that entitle them to free inpatient and outpatient services from participating public, FBO and private facilities. PwC acting as the third party administrator (TPA) reimburses the facility by a fixed amount per beneficiary. The HAKI program has only been in operation since November 2012, hence there is little systematic information about its performance. Medical Savings Accounts (MSA): Most MSA products currently available in Kenya are supplied by Changamka Microhealth Limited. The Changamka outpatient smartcard can be purchased from select supermarkets and comes pre-loaded with a certain amount of credit, which the bearer can top up using MPESA and use to pay for pre-determined services at pre-determined providers (Changamka negotiates rates with providers in its network). Changamka also offers a maternity smartcard for use at Pumwani Maternity Hospital and a platform for third party payer schemes. Interviewees on the policy-side were on the whole skeptical about MSAs working for the poor, who have a low savings potential. In contrast, the interviewed social franchise networks (SFN) and private actors reacted more positively to the idea, some of whom mentioned that they were currently developing MSA products. National Hospital Insurance Fund (NHIF): NHIF offers mandatory inpatient insurance to all formal sector employees, inpatient cover to informal sector workers on a voluntary basis, and outpatient

16 coverage to civil servants. The civil servants outpatient scheme uses capitated payments while the inpatient scheme reimburses providers for services delivered (NHIF uses different reimbursement methods such as fee-for-service and bed-day rates for different types of facilities). On the policy-level, interviewees viewed working with NHIF as the most promising way to extend access and financial risk protection to the poor given NHIF s long history, large existing risk pool, and potential for crosssubsidization. However, several respondents expressed reservations about a lack of choice in insurer reducing individual utility, as well as concerns about the risk of an already unaccountable and inefficient public institution getting worse if it is given more funds and a monopoly over insurance provision. Many respondents were of the opinion that while there is a consensus among all key stakeholders that Kenya needs to move towards universal and mandatory health insurance for all its citizens, the way this should be operationalized remains highly contentious. Some respondents expressed the need for NHIF to become a service institution that is more transparent and accountable for both its finances and the benefits it provides to its members. New leadership and transparency measures at NHIF (e.g. NHIF publishing its financial records in the newspaper) were cited as indication that NHIF was moving in the right direction, and further governance reforms are expected under the new administration. The implementation-level interviews with service providers revealed low levels of trust in NHIF, widespread concerns regarding its inefficiencies, and a belief that NHIF is out of reach for the poor. Community-based health insurance schemes (CBHI): CBHI schemes in Kenya involve low-income earners from the informal sector who are not covered by either private insurance or NHIF. The community running the scheme assumes the risk in CBHI, whereas MHI schemes involve traditional private insurers who bare the risks for the group. The two most prominent CBHI organizations are Kenya Community Based Health Financing Association (KCBHFA) and Jamii Bora Trust. KCBHFA currently has 9 member organizations and a total membership of approximately 258,000, and offers several health packages. Jamii Bora, a micro-finance institution (MFI), runs a health insurance scheme which has been in operation since A contribution of approximately KES 1200 per year gets an adult and a maximum of four children cover for all in-patient costs at FBO hospitals, including maternity care but excluding HIV/AIDS services. In Kenya, CBHI schemes are not covered by insurance regulations; instead they are registered and overseen by MOG. Most respondents on both the policyand implementation-levels appreciated the value of CBHI schemes in reaching the informal sector, and repeatedly emphasized the power of community networks and trust to both attract and retain

17 members. However, a majority questioned the sustainability and scalability of traditional CBHI schemes given capacity and resource constraints at the community-level. Micro Health Insurance Schemes (MHI): Partnerships involving MFIs, cooperative societies, international partners, and traditional private insurers are now offering a range of low-price MHI schemes in Kenya. Examples include Jamii Afya (CIC Insurance), Kinga Ya Mkulima (Britam), Equihealth (UAP), and the Tanyikina Community Healthcare Plan (AAR). The latest mobile phone-based insurance product launched at the end of 2012, Linda Jamii, is the result of a partnership between Changamka, Britam and Safaricom that combines a mobile savings mechanism with a comprehensive insurance product that includes both inpatient and outpatient cover. After registering for the scheme, which can be done by mobile phone, an individual can purchase insurance cover for his or her whole family upon saving half of the annual premium, and continue to pay the rest of the premium using mobile transfers during the course of the year. Interviewees at both policy- and implementation-levels viewed MHI schemes as a promising way to reach the poor, but they acknowledged that government subsidies will be necessary to reach the poorest of the poor. Some policy-level respondents raised concerns regarding the schemes suffering from high costs stemming from adverse selection and/or inefficient management, which threaten the sustainability of such schemes. Provider-based schemes (PBS): We refer to provider-initiated pre-payment and risk-pooling schemes wherein members pay a fixed amount per year to receive a pre-defined package of services as PBS. There are several PBS schemes in Kenya that offer their members out-patient cover (AAR, Meridian), in-patient cover (Avenue Hospital), or comprehensive coverage for both (Clinix and Avenue). Under existing Kenyan law, PBS is not considered insurance. Therefore, they are largely unregulated. Several interviewees mentioned that PBS schemes/hmos offer a high potential for cost-containment; under third party payment and fee-for-service, providers have the incentive to over-supply services, whereas under PBS providers have the incentive to keep people healthy and contain the services supplied. Some brought up the risks of PBS such as poorly managed schemes collapsing if they are not properly regulated, as has been the case with several PBS schemes in Kenya. 4. Opportunities for Enhancing DSF in Kenya From the interviews conducted, the team learnt about several DSF schemes that are being planned. This information is summarized below.

18 NHIF s Health Insurance Subsidy Program (HISP): With funding from Rockefeller Foundation, NHIF has developed a scheme to cover indigents. GOK is planning to use a US$1.5 million loan from the World Bank to test the concept by providing insurance coverage to 5,000 of the poorest families from across the country that will be identified using MOG s mean-testing processes. The initial test is expected to run from mid-2013 for one year. Lessons from the pre-test will be used by NHIF to make any corrections necessary before the program is gradually scaled-up to cover 9 million indigents by MHI Schemes: KfW is currently exploring the idea of financing a MHI pilot that would involve bringing together a MFI, a private insurer, and a TPA. Changamka is exploring products with NHIF as an underwriter to reduce costs and broaden the network of providers. Other potential MHIs include a partnership between Faulu Kenya and Africa Medilink, and a comprehensive scheme from Equity Bank that combines their existing insurance products with care provided through an Equity-branded network of service providers. OBA Scale-up: KfW and GOK are exploring ways to expand the OBA scheme to cover more areas and more services, with both GOK funding as well as support from other donors. The Access and Equity Fund (AEF): The idea of the AEF was articulated in the DKHFS (2008) that was never finalized. KfW is currently funding a consultancy to develop a proposed design for the fund. According to respondents, AEF would be controlled by the national government and could be used to both purchase cover for the poor through public tendering and finance the scale-up of the OBA scheme. The debate over how the AEF is to be set up and its institutional home is currently ongoing, with some stakeholders preferring an institutional separation between NHIF and the AEF. Scale-up of Cash Transfer programs: MOG has plans to scale-up its cash transfer programs with greater on-budget support from GOK as well as donor financing. However, the future of MOG is not clear, as the government structure in Kenya is being redesigned. It is quite possible that different MOG programs will be split between other ministries. 5. DSF Options for AHME in Kenya Based on the information collected during the landscaping study, which is summarized above, the Kenya team developed three DSF options for the AHME project in Kenya at a workshop held in Accra, Ghana, on April 7-9, They are described and compared below.

19 Option 1: Support NHIF to extend insurance coverage to the poor Problem statement: The poor in Kenya, for whom payments at the point of service pose a grave financial barrier to accessing care, cannot afford to purchase any of the health insurance products that are currently available. Proposed solution: NHIF has designed HISP, a new program that aims to subsidize health insurance premiums for 9 million indigents. This option will entail AHME partners working with NHIF and other stakeholders to implement HISP. The vision for AHME would be to assist NHIF to implement a 1-year pre-test for the scheme and, in subsequent years, scale-up the program and ensure its sustainability. In the test phase of the HISP program, which NHIF proposes to start in July 2013, 5,000 of the poorest households from across the country (approximately 100 households from each of the 47 countries; an estimated 30,000 individuals in total) will be provided with insurance for a year. Under the program, MOG will select the households using its proxy means-test methodology and MOH will pay the entire cost of the premium. The scheme will offer a benefit package that includes both inpatient and outpatient services. The outpatient component will be organized using the capitation system that NHIF has developed for the civil servants scheme, wherein enrolled households select a primary care provider from a panel of private and public providers for 1 year (they have the choice to switch provider during the first quarter). The provider is paid a capitated amount, which is meant to cover all outpatient services including prescribed tests and drugs (there are no co-payments or benefit limits). For inpatient services, NHIF will reimburse providers on the basis of services provided, as it does for all its existing inpatient schemes. NHIF views the 1-year pre-test as a way to test the capacity of its systems to implement HISP at scale. After the 1-year test phase, NHIF aims to gradually expand the program to cover 9 million of the poorest individuals in the country by This will entail additional discussion and planning, especially with respect to resource mobilization and fund management. In addition to implementing HISP that will extend coverage to the poorest of the poor, NHIF is exploring ways to increase uptake of its scheme in the informal sector. AHME s Role: NHIF has welcomed a potential collaboration with AHME to expand its coverage amongst the poor. NHIF has previously worked with both IFC and Pharmaccess, and views them as valuable partners. If AHME opts for option 1, its role could entail the following:

20 The project can provide technical support to NHIF as it implements and evaluates the HISP pretest, develops a long-term sustainability plan for the subsidy program, and scales up the program after the pre-test period. AHME can support NHIF to market its informal sector plan to networks such as voluntary associations, MFI member networks, community groups, and SFNs. The AHME consortium can work with SFN facilities to achieve NHIF accreditation following the example of facilities in PSI s Tunza network that are already accredited members of the NHIF network. NHIF is particularly keen to engage SFN facilities, since the insurer has observed through its research that SFN facilities have an established track record of delivering services at low costs to the poor. This effort would be done in collaboration with the supply-side component of AHME. The project can support NHIF to introduce information communication technologies (ICT) that further reduce their operating costs and improve the quality of services. AHME can support NHIF as it implements governance reforms, with a focus on improved transparency and accountability. Costs and Existing Financing: The HISP concept paper was developed with support from the Rockefeller Foundation. The average cost of the benefit package is estimated at $50 per person per year. GOK is expected to fund the program using a subsidized-loan from the World Bank worth US$ 1.5 million. NHIF will cover the administrative costs from its existing resources. The World Bank and the Japanese International Cooperation Agency (JICA) have expressed an interest in supporting HISP with additional funds in the future. Advantages of option 1: Through option 1, AHME can support a program which represents the first serious attempt by GOK to subsidize insurance coverage to the poorest of the poor, who cannot afford the cost of insurance. The comprehensive package offered by NHIF will include high priority interventions, and both inpatient and outpatient cover. NHIF intends to scale-up HISP rapidly to reach 9 million Kenyans by 2017, bringing them into the largest existing risk pool in Kenya. The proposed option will integrate SFNs into the largest existing health insurance scheme in Kenya.

21 Limitations and potential risks of option 1: The ongoing transition process and NHIF reforms could slow the implementation of HISP. Low trust in NHIF due to weak governance may result in low uptake or use of the program. NHIF has historically suffered from high administrative costs. Option 2: Developing a health insurance product for the informal sector distributed by SFNs Problem statement: The poor, who are predominantly working in the informal sector, are currently not covered by health insurance in Kenya. Reaching the informal sector remains a challenge for existing insurance schemes including NHIF, which have traditionally focused on the formal sector and/or the richer segments of the population. Proposed solution: Under this option, AHME will work with a consortium of partners to develop a MHI scheme that reduces costs by leveraging the SFNs and introducing ICT solutions, grows the health insurance market by partnering with communities, and develops a mechanism whereby GOK or partners can subsidize premiums for the poorest of the poor. The plan will be based on a basic package of outpatient services and maternal care services. AHME s Role: The role of AHME DSF partners would be to assemble and coordinate the working of the MHI consortium that will design and implement the health plan. The approach to the development of this health plan will be characterized by consultation with partners, thorough analysis of the situation, careful planning and systematic evaluation. The roles of different MHI consortium members are described below. Social Franchise Networks: The SFNs (e.g. Amua and Tunza) will be responsible for service delivery and will be supported by AHME DSF partners in the design, marketing, and management of the health plan. Experience shows that the active involvement of healthcare providers in the promotion of a health plan can have a positive effect on uptake. AHME will draw up a shortlist (based on selection criteria) of healthcare providers for inclusion in the project. This shortlist will be discussed with the MHI consortium partners and the final selection of healthcare providers will be agreed upon jointly. Under the plan, providers will receive capitated payments for all services except maternity interventions, which will be reimbursed on a fee-for-service basis. TPA: The administration of the product would be done by a TPA. The advantages of using a TPA are that it can reduce administration costs considerably. Moreover, the TPA can work with

22 multiple insurers and sources of subsidies for the plan, and eventually carry multiple insurance products. Insurer: The product would be underwritten by one or more private insurers.. Communities: Obtaining the support of community and opinion leaders is essential to increase people s confidence in the health plan in general and healthcare providers in particular. ICT: Mobile technology (e.g. Safaricom) can be used for marketing and active sales of the health plan among community members. In addition to that, mobile technology can be used for costeffective premium collection and administration of the health plan (e.g. claims payment). Advantages of option 2: The option will be easy to scale-up for AHME because it involves consortium partners. The scheme has the potential to be financially self-sustaining for quintile 2 and above. The scheme will leverages community platforms to boost enrollment. Integration of financing and service delivery can lead to cost containment. This option is not hinged on key decision or actions by GOK, which are inherently more uncertain and prone to delays. Limitation and potential risks of option 2: Subsidies will be needed to make an MHI product accessible for the poorest of the poor through any insurance scheme. Without GOK involvement in this scheme, it is unclear how sustainable financing for the subsidy component will be secured in the future. A new insurance scheme adds to the fragmentation of risk pools in Kenya. A voluntary scheme such as this carries a risk of adverse selection in case of low participation and enrolment (e.g. SFN facilities would have the incentive to enroll only sick people if the scheme is using a fee-for-service reimbursement system or only healthy people if provider payments are capitated). Cost: The average cost of a basic care package currently ranges from Ks 5,000 Ks 8,000 (~$60-$95) per family of 5 per year. Option 3: Assist GOK expand the OBA scheme to include more services and cover more regions Problem statement: Kenya is not on course for reaching its MDG targets related to reproductive and maternal health. Payments at the point of use present a key barrier to healthcare access for the poor.

23 Proposed solution: With support from KfW, GOK has been implementing the OBA scheme that offers poor women vouchers to access services related to SMH, FP and GBV in select districts since Program evaluations have documented positive results. Under this option, it is proposed that AHME work with GOK to develop and execute a plan for expanding the OBA scheme to cover more services and scale-up nationally. The vision for this option is to boost the uptake of high priority interventions across Kenya in the lifetime of the AHME project. While the special programs unit within GOK that has been implementing the OBA program and key partners like KfW have been engaged in discussions on this topic, there is presently no blue-print for the proposed expansion. The ideas being considered relate to scoping-up the program to include child health and possibly other services, which are critical for Kenya achieving its MDG targets, and scaling-up the program to more counties. There is also the idea that the scheme be rebranded with a new name (e.g. health card) to address the current image of OBA as an unsustainable project. The ultimate aim is to gradually transition voucher users to a health insurance scheme, ideally integrating the OBA program with HISP. The transition could happen, for example, by increasing the benefit package gradually. AHME s role: The AHME team can work with GOK to expand and further develop the OBA schemes, which could include tasks such as: Designing vouchers for child health and other high priority services in partnership with other stakeholders. Supporting the expansion of the program to new geographical areas, especially those with a high density of SFN. Facilitating the increased participation of SFN in the OBA scheme panel of providers with respect to services covered by the program currently and its proposed expansion to cover additional services. Improving accreditation methods and providing technical support in areas such as costing and speeding up provider reimbursement through ICT solutions. Assisting in the transition of OBA towards a health insurance model over the course of the next 5 years.

24 Costs and Financing: The program is currently in its 3 rd phase of implementation, which extends from November 2011 to October 2014 and has a total budget of US$ 20 million (Euro 15.2 million). In this phase, approximately 90% of the budget is being financed by KfW. The remaining 10% is supposed to come from GOK, but there is at present uncertainty over whether these funds will be made available. GOK and the German Government have a debt-swap agreement that is likely to finance the implementation of the program in 4 new counties from mid-2013 until mid It is expected that the KfW will secure additional support for the OBA scheme in its program cycle. Other funders like DFID and JICA have also expressed interest in supporting OBA expansion. Advantages of option 3: The program has a proven track record of reaching the poor. It focuses on high-impact interventions. As the implementer of the OBA scheme, GOK owns the program. Limitations and potential risks of option 3: There is presently no plan or blue-print for OBA expansion, hence AHME would have to invest considerable time in the initial phase of the project to assist GOK develop such a plan before implementation can begin. The OBA scheme is a vertical program that, even after the proposed scoping-up of services, will only cover RH and child health services and will not include other high impact interventions. GOK has hitherto not invested a significant amount of its own resources into the program and has not met its phase 3 funding commitment as yet. Comparison of Options The AHME project has adopted 5 selection criteria for choosing a DSF option for the project. How the options fare along each of the 5 criteria is discussed below, and summarized in table 1 below. Most benefits accrue to quintile 1 (Q1) and quintile 2 (Q2): Both options 1 and 3 score high along this criterion. NHIF s HISP is specifically designed to subsidize insurance for the poorest of the poor, i.e. quintile 1, by GOK. The insurer is simultaneously attempting to market its informal sector scheme to families in quintiles 2 and above. The OBA scheme has a track record of benefiting the poorest of the poor. Option 2 scores lower than the other two options in this area. This follows from the fact that a low-cost insurance product will remain outside the reach of the poorest of the poor. AHME can

25 subsidize this product for this demographic group during the life of the project, but how this will be sustained in the future is unclear. Hence, it is harder to secure sustainable financing for subsidizing the poor under option 2. Covers high priority interventions: Option 1 involves a comprehensive package that includes both inpatient and outpatient services. Option 2 entails a more limited package of outpatient and maternity care services. Option 3 involves some high priority interventions in the areas of reproductive health and potentially child health, but excludes other high priority interventionsl. Will benefit many people by year 5: All three options proposed offer the potential to reach many people by year 5 of the project. Low implementation risk: All three options involve some implementation risk for AHME. The launch of HISP may be delayed by the ongoing government transition process and reforms within NHIF. Several low-cost insurance products have hitherto not succeeded in achieving scale, financial sustainability, and a comprehensive benefit package for different reasons. The OBA scheme is viewed by many both within GOK and amongst partners as being unsustainable given its high costs. Its expansion to new areas will require fresh tendering for a VMA, which can be slow given government systems and capacity constraints. Leverages government or other funding that is likely to continue: The HISP pre-test will be financed by GOK through a subsidized loan from the World Bank. It is expected that further expansion of the program will be supported through increased investment by GOK and other partners. The MHI scheme is self-financed for Q2 while AHME will need to provide subsidies for Q1. Whether GOK or some other partner will pay for the Q1 subsidy beyond the lifetime of AHME is hard to predict. GOK investment in the OBA scheme has hitherto been low, but it is expected to attract more GOK funds through a debtswap with the German Government. KfW funding for the current program ends in late 2014, while GOK debt-swap funds will finance the program in 4 new counties from mid-2013 until mid While it is likely that KfW, DFID and other partners will commit funds in the future these commitments are yet to be confirmed.

26 From the perspective of SFNs, both options 1 and 3 integrate them into larger government-owned schemes that are more likely to attract government funding, while option 2 creates a new scheme focused solely on the SFNs. Table 1: Comparison of the options using AHME principles Criteria Most benefits accrue to quintile 1 and quintile 2 Covers high priority interventions Will benefit many people by year 5 Option 1: Support NHIF s HISP HISP specifically designed to target the poorest households in quintile 1 using MOG s means-test Comprehensive package including most high priority interventions Option 2: Develop MHI product Benefits will accrue to users of SFN networks who can afford to pay the premium. Outpatient and maternal health services including many high priority interventions All have the potential to reach many people by year 5 Option 3: Support OBA Expansion Vouchers sold to the poor using community health workers Some high priority interventions Low implementation risk Risks associated with working with a public institution Mixed track record of working Uncertainty over future funding Leverages government or other funding that is likely to continue Role of the SFNs Financed through GOK funds; greatest potential for crosssubsidization Brings SFNs into the largest existing insurance scheme Partial self-financing makes it sustainable; however, it is unclear how subsidies for the poorest of the poor will be sustained Builds an insurance scheme centered on SFNs GOK is going to finance the expansion of the scheme to 4 new counties through a debt-swap agreement. Future funding beyond the current KfW and GOK commitments is currently unknown. Integrates SFN into an existing program and uses SFN for the expansion of the scheme 6. Recommendations from the AHME Steering Committee The AHME DSF partners, IFC and Pharmaccess, presented the three Kenya options to the AHME Steering Committee on May 7, 2013 in Abuja, Nigeria. The Committee provided the following recommendations to partners:

27 Option 1: The Committee encouraged the AHME DSF team to develop a plan of work for AHME to support NHIF to extend insurance coverage to the poor, with a focus on the implementation and scale-up of HISP. While the Committee expressed reluctance towards AHME contributing directly to subsidizing premiums on the grounds that this is unlikely to be sustainable in the future, the DSF partners were encouraged to explore strategic areas where AHME partners can add value given their core expertise and experience. The DSF partners will present a detailed, costed work plan at the next meeting of the AHME Steering Committee Option 2: The Committee was in favor of exploring health-wallet and other ICT solutions for promoting health savings and group purchasing of health services, but expressed hesitation about AHME launching a new MHI product that runs the risk of being unsustainable and difficult to align with GOK health financing policy. The Committee asked the AHME DSF team to refine the strategy under option 2 further by exploring both the idea of a SFN-based MHI combined with health wallets as well as each element separately, and present them to the AHME Steering Committee at their next meeting. Option 3: GOK, KfW and other development partners are currently in the process of discussing the future expansion of the OBA scheme. The AHME partners were asked to learn more about these discussions, explore if there are ways for AHME to play a strategic role in the expansion of the OBA program, and present an update to the AHME Steering Committee at their next meeting. The team was encouraged to present detailed plans and/or progress updates for all three options at the next AHME Steering Committee meeting, which is expected to take place in September of 2013, for a final determination on AHME DSF activities in Kenya. 7. Conclusion Kenya is at a crossroads in many respects. It is in the throes of implementing a new Constitution that will change the nature of health service delivery in Kenya. Devolving key functions in the health sector to the newly created county governments will be the primary focus of the newly elected GOK in coming months. Simultaneously, the two existing ministries of health will be merging into one, with new leadership at the helm. These systemic changes present both challenges and opportunities for the AHME project.

28 The biggest challenge for the AHME project in Kenya is that it is operating in the absence of a comprehensive Government-led health financing strategy. While there appears to be agreement amongst key stakeholders that Kenya needs universal and mandatory health insurance, but they continue to disagree over how this should be implemented. NHIF being the only insurer for a mandatory health insurance scheme is a contentious issue both within and outside GOK. There are many DSF mechanisms already in use in Kenya, some of which are expected to benefit from reforms and extensions that will expand their coverage of the poor or of services delivered, or both. However, the proliferation of uncoordinated, parallel health financing schemes is viewed as risky and GOK has little appetite for small pilot schemes championed by different development partners. Partners are encouraged to coordinate their activities with GOK. In the case of health financing activities, the Health Financing ICC is the appropriate platform for such engagement. Combining these considerations with technical findings from the desk review and stakeholder interviews, the Kenya team proposed the following options for AHME to consider: 1. Work with the National Hospital Insurance Fund (NHIF) to develop and implement the health insurance subsidy program (HISP) 2. Developing a health insurance product for the informal sector distributed by SFNs 3. Assist GOK expand the voucher scheme to cover more areas and/or more types of interventions Following the recommendations from the Steering Committee, the AHME DSF partners IFC and Pharmaccess are going to further develop and explore the three options in the coming months in consultation with GOK and partner agencies, especially the Health Financing ICC.

29 Citations Deloitte, IFC, NHIF and MOMS, 2011a, Market Assessment of Private Prepaid Schemes in Kenya. GOK 1994, Kenya Health Policy Framework. GOK 1999, Kenya Health Sector Strategic Plan I ( ). GOK 2005, Kenya Health Sector Strategic Plan II ( ). GOK 2011, National Health Accounts. GOK 2011, National Health Policy Framework ( ). GOK 2012, Kenya Health Sector Strategic Plan 3 (October 2012 draft) GOK 2007, Kenya Vision 2030: Popular Version. Draft Kenya Health Financing Strategy MOMS 2012a, 2010 Facts and Figures. MOMS 2012b, Sessional Paper 7: Policy on Universal Health Coverage in Kenya. MOMS and MOPHS 2012, Sessional Paper 6: Kenya Health Policy. World Bank 2012, Devolution without disruption, Washington DC.

30 Annex A: Country Literature Review Indicators tracking health outcomes and health system output in priority areas like maternal and child health in Kenya tell a somewhat mixed story about improvements in the health system s performance over time. On the one hand, the marked decrease in under-five mortality from 115 deaths per 1000 live births in 2003 to 74 deaths per 1000 live births in 2008/09, which can be traced to an increase in the percent of fully vaccinated children from 57% to 77% over the same period, is evidence of the health system expanding effective coverage of priority interventions. On the other hand, the increase in maternal mortality from 484 deaths per 100,000 deliveries in 2008/09 to 514 deaths in 2011, which is in part linked to the fact that less than half of all deliveries in Kenya are taking place in hospitals, is a cause for concern. Health Indicators / Under five mortality 115/ /1000 Maternal mortality - 484/100, /100,000 Fully vaccinated children 57% 77% Mothers delivering in a health facility - 43% Table 1: Important health indicators in Kenya (Deloitte Consulting, 2011a) Additionally, when these measures of health outcomes and healthcare utilization are disaggregated by wealth quintile, they reveal stark inequity across income groups. For example, under-five mortality was 94 deaths per 1000 live births in the poorest quintile, compared to only 68 in the wealthiest quintile. Nearly 90% of deliveries in the wealthiest quintile took place at health facilities, while the comparable figure for the lowest quintile of mothers delivering babies was 18% (KNBS 2010). In other words, both health outcomes and utilization of health services are the worst amongst the poor. Hence, improving health outcomes in the aggregate is predicated on the improvement of health outcomes for the poor, which in turn requires a targeted effort to increase the coverage of priority health services amongst the poor. Removing both supply- and demand-side barriers to healthcare access for the poor in Kenya is the overarching goal of the African Health Markets for Equity (AHME). Within that, a key strategy of the project is to enhance demand-side financing mechanisms that remove financial barriers to healthcare access. Under demand-side financing, financial resources follow the consumers, flowing to providers

31 based on the services accessed by consumers. This empowers the end users of the health system thereby boosting their demand for services, reduces out-of-pocket spending at the point of use that pose a key barrier to access and cause impoverishment, and makes providers more responsive and accountable. This document summarizes what we know from the existing literature about the health financing landscape in Kenya as well as ongoing demand-side financing mechanisms in use in the country. Section 1 discusses the health financing landscape, with a focus on the evolving health financing policy context. Section 2 describes the main demand-side financing mechanisms in use in Kenya. Given the AHME project s focus on leveraging cutting edge information and communication technology (ICT) for improving access to services amongst the poor, section 3 discusses the current status of ICT use in the health sector in Kenya. 1 Country Health Financing Landscape 1.1 Health expenditure patterns and trends Out-of-pocket (OOP) payments remain the largest financing mechanism in Kenya, resulting in a heavy burden of payment for the sick and the poor. According to National Health Accounts (NHA) estimates for Kenya, private health spending continues to account for the greatest share of total health expenditure (THE). In 2005/06, Kenya s THE was estimated at Kenya Shillings (Ksh) 102 billion, of which the public sector contributed 29%; private spending accounted for 39%; and development partners were responsible for 31%. Four years later, the NHA (2009/2010) estimated Kenya s THE as Ksh 123 billion. While public financing remained at 29%, private spending dropped slightly to 37%, and development partners experienced a small increase in spending to 34% of THE.

32 Overall Health Expenditure trends Percentage /2 2005/6 2009/ USD per capita THE as % of nominal GDP Government health expenditure as % of total Government expenditure THE per capita (USD) Year Figure 1: Overall Health Expenditure trends (MOMS & MOPHS, 2012) A significant increase in per capital health spending has also been witnessed, with expenditure rising from US$17 per capita to an estimated US$40 per capita in nominal terms between 2000 and 2010 respectively. The main driver for this increase was growth in government and donor resources, whereas the proportion of household expenditure reduced as a proportion of total expenditure. Despite the increase in expenditure, there was no real increase in health system resources, with THE as a proportion of GDP remaining stagnant. Government health expenditure as a proportion of total government expenditure has alarmingly decreased during the period, as shown in Figure 1 (MOMS & MOPHS, 2010), moving further away from the 15% target set by the Abuja Declaration. However, the composition of government health spending as shown in Graph 3 points to a positive trend, with recurrent expenditure (i.e. staff costs, drugs, operating expenses etc.) decreasing over time as development spending (i.e. capital outlays for new facilities and equipment) increases.

33 Public Health expenditure trends Kshs. (million) Year Recurrent (Kshs. millions) Development (Kshs. millions) Recurrent (%) Development (%) 100% 80% 60% 40% 20% 0% %-age Figure 2: Public Health expenditure trends (MOMS & MOPHS, 2012) Distribution of total Private Health expenditure 9% 2% Private for Profit Hospitals NFP Hospitals 21% 3% 47% NFP Health Centres/Dispensaries Private Clinics Private Pharmacies 18% Community Health Workers Figure 3: Distribution of total Private Health expenditure (Barnes et al., 2010) The public sector spends almost 100% of its funds on public facilities, which are owned and staffed by the Government of Kenya (GOK). Approximately 51% of all health facilities in Kenya are owned by GOK, while commercial private facilities and facilities operated by faith-based and non-governmental organizations account for 34% and 13% of health facilities respectively (Deloitte Consulting, 2011) 2. The private facilities depend largely on self-financing. Within the private sector, the highest spend is on private for-profit hospitals, which takes up almost half of the expenditure circulating within the 2 Organizations that do not fall into either of these categories manage 2% of all health facilities.

34 private domain (refer to Error! Reference source not found.). Error! Reference source not found. shows the function of health distribution as a percentage of THE (MOMS & MOPHS, 2012). 2001/ / /10 In-patient care 32.1% 29.8% 21.9% Out-patient care 45.2% 39.6% 39.1% Out-patient 7.4% 2.6% 2.8% Pharmaceuticals Prevention and 9.1% 11.8% 22.8% public health program Health 5.0% 14.5% 9.0% administration Others 1.3% 1.7% 0.8% Table 2: Distribution of total private health expenditure. 1.2 Healthcare Financing Challenges in Kenya Kenya faces several healthcare financing challenges, which in turn influence the Kenyan healthcare sector as a whole. First and foremost, Kenya s high poverty levels pose a major financial barrier for a large majority of the population to access quality care. Approximately 46% of Kenyans live on less than US$1 per day and nearly half of this group is considered to be absolutely poor ( indigent ). Second, the Government of Kenya is currently not able to invest adequately in the health sector. As has been shown above, Kenya s THE in 2009 was less than 6% of GDP, while government health spending was only 4.6% of total government spending. A third key challenge is the inefficient allocation and use of scarce resources. Health prevention services account for only 12% of THE while administration costs are approximately 14.5%. Fourth, a majority of Kenyans are not covered by risk-pooling arrangement, and user fee charges at the point of use in both public and public facilities are the cause for high OOP spending in Kenya. Fifth, donor financing is a major source of health spending in Kenya, which raises concerns about sustainability and makes the country vulnerable to the vicissitudes of foreign funding (Deloitte Consulting, 2011a). Finally, and perhaps most pressingly, Kenya is lacking a comprehensive and robust health financing policy. 1.3 Kenya s Health Financing Policy Context Immediately after Kenya gained independence in 1963, GOK made a commitment to providing free health for all, alleviating poverty and improving education. By the end of the 1980s, GOK was forced to cut public expenditure on free and subsidized public goods including healthcare due to the inadequacy

35 of public resources. Government provision of free basic healthcare for all citizens proved not to be financially sustainable and new reforms needed to be implemented. The first reform implemented was a user fee system in Subsequently, GOK adopted the Kenya Health Policy Framework (KHPF ), which introduced both organizational and financial reforms. Successive five-year Health Sector Strategic Plans ( , , and the current draft plan for ) have been adopted to operationalize the health policy. Health also plays an important role in Vision 2030, GOK s long-term blueprint for social and economic development. The strategy document established health flagship projects and set out a health vision which is to provide equitable and affordable healthcare at the highest achievable standard (Government of Kenya, 2007; MOMS & MOPHS, 2012). In 2004, Kenya attempted to establish a social health insurance program with national coverage when Parliament passed the National Social Health Insurance Bill. However, the attempt was not successful as the Bill did not receive assent from the President and currently remains in abeyance. In order to support national health policies and provide more guidance within the health sector, GOK has developed a number of sessional papers (MOMS and MOPHS, 2012; MOMS, 2012). Significant recent initiatives and programs geared towards strengthening the health system include the definition of the Kenya Essential Package for Health (KEPH) and Community Health Strategy as part of National Health Sector Strategic Plan II, both of which are now being updated for the Kenya Health Sector Strategic Plan III; the introduction of the Health Sector Service Fund, a direct supply-side funding mechanism for health facilities in 2010; and the introduction of District Health Information System (DHIS) to streamline health information management on a national level in Gains were also observed in the management of human resources for health, although unequal distribution of the health workforce remains a major challenge in Kenya (Luoma et al., 2010). Sector development planning is dominated by officials within the Ministry of Health, with ongoing participation from civil society and the private sector (Luoma et al., 2010; MOPHS and MOMS, 2012). A defining feature of Kenyan health sector governance between 2008 and 2013 was the split of the Ministry of Health into the Ministry of Medical Services (MOMS) and the Ministry of Public Health and Sanitation (MOPHS). The division was a consequence of the formation of a Grand Coalition Government after the 2007/2008 post-election violence. MOPHS was in charge of overseeing primary

36 healthcare delivery up to the level of health centers, whilst MOMS was in charge of administering and overseeing secondary and tertiary services. The split was perceived as having an adverse effect on sector partnership arrangements (Luoma et al., 2010). The two ministries are currently being merged following the national election of Ongoing Reforms In 2010, Kenya adopted a new Constitution, which introduced several major changes in the health sector. First, the 2010 Constitution establishes every Kenyan s right to health; Article 43 states that every Kenyan has a right to quality and affordable health care, including reproductive health ; and that no Kenyan can be denied access to emergency health services when in need (MOMS, 2012). The Constitution places a fundamental duty on the State to take legislative, policy and other measures, including the setting of standards, to achieve progressive realization of the health related rights. The second major reform ushered in by the 2010 Constitution is devolution, which is currently ongoing and will last the duration of the AHME project. Schedule 4 of the new Kenyan Constitution of 2010 assigns the function of delivering essential health services to newly-formed county governments, and the functions of stewardship for health policy and oversight of national referral health facilities to the national government. The devolved system will have a major impact on the way in which health services are delivered across the nation. A key role of national government in health policy is ensuring that clients can access quality essential health services without financial barriers. The process of defining a comprehensive financing framework for health is ongoing. Facilitating universal health coverage through a public health insurance scheme has re-emerged on the policy agenda with the release of sessional paper 7 by MOMS in late The document states that access to healthcare, particularly for the poor, will remain an unattainable goal unless the Government introduces new financing strategies that gradually shift the country from predominantly out-of pocket and tax funding to more sustainable pre-payment schemes in which GOK will pay the cost for covering the poor. While currently membership in the informal sector is voluntary, a section of the existing NHIF Act requires that this segment of the population be covered under a mandatory scheme. According to the recent sessional paper, GOK will start enforcing this section of the Act in order to benefit Kenya s rural

37 population, which constitutes over 60% of the total population. In order to enable this, the paper suggests that the NHIF will target the informal sector through multiple marketing approaches, with a target to enroll 50% of informal sector workers during the period 2011/12 to Strategies to reach the informal sector would include group memberships for private associations such as Co-operative Societies and Faith-Based Groups, and working with government agencies for the collection of contributions. The paper further recommends that GOK adopt a policy of health insurance for all by introducing a subsidy to cover NHIF premiums for the poorest of the poor. The tax-based subsidy would be added to the internal cross subsidy inherent in a social health insurance scheme. It is proposed that the subsidy program be scaled-up to reach 9 million people in the poorest quintile by year Other reforms proposed in Sessional Paper 7 include restructuring of the composition of the NHIF board and staff, and a new contribution scheme where contributions to the Fund by employers will be 1.5% of the employee s salary. The employee will contribute an additional 1.5% of their salary, bringing total contribution to the Fund to 3% (MOMS, 2012). 2 Demand-Side Financing Mechanisms in Kenya This section provides brief summaries on the currently existing demand-side financing mechanisms in Kenya, as documented in published and grey literature. The first six mechanisms involve risk-pooling: NHIF, private health insurance (high-end and micro health insurance), community based health financing, provider-based schemes (PBS) and employer self-funded schemes; the remaining four mechanisms discussed do not involve risk-pooling: Voucher systems, medical savings accounts (MSA), cash-transfer systems and fee-waiver mechanisms. National Hospital Insurance Fund NHIF is the largest risk pooling institution in Kenya, established in 1966 to finance healthcare in accredited public and private facilities. The NHIF is a government scheme and mandatory for all formal sector workers. A monthly contribution of Kenya Shilling (Ksh) 320 (minimum Ksh160 US$ 3.77/ minimum 1.89) is deducted from members pay and remitted in advance to NHIF by all registered employers. Informal sector workers can also sign up individually for their family paying a fee of Ksh 160 (US$ 1.89) on a monthly basis. The informal sector portfolio currently has just over 500,000 members.

38 Currently the NHIF offers three distinct packages of comprehensive in-patient medical cover: - Contract A: In which hospitals are contracted to offer in-patient care to members with no copayment. - Contract B: In which hospitals are contracted to offer comprehensive care, including a co-payment and with an agreed limit for surgical cases. - Contract C: An in-patient linked cover which is mainly available for the private high cost hospitals and the benefits for members are pegged to daily rebates paid to providers as agreed by NHIF. In order to align to MDG 4 targeting maternal health, a maternity package has been introduced. This introduction in the scheme played a key role in improving the quality of care and safe motherhood. The NHIF has a network of 30 semi-autonomous branches which collect revenue, pay claims and register members. These branches are connected through a Wide Area Network (WAN) which enhances real-time operations. The branches are located in all counties and serve all districts. In addition, the NHIF is in the process of connecting all hospitals to its database to facilitate smoother claims processing and develop a health management information system (Deloitte Consulting, 2011b).

39 Figure 4: Position of NHIF and Private Health Insurance within Health Financing Environment Institutional responsibilities: Several stakeholders are represented on the NHIF Board including Association of Kenya Insurers, Federation of Kenya Employers, Kenya Medical Association,MOMS, Ministry of Finance, and Central Organization of Trade Unions (representing workers in formal employment). Today, the NHIF reimburses public and private service providers who provide services to its members. Currently, the NHIF pays hospitals for providing in-patient services to members and for some groups such as the civil servants. It also covers outpatient costs. Figure 4 shows the position of NHIF within the broader health financing landscape. Successes: Over the past decade the performance of the NHIF has shown positive results in increasing the proportion of claims paid as a percentage of revenue and declining administrative costs. Furthermore, the NHIF has a large membership base (entire formal sectors and part of the informal

40 sector) and is continually working on improving capacity in order to meet the principle of universal coverage. In addition, the Fund has made efforts to enhance its administrative capacity and operational efficiency via the introduction of several ICT payment methods and claims processing mechanisms (i.e. online banking, M-PESA Agency business model, merchant cards, surveillance, disease classification according to ICD10 standards, and electronic claims processing). Over the past 7 years, administrative expenditure declined from 69% in 2005/2006 to 38% in 2012/2013. The major drawback has been the fixed contribution rate (MOMS, 2012). Challenges: There has been some controversy around the NHIF scheme. In particular, the fact that it is a mandatory scheme rather than a free-of-choice scheme elicited objections. Furthermore, the efficiency of the NHIF has been weak and needs improvement. The administrative costs, for example, are too high and need to reduce, while the payout ratios need to be improved (Deloitte Consulting, 2011a). Since its inception, the NHIF has undergone several reforms and is currently proposing to roll out an out-patient scheme. This proposal is currently pending the resolution of court cases filed against the increase in contributions that is proposed to support the out-patient scheme (Deloitte Consulting, 2011b). High-end Commercial Private health insurance Private health insurance became visible in Kenya in the early 1980 s. The industry is regulated by the Insurance Act Chapter 487 under the Kenyan law. Over the years insurance companies in Kenya have matured and currently offer various payment mechanisms to the provider, including fee-for-service (either directly to the provider or reimbursement to the patient), bundled payments and capitation. Institutional responsibilities: The membership of private health insurance covers of different types is constituted by people in formal employment. It is estimated that out of Kenya s total 2 million formal sector workers at least 800,000 have a medical cover with the private insurance firms. The health insurance coverage is estimated at 8% of the overall formal population and another 40% is estimated to be part of some form of self-funded. Currently there are 45 licensed insurance companies; 16 underwriting health insurance and 10 dominant firms that control over 90% of the market share.

41 Distribution of these products is mainly done by brokers and registered agents. Commercial Banks have also recently started offering the products via bank assurance as well as providing facilities for premium installments for clients at a fee. Successes: Advertising and marketing of the private insurance product increased the awareness of health insurance. Furthermore the private insurers have shown a steady growth of the enrolled population over the past 10 years. In addition the relationship with providers throughout the country has improved. Private insurers continue to play the lead in implementing innovative product offerings and implementing ICT solutions such as the biometric member identification system. Challenges: The biggest challenge private insurance companies face is the perceived high cost of the package. The market penetration is therefore not high enough yet as they have not been able to provide effective low cost products to reach the informal sector. The trust from the community in insurances needs to improve in order to become more successful. Micro Health Insurance (MHI) MHI is defined as health insurance that is accessible to the low-income population. It does not currently have separate regulation, and is potentially provided by a variety of providers and managed in accordance with generally-accepted insurance practices. Within the private sector, a number of low-cost health insurance schemes for the informal sector and the low income-population have emerged. The models typically charge a lower premium which is paid on a monthly basis rather than annual advance payments like in the traditional insurance schemes. The plans also have additional conditions such as a closed panel of providers and reduced benefits to keep the premiums affordable. The Micro-insurance Policy Paper that was presented to the Ministry of Finance maps out the IRA future path in the regulation and supervision of micro-insurance in Kenya. Institutional responsibilities: The private sector often works together with Micro-Finance Institutions (MFIs), Savings and Credit Cooperatives (SACCOs) and other Community-Based Organizations CBOs. Besides health insurance, some micro-insurance schemes also provide other covers like final expense benefits and life insurance. Examples of micro insurance schemes in Kenya are (Deloitte Consulting, 2011a):

42 Britam Insurance with KTDA: Kinga Ya Mkulima (28,000 members) UAP Insurance with Equity Bank: Equihealth (2,000 members) Changamka: Medical Savings Card with General Accident Insurance (9,000 members) Faulu Kenya with Pioneer Assurance (now with Britam) Advantages: The informal and low-income market segment present future growth opportunities for both NHIF and private prepaid schemes. Currently, 25% of the Kenyan population who does not have any health insurance is able to afford some kind of prepaid health insurance cover if appropriate products and services are developed, and marketing and distribution are done (Deloitte Consulting, 2011a). Challenges: The main challenge of MHI is the distribution of the product at a cost-effective price. It proved to be difficult to work out a successful cost-containment strategy including support and incentives of the GOK. Furthermore it is a challenge to partner with quality healthcare providers or a network of providers that may be willing to take on other forms of payment mechanisms apart from fee-for-service. Further, the general insurance challenge plays also a part: It is difficult to make people, particularly in the informal sector, to understand and trust the principles of insurance. Provider-Based Schemes PBS combines healthcare delivery with finance and in Kenya this mechanism remains largely unregulated. The preference of the providers running schemes on a prepaid basis is to target groups to join; individuals are also included, but to a limited extent due to adverse selection. There are three broad categories of provider-based benefit structures: 1- Out Patient cover only examples include AAR and Central Memorial Hospital 2- In Patient cover only example includes Avenue Hospital 3- Out Patient and Inpatient cover examples include Clinix and Avenue Healthcare PBS use a fixed membership fee as a means of financing. This membership fee is a pre-payment mechanism in which an individual pays a fixed sum in advance to cover an agreed period to a healthcare facility. In return the healthcare facility provides a defined package of services for the

43 agreed period of time. The financial risk in this method is usually borne by the provider as opposed to the indemnity scheme where the risk is borne by the insurer. Institutional responsibilities: The membership portfolio is managed by private healthcare providers who offer various outpatient and/or inpatient benefit packages for corporates or groups who wish to provide cover for their staff and/or dependents through a risk pooling mechanism. The schemes are mainly funded by the employer through annual budgets with sometimes part contributions from the member. Providers also use the distribution channels deployed by the private insurers such as brokers and registered agents. Some banks also offer premium installments to firms that may want to enroll groups. The facilities have to be legally registered by the Medical Practitioners and Dentists Board (Regulator under MOMS) but as such do not have a separate license from the IRA. Advantages: The costs of these schemes are much lower compared to the traditional insurance schemes improving the choices for groups in formal employment. It provides for a predictable medical budget for corporates as it protects from unplanned healthcare cost shocks. Greatly reduces the administration costs and this gets transferred to the patients. The risk of fraud and over utilisation is now transferred to the provider who has full control over these risks. It promotes prevention and health education with a focus on keeping the members healthy and providing high quality of care continuously. Challenges: Currently in Kenya there are very few providers with the capacity to administer PBS and the regulatory framework to promote these mechanisms remains weak and non-existent. The IRA also lacks capacity to regulate these schemes. Market awareness still remains low and it is often mixed with the reputation of private insurance companies that currently have a low trust within the community. Quality concerns have been also raised in this mechanism as the pooling and provision functions are handled by the same institution. The benefit packages tend to be limited to the services and capacity that can be handled by the provider. Catastrophic insurance is still very costly within the market making the scheme less secure than optimum. Multiple providers with different ownership within a network of providers pose a difficult challenge on operations and costing of the scheme. Benefits are not widely available to individuals therefore limited in their reach to the informal sector.

44 Community-based health financing (CBHI) schemes CBHI schemes have emerged to meet the healthcare financing needs of low-income earners who are unable to afford enrolling in private insurance and the NHIF. CBHI schemes are often financed and operated through pooled revenue collections by the community, mostly by people in the informal and rural sector. Those contributing to a CBHI scheme are often people who are not able to obtain public, private or employer-sponsored health insurance. Unlike health insurance providers, CBHI schemes are based on the concept of mutual aid and solidarity. There is no specific regulation for CBHI and most schemes are currently registered by the Ministry of Gender, Children and Social Development (MOG). Many of the members have the health cover bundled with a loan policy that is offered to them by the group (SACCO). Institutional responsibilities: The major player in Kenya with regard to CBHI is the Kenya Community Based Health Financing Association (KCBHFA). In 2010, KCBHFA had nine member organizations, 33 schemes, and a total individual membership of 258,000 people; with beneficiaries in excess of one million people (HENNET, 2010). The providers in a CBHI scheme are mostly public and Faith-Based Organization (FBO) facilities, as their overall costs are generally lower than within private facilities. One example of a KCBHFA organization which is doing very well is the Jamii Bora Trust (see box below). Advantages: CBHIs allow members of a group to come together and create a pool of funds through a pre-payment mechanism to ensure health costs are covered. This reduces the shocks of high unplanned healthcare costs that commonly affect the target population. The loans provided by the group have a higher compliance rate as regards paying back the installments. Challenges: The major challenge is still the weak regulatory framework as the IRA does not currently recognize or license these schemes. Catastrophic insurance or re-insurance are still not in place, making these schemes less secured. The administration capacity for claims and case management needs to be strengthened to improve overall efficiency.

45 Jamii Bora Trust The Jamii Bora Trust started in 1999 and found its roots from a charity initiative by a lady who initially assisted 50 beggar families in Nairobi. When the income from the charity alone proved to be unsustainable, Jamii Bora gradually evolved into a community savings scheme. People collectively contributed to the savings of the group and it would then be possible for them to take out loans. It became apparent that most members who were not able to repay their loans were not able to do so due to ill health. As the organization grew, new conditions of membership were introduced. One of these was that a member taking out a loan must also open a healthcare loan account. The practice is that members of Jamii Bora join in groups of five who act as guarantors to each other. One is registered as a member upon payment of a Ksh 100 registration fee, Ksh 50 card fee and a Disaster Fund fee of Ksh 50. Members make weekly contributions of a minimum of Ksh 50 to the savings account and Ksh 30 to the health insurance account. By 30 September 2007, eight years from the date of inception, membership had grown to 170,000 members. It is estimated that there are currently more than 240,000 members. Adapted from: HENNET, 2010 Employer Self-Funded Schemes An Employer Self-Funded Scheme is a scheme in which employers provide or arrange for the provision of health benefits as incentives to their workers and dependents through self-financing (self-funded in-house medical schemes). Institutional responsibilities: A large number of such schemes are offered by corporate firms for their staff and/or dependents. They do not constitute a risk pooling mechanism. The schemes are funded by the employer through annual budgets and are either managed in-house or through a third party administrator (TPA). A provider or a network of providers is contracted for provision of services to entitled employees. Successes - This method provides direct access mainly to staff members and sometimes also to their dependents to healthcare services, ensuring improved productivity of the employees and therefore the organization. It has also been shown to be a good way to retain staff at these firms as this entitlement is provided over and above their remuneration. Challenges - A number of employers run their own healthcare facilities, including Del Monte farm in Thika and Karuturi Horticulture farm in Naivasha. There are no specific regulations for in-house schemes and it has been noted that there is a rising trend among private companies in Kenya to provide support to their employees over and above the legal requirements.

46 Pooling funds Level of coverage Administration Payout ratios range mobilized 2009 (Ksh) expenses ratio range Estimates NHIF 6,600,000 5,079,569, % to 43.5% 32% to 55% (17% of population) Private insurance companies MIPs International Private Insurers Community-based schemes Total risk pooling funds 5,887,151,817 Private insurers and 19% to 22% 65% to 69% MIPs 700, to 25% (and 14% (1.8% of population) 46% to 61% 2,000,000,000 statutory commissions) 1,000,000, ,000 95% to 102% (2003- `150,000,000 (1.2% of population) 2005) 14,166,720,817 Table 3: Funds mobilized for risk pooling and coverage in Kenya (Deloitte Consulting, 2011a) Voucher Scheme Since 2006, the GOK has been working on the reproductive health (RH) vouchers program together with the German Development Bank (KfW) as a funding partner. The main objective of the program is to significantly reduce maternal and neonatal mortality by improving access to appropriate reproductive health services for the poor through incentives for increased demand and improved service provision (Population Council, 2011). Vouchers are a form of Output-Based Aid (OBA) and a form of demand-side financing (DSF) where providers are reimbursed based on the number of services they deliver. The OBA program in Kenya is now in its third phase. The RH -OBA Voucher Program subsidizes the three packages that are currently being implemented in Kenya: 1. The Safe Motherhood (SM) package which aims to provide safe delivery, prenatal and post natal care at a cost of the women of Ksh 200 (US$ 2.35). The total cost for each delivery thus far to the funders is Ksh 10,500 (US$ 123.5) per delivery. A total of 96,000 deliveries took place between 2006 and 2011.

47 2. The Family Planning package which focuses on providing long term family planning (implants, intrauterine contraceptive device [IUCD] and voluntary female surgical contraception) at a cost of Ksh 100 (US$1.18), with a total cost of US$24 for long-term family planning. Between 2006 and 2011, 27,000 long-term family planning packages were used. 3. Gender-based violence recovery services at no fee. The gender-based violence recovery services costs are comparatively low; by the end of 2010 these services encompassed only 1% of the total claimed vouchers. Institutional responsibilities: In Kenya the GOK and KfW are the funders of the OBA program and PriceWaterhouseCoopers (PwC) acts as the Voucher Management Agency (VMA). The program works with public and several FBO providers (54 providers) to target poor women in the districts of Kisumu, Kitui, Kiambu, Kilifi and Kaloleni. Additionally, the Korogocho and Viwandani informal settlements in Nairobi are covered. The identified Community Health Workers sell the voucher to the target women after deciding who is eligible, based on agreed criteria. Successes: The main success findings of the OBA program are that the project had a positive impact on the lives of the beneficiaries. An estimated 234,886 women of reproductive age or 24% of the target population in the five regions were reached. Furthermore, OOP expenses for voucher clients reduced and they visited clinics for check-ups more often. Furthermore, maternal deaths in the community declined as a result of the safe motherhood voucher. Additionally, the claim submission process enabled administrative and finance staff of the providers to learn new skills in accounting. This provided an opportunity for the clinic to know how to better manage other assets in the facility as well. Some providers were also noted to increase investments into their facilities to improve service delivery (Population Council, 2011). Challenges: Some challenges that became clear from the OBA program were that there should be better coverage in remote areas. Furthermore the transport costs for the women to a facility were often an issue as they did not have the financial means to pay for it. The greatest challenge to the project was in the area of efficiency in some aspects of management, which affected the timely use of human, financial and physical resources. This situation was unavoidable due to several activities which

48 took time to implement (IPE Global, 2012). 3 Furthermore, despite the fact that the actual reimbursement rates were negotiated, some FBO providers felt that the ceiling set was too low and at times the payments to facilities took too long (Population Council, 2011). Cash Transfer Systems Kenya s Unconditional Cash Transfer Program for Orphans and Vulnerable Children delivers financial and social support directly to the poorest households containing orphans and vulnerable children (OVC). The family receives cash money which they can use to pay for food, clothes, and services such as education and health. The aim of the program is to keep OVC within their families and communities and to promote their development. It is important to note that the program was not intended to address poverty as a primary objective. It is intended, rather, as a rights-based program that primarily fosters orphans and other vulnerable children and supports the development of their potential (human capital). The Kenyan program was influenced by cash transfer program development and research in Latin America, Asia, and Africa., It was seen as an opportunity to examine the specific challenges in Kenya (Bryant, 2009). Besides the program in support of OVCs, the Ministry of Gender also provides cash transfer support to several other target groups like the elderly and to the hungry via the Hunger Safety Net (Ministry of State for Planning National Development and Vision 2030, 2012). Institutional responsibilities: The GOK, in collaboration with its funding partners UNICEF, the UK Department for International Development (DFID), SIDA and World Bank, started the cash transfer program in 2004 and had reached a total of 412,470 beneficiaries by Equity Bank is facilitating this project as the banking partner. A National Steering Committee was set up for actions aimed at OVC, which is chaired by the Permanent Secretary in the Ministry of Home Affairs. Advantages: As a result of Phase One, children who had HIV were able to receive antiretroviral (ARV) treatment, which they had not been able to afford previously. Another positive impact is that other 3 Quotation from the original text: First of all, the project was shifted at the end of Phase II, from the National Council for Population and Development (NCPD) in the Ministry of Planning and National Development (MOPND) to the Ministry of Public Health and Sanitation (MOPHS) where it was led by a Project Management Unit (PMU). The elements of the lengthy process of transition to a relatively young and inexperienced team (the PMU), and the time taken to carry it out, and renew the contract to the VMA, contributed to gaps in the quality of the administrative systems and ability of the new team to make benchmark comparisons of progress. The IPE study team notes that in Phase II, the project was also affected by gaps in the GOK Health Information System (HIS) itself constrained by bureaucracy in governance structures and the shortage of professionals at all levels of health systems (IPE Global, 2012)

49 household members were benefiting from the cash subsidy. Between 30% and 50% of adult members of the beneficiary households were HIV positive or had developed AIDS. Data reported identified that part of the cash transfers was used to buy ARVs for these people (Bryant, 2009). Challenges: One reported challenge was selecting recipient households. Only 25% of the poorest households were selected due to budget constraints. It was reported that the program selection process was not able to identify the poorest families consistently. As a result, a large part of the poorest OVC households did not benefit from the program. Determining how to identify the poorest OVC households remains a challenge. Furthermore it proved to be a challenge to develop programmatic structures and processes to deliver the benefits to the families and monitor the outcomes. The beneficiaries reported that the money received was not enough to cover the full extent of the families basic needs. Furthermore, it became apparent from the community that there should be checks in place to avoid misuse of the transfers (Bryant, 2009). There was limited literature available on conditional cash transfer in Kenya, as the only literature found was regarding the GOK-UNICEF project. It would therefore be difficult to make any recommendations based on the available literature only. The research team is aware that there are other social cash transfer schemes in place and these include programs such as older persons cash transfer (OPCT), disability grants, and urban food subsidy, general food distribution (GFD) with the World Food Program, supplementary feeding and food/cash for assets. Medical Savings One organisation that enables medical savings in Kenya is Changamka Microhealth. Enrolled members can save money on their Changamka Medical Smart card and use their savings to pay for agreed services directly to the provider within the network. This model is not widely used and as such there are very few examples of this mechanism in Kenya from which to draw any informed conclusions. Institutional responsibilities: Through a PPP together with Pumwani Maternity Hospital, Changamka provides a health savings plan to low-income mothers who have no access to medical schemes or insurance coverage (Ng weno, 2010). Changamka has a provider network of 36 clinics in Nairobi and five in Mombasa with whom discounted prices for Smart Card users was agreed. The Medical Smart card is operationalized with the use of Safaricom s M-PESA which makes funds transfer relatively easy.

50 Advantage: This allowed the target population to better plan ahead for services, reducing the high costs during actual use of the service. Challenges: By September 2010, 8,000 Smart Cards were sold. Lack of customer awareness was given as a possible explanation for the relatively low number (Ng weno, 2010). Waiver of User Fees The Health for all Kenyans through Innovation (HAKI) project is currently piloting a fee waiver system in Kwale County. According to the initial design, HAKI was designed to test both the approach of SHI subsidies for the poor directed at both in-patient and out-patient care, and the removal of user fees by contributing user fees for KEPH to pre-identified poorest households, assisting the existing government waiver system. This means that no fee is being charged at the point of service to the selected target group 4. A poverty identification tool has been used to identify the poor for the SHI for the poor. ( Health for All through Innovations, 2010). Institutional responsibilities: The strategic partners within HAKI are MOMS and MOPHS. The funding partners are DFID 5 and GIZ 6 and the implementing partners are PwC (acting TPA), Kenya National Bureau of Statistics (KNBS), district health service providers (public, private and FBO) and the District Management Committee. The population coverage of the program is 8,568 of the selected poorest households and the providers participating are the existing facilities. Since this project is still in its pilot phase, no clear advantages or challenges have been reported yet. The advantages and challenges described below are expected results as derived from a meeting between the financing strategy stakeholders ( Health for All through Innovations, 2010). 4 The research team learnt during the in-depth interviews, that the social health insurance subsidy part of HAKI has since been abandoned, and will be replaced by a World-Bank funded pilot based on a concept designed by The Rockefeller Foundation (see Annex B).

51 Advantages: It is expected that HAKI will propose a financing system which guarantees access to quality health care for all Kenyans, but especially for the poor. The development of the program has included different stakeholders; it is therefore expected that they will all be motivated to contribute to the program. The strategy has been designed in such a way that it can (and should) be linked to ongoing reforms in the health sector such as the Health Sector Services Fund, Community Strategy, operational hospital autonomy, referral strategy, PPP reforms, administrative and governance reforms ( Health for All through Innovations, 2010). Challenges: In Uganda, Zambia and Niger, the reported challenges experienced with the user fee subsidy are: insufficient budget allocation to facilities; delayed reimbursements to facilities; shortage of healthcare workers and drug stock-outs; and lack of transparency.

52 OBA voucher program Medical savings User Fee Subsidy - HAKI Cash Transfer NHIF Changamka Microhealth, KfW, PwC, GOK, public and FBO GOK, DFID, GIZ, Main partners Safaricom, Pumwani GOK, Unicef GOK providers PwC, KNBS Maternity Hospital Start Year Women in their reproductive age in the areas Kisumu, Kitui, Target group Kiambu, Kilifi, Kaloleni, Korogocho and Viwandani # of people An estimated 234,886 women covered was reached (IPE Global, 2012) Pregnant women ( for Maternity specific product) All Kenyans, but mandatory for Poorest families OVC and general population for formal sector workers the wider benefit 412,470 (Ministry 8,568 families (Financing 8000 saving cards sold of State for Strategy Stakeholders (Ng weno 2010) Planning et al. HAKI 2010). 2012) 6,6m ( Deloitte et al., 2011b) Target Q1/2 Yes No Yes Yes No Providers GOK, FBOs Public, Private Public, FBO, Private NA GOK, FBO, some private Ante-natal care and childbirth Inpatient and outpatient Benefit package Family planning NA 500 KES cash Inpatient cover care Gender based violence recovery Contributions Differs per person but card Formal sector: Maximum Ksh Safe motherhood 200 Ksh fee is minimal of Ksh 150/= 320/= to a minimum of 160/= Family planning (FP) Ksh NA None Savings made as per ability monthly for minimum package. Gender based violence no fee Open contribution Informal sector: Ksh 160,= Kisumu, Kitui, Kiambu, Kilifi, Geographical Nairobi, Kwale, Kaloleni, Korogocho and Nairobi area Kwale, Wundanyi areas and Garissa Vivandani All over Kenya Use of ICT e.g. use of mobile phones MPESA, Smart Card NA Mpesa, Administration systems,

53 Website Main funders/ KfW, GOK NA DFID, GIZ UNICEF donors KfW: Funding GOK: Strategic partner GOK: Public sector: Some facilities Institutional PwC: VMA DFID/GIZ: Funding Management Private sector: responsibilities GOK: Funding/ facilitating PwC/KNBS; UNICEF: Funding Management, Facilitating FBO: facilitating Implementation and management Table 4: Comparison of different DSF schemes (1 of 2) GOK, Income through premiums World Bank (HISP) GOK: Managing and facilitating. FBO: Facilitating Private providers: Facilitating Employers: Remittances Employer Schemes Private Health insurance MHI Provider-based schemes CBHI schemes Main partners Employers, TPA Private health Insurance companies, Providers, Brokers and MFIs, SACCOs, CBOs CBOs, Micro financiers MIPs and Brokers Companies Started since Since 1970 s 1980 s more visible in Kenya Since 2000 s Since (Jamii Bora) Target group Employees Corporates, Groups and families Informal and low Large groups and Informal sector workers, income workers corporates poor women, community # of people covered 7 700,000 50,000 90, ,000 Target Q1/2 No No No No Yes Type of providers Public, private, FBO Private, public, FBO Public, FBO Private Public, FBO Benefit package Mainly outpatient Inpatient, Outpatient or both Inpatient, sometimes Inpatient, Outpatient or Differs, but mostly with injury/work Wider benefit range with premium outpatient. Exclusions both. Exclusions are inpatient related inpatient loading. Worldwide cover availiable. uncommon. common. Contributions Differs Differs per package Differs per package Differs but the range is Differs per CBHI eg Jamii 7 Source: Deloitte Consulting, 2011a

54 Geographical areas Use of ICT Main funders/donors Institutional responsibilities Range is around 20,000/= to but is less than private around 8,000/= to 200,000/= per member per year. ( Age band also applies for some schemes) health insurance 25,000/= per memeber annually Urban and larger Urban and specific to towns. Agricutural and Kenya, Regional or even Worldwide Urban and rural provider industrial zones Photo Cards, Claims administration MPESA, cloud based systems, internet MPESA Administration systems systems and MPESA Employers, sometimes in collaboration with NGOs N/A N/A N/A GOK: regulating Employers: Funding GOK: regulating through IRA through IRA TPA: Administration Private: Financing, Private: Management, Funding Private: Management and management facilitating and managing Providers: Facilitating Funding Providers: facilitating Providers: Facilitating Table 5: Comparison of different DSF schemes (2 of 2) Bora is about Ksh 47/= per week. Countrywide but mainly urban MPESA and claims management systems Community, occasional charitable donors which differs per CBHF Public sector: registers the CBHF schemes + providers Private: Management, facilitating FBO: Providers

55 3 Synergies with ICT projects E-Health The National E-Health Strategy was published in April Five key strategic areas form the pillars of the e-health Strategy: Telemedicine, Health Information Systems, Information for Citizens, M- Health and E-Learning. With the exception of Health Information Systems, they all represent areas where technology allows health systems to develop interventions that were previously not possible. Health Information Systems drive technology enabled transformations to what health systems already do, such as keeping medical records and supplying medicines and supplies to facilities. The five pillars represent a conceptual framework but the Strategy recognizes that in practice there will be overlaps and interventions might cut across more than one or even all pillars. In workshops related to the e-health strategy, stakeholders prioritized the health information systems pillar and adopted the notions of enterprise architecture and interoperability strategy as implementation framework (MOMS and MOPHS, 2011). One of the national health priorities outlined by MOMS is collaboration between public and private sector partners in ICT which should be fostered to enhance healthcare service delivery through improved access to medical care at lower cost. M-PESA M-PESA is an agent-assisted, mobile phone-based person-to-person payment and money transfer system implemented and operated by the biggest telecom provider in Kenya, Safaricom. The systems allows users to store or save money on their mobile phone in an electric account, and deposit or withdraw money in the form of hard currency at any of the numerous M-PESA agencies. The M-PESA system was launched in 2007 and in its first year already attracted 1 million subscribers. By March 2011 M-PESA reached over 13.8 million registered users and 27,000 M-PESA agents (Haas & Nagarajan, 2011; Plyler, Haas, & Nagarajan, 2010). Even though M-PESA does not have a straight forward relation with healthcare financing research has shown that M-PESA does increase the access to health for its users. M-PESA used to receive money from family and friends to pay for medical procedures and because of the speed of payment it is better possible for people to seek medical consultation in time. M-PESA can also be used as a form of medical saving. Earlier in this document the product of Changamka was discussed, but besides this product people can on their own save money in their M-PESA to cater for their medical bills. Besides the above innovative health care providers are using M-PESA to increase patient access to health care. One example is the Freedom from Fistula Foundation. When women call the foundation to seek advice, they will be screened

56 if it is needed for the woman to go to a clinic. If the woman does not have the financial means pay for her transport to the clinic the Foundation transfers the transport money into her M-PESA. It is reported or the first 16 months of the program that there have been no discoveries of fraud with this means of subsidization. Currently most healthcare providers do not accept M-PESA (yet) as a mode of direct payment. Patients who want to pay via M-PESA need to go to a registered M-PESA agent first to obtain the cash from their account. 56

57 References Barnes, J., O Hanlon, B., III, F. F., McKeon, K., Gitonga, N., & Decker, C. (2010). Private Health Sector Assessment in Kenya. Washington DC. Bryant, J. H. (2009). Kenya s Cash Transfer Program: Protecting the Health and Human Rights of Orphans and Vulnerable Children. Health and Human Rights: An International Journal, 11(2), Deloitte Consulting. (2011a). Market Assessment of Private Prepaid Schemes in Kenya. Nairobi. Deloitte Consulting. (2011b). Strategic Review of the National Hospital Insurance Fund - Kenya. Nairobi. Government of Kenya Kenya Vision A Globally Competitive and Prosperous Kenya (2007). Haas, S., & Nagarajan, G. (2011). M-PESA and access to health in Kenya. Health for All through Innovations: A Pilot Introduction of the Healthcare Financing Strategy Stakeholders Meeting. (2010). Nairobi. HENNET. (2010). Documentation of Best Practices and Lessons Learned among Hennet Member Organizations. Nairobi. IPE Global. (2012). Summary Findings and Recommendations - Evaluation OBA Phase II and Baseline Survey Phase III. Nairobi. KNBS (Kenya National Bureau of Statistics) and ICF Macro Kenya Demographic and Health Survey 2008/09. Calverton, Maryland: KNBS and ICF Macro. Luoma, M., Doherty, J., Muchiri, S., Barasa, T., Hofler, K., Maniscalco, L., Ouma, C., et al. (2010). Kenya Health System Assessment Bethesda MD. Ministry of Medical Services [Kenya] Sessional Paper No. 7 of 2012 On the Policy on Universal Health Care Coverage in Kenya (2012). Ministry of Medical Services [Kenya], & Ministry of Public Health and Sanitation [Kenya]. (2010). Kenya National Health Accounts 2009/2010. Nairobi. Ministry of Medical Services [Kenya], & Ministry of Public Health and Sanitation [Kenya] Kenya National e-health Strategy (2011). Ministry of Medical Services [Kenya], & Ministry of Public Health and Sanitation [Kenya] Sessional Paper No. 6 of 2012 On the Kenya Health Policy (2012). Nairobi. Ministry of Public Health and Sanitation [Kenya], & Ministry of Medical Services [Kenya]. (2012). Kenya Health Sector Strategic and Investment Plan KHSSP (Draft), (July). Ministry of State for Planning National Development and Vision (2012). Kenya Social Protection Sector Review. Nairobi. Ng weno, A. (2010). How Mobile Money Has Changed Lives in Kenya. Global Savings Forum. Seattle: Bill & Melinda Gates Foundation. Plyler, M. G., Haas, S., & Nagarajan, G. (2010). Community-Level Economic Effects of M-PESA in Kenya : Initial Findings. Population Council. (2011). The Reproductive Health Vouchers Program in Kenya - Summary of Findings from program evaluation. 57

58 Annex B: Analysis of Stakeholder Interviews Methodology A total of 46 Qualitative interviews were conducted with decision makers, key opinion leaders, experts and practitioners from the Ministries of Health (MOH), international organizations, health programs, implementing agencies, as well as public and private organizations engaged in aspects of healthcare provision (health facilities, insurance providers, financing and supply chain). The initial list of respondents, a purposive sample, was developed based on the sector knowledge of the International Finance Corporation (IFC) and Pharmaccess. Additional participants were added to the list according to recommendations by interview participants (snowballing method). Semi-structured discussion guides were developed and administered to elicit answers for the following research questions: What Demand-Side Financing (DSF) mechanisms are currently being implemented, or planned for implementation in Kenya? What new or different ideas of DSF mechanisms do experts and stakeholders consider promising? What is the level of success of the different existing DSF mechanisms, and what is considered suitable for African Health Markets for Equity (AHME) to implement? How do different approaches compare according to a range of selection criteria? What Information and Communication Technology (ICT) projects and solutions exist, that could support the implementation of the DSF component? Development partners were also asked questions pertaining to their key priorities and policies, and budgets related to financing of access to healthcare for the poor. As a complement to the interview, participants were asked to score several DSF mechanisms on a scale from 1-5 along five key assessment criteria (Equity, Scalability, Sustainability, Effectiveness and Efficiency). Respondents were categorized as Policy-Level (MOH, National Hospital Insurance Fund (NHIF), technical experts, private sector opinion leaders and development partners) and Implementation Level (health facility managers, social franchise network (SFN) coordination officers, supply chain, and health- and micro health insurance (MHI) representatives). The policy-level interviews were conducted and analysed by a team from IFC, and the implementation level interviews by a team of PharmAccess. All interviews were audio-recorded with a duration of between Minutes. Data entry, data condensation and high-level coding were carried out in a single step: The interviewers listened to the audio file, and entered information into a structured template that corresponded to the research questions and report outline. Data from the self-completion sheets were entered manually into an Excel spreadsheet to calculate average scores. 58

59 All participants were assured of full confidentiality in order to facilitate open and honest sharing of their views and opinions. By default, their identity is not revealed in the report. The references in upper case are coded by type of respondent as follows: G = Government/NHIF P = Private Sector Opinion Leaders T = Technical Experts/Academics D = Development Partners HF = Health Finance Institution/Financing Partner S = Social Franchise Network PR = Provider HI = Health Insurance I = Medical Distributor In cases where the inclusion of a reference would have allowed the attribution of a reference code to a specific organization, the reference was purposely omitted. Country Context Social Environment The Kenyan economy has shown signs of growth, driven by a strong middle class. This opens new opportunities for voluntary insurance schemes. T11 There are, however, contradictory perceptions on whether poor populations (Q1 and Q2) understand and appreciate the concept of health insurance, with opinion leaders in the private sector being more optimistic than health financing experts. T11,P20 Healthcare is seen to be consumed on an emergency basis, with little understanding of promotive and preventive P12, HI17 care. A household expenditure survey is expected to be conducted in 2013 and provide fresh insights in household spending patterns and preferences. D14 Kenya has a tradition of informal and formal organized social groups, such as Dairy Cooperatives, Matatu Associations, small-scale merry-go-rounds and investment groups, as well as illegal groups like the Mungiki. P20, S14 Despite this, respondents saw Kenya as an individualistic society with little sense of togetherness, compared to Ghana for example, as social groups are mainly formed in relation to financial matters. D3,T9,T11,G13 "If you look at our society, people are more individualistic. In fact, even the adoption of a socialist system in this country becomes a [challenge]. You believe in yourself alone, you look for your interest alone (Health Financing Expert) 59

60 The Health System and Public Governance There is a broad consensus in Kenya that the country needs to move towards Universal Health Coverage (UHC), T9,T19 and donors and government agree that Social Health Insurance (SHI) has an important role to play in it. D1,D2,T9,G15 However, there is an even stronger agreement that there should be a pluralistic approach rather than a SHI monopoly, with this view expressed by individuals from across government, donors, experts and the private sector T2,D7,P12,G10,D17,T19,P21 "The concern coming from the United States is that Kenya adopts the American model, where no decision is made and there are five competing systems. That's an honest risk. The Kenyan market reminds me of the American experience." (Academic) The perception of the performance of the two Ministries of Health, the Ministry of Medical Services (MOMS) and the Ministry of Public Health and Sanitation (MOPHS) over the past 5 years has been relatively poor: The split into two ministries drove inefficiency with turf wars and duplications ;P12, there was relatively low political commitment and perceived weak leadership, D3,T9 as well as insufficient engagement of stakeholders in the private sector. D7,D16 In terms of capacity, MOPHS is unable to handle the accreditation of health facilities for the Output-Based Aid (OBA)/Voucher scheme internally and has had to outsource it. G10 Further, specific agendas were driven forward in the ministry, often driven by individuals T11. Key focus points for MOPHS were the Millennium Development Goals and Community Health Extension Work G10,D14. A sharp rise in professionalism and commitment is expected in the combined ministry under the new government which, expected to come into place in the second quarter of D3 Within MOPHS, a clear conceptual distinction is made between Social Protection and SHI, where the former covers the indigent population G10. An expert pointed out that most of the current government expenditure on health does not reach those who need it most. T9 "A lot of things have just been put on hold, waiting for the new regime to arrive" (Development Partner) The challenges noted by interviewees in the Kenyan health system, particularly in the private sector, include rapidly expanding cost of healthcare at an inflation rate that is much higher than the general inflation; P21 lack of understanding and professionalism in health service costing and procurement (results 60

61 of an ongoing national costing study are eagerly awaited); P12,P21,D14 lack of reporting and transparency from the provider side P21 and a massive risk of moral hazard, whereas the average number of annual outpatient visits rises from 2.7 up to 6.7 for insured vs. uninsured individuals. D14 There is a large number of different donor programs, the harmonization of which poses a challenge both on the policy level and on health facility levels. D4 On one hand, the ministry is sceptical about continuing to have many disconnected pilot programs T9, while on the other hand there is the perception that MOH is interested to try all available options.t11 There has been an effort to design a donor funding roadmap to map activities to donors; an exercise that could not be completed to date. D17,D23 "If you look at the health system as it is working now, with all the partners we have - private sector, public sector, donors, banks, NGOs of course and private initiatives, foundations... if you go down to the level of health facilities, they have to deal with all these partners. I would say this is a mission impossible." (Development Partner) Devolution The most disruptive event in Kenya is the ongoing transformation into a devolved system of governance, which concerns many sectors, including health. How devolution will work out in Kenya is not yet well understood, P12, S15 and the intensity of the process as well as the uncertainty resulting from it has led many donors to put health financing activities on a back seat for the time being. D23 However, some interviewees expressed optimism: A key policy maker hopes that the county system will lead to more equitable distribution of health service provision, P13 and a health insurer expects that the accountability of counties will be better than it was with the national government. HI19 Furthermore comparisons between counties will lead to regional competition which, if well managed, can lead to improved service P20, HI19 provision. We are looking forward to the next era with the county system. Because we think that when resources are brought at the county level and we have good managers in the name of governors... we believe we would be able to capture the priorities for the counties, instead of things being done from Nairobi. Sometimes they {GOK} do not have a clear picture how things are being done on the ground. PR7 61

62 "We are not getting any guidance from the Ministry of Finance on how the developing partners will have to operate under devolution. At the moment, the thinking is that in fact it is going to be a struggle to keep the national level involved, because partners will go directly to counties. And counties will have the power to negotiate with donors. But from the donors' point of view, that's not practical; they cannot have 47 different agreements." (Development Partner) Interviewees also noted that porous county borders and medical tourism between counties might naturally lead to a purchaser/ provider split in the public sector: budget-conscious county governors will not be willing to finance healthcare for citizens of other counties. P20 The fixed allocated budget for counties from the national kitty is seen as insufficient, but additional conditional grants are sees as an opportunity which might lead to better performance. D14,P16 Nonetheless, a representative from the private sector saw early attempts of the central government to interfere with part of the devolution process P12. A Ministry of Health policy maker said that they are seeking to empower health facilities to operate more autonomously, to ensure that health service provision will not be disrupted by a limited capacity at the county level. G13 "We will come to terms with devolution after March 4th. In every sense of it, it's an animal that is not well understood at all. We will see different counties evolve, tinker their own health system. What the Ministry of Medical Services is trying to do, is to interfere with this process by creating referral centres (...) but the constitution says let go" (Private Sector Representative) Health Financing Most of the health financing in Kenya is currently input-based, despite the recent growth in NHIF coverage. T2,G13 About 40% of total health expenditure is carried by private households, and the remaining 60% are shared roughly equally by GOK and donors. T9 About 2% of the population is covered by private health insurance (estimated around 750,000 lives). Whilst the NHIF pool covers the biggest number of lives, the financial volume processed by NHIF is roughly equivalent to the financial volume in the private insurance sector. D2 One representative of the private health insurance industry pointed out that if this proportion was to be raised to as little as 10%, the industry in its current form would be unable to handle it P21. 62

63 "The central government will have to deal with financing healthcare for the poor. The hospitals are going to the counties. They'll have to balance their books. The governor will say 'I have to charge a fee for these things to balance, don't come to me with your manifesto. It's my money. It's what I chose to do.' So the government will have to find a way to give them grants to deal with the poorest. The easiest is to say we'll pay for these people." (Private Sector Representative) Interviewees noted the high administrative costs in government, with 70% of the annual government health budget going towards personnel costs. D14 Regulation and Legal Framework: Priority Needs The pace at which legislation for health sector is processed in Kenya is low. In 2004, there was a push for a Social Health Insurance Policy, which was opposed by the private sector and has not moved forward since. D7 In contrast, the Ministry of Health rushed a number of legislative pieces to Parliament in 2012, including the Kenya Medical Supply Agency (KEMSA) bill and the Sessional Papers No. 6 and 7 G6. In 2012, the Kenyan Parliament also approved the Social Protection Policy, which also has a component on SHI. D5,D7 As mentioned, Health Financing is expected to remain in the domain of the national government within the devolved system. G10,T11 However since counties have legislative power and can decide to run their own health risk pools, there is some uncertainty about the future coverage of NHIF G13,G15 There are several pressing needs in relation to health sector regulation in Kenya. Several donors and a private sector opinion leader pointed out that a stringent health insurance law is urgently needed. D2,D9,D21 Provider-driven membership or subscription schemes (Health Maintenance Organization (HMO)-like), community-based health insurance (CBHI) and even the NHIF capitation arrangement for the civil servant scheme are currently under-regulated or operating in a regulatory void. P21, I1, HF2, HI16, HI18, HI19 There was anecdotal evidence that personal relationships with key decision makers in politics play a role in whether or not medical schemes are allowed to operate without being subjected to IRA regulations. We belong to a club of community-based health insurance organizations and the Minister has a soft spot for us and was able to protect us from the IRA. ( ) There is a risk that the new Minister of Health will view our business as insurance and will require us to be regulated HI18 63

64 The law for Medical Insurance Providers (MIP) resulted in former HMOs taking measures to transform into insurance companies, and currently the law only applies to insurance brokers. P21 Stringent and wellinformed legislation, however, would prevent insurance companies from making losses and failing. P21 Another issue regarding insurance regulation mentioned by interviewees is that the GOK and the NHIF are too intertwined which leads to perceived lack of accountability as the NHIF is regulated by the GOK. HI19 ( ) It (NHIF) actually regulates itself; I am not quite sure how the Minister regulates it as he owns it. It must be subject to a separate regulator in the same way that the NSSF is subject to the RBA 8 HI19 Key stakeholders from the private and public sector see a need for a Health Benefits Authority, as proposed in the strategic NHIF review. G15,P21 Other urgent regulatory requirements include the finalization of the Health Financing Policy that has stalled for several years, D17 an independent accreditation system T9 and, as a basic prerequisite for UHC, standardization and regulation pertaining to issues such as drugs procurement, coding, clinical protocols and capitation arrangements. P21 In addressing the problem of spiraling costs in healthcare, one key opinion leader from the private sector proposed that the government consider regulation that would prescribe standardized referral pathways and introduce a gatekeeping mechanism for specialized/ higher-level care. P21 More prominently, a radical and widely discussed proposition, seen as a pre-requisite for UHC by many, is a law to make health insurance mandatory for every Kenyan. P20 A large medical distribution company indicated that the registration of pharmacies is an issue for their business. The company has the policy only to deliver to registered pharmacies. Across Kenya there are only around 2500 legally registered pharmacies, but the estimated amount of pharmacies in the country is close to The company is therefore missing out on a lot of potential clients. Following the law we will only give access to people who are legally bound by the law. A lot of wholesalers come into play because they sell to anybody and everybody [including those who are not legally registered] that is why we still use sub-wholesalers/distributors. I1 8 The NSSF is the National Social Security Fund a statutory fund which provides social security protection to workers in the formal and informal sectors (age/retirement benefits amongst others). The RBA is the Retirement Benefits Authority and oversees the NSSF. 64

65 Leaving these sub-wholesalers/distributors out of the supply-chain will save cost and thereby increase the affordability and access of quality medicines. Over the last 2 years we have increased our base and we are entering the market as directly as possible. We have seen and learned that the wholesale distribution network has been a mess, because it is not controlled. There is no unity, there is no governance, no fair playing ground. It would be the best if we could be given a legal network to distribute to I1 Perception and Role of the Private Sector In principle, it was agreed that Kenya has a favorable policy climate for the private sector, which serves about 40% of the low-income bracket of the Kenyan population D4,D7,T9,P12. Public sector collaboration with the private sector was already outlined in the 1994 Health Policy, T9 and has recently resulted in increased Public Private Partnership (PPP) activity. The most important platform, PPP-HK, was successful in bringing together not only the public and the private sectors, but also the faith-based and the commercial private sectors. P12 Increased PPP activity was initiated within MOMS, and in general there was somewhat stronger enthusiasm felt from that side; MOPHS saw the need to engage a focal person for PPP later P12. A private sector opinion leader expects the private sector to thrive in the devolved system, P12 and in line with Vision 2030, many in government believe that in the long run, implementation / health service provision is not the task of the government, but rather private providers. G15 "There is a readiness and openness in government to work together with the private sector. There are people within the ministry who strongly believe that implementation is not the task of the ministry." (Development Partner) That said, a donor and a government representative reiterated that donors and the public sector are traditionally skeptical about the involvement of the private sector, especially for health financing and risk pooling. D3,G13 One indicator of suboptimal inclusion of the private sector was the manner in which the Sessional Papers 6 and 7 were submitted to Parliament in late 2012 without consultation in the private sector D7. A technical expert intimated that the extent to which the private sector is included in the government programs depended highly on individuals in the government; as examples he referred to the OBA program which was inclusive, in contrast to the performance-based financing (PBF) pilot in Samburu, where only the faith-based sector was included after prolonged hesitation. T11 65

66 Making the Private Sector work for the poor A private sector representative and a government economist independently pointed out that the definition of a basic benefit package of health is a prerequisite for the optimal inclusion of the private sector in health provision and financing. P12,G13 Making private sector providers cost-conscious needs to be stimulated by setting the right incentives, and monitoring key indicators such as average lengths of stay. D14 To reach more of the low-income population, strategies need to be put in place to attract private sector providers to remote rural areas. T9 66

67 Existing Pro-Poor DSF Mechanisms in Kenya National Hospital Insurance Fund Background The estimate of current population coverage of NHIF is around 30% T9 there has been rapid growth recently with the addition of the civil servants scheme, and increased growth in the informal sector. G15 Most NHIF members (except civil servants) receive a benefit package that is limited to hospital bed costs; P12 with the plans to raise membership fees and add outpatient cover, the need to have a clearlydefined benefit package for NHIF to build trust was expressed. P12,G13,P21 Lack of transparency and accountability is perceived as an impediment to working with NHIF by some donors. D1 The respondent from the NHIF emphasized that reforms are under way, with NHIF recently publishing their accounts in the newspaper HI16. NHIF also started to implement the publicly-available recommendations brought forward in the IFC/Deloitte report. According to the same interviewee, a young, professional and open-minded generation is gaining ground in the organization. ( ) they {NHIF} published their financial accounts for the first times in the newspapers. It must be about So in terms of accountability that is better. HI16 In 2012, NHIF launched the first combined outpatient and inpatient benefits scheme, after publicly tendering it. A private sector consortium initiated by a few spirited individuals had discussed and considered to submit a bid for the tender, which eventually failed due to a disagreement around the percapita amounts to be paid out for the outpatient capitation scheme: Private sector providers considered the amount offered by NHIF too low to be sustainable P16. However, despite contrary expectations from the private sector, the scheme that was eventually launched and managed by NHIF themselves seems to have been running relatively smoothly to date, with the capitation fees apparently covering provider costs. G13,G15,P16 In reference to the public scandal around the selection of providers at the launch of the scheme, a key informant from the private sector analyzed it as follows: the concept was brilliant, but they blundered in the implementation P21 According to NHIF, inpatient usage among civil servant scheme members dropped from 13% to 5-6% after the introduction of the outpatient cover, which is an indicator that the inpatient scheme had previously been fraudulently abused. An audit report about the civil servant scheme is expected shortly, and will provide more insight into sustainability. In parallel, NHIF are in the process of commissioning an actuarial review. 67

68 As already discussed, health financing is not listed among the government functions to be devolved, yet there is a real possibility that counties start running their own risk pools rather than contributing to NHIF. G13,G15 Since NHIF heavily depends on urban regions (80-85% of the contributions stem from the Nairobi, Mombasa, Eldoret, Nakuru and Nyeri, with Nairobi making up 48% of NHIF s revenue), such a scenario is a threat to its stability and survival. G15 To mitigate the risk, stakeholders in the Ministry of Health and NHIF plan to lobby and convince county governments about the importance of large risk pools and the national good. G15 Despite that, a respondent from the private sector expects county governors to be at loggerheads with NHIF. P20 The opposition from private health providers and health insurance companies is not as stiff as some perceive it. D14,P16 Most health insurers do not seem to perceive NHIF as a very serious threat even if contribution fees are increased. Insurers are exploring business opportunities at the top-client segment especially with international health insurance products, whilst some are exploring MHI products for the informal/mid-level sector. P20,P21 More resistance comes from the overall private sector (not limited to the health sector): Increased NHIF membership and employer fees limit the choice of both employers and members. There is little trust in NHIF efficiency; furthermore, there is no clearly defined benefit package for NHIF. P12,G13 NHIF and the Informal Sector The negative press during the launch of the civil servant scheme in 2012 seemed to have accelerated the rate of subscriptions from the informal sector. The daily average new subscriptions rose to about 600, up from 350 prior to these events. G15 Since then, voluntary membership for informal workers is the fastest growing segment of NHIF and it has an estimated loss ratio of 1:6, mainly due to adverse selection. T9,G13,G15 The current contribution for informal sector members stands at Kenya Shilling (Ksh) 160/month, a rate MHI or CBHI could not compete with, as they lack the possibility to cross-subsidize and do not have a comparable risk pool. The monthly contribution proposed for the informal sector under the proposed new NHIF (with outpatient cover) is Ksh 500, still with the assumption that the informal sector will be cross-subsidized by formal sector membership fees. G13 NHIF and the Indigent NHIF in its current form does not target the poor. T9,T13 Having the monopoly on mandatory health insurance, there is an obligation and high pressure for NHIF to show that they are taking measures to cover the poor. G13,G15 Covering the poor, however, is as challenging for NHIF, as it is for others, both from 68

69 an administrative point of view (identification of those eligible for subsidies) P16 as well as from a risk or loss ratio point of view G15. In support of a scheme where NHIF covers the indigent, the Rockefeller Foundation is currently funding a study to lay a foundation for Health Insurance Subsidy Program (HISP). D1,G13,G15 The study is conceptually similar to a SHI study that was planned by the German-funded Health for all Kenyans through Innovations (HAKI) program, with the difference that the HAKI SHI study was designed as a pilot and in conjunction with a third-party administrator, both of which was not welcomed by NHIF G15. A stakeholder meeting to provide information on the Rockefeller study is expected within the second quarter of 2013, and study findings are expected in the first half of Despite NHIF preparing to assume a more active role in the coverage of the poor, a private sector informant expects that if contribution costs rise, NHIF will be claimed by its owners (the formal sector contributors) who will demand better services and a more extensive benefit package, rather than the usage of their contributions for subsidies of the poor or for administration. P21 Coupled with the view of a policy-maker and a health financing expert that NHIF does not have the capacity to cover all the indigents G13,T18, and the MOPHS conception that Social Protection is distinct from SHI G10, the extent to which the NHIF will be expected to cover the indigent population remains unclear. The Debate around NHIF The role and operations of NHIF are the most heavily debated issues in the Kenyan health financing arena. The discussion is not so much about the principle of a social (or national) health insurance, but much more about NHIF in its current and historic shape, and its management. Overall, a negative image prevails, although as mentioned earlier, on the policy level there is a broad consensus that in principle, NHIF would be a strong vehicle to move towards UHC, with the condition that there are far-reaching reforms and that it does not have a monopolistic status. One donor representative cautioned, however, that NHIF is currently not well known at the primary healthcare level. D3 Negative Perceptions of NHIF High concentration of power in a monopolistic institution is widely seen as an arrangement that bears an unacceptable risk of abuse in the Kenyan context, especially in the Donor community. D1,D2,D7,G10,D14 Technical experts and private sector representatives agreed that the technical capacity and the governance of NHIF was insufficient, T2,T9,P12,T18 and some pointed to the questionable role of NHIF as a tax 69

70 collector T2,T9,D4,T18. According to one private sector representative, being a large government body in itself leads to structural flaws. P12 High administrative costs were cited as one of the main weaknesses of NHIF D3,T11,P12, with the ratio currently being at about 45%. The NHIF proclaimed target of a 20% administrative cost ratio is still seen as too high by private sector opinion leaders. P12,P21 The negative publicity around a flawed selection of providers for the civil servants scheme, which led to the dismissal of the NHIF board in 2012, eroded confidence among some donors and specifically within the German government. D1 Likewise, the majority of implementation-level respondents were not positive about the NHIF. The arguments heard most were that the NHIF is not efficient, S9, S10, HF11, S14, S15, HI16 not trusted by the community, S12, S14, S15 HF11, S12, S15 and does not look after the poor. Several attempts for collaboration with NHIF have been made by respondents from the private sector, but most of their experiences have not been positive. Working with NHIF is like banging your head against a stone wall and I think more can be achieved when working with the private sector HI16 A large microfinance institution set up a MHI in collaboration with a private insurance for the administration. They worked with the NHIF as insurer and provided a health insurance loan for the clients. After a short period of time the scheme had to be discontinued because, according to the interviewee, NHIF was not paying providers for their services, after which the providers started to refuse clients of that scheme. In turn, loans were not repaid to the microfinance institution. When you look at NHIF as an insurer for your scheme you also look at it from a political dimension ( ) The experience with NHIF wasn t pleasant ( ). Because of NHIF the trust in our product XXX was lost. HF22 A respondent of a large public facility believed that the trust of the community was there, but that the fee of Ksh 160 is still too much for many in the informal sector. 70

71 The challenge for the informal sector is the 160 shilling per month. I believe the community trust NHIF but the challenge is the 160ksh per month which is too much. If they had it they would become members PR7 The NHIF needs competition from other schemes to improve and become efficient. The best way to pressure them is to reduce costs HF11 Positive Perceptions of NHIF The positive aspect of NHIF, according to technical experts and influencers lies mainly in its potential. T2,T9,D14,P20 It has a strong existing infrastructure and working systems in place at a countrywide scale, which can and should be leveraged. P12,D9 Capitation for the civil service scheme was the right approach. D14,P16,P21 There is recognition that NHIF has started to change, and that there are smart people willing to reform represented in the organization, and that there is more transparency than before. D14,G15,P21 From the implementation side, there were also some positive views of the achievements of NHIF so far. NHIF is not doing badly. But it is mostly for the working-class PR7 I think NHIF has been successful to the extent that it provides a basic level of cover through institutions to those who don t have private medical cover. Let s not argue about the standard, the fact is that it is there. There are some institutions in this country where the NHIF reimbursement is enough to sustain them and for the NHIF members to go and be treated. And that is better than nothing HI16 Conditions for NHIF to succeed The most important requirement for NHIF to succeed is institutional change. This was expressed by those who said that the institution needs to be fixed or radically reformed D4,D7,P12, needs to be more transparent, T11 give up some of the functions, especially accreditation, D7,D14 increase their technical capacity D2, and more generally become more independent and detached from politics. D2,P12 One 71

72 respondent also suggested that the re-introduction of cost-sharing in health facilities would increase the likelihood of NHIF being successful. D14 In contrast, a SFN administrator saw the role in accreditation and revenue collection as strength of NHIF. S10 NHIF is very good at accreditation which is done properly and the NHIF is efficient in collecting money than KRA S10 Vouchers In Kenya, vouchers for healthcare financing are equated by most stakeholders with the Output-Based Aid (OBA) program financed by the German Development Bank (KfW) and administered by PriceWaterhouseCoopers (PwC). Two other, more experimental initiatives were mentioned in interviews: One works with so-called coupons that are given to low-income users by Population Services International (PSI), and allows them to get discounts when using the services of Tunza clinics. D1,T11 The other one was a voucher program initiated by UNICEF in Northern Kenya, which, according to the respondent, did not work so well. D1 OBA Success The OBA program was started by KfW in It is currently in its third implementation cycle (Phase 3). D1 Vouchers for antenatal care (ANC), delivery and family planning are sold to eligible beneficiaries at a nominal fee, and can be redeemed at accredited public, private and faith-based health facilities D1,G10 Voucher sales, claims processing and reimbursement are administered by PwC. There are varying views about their involvement in the voucher scheme. PwC s involvement - or the involvement of an external agency more broadly - was described as by one interviewee as instrumental to the success of the program. G6 Conversely, the involvement of an external voucher management agency (VMA) was seen by some as a threat to sustainability, causing high administration costs. T9,P20 There was no agreement on whether the voucher administration costs were high or in line with industry standards. Different ratios were quoted, with one expert thinking it was at about 18% of costs, and another one estimating it at 30%. T9,T11,P20 The OBA is implemented with the close involvement of the MOPHS Program Implementation Unit and is still in project mode : At the time of the interviews, the Ministry did not have a program 72

73 that could absorb the vouchers as a fully institutionalized mechanism. D1 Nonetheless, financial contributions from the government side are increasing, and the vouchers are seen as an important pillar of Social Protection. G13, G10 "Everybody talks about covering the whole package. My focus is on the MDGs, that is covering the mother and babies under 5. Right now under OBA, we are just covering pregnancy, ante-natal and post-natal. Then we want to extend coverage to children under 5." (Policy Maker) The OBA program is seen from all sides as a successful intervention in terms of impact, a quick-win program driving utilization quite massively for specific services: ANC, deliveries and family planning. D1,D3,T2,T11,G10,P20 It works well for facilities from both the private and public sectors, G10,P12 and, in its competitive form, it has led to some infrastructure improvements in health facilities T9,T11. Furthermore, it opens up health facilities to cater for the poor, who had previously been viewed as loss-incurring clients. D1,G6 Beneficiaries reported provider responsiveness, and recommended the use of vouchers to others people. D1 "Voucher schemes work! If the goal is to get utilization up, in a world where universal health coverage is the priority, you try to get new users into the system, this can do that. It accelerates the trend." (Technical Expert) One respondent who runs a faith-based clinic participates in the OBA-voucher scheme. He reported a steep increase in the number of deliveries, and a great benefit it offers to the users. We used to have 4-10 deliveries in a month in 2009/2010. Now with the introduction of this voucher program we are delivering over 100 mothers per month. The majority of our maternity mothers are now vouchers. If you come here on a Wednesday of Thursday this place is packed with mothers who have vouchers. They are getting their services. It is a very good program; we thank the people who have initiated this approach because I think it is one of the best approaches when we are targeting safe deliveries. Because these mothers are at their sixth delivery and this is the time they are getting their first time delivery with skilled healthcare workers. To our side it is also an advantage because when we process the claims they reimburse ( ) PR8 73

74 Challenges Despite the broad success, the OBA voucher program has numerous challenges in Kenya. One critical issue that was often raised concerned its sustainability including, and especially from government/nhif G6,G13,G15, T2,D8 respondents. One interviewee argued that it was not sustainable since it does not have an inbuilt pooling mechanism, G15 while another respondent pointed out that it will take a long time before it can be financed entirely from government resources, but that the expected Access and Equity fund (AEF - see below) might be a good way to (partially) finance OBA. G6 "The voucher scheme, I can tell you for a fact. The moment the donor support is not there, the voucher system will collapse. It has no support structure." (Policy Maker) Another question mark concerned the depth of coverage, given that women/mothers require more holistic care than the narrow services covered by the voucher; initially the newborn child was not covered, which was critizised T2,G15. Further, two interviewees mentioned that the voucher scheme had experienced its share of abuse: Some providers bought vouchers for prospective clients, non-eligible users obtain vouchers either directly, or from beneficiaries selling them onward. According to one respondent, most people don t like to talk about the issue of abuse. T9,P12,PR7,PR8 Provider fraud (false claims) is being averted through checks and balances by the VMA. G10 One issue with vouchers is that sometimes we find very wealthy people with vouchers. The way it is distributed, maybe there is a gap. Sometimes the distribution is not very equitable. PR8 I think some people who distribute the vouchers do not have the courage to tell the people who are not eligible that they are not allowed to buy a voucher; they still sell the vouchers to them PR7 The identification of the poor remains a challenge, and it turned out that community health extension workers have not been effective in that task. D3,T9,G10 Other lessons learnt were: 74 Reimbursement rates for the private sector have to be higher than the rates for the public sector, since there is no subsidy in form of healthcare worker salaries G6 Depending on the reimbursement rates, voucher schemes can have unintended effects due to the wrong provider incentives (high rates of caesarean section) T9,D14

75 The main challenge for the government is handling the accreditation of facilities, which is not done by PwC. They are trying to outsource it G10 The reimbursement process in the public sector lacks transparency, and it is not entirely clear how much of the reimbursement paid out reaches the health facilities, and how much stays at district level T11 Increased workload due to the rise in utilization can overwhelm staff PR8 There have been delays in claims processing 7, PR8 The staff is now overstretched to the limit. Like now I was busy with registering the patients, we are understaffed PR8 The last time I spoke to the financial manager we had a backload of 1.2m Kenya shilling in unpaid claims. This is a small facility as compared to big ones, so if we have a deficit of more than Ksh. 1m..We need money to pay staff, medicines etcetera: Not being paid is somehow constraining the management PR8 In summary, there were both enthusiastic and critical voices among our respondents about the OBA voucher scheme. Along with NHIF, it was the most contentious DSF mechanism; in a sense the question OBA or NHIF could be construed as a proxy war between different approaches T9,T11,G13. The distilled question being debated can be formulated as follows: Will healthcare for the indigent be covered as part of social protection, independent and detached from NHIF, or will it be part of the national social insurance scheme? Conditional Cash Transfers (CCT) The largest cash-transfer program in Kenya, though unconditional (UCT), is the Orphaned and Vulnerable Children (OVC) program run by the Ministry of Gender, Children and Social Development (MOG). It currently reaches about 150,000 households countrywide, and at the time of interviews there were plans to scale it up on the government budget (initially the program was funded by UNICEF, the World Bank and the UK Department for International Development (DFID). The private sector played an important role in the monitoring and evaluation components of the program. Another UCT program is the DFID-funded Hunger Safety Net Program in Northern Kenya. To date, it has not received government funding, but there 75

76 are discussions ongoing. D5 One government respondent was aware of a UCT where mosquito nets were provided in exchange for having children immunized in an informal settlement in Nairobi. He pointed out, with some amusement, that the program, which was otherwise very successful, had been abused by some who brought their child for immunization repeatedly. G13 The OVC UCT program was not directly related to healthcare, but rigorous evaluation shows that it had a positive impact on the uptake of health services even in the absence of this specific conditionality. D1,D3,D5,T9 "Conditional cash transfers - I think there is room to ride on the system that has been there. Each county government will say that they do conditional cash transfers as some sort of pension to poor households. I know there is something for orphans. I would simply do due diligence to check that it is actually targeted at the poor, then add a new layer for healthcare, so that in addition to getting a little money to buy sukumawiki, they can also access healthcare" (Private Sector Representative) Influenced by the success of the OVC cash-transfer programs, a baseline study is currently being carried out to set the basis for a new CCT, which stands a good chance of being financed by the World Bank and DFID. Results from the pilot are expected in 2 years, and will include an analysis of health-related conditionality D5,T9. A respondent in MOPHS confirmed that a team had inquired about using the Mother and Child Health Booklet for their CCT pilot. There was little knowledge of the existing cash-transfer programs both on the level of some policymakers, private sector opinion leaders and implementers. P12,G13,I The cash transfer programs were known in MOPHS, where a stronger linkage between MOH and MOG programs was seen as desirable. One key donor representative was wondering whether lack of access to healthcare was really a problem of community behavior and therefore questioned whether CCT was an approach to be prioritized. D14 Voluntary Insurance Schemes The discussion on the enrolment in non-mandatory insurance schemes is led in a country context where numerous semi-formal organized groups exist, often with the purpose of achieving financial objectives. These groups, in the view of many, can be advised on how to purchase health benefits for their members; they can be used as a vehicle to mobilize money for health insurance, even if may not be efficient or sustainable for them to run their own schemes. T9,G13,G15,D14 Two other respondents explained that there is a relatively large population in Kenya (estimated at about 10 Million) who could afford health insurance premiums, and while the concept of insurance, as opposed to investments, has still not been fully grasped by many, there is also increasing willingness to pay T2,P20. 76

77 Policy makers would like to see a regulation for CBHI and MHI, G15 and would like for private companies to be able to cover the middle and lower income groups. G10 For this to succeed, provider costs need to be controlled by moving away from fee-for-service models, G15 and large pools have to be created by reinsuring or linking up CBHI T11, and designing health insurance membership for groups (or making it mandatory for every citizen) to avoid adverse selection P21. Keeping administration costs at bay, for example by working with agricultural cooperatives, was seen as a condition for success by two donors. D4,D7 One challenge for all voluntary schemes that target low- and middle income population in the informal sector is that their income is seasonal, and they might only be able to afford premiums at certain times of the year. T9 Commercial Health Insurance Commercial health insurances target high-income population, without being able to successfully reach out below the 3 rd quintile T2. Instead, they are now starting to increasingly market top-end international health insurance products P21. The concept of large volume/low margin business is not well understood among private health insurers. T9 "I am always debating about private insurances in terms of their ability to target the poor. Unless somebody is paying for it, the poorest really have very little money at home. Unless there would be someone to enroll the population and pay for it, it becomes difficult" (Private Sector Representative) Notwithstanding, most commercial health insurances in Kenya are making losses. They survive by being carried by other lucrative segments within insurance companies. T2 The losses are attributed an inability to cost and market products adequately, P20 and also a lack of emphasis on negotiated purchasing and provider cost-containment. D1,P16,T18,P20 This lack of negotiation makes the insurance providers involuntary contributors to the spiraling medical inflation in Kenya. D14,P21 The interface between health insurers and providers was generally described as fraught with problems, with a technical connectivity short of a disaster P16. Respondents described the healthcare market as being a provider market with unbalanced powers and an information asymmetry; this despite the fact that by now, many of the mid- to upper-level private providers obtain large proportions of their income (often around 80%) through patients with medical cover, rather than out-of-pocket P "The schemes have been designed to attract the sick and have adverse selection. The person who can actually afford, who runs a little kiosk in town -those guys have a lot of cash, but they will

78 never pay a medical scheme, because they feel it is too expensive. The schemes are not talking to that healthy population. Because of that, we have drawn out that insurance can only be afforded by the rich and/or employed. Lower-end people who will buy insurance do so because they have an acute need. They are literally buying money. We have completely messed up our insurance industry. It has a big problem right now." (Private Sector Representative) Another crucial problem is moral hazard, with members increasing the frequency of outpatient visits and skipping primary healthcare provider to go directly to expensive hospitals and medical specialists D14,P16,P20. One respondent explained that health providers on all levels tend to raise their fees if they know that a patient is insured, rather than offering services at lower, negotiated rates. Traditional incorrect positioning, structuring and marketing of insurance products automatically lead to adverse selection and financial loss, due to clients preferences for a broad and expensive high-end provider panel rather than convenience and financial peace-of-mind P21,P20 Community-based health insurance schemes Among policy level respondents, the CBHI that were mentioned by name included Jamii Bora and two hospitals - Mewa Hospital in Meru, and Chuka Hospital - which might possibly be provider-based schemes (PBS - see below). The Jamii Bora medical schemes was seen by some as having lower uptake than expected, threatened sustainability without Non-Governmental Organization (NGO) support and limited management capacity. T9,P12,D14 The fact that it still exists was seen as proof by a private sector representative that it has been sustainable so far. P12 The cost for Jamii Bora health cover is currently Ksh per year, per adult and 4 children. Including an additional adult the costs are Ksh. 4200,= in total per annum. The organization works as a micro-finance institution (MFI) and provides loans to its members under the condition that the person taking up the loan will take up a health cover. As the organization became a bank it encountered problems with registration and regulation of the health scheme. This forced some members to be without an insurance as they were no longer able to afford it. (see also the paragraph laws and regulations ). CBHI is made affordable for the poor households by having flexible payment mechanisms and allowing enrollment in stages. HI19, HI18 The scheme mentioned above for example enables weekly payments of Ksh. 46. However, the current rate for NHIF informal sector voluntary membership of Ksh 160/month is so low 78

79 (and loss-making) that CBHI cannot compete, as they do not have cross-subsidy mechanisms G13. Therefore, a number of the existing CBHI link to NHIF for inpatient coverage. D1,G13 One respondent mentioned that group-based schemes are very interesting because they are built on an already existing foundation which also offers benefits apart from healthcare. Furthermore, the fact that they are based from an already existing group works trust-enlarging and groups are able to target a part of the population which is otherwise more difficult to tackle, e.g. rural communities. S10 CBHI seem to be able to tackle a co-payment from the lowest quintile as it has shown to have worked for a community of beggar-ladies and has a big impact on their lives: The insurance made them feel hopeful and safe because they knew that they did not have to die because of the lack of money HI18 Challenges The main challenges related to CBHI is the strong adverse selection, G15,T18,P16,P21 and related to it, the easy entry and exit for members, who often do not renew their subscription if they have not utilized services in a year. T11,G15,P16 To mitigate the problem of adverse selection, the AAR/PharmAccess CBHI program created incentives for group/family (rather than individual) enrollment P16. The other key challenge with CBHI is the limited management capacity that most of them have by virtue of their community-based nature. T2,D3,DT9,D14,G15 Further, many CBHI do not have adequate depth of cover, as a means to protect themselves from losses. T2 In the donor community, as one respondent put it, the season of CBHI is over the Germans, for instance, don t want to talk about it anymore, presumably because they had some unsuccessful experience in the past. G10,T18 "People tout CBHI. But I think procuring healthcare is complex. We are not doing it in a major centre like Nairobi, even the commercial insurances. Pushing something that complex to the community, I m not so sure. What could work, is for communities to come together to buy into the social health insurance. That makes sense. If people together raise the funds, so that collecting the cash is cheaper to buy into SHI, that makes sense. Them running their own schemes out there, I don t think they have the expertise or gravitas." (Donor Representative) 79

80 Micro Health Insurance Schemes The conceptual difference between CBHI and MHI, as defined internally by the research team, is that the former originates in the community, while the latter are initiated by an external organization, often commercial insurance companies or MFIs. D8,T9 However, there is an overlap, and terminology was not used in exactly the same way by all participants. MHI are differentiated from regular commercial health insurance products by lower insurance premiums, making them more affordable to middle and possibly low-income groups. The interviewee from NHIF expressed the view that MHI would be a good solution to cover the indigent population, and the respondent from MOPHS equally indicated that coverage of the poor should be handled in a competitive manner, with the inclusion of MHI and/or private sector consortia. Specific names of MHI institutions that were mentioned during the interviews were: Faulu Kenya, a MFI, offers a medical cover to its account holders. It started with a United States Agency for International Development (USAID) credit authority of 5M USD. One respondent from a major donor organization was unaware of the level of success since there had been little reporting, but a donor and a technical expert were indicating that the Faulu MHI was not doing well because of not being able to control provider costs D1,T9 Afya Yetu in Nyeri is a MHI with a provider panel limited to lower-level hospitals, linked with NHIF D1 Linda Jamii is a recently launched MHI, a collaboration of Changamka, Safaricom and Brittam. As a unique feature it covers childbirth, as well as out-patient and inpatient services. Linda Jamii was HF2, HI16,G10 known both on a high policy-maker level and on the implementation level The partnership between PharmAccess and AAR to provide medical cover to farmers in a limited geographical area was mentioned by a respondent from the private sector; he pointed out that challenges with that scheme included getting providers on board, and controlling cost P16 Equity Bank had attempted to launch a MHI, which, according to one technical expert, failed due to the seasonality of income of the targeted population (he referred to it as Mama Mboga Syndrome ) T9 Many implementation-level respondents were in a way involved or interested in innovations around HF2, HF4, S9, S12, S15, HI19, HF22 MHIs. One way of financing MHI for the low-income groups is through a medical loan. A micro finance institution provides a medical insurance loan whereby the client can repay the loan in installments. HF22 Another way HI3, HHF20 is linking the MHI to a group of people, for example a factory or labor group. 80

81 Challenges Even though there are innovative schemes being implemented, the uptake of MHIs is still low. This was attributed to several factors. First of all the implementation-level respondents mentioned that the MFIs are still too costly for most low-income groups. PR5, PR7, S12, HF13, HF22 Insurances in general, and thereby also MFIs, do not have a high trust-factor with the lower-income groups. HF4, HF13, S14, which is mostly caused by a lack of understanding. HF13 In order to build trust and create awareness people need to be educated through suitable marketing methods. HI19 Most attention has been going to setting-up of the scheme and less to the marketing of the product. HF2, HI3, HHF20 From the marketing and even more from the healthcare cost perspective, there need to be variable pricing for MHI for different geographic regions; the failure of institutions to do so, until now, was seen as a blunder by a respondent working for a commercial medical insurance provider company. P21 The main factors limiting the success of MHIs are similar to those leading to losses for commercial health insurances (see above). Provider-based schemes Not all respondents were aware of PBS existing in Kenya. Those unaware included many implementers and also policy makers in the government. Among the implementers who were aware of PBS, a number of SFNs expressed interest in setting up a similar scheme with their facilities or linking their group of facilities to an already existing scheme. S9, S10, S12 Policy-level respondents from the private sector repeatedly referred to Avenue Healthcare as the most prominent example for an existing PBS in Kenya; they also referred to the former AAR HMO set-up that has now been split into two separate companies, one being a health insurance company. A different, unique example given was a company in Magadi that runs an inhouse health facility primarily for their employees. They had been providing healthcare for adjacent Maasai communities at subsidized prices for a while. To shield themselves from losses, they contacted a medical insurance provider to help them initiate a medical scheme for the local community, which links up to NHIF for inpatient. P21 Opportunities Opinion leaders from the private health sector, along with the respondent from NHIF, saw great potential in the concept of PBS. P16,P20,P21 A key donor representative thought that PBS was the mechanism most 81

82 likely to lead to efficient provision of care with the elimination of over-supply or provider fraud, D14,P12 and providers being forced to systematically collect and analyze data to keep their patients healthy. P16 One implementation-level respondent was that the PBS scheme will filter out the patients who only have easily treatable coughs and colds. In this respect the severe cases will be referred to the District Hospitals which will ease their workload as they are not held up anymore with patients who have easily treatable illnesses. HF4 Furthermore it will smoothen the income of the provider, as the income will become more predictable and stable. HF4 An optimistic respondent pointed out that the capitation payment that NHIF introduced for the civil servant outpatient scheme was already, in its logic, similar to a PBS. P21 "I'm a strong believer in provider-based schemes, if they are regulated well. As a business person, you want to maximize profits. If you are not a very ethical person - I wish that could be measured in the blood (...) - there has to be regulation and good policing. But generally, I think it offers us the best option of reasonably priced healthcare system. Both at Avenue and at AAR, every single day of our lives we were looking at statistics and measures of what trends are happening. Because once you get the money, you have no option; you have to serve someone for a year. So if the guy is sick, you take care of him." (Private Sector Representative) Challenges One returning issue was the weak regulation, which has created a grey-zone around the legality of PBS. HI16,P16, P20,G15 This was attributed, at least in part, to a limited understanding of the health sector by the Insurance Regulatory Authority. P16 Furthermore, implementation-level respondents mentioned that their current administration and financial capacity is not sufficient to cater for an efficiently running PBS; HF4, HI16 a private sector opinion leader and a technical expert pointed out that the lack of capacity starts with facility managers neither understanding their costs, nor being able to control them. P20,T2 This had led, in the past, to the collapse of donor-supported PBS immediately after the donor support ended. Sustainability was seen to be threatened by moral hazard and adverse selection, but no less than in the case of other risk-pooling mechanisms. G10 It was questioned whether PBS schemes can work in rural settings. P12 From the implementation side, one respondent mentioned that quality of care might be threatened. S12 Conditions for Success For PBS to work as a replicable model in Kenya with a positive health outcome, one of the important conditions would be, again, the definition of a basic benefit package of health. This would allow clients to 82

83 make comparisons. P12 To drive uptake, providers would have to work closely with the community, including community health extension workers. D14 Further, providers need to introduce strong systems for cost management possibly with technical support. P20 Finally, increasing numbers of PBS would have to be accompanied with good policing to avoid any substandard service quality. Other Existing DSF Mechanisms Employer-Based Schemes Employers (large corporate entities and parastatals) often provide healthcare for their staff as a benefit. Instead of, or in addition to, enrolling employees on health insurance, many provide outpatient care either through an in-house medical cover (a regular budget item) or by providing healthcare in a clinic on their premises. Outpatient medical covers are very expensive to purchase from health insurance companies, which is the main reason companies prefer to handle it in-house. Due to the complexity of the administration, they often contract third-part administrators. P21.T2,D3 Company medical clinics, in the eyes of the representative of a large donor, might have a yet untapped potential to expand services to the surrounding community. D3 The example of Magadi mentioned above seems to corroborate the viability of the idea. User fee waivers As part of the Health for all Kenyans through Innovation (HAKI) program, GIZ implements a fee-waver pilot project in Kwale. Beneficiaries are identified with an adapted version of the MOG means-testing tool, which introduces an element of community identification. The experience with the community-based identification method is mixed, as there have been instances where it led to the identification of the incorrect people ( elite favouritism ). D17 Identified beneficiary families receive a health card, and upon presenting the card in health facilities they obtain a pre-defined set of health services for free (in-patient and outpatient.) The scheme is managed by a third-party administrator. D17 "The original idea was not a waiver mechanism. When HAKI was proposed to the government, it was proposed as a social health insurance, and another pilot on the removal of user fees. Now it became political because politically we know the country is not deciding to abolish all user fees, so a pilot is just a waste of money. The government was quite strong in that position." (Donor Representative) 83

84 Whether or not the pilot runs smooth and the approach is promising is not known among stakeholders at this point, as the project has started very recently and there had not been extensive communication. G10,G13,T19 The implementation of the HAKI pilot in Kwale is not without controversy. Two respondents expressed skepticism about piloting a scheme where it has already been decided that it is not the way the country will go. T9 Public facilities in some parts of Kenya had previously applied a less structured government fee waiver, where beneficiaries were identified on the spot when consuming healthcare services. D17 This had not worked well on one hand, not knowing whether or not they would be asked to pay, potential beneficiaries were discouraged to seek health services in the first place, and on the other hand, there was always the risk to grant the waiver to those who are not eligible. PR7,D14,D17 A technical expert mentioned that the experience in Kenya with waivers in the education sector showed that they work well if beneficiaries are pre-identified. T9 Medical Savings Accounts (MSA) Most respondents from both the implementation and policy levels were not aware of any MSA scheme in Kenya. The only one that was mentioned by name was Changamka; some respondents knew that it has an offer for deliveries, D1 that it is not only a MSA but also works with a Micro-insurance, P20 and that it uses an electronic format. P12 In terms of the viability of the approach, a large proportion of respondents on the policy level were highly skeptical that MSA could improve access for the low-income group. They were aware that it was in use elsewhere (South Africa, Singapore, USA), but did not see it as appropriate in the Kenyan context. The reasons given were that it requires a mind-shift among Kenyans, that the young and healthy do not see the point of medical saving, and indigents have other, short-term priorities like food. Furthermore, a donor representative thought that MSAs put too much responsibility into the hands of the user, who know little about getting optimal care for a given cost, and are generally uninformed. MSA limit access to care for the account holders to the amount they have saved at the point in time when they need it. PR7,G6,D7,T9,D14,P20 One donor representative, in contrast, suggested that it is an idea worth exploring. D1 "Medical savings account is a buzzword. Who knows what their cost of health will be next year? That they can apportion their income to put in an account that will guarantee you when you fall sick, that account covers you for your illness. Nobody knows! And with catastrophic health 84

85 expenditures, there is nobody who can keep aside 1 Million, 2 Millions waiting for them till tomorrow, when they fall sick." (Technical Expert/Donor-Funded Program) Another donor suggested that the concept was more well-known in MOMS, D3 possibly in relation to the scheme Changamka had introduced in collaboration with Pumwani Maternity Hospital. To make sense, a government policy maker said, MSAs have to be embedded in another program, for example education saving. G13 At one point in the past, the concept was discussed in the National Economic and Social Council of Kenya. P20 On the implementation level, the picture looked somewhat different. Although the feeling that indigent have pressing needs that prevent them from saving was shared, overall the respondents had a positive opinion on MSA. A respondent S9 representing a large SFN mentioned that he was very interested in the concept of linking a PBS to a MSA and to include a subsidy in that mechanism, to work towards eventually creating health insurance cover. Maternal savings work because the women know about when and for what they will need it. S9 A health facility manager shared some experience with technical challenges. The customer experience with the medical savings cards has been bad because sometimes there was no electricity so the card system wasn't able to work. Also the cashier is a very busy person, this card service is then perceived as an extra burden as they need to get off their regular routine to do this. Maybe you can provide training, but they left. Since the card will be out and mobile e- wallet will be in, we will provide the customer with a small tangible write up of the program. This way the customer has a so-called sense of belonging. HF4 One person mentioned that it could be difficult to find people who are willing to individually save for their medical service. A solution would be to link a MSA to widely accepted financial pooling mechanisms like micro savings groups (Chamas) or Savings and Credit Cooperatives (SACCOs). My personal view is that people have Chamas/groups and are putting money together for nonhealth issues, so I think it is good to build on that concept HF4 Other related mechanisms 85

86 Several respondents mentioned that there have been attempts to use financial means to enable or encourage health care workers to attract more clients. The Health Sector Services Fund in theory has the possibility for health care workers to support needy healthcare users in the payment of their transport to the facility. However, there is a lack of management capacity on facility level for the administration of this kind of mechanism. D3 UNICEF attempted to incentivize health care workers, through PBF, to actively increase the number of their clients. T9,G13 The Food for Work program supported by the World Bank was also mentioned as a program that bears resemblance to certain (conditional non-cash transfer) DSF methods. D1 86

87 Opportunities for Enhancing DSF in Kenya Planned DSF Programs Vouchers The leadership in MOPHS are starting to plan the scale up the OBA vouchers scheme; the bulk of the funding would initially come through earmarked debt relief mechanisms by the German government. Optimism was also expressed that the Japanese and US government would provide financial support for voucher or coupon schemes. In the Ministry, expanding the scope of vouchers by including healthcare for children under 5 is a top priority, as well as the increase of geographical scope. In addition, the introduction of a smartcard to support the identification of beneficiaries is being considered. Ways of re-designing the voucher for treatment of conditions related to gender-based violence are also looked at, as that voucher was not widely utilized. D1,T9,G10,T11 Conditional Cash Transfers The currently ongoing baseline study on CCT was initiated in view of scale-up of the program if successful. The World Bank is actively considering financial support for such an expanded program. The study was expected to finish in 2011, but was beset with delays. T9 Pro-Poor Health Insurance There is major movement in the field of health insurance for the poor. On one hand, a Rockefeller-funded pilot study on HISP is approaching its launch later this year (2013), and those involved with it would welcome any funds towards increasing the number of households included or scaling up the program after the findings are out. Currently, 1.5 M USD are (nearly) secured from the World Bank to fund the pilot program. D5,D8,D22,T9 On the other hand, there are several ongoing initiatives on MHI, with both donor and private sector involvement. The SHOPS program supported by USAID has been experimenting, and KfW are planning a pilot project of a MHI in collaboration with a MFI. In parallel, Equity Bank is still working on its planned scheme, as well as Javabu. Faulu has partnered with Afrika Medilink to improve their MHI portfolio. D1 87

88 Access and Equity Fund A pooled fund to be used to finance various programs to improve healthcare access by the poor through DSF had been mentioned in the (stalled) Health Financing Policy draft, and has recently resurfaced in discussions between donors and the government. This fund is on the agenda for the upcoming Health Financing Interagency Coordination Committee. The Health Access and Equity Fund appears to be an alternative to monopolistic NHIF health coverage for the poor, and is therefore endorsed primarily by the proponents of the Social Protection Approach (rather than SHI). There are different ways the AEF could be tapped; one way is to float government tenders for health insurance for the poor, which could see private sector consortia submit competitive bids along with NHIF and non-governmental organizations. Some also see the AEF as one source of funding for the expansion of the voucher scheme. D1,T9,G10,G13 Since UHC and access for the poor is seen as a function of the central government, one respondent said that the AEF is a mechanism for the government to sustain health delivery after devolution. D8 Other Viable Approaches Some of the suggestions for other viable approaches stood by themselves: One was the idea to create equalization funds on the district level, combined with community-based identification of the poor. The district equalization funds would reimburse health facilities for a range of predetermined services that they provide for the identified indigents. According to one respondent from the donor community, this approach was successful in Ethiopia, and should therefore also be viable in Kenya. D14 The concept seem to resemble the HAKI fee waiver approach piloted in Kwale, with the difference that the management would be handled by the district management. A donor representative, a policy maker and a technical expert alike proposed a pluralistic approach. Though pluralistic, it needs to become more holistic as well, for example by listing a range of different DSF mechanisms in a matrix and the impact and efficiency of each systematically assessed as they are implemented, with standardized measures and coordination between donors and government stakeholders. D3,T11 The same donor representative also pointed towards the possibility of working with corporate entities to expand staff welfare programs to support communities. Still some in the donor community suggested connecting generic social welfare programs (especially conditional cash-transfers) systematically to sector-specific priorities. D7 Other suggestions could be grouped according to their relationship with existing methods. 88

89 NHIF derivatives In line with the already-initiated HISP program, but independent of it, several respondents proposed that NHIF coverage could be increased with the support of government subsidies. D7,T9,D22 Others proposed that the voucher approach could be combined with, and administered by NHIF. T9,P12,G13 A combination of NHIF with PBS was also suggested as a promising model, with the indication that the capitation payments NHIF uses for the civil servant outpatient schemes already constitute a mechanism similar to PBS. An additional linkage between NHIF and CBHI was also proposed. Finally, one government representative suggested that standalone mechanisms in counties should be allowed, but ways should be identified to link them back to NHIF. G13,D14,G15,P16 CBHI derivatives Strengthening already-existing CBHI by connecting them to an underwriter or SHI, or by linking a number of CBHI together to increase the risk pool was seen as a possibility to leverage community access by those institutions, while at the same time mitigating their shortcomings. D1,G13,T11 From the private sector came the idea to combine CBHI with a type of voucher approach, whereas vouchers would be used as incentives to use health services or enroll for an insurance scheme. Vouchers (not only for healthcare, but also for other services like education) would in that case be used as part of a conditional non-cash transfer approach. P12 A related idea was offered by an interviewee from a health financing institution, who suggested that vouchers could serve the purpose of building trust, whereas for some period vouchers would be offered to beneficiaries, and the extension package after one year would be constituted by a health insurance. HF11 Within groups there is a tight bond within the members. I think you get more value, because people in the community think in groups. You can t address people as individuals. S15 Private Health Insurance and PBS derivatives A frequently mentioned promising approach was the formation of consortia within the private health sector, where health insurance companies, providers and other players would team up in an effort to provide health cover for the poor. G10,G15,P20,D22 Such a consortium could then submit a bid for available 89

90 funds, for example the Access and Equity Fund G10 (see above). In conjunction with SFNs, this could lead to low-cost, efficient limited-panel sustainable insurance products. D3 Recommendations for the AHME Implementation Drivers of Success A basic condition for program success that cannot be taken for granted, is the ability to work with one or several individuals with strong personal interest and commitment within the Ministry of Health. D1 Other important conditions to make DSF initiatives work include integration and strategic use of data and health information systems T11,P21 and to find efficient, harmonized, ideally self-regulating ways of identifying the poor. G10,P20,P21 You need to address community needs to break through and have integration with other programs and not go solo S14 Regulatory Measures As mentioned above, there are several key legislative measures that might contribute immensely to the achievement of health access for the poor. Most frequently mentioned were: Make health insurance mandatory for every Kenyan T11,P20,P21 Define a basic benefit package for health D3,P12,G13 Set up a health benefits authority P12,P20 Define and implement clear standards and regulations across the health sector P12,P20 In addition, a private sector representative suggested either legislation or a massive campaign to put into effect proper standard referral pathways and avoid self-referrals to large hospitals and medical specialists. P20 90

91 Service Provision and Payment Stringent measures are required to ensure quality of care alongside all measures to improve access to health. D1 Standardization of care through clinical protocols were referred to as an urgent measure to control cost, quality and generate predictability from both the implementation and the policy side. HI19 Three respondents emphasized the need to move away from input-based financing in the public sector, and fee-for-service provider payments in the private sector, to achieve more efficiency (and therefore lower cost) in healthcare. HI19,D14,P21 Another measure to bring down cost is increased purchase of medical supplies through central procurementi. 19 Thinking and operating with a large-volume, low margin logic has to be actively promoted among service providers and insurance companies P20 We find that a lot of health awareness and behavior change needs to happen so we encourage positive health behavior so that people are seeking preventative healthcare. ( ) The preventative health choice you make could be rewarded. Rewards for preventative healthcare instead of curative. We would encourage the franchises to get involved into this model HI17 Specific Approaches The most frequently recommended approach to go for was the support of innovative, pro-poor MHI T2,D3,D4,G10,G15,P20. This could be through active support of commercial entities in their efforts to reach the poor D3 or through mechanisms such as the Access and Equity Fund. G10 In any case, the AHME team was reminded not to forget the large proportion of Kenyans who could afford low-cost health insurance, but are not currently covered because of competing priorities, lack of trust, or ignorance. P20 Providing support for NHIF, as a solution that still offers choice at least to those who can afford alternatives was also recommended by a number of respondents, and some favoured the approach of combining NHIF wither with PBS and CBHI, P12,D14 or with PBS and MHI. P20 Geographical, culturally-sensitive variation and targeting of approaches used (e.g. PBS vs. CBHI) was highly encouraged. D14 Some donors and an expert proposed for AHME to focus more on the how of DSF implementation, rather than the what. This would include training people in efficiency analysis, and establishing standard metrics; conducting systematic assessments for regional and cultural targeting of approaches; creating an 91

92 inventory of different methods to draw from and encourage counties to experiment one of the approaches and subsequently share the experience and the learning. D1,D3,T11 "In Kenya, depending where you are introducing these things, you could have quite a different approach. It depends on the size of the informal sector; what kind of informal sector you have will influence which approach will work. At this stage, the best thing that can be done is to lay out the options, and look at where these options work well, and what are the factors behind success. (...). I think it's always good to provide options, with pro's and con's, where it worked, why it worked. I would not go for one approach. It's always good to go with options." (Development Partner) 92

93 The Use of ICT The interviewed stakeholders were asked if they are aware of existing ICT initiatives that could be leveraged to generate synergies with the objectives of the AHME DSF objectives. The established or recently introduced technology innovations mentioned by respondents from the policy level included: Biometric smart card technology, which has been introduced by a sizeable proportion of mid- to large-size healthcare providers and health insurance companies in Kenya. The main provider of the smartcard solution is expected to launch an electronic claims transfer ( switching ) system encompassing their network of about 1,600 connected providers. There are discussions about connecting smart-card identification systems with the governments Integrated Person Management System (IPMS) that assigns unique identifiers to citizens and residents in efforts to T2,D16,P20, HI3, HI17, HI18 achieve universal healthcare coverage Electronic processing (switching) of claims by NHIF, which was initially introduced as a sideproduct of measures that were taken to manage NHIF human resources through a front-office software system T2,D14 An interactive voice response system for telephonic advice to pregnant women (Population Council) a hospital-based electronic claims management with South African and international diagnosis coding (Metropolitan Hospital) the use of tablets for the improvement of data quality and case management (JICA) Further, JICA is looking into the possibility of expanding an existing HIV/AIDS commodity management system into a broader HMIS tool; MOPHS is developing the idea of introducing a smart card identification system for the OBA scheme; and the Population Council is considering a mobile phone-based transport auction system. Africa Medilink, an Indian company that recently started operating in Kenya, was mentioned as an important Third Party Administrator whose services rely largely on innovative software solutions. P16 93

94 Respondents from the implementation level further mentioned the following uses of ICT: reporting via mobile phone S9 payments via M-Pesa HF2, HI17, HI18, HF22 Provide information via bulk-sms I1 Mobile saving HF2 Several of the practitioners were in the process of computerizing their systems at the time the interview was conducted, for operational and finance management (billing, stocks, referrals) PR5, PR8, HF11, 12, HI16, HF22 Benefits and Challenges Information technology has become cheap, HF2, HI17,HF21 fast, I1, HF2 and is able to reach rural areas. I1 It has the potential to greatly improve administrative efficiency, D2 S9, HI16, HI18, HF24 and promises the availability of more reliable data, and a reduction of the information asymmetry between healthcare providers and purchasers. Ideally, this could lead to transparency and associated gains in efficiency. P20 The biometric identification of beneficiaries would further ease administration and also reduce opportunities for fraud. D3, HF11, HI19 S10, HI19 A good use of technology has the potential to improve the quality of health care. Despite this potential, the past and current development of numerous parallel systems that are not interoperable, and the non-existence of coding standards have led to fragmentation and lack of ability to fully harness the benefits of health information exchange. Hence, the danger of fragmentation and the loss of many potential benefits if ICT is considerable. P20 HF2, HI3 From the practitioner s point of view, a major constraint in the use of ICT is the supply of electricity. Further, many small providers do not have a computer. S9 Related to this, smartphones applications for health management exist, but they usually need expensive smart phones to work. Providers with a limited budget cannot afford these phones. HI17 Development Partners and their Priorities The Germans have a prominent presence in the Kenyan health sector through the KfW funding of the OBA voucher program. Their priorities in the country are healthcare, agriculture and water; within healthcare 94

95 their priorities are health financing and reproductive health. Health financing is also a core focus area for GIZ. These priorities are not likely to shift within the next 5 years. The new GIZ funding cycle will start in 2014 for 3 years. KfW have recently engaged consultants to work towards the implementation of an Access and Equity Fund, and to lay the ground for a MHI pilot project in collaboration with a MFI institution. The intention is to make efficient use of technology to reduce administrative costs. After the controversial reports about potentially fraudulent selection of outpatient NHIF service providers in 2012, and doubts about the governance of the organization, there were instructions from the German government to suspend close collaboration with NHIF until allegations are cleared. The Germans are, nonetheless, interested and committed to work with NHIF. The Japanese have focused extensively on primary healthcare and especially on the health extension worker program, on quality assurance, and on leadership and management training for health facility managers. DSF was introduced as a component in the community health worker training, whilst accounting, auditing and financing was part of the leadership training. UHC as a new focus area for JICA is starting in From around May, a consultant will be dispatched to the Ministry of Health for about 6 months, to carry out a detailed assessment on viable financing mechanisms to support. A substantive amount of money has been earmarked by the Japanese government as a loan for Kenya, specifically targeted at UHC/Health Financing. USAID s health sector development money for Kenya derives mostly from The U.S. President s Emergency Plan for AIDS Relief (PEPFAR) resources (80-90%) and is therefore targeted at HIV-related activities. Broadly speaking, key areas of interest within USAID are efficiency of service provision and purchasing, and extending health insurance coverage, as well as leveraging the private health sector. Their two main related health programs are SHOPS (Strengthening Health Outcomes through the Private Sector), and the Health Policy Project (HPP). The former is trying out health insurance approaches and currently working on a scheme with CIC Insurance, whilst the latter is focusing on the impending devolution of healthcare, but will later emphasize more on health financing. HPP has a duration of 3.5 years and will end in September It has an annual budget of about 5M USD. Much of their efforts go towards evidencebased decision-making, including the collection of data. HPP are tasked and inclined to collaborate with NHIF to for the coverage of the indigent. 95

96 The World Health Organization has recently hired an expert dedicated to health financing, which indicated that it is a priority in their agenda. They do not, however, fund any health financing interventions in Kenya and stick to their role as providers of technical support. In terms of values/project criteria, four concepts appeared to stand out: Sustainability and Scalability (perceived as being closely related), Equity, Efficiency, and Accountability (Figure 5). Figure 5: Development Partner Values Comparison of existing DSF Mechanisms Criterion 1: Benefits Accrue to Lowest Income Quintiles There was a relatively broad agreement that the targeted approaches benefit the lowest quintiles most, and these include CCT, Voucher Schemes and CBHI. Opinions were divided about the ability of SHI, MHI, UCT and PBS to benefit the poor in terms of health outcomes. In contrast, consensus emerged that neither Private, Commercial Health Insurance nor MSA are able to benefit indigent the lowest two quintiles efficiently. Criterion 2: Potential to Benefit Many in Year 5 A technical expert summarized his view that sustainability depends on political viability, which depends on trust, and that the latter depends on transparency. He therefore did not see this aspect as being inherent in any particular mechanism. T11 SHI stood out against all other mechanisms as being the most scalable. However, views were sharply divided about the scalability and sustainability of voucher schemes. CBHI was seen as not scalable or sustainable by most technical experts. One respondent expressed doubt about the scalability of MHI and PBS. 96

97 Criterion 3: Leverages funding that is likely to continue Whilst there was no clear winner among donors between the different DSF mechanisms, the view was expressed that vouchers and anything that is able to target poor populations and emphasizes primary care were generally attractive to donors. The other important principle to receive donor support is proven effectiveness. OBA was expected to receive support by the Germans and potentially the Japanese, whilst MHI programs were seen as good candidates to receive support from USAID, IFC, and again the Germans. D1,T9,G10,T19,D23 In the Government, the two most supported mechanisms for financing and scale-up, albeit by different fractions, are the OBA voucher scheme and NHIF. There might be changes in these preferences with the devolved government, and some of the funding decision will be made at county-level. Another financing mechanism that is favored for national scale up is PBF. Whilst this is not a DSF, it may shift provider attitudes towards output-based financing, from which it is only a small step to DSF. Criterion 4: Health Impact The only agreement among respondents in relation to efficiency was that it is difficult to estimate DALYs averted for different DSF mechanisms, because more depends on how something is implemented rather than on what is implemented. Nonetheless, most respondents did not expect private commercial health insurance or MSA to have a large impact on health. Opinions regarding the value for money of vouchers and CCT were divided. SHI was regarded as potentially providing the best value for money, because of its ability to operate at a large scale. Criterion 5: Implementation Risk An impediment to feasibility is the complexity of an approach. A donor representative expressed the view that what PwC is currently doing in terms of administering the voucher scheme might be too complex for the government, and that any approaches that involve Community Health Extension Workers might confuse them and fail, unless intense additional training is provided. MSA was regarded as not being context-sensitive to Kenya, and CCT that involves handling cash as being susceptible to abuse by 97

98 corruption. Vouchers were seen as possibly not suitable for certain geographic areas in Kenya. SHI was considered as something that requires extensive institutional reform to eliminate implementation risks. 98

99 Table 6 and Table 7 show the average scores that respondents gave to the different existing mechanisms. Not surprisingly, respondents from the policy-level rated the different schemes according to their perceived potential, whilst the implementation-level respondents were more concerned with their actual experience. Table 6: Rating of schemes from policy-level interviews Equity Sustainability Scalability Impact Effectivess Total Competitive Voucher Schemes Conditional Cash Transfer Community-Based Schemes Social Health Insurance Private/Commercial Health Insurance Medical Savings Accounts Provider-Based Schemes Table 7: Rating of schemes from implementation-level interviews Equity Sustainability Scalability Impact Effectiveness Average Competitive Voucher Schemes 4.0 1,9 2, ,8 3.0 Community Based Schemes 3,8 3,7 3,0 3,2 3,5 3,4 Social Health Insurance 2,6 2,9 3,4 3,3 2,1 2,9 Private/Commercial Health Insurance 1,6 3,0 2,5 3,6 2,9 2,7 Medical Savings Account 2,4 3,2 3, ,6 2,9 Provider-Based Schemes 2,9 3,1 2,6 3,7 3,3 3,1 Micro Insurance 3,9 3,4 3,4 3,6 2,9 3,4

100 Respondent References Policy-Level Interviews Number G6, G10, G13, G15 Government Policy Makers 4 P12, P16, P20, P21 Private Sector Opinion Leaders 4 D1, D3, D4, D5, D7, D8, D14, D17, D22, D23,D24 Donor Representatives 11 T2, T9, T11, T18, T19 Technical Experts *** 5 24 Implementation-Level Interviews I1 Medical Distributor 1 HF2, HF4, HF11, HF13, HF21, HF22 Health Finance Institution/ Financing partner 6 S9, S10, S12, S14, S15 Social Franchise Network 5 PR5, PR6, PR7, PR8 Provider (public, private, FBO) 4 HI3, HI16, HI17, HI18, HI19, HI20 Health Insurance (private, micro-, CBHI) 6 22 *** Most technical experts derive their salary or professional fees from donor-funds