Following recent events in Kenya, we have decided to indefinitely postpone this webinar. Our thoughts go out to the people of Kenya, and we hope for a quick and peaceful resolution to the current crisis.

What does Kenya’s 2024 Finance Bill mean for the nation’s ambitious universal health coverage (UHC) plans?

On June 26, ThinkWell Kenya and Bajeti Hub (previously the International Budget Partnership) will cohost a webinar to unpack the 2024 bill and its implications for the health sector and the future of UHC in Kenya.

Recently, as part of its budgeting process, the Government of Kenya has been formulating budget proposals for the upcoming fiscal year. At the center of the government’s agenda is health care and accelerating progress toward UHC. Two laws—the Social Health Insurance Act and the Facility Improvement Financing Act—are among other laws that were enacted last year. These two laws seek to propel the nation toward the goal of UHC.

The Social Health Insurance Act establishes the legal framework for extending health insurance to all Kenyans through member contributions and government subsidies for the estimated five million poor households across the nation. This law also mandates the creation of the Primary Care Fund (PCF) and the Emergency Care and Critical Illness Fund (ECCIF), both of which are tax funded.

The national fiscal space is constrained by debt repayments and demands from other sectors. The government allocation to repay public debt has risen to 47.9% of all revenue. Within the health sector, significant financing is required for human resources, medicines, information systems, and infrastructure. What are the implications of this budget and these constraints for Kenya’s health system? We’re asking four experts for their thoughts:

  • Abraham Rugo, the Chief Executive Officer of IBP Kenya, has a wealth of experience working on decentralization, participatory governance, and public financial management in Kenya.
  • Felix Murira, Country Program Manager for ThinkWell Kenya, is currently supporting the national and subnational governments to implement heath financing reforms in pursuit of UHC.
  • John Kinutha, a Senior Program Officer at IBP Kenya, is a champion of budget transparency, inclusion, and equity in his work with the Kenyan national government and county governments.
  • Geredine Kandie, a Technical Advisor for ThinkWell Kenya, has over 20 years of health systems experience and has significantly contributed to the strengthening of the Kenyan system.
  • Anne Musuva, the Regional Director for East & Southern Africa at ThinkWell, will moderate the discussion.

If you have questions or comments, please don’t hesitate to reach out to the ThinkWell Communications team. See you on the 26th!

By Nirmala Ravishankar, John Kinuthia, Agnes Gatome Munyua, Boniface Mbuthia, and Anne Musuva

The Facility Improvement Financing (FIF) Bill unveiled by the Government of Kenya in August 2023 is a win for health facilities in the public sector. If passed, the FIF Bill will allow them to directly receive funds and spend them on some operating costs. How big of a win the legislation will be depends on how easy (or complex) it is for facilities to use the funds. The FIF Bill is a step in the right direction, but some of the specifics remain to be fine-tuned.

Devolution and its implications for facility financing arrangements

Kenya shifted to a devolved system of government in 2013. This proved to be a turning point for facility financing arrangements in the country. Prior to 2013, health facilities retained and spent revenue from user fees, health insurance, and other payment schemes. Following devolution, the newly formed county governments asserted control over all revenue in the county.

To substantiate their control, the counties cited the Public Financial Management (PFM) Act of 2012 to require facilities to remit their revenue to a county revenue fund. While the PFM Act does describe this as the default position, it also allows county governments to authorize entities like health facilities to retain their revenue. But many county governments asserted control over all facility revenue, which hampered the latter’s ability to function effectively.

Some counties have tried to rectify the problem using different approaches, resulting in considerable variation in facility financing arrangements across Kenya’s 47 counties. While 10 county governments have passed laws or adopted practices to grant financial autonomy to facilities, 21 counties still claim all facility revenue. In the remaining 16 counties, facilities have access to some of the funds they collect, while the rest goes to the county. Among these 16 counties, 10 have created a central, special purpose “FIF fund” to hold all facility revenue. Through this fund, a county retains a percentage of the funds to cover its administrative costs and transfers the rest back to the facilities; however, county-level structures and processes to administer the fund typically result in a delay in fund flow.

Restoring autonomy to health facilities

The FIF Bill corrects for several things.

  1. First, it states unequivocally that health facilities can retain all revenue they generate in their own accounts, restoring to facilities autonomy that they had before devolution in Kenya. This is especially important for the 21 counties where facilities presently cannot retain any of their revenue. It also rules out the continuation of county-level “FIF funds” to pool facility revenue.
  2. Second, the bill stipulates that facilities can retain any unspent funds at the end of the fiscal year. This prevents county treasuries taking back all unspent funds. Having residual rights over its revenue will hopefully create incentives for a facility to use its funds judiciously.
  3. Third, it does away with the need for each county to pass enabling legislation to grant facilities financial autonomy. Having such laws passed and implemented has proven arduous and time-consuming. Indeed, several counties have enacted laws, but not operationalized them.
  4. Fourth, the bill calls for the integration of facilities into the Government’s financial management information system and routine budget implementation reports. This will give facilities greater legitimacy within Kenya’s PFM architecture and enable greater visibility over facility revenue and expenditure.
  5. Fifth, the bill emphasizes ongoing monitoring of its implementation. In so doing, it sets the stage for greater learning and knowledge-sharing about best practices.

How the bill could be improved

While the bill empowers facilities to retain their revenue, the processes described for them to spend these funds seems unnecessarily bureaucratic. As is standard practice for government entities in Kenya, health facilities must prepare annual budgets for approval by the county government and receive an “authority to incur expenditure” (AIE) from the county government on a quarterly basis to spend their money. But the bill stipulates that, even after receiving AIE, facilities must raise vouchers for approval by the county department of health accountant. Then the subcounty accountant, who is a co-signatory on the facility account along with the facility in charge, must authorize the transaction. The number of steps needed by various government officials for the facility to merely spend funds in its account against its approved budget seems excessive. Moreover, these provisions go beyond what is current practice in many counties, meaning some health facilities will have less flexibility than they presently enjoy.

It is also interesting to note the comparison between the health and education sectors in this area. Schools receive public funds from the national government on account of education not having been devolved. Each school has a management board comprised of officials from the school and community members, which approves its budget. The school in charge is the accounting officer for the school’s accounts and can spend funds as per the school’s approved budget after receiving the quarterly AIE from the county department of education. In contrast, the FIF Bill stipulates that health facility budgets must be approved by the county. The county chief officer for health is the accounting officer for health facilities. And the county health accountant must approve each transaction. In other words, even after the bill, it seems health facilities will have less autonomy than public schools presently enjoy in Kenya.

When it comes to public moneys, authority to spend must be balanced against financial controls. While the FIF Bill reflects this imperative, it seems to err on the side of more rigid control. The process seems especially onerous given that county governments will continue to pay for big expenses (like worker salaries, infrastructure, and most drug costs), while facility funds will pay for relatively small operating costs. The over-prescription of process will erode the very autonomy that the bill aims to establish. Correcting for this—in the implementation regulations if not in the bill itself—will ensure that this important piece of legislation leads to meaningful change.

One month ago, the Government of Kenya released four new health bills to accelerate progress towards the goal of universal health coverage. If passed, the bills will set in motion far-reaching reforms to how health services are financed and delivered in Kenya. Among these bills is the Social Health Insurance Bill, which proposes extending health insurance to all Kenyans based on member contributions, with government-subsidized coverage for the poor. It also mandates the creation of three funds to cover different types of services and a new government agency to manage it all.

To unpack what the Social Health Insurance Bill aims to do, why, and how, ThinkWell hosted a Counterpoint webinar with the bill’s primary architects, county stakeholders, as well as leading health financing experts on October 3, 2023.

Click the button below to watch the webinar recording on our YouTube channel.

Watch the recording

Counterpoint is ThinkWell’s signature series of webinars, which offers a platform for free and frank debate about questions related to health system strengthening. In this edition, ThinkWell’s Regional Director for East and Southern Africa, Dr. Anne Musuva, hosted a discussion about Kenya’s new Social Health Insurance Bill featuring four panelists:

  • Dr. Elizabeth Wangia, Director, Healthcare Financing, Kenya Ministry of Health
  • Dr. Daniel Mwai, President’s Advisor on Health and Standards, Office of the President, Kenya
  • Mr. Felix Murira, Country Program Manager, ThinkWell Kenya
  • Dr. Joy Mugambi, County Director of Health Administration and Planning, Nakuru County, Kenya

Some of the questions the panel explored include the following:

  1. What overarching objectives is the Social Health Insurance Bill trying to achieve?
  2. What drove the specific design choices (e.g., three separate funds, means-testing for everyone not employed in the formal sector, and a new health authority)?
  3. How do the reforms envisioned by this bill align with the service delivery reforms set out in the other bills, especially the reorganization of all primary and secondary care facilities into networks?
  4. What is the role of counties in implementing these reforms?
  5. What are the biggest hurdles we can expect on the way to implementing the bill successfully?

Please contact our team with any questions or concerns.

By Anne Musuva, Country Director, ThinkWell Kenya

Much has been written about the inadequate or delayed flow of funds to frontline providers and its contribution to poor service delivery. The Lancet Global Health Commission on financing primary health care notes that because of insufficient public spending in many places, primary health care is not fully meeting the needs of people.

I gained a new, more grounded appreciation for this problem when I recently visited a series of dispensaries and health centers in a western county of Kenya. At many of these health facilities, casual staff like cleaners and clerks had not been paid for months because the funds received from the county were inadequate and often delayed.

Other facilities I found understaffed—some staffed by a single nurse—and it is not rare to find these facilities closed because the managing nurse is on leave or away for training. When the nurse is available, patients are often sent away to buy drugs from private pharmacies because the dispensary is out of essential medicines. These circumstances are common in many other parts of the country and point to significant under-resourcing of primary health care (PHC) in Kenya as well as poor fund flow to frontline providers.

The importance of PHC

In 1978, the International Conference on Primary Health Care signed the Declaration of Alma-Ata and called for strengthening of PHC, particularly in low- and middle-income countries. PHC is a whole-of-society approach to health that puts people and communities at the center of their health, focuses on patient needs, and shifts focus away from hospitals and specialist care. Equitable and high-quality PHC is the foundation of a strong health system and is essential for achieving universal health coverage (UHC).

What Kenya has gotten right

Kenya has made significant progress in expanding equitable access to PHC. Inspired by the Declaration of Alma-Ata, in the 1990s, the nation introduced user fee exemptions in public primary health care facilities to expand access to PHC. In 2006, Kenya launched a community health strategy that outlined services to be offered at the community level.

In 2013, Kenya adopted a devolved system of government which made the delivery of health services a county responsibility. Since then, county governments have expanded geographical access to health care by constructing health facilities, particularly dispensaries and health centers, referred to as PHC facilities. Access to PHC services was further improved through the free maternity program, Linda Mama, launched in 2013. The national government later introduced the “user fee forgone” grant to compensate PHCs for revenue lost from user fee exemptions. These funds were used for facility operations, including filling supply gaps and paying casual workers.

In 2015, the National Health Insurance Fund (NHIF) shifted from a focus on hospitalization to an expanded benefit package that includes outpatient care. The NHIF introduced capitation, a population-based provider payment mechanism that can improve equity and strengthen primary health care. Additionally, DANIDA, Denmark’s Development Corporation provides funds to PHC facilities for their operations and maintenance.

Currently, the Ministry of Health (MOH) is pursuing a number of reforms to strengthen PHC. The government is rolling out primary care networks which seek to improve PHC through reorganizing service delivery around a network of community units and PHC facilities. The MOH has also announced plans to recruit community health promoters across all counties and the establishment of a PHC fund to further improve PHC.

The glass half empty

Despite Kenya’s recognition of PHC as the backbone of UHC and the country’s immense milestones, we continue to face challenges in advancing the PHC vision. These include inadequate financing for PHC and lack of financial autonomy which lead to compromised quality, inadequate human resources, and drug stock-outs. Secondary and tertiary facilities receive the lion’s share of resources, including direct financing, human resources, and drug supplies. ThinkWell conducted preliminary analyses of several counties which show that PHC facilities on average receive less than 20% of a county’s health allocation yet constitute over 90% of the facilities and provide at least 60% of the services in a given county. Financing of the community health strategy and  paying stipends for community health volunteers has been inconsistent.

Several recent developments have jeopardized nationwide PHC financing. In 2021, the national government discontinued the user fee forgone grant for PHC facilities and converted the conditional grant to an equitable share grant for counties. The counties have full discretion over these funds, many of which have not been channeled to PHC facilities. DANIDA, which remained a main source of direct financing for PHC facilities, announced plans to phase out this funding by 2025.

Following the loss of two primary funding sources, PHC facilities are left with limited options, including the NHIF and county grants in the few counties that provide them. A facility’s access to NHIF revenue depends largely on whether its county has enacted legislation allowing facilities to retain and use funds generated from the NHIF, including from Linda Mama and from capitation payments. 21 counties have not allowed facilities to do this. Providers in these counties have little incentive to submit claims to the NHIF, leading to loss of NHIF revenue. As a result, mothers coming to deliver at PHC facilities in these counties are often sent away for drugs and supplies, defeating the purpose of Linda Mama, a program premised on free care to vulnerable women at point of use.

So, what should be done?

As Kenya rolls out its ambitious UHC program, we must strengthen PHC to deliver on the UHC promise. The government will need to prioritize the following:

Review resource allocation to prioritize PHC.

This will involve not only increasing allocation to the health sector, particularly PHC, but also reviewing how resources are allocated between PHC, secondary care, and tertiary health care. These allocations should be commensurate with the health care demands at each level. This is at the heart of strategic purchasing, a health financing function which seeks to allocate resources based on information about population needs and provider behavior.

Enact legislation to grant facilities financial autonomy.

The national government or counties should enact legislation that allows all health facilities, including primary health facilities , the autonomy to raise, retain and use funds at facility level. This will mean that facilities can retain NHIF revenue for the services they provide and would be incentivized to make claims to NHIF.

Instate direct facility financing.

As the main sources of direct facility funding dry up, counties should consider directly funding PHC facilities for their operations to improve service delivery. Facility managers are best placed to determine their priorities and manage their funds to meet the needs of the communities they serve. This should be accompanied by support to ensure adherence to the public financial management rules to ensure funds are well used and facility managers are accountable.

Prioritize service delivery.

Investing in additional facilities should be preceded by careful consideration of the need for a facility and the availability of resources to maintain it. Preliminary analysis suggests that counties should shift their priority from building new facilities to resourcing existing facilities and improving quality of care. The focus should be on ensuring existing facilities are well equipped, are stocked with medicines, and have adequate and well-trained health workers.

Conduct further research.

There is a clear need for further evidence on how best to finance and incentivize PHC to deliver high-quality, cost-effective, and equitable care. We need to track financing levels, sources, and expenditure for PHC, and measure what funding levels, strategies, and incentives are associated with better outcomes.

As Kenya continues to deal with the effects of the Covid-19 pandemic and face a triple burden of disease, financing PHC is even more important and should be a key priority for government, at both the national level and county level. The government’s plans to roll out primary care networks and improve PHC financing are a great opportunity for strengthening primary health care. The implementation of these reforms and their outcomes should be tracked closely to inform policy.

By Boniface Mbuthia, Janet Keru, Geredine Kandie, Felix Murira, and Anne Musuva

The availability of essential medicines and supplies is critical for accelerating progress towards universal health coverage (UHC). Since Kenya embraced devolution in 2013, its 47 newly formed county governments have become responsible for allocating financial resources for health supplies on behalf of public sector health facilities in their jurisdictions. Exactly how they go about this and its implications for the availability of commodities—which include essential medicines, reagents and non-pharmaceutical supplies—has not been well documented.

To fill this gap, ThinkWell collaborated with inSupplyHealth and the Chartered Institute of Procurement & Supply (CIPS) to holistically map processes for forecasting and financing existing bottlenecks, procurement of commodities, and the implications for the availability of health supplies. The team undertook a rapid landscaping analysis in four focus counties during the last quarter of 2022 and spent the first quarter of 2023 validating findings with each county government.

On March 28th, ThinkWell, inSupplyHealth, and CIPS organized a meeting in Nairobi, Kenya where officials from the Ministry of Health (MOH), Council of Governors, delegations from the four counties, development partners, and other stakeholders met to discuss emerging insights from the county deep-dives. The MOH delegation included officials from the country’s Division of Health Products and Technologies. Isiolo, Nakuru, Trans-Nzoia, and Kakamega Counties all sent teams to join the meeting. Supply chain partners such as Africa Resource Centre (ARC), Kaizen joined the discussion. The dialogue focused on three key themes:

  1. Insufficient allocation for health supplies: Counties are not allocating sufficient resources for health supplies. In collaboration with partners, MOH developed a systematic, step-by-step approach to forecasting and quantifying health commodity requirements and costs; however, counties are not following these guidelines. Consequently, their allocations are lower than the need.
  2. Low execution of the budget for health supplies: Less than 50% of the budget allocated for health supplies is being spent. This is attributed to several factors including pending bills from previous financial years, delays in the government transfers, and delays in the approval process for local purchase orders.
  3. Health facilities with financial autonomy are better positioned to fill gaps: A best practice was observed in Nakuru County where the public hospitals were able to use their own-source revenue to source funds for health supplies. The county government has established health facilities as procurement entities so that they can engage suppliers directly and account for their expenditure using processes that follow public procurement and public financial management regulations of the country. Hospitals in the county were noted to have better availability of health supplies as a result compared to hospitals in counties that did not allow autonomy.

The team is now working on a detailed technical brief documenting the findings from the landscaping analysis on these three topics. We expect to publish it later this year. So, stay tuned!

Header image: From left to right, Dr. Claver Kimathi (Isiolo County), Dr. Eunice Gathitu (MOH), Dr. Emmanuel Wamalwa (Council of Governors), Dr. James Riungu (Chemonics), Mr. Josephat Ngesa (CIPS), and Dr. Anne Musuva (ThinkWell)