Kenya: NHIF in Bid to Tame Surging Expenditure

18 February 2020

The National Hospital Insurance Fund (NHIF) has announced plans to cut down on administrative cost in a bid to save the agency from collapsing.

NHIF board Vice-Chairman Roba Duba on Monday said the agency has been struggling and there is unnecessary haemorrhaging of funds that needs to be nipped in the bud.

"In line with the mandate of NHIF as a strategic purchaser of Universal Health Coverage benefits package; the board is realigning the staff based in skills match," he said.

Mr Duba said the insurer spends 14 per cent of all the contributions on advertising, salaries and accommodation, among other administrative costs.

Thus, it will reduce expenditure on advertising and publicity from Sh753 million to Sh100 million.


Bank charges will also be reduced from Sh315 million to Sh45 million and travel costs slashed from Sh312 million to Sh219 million.

The administrative costs have been high over the years: it spends Sh289 and Sh85 for every monthly contribution of Sh1,700 or Sh500, respectively. Out of Sh45 billion collected in 2018, Sh8.3 billion was spent on administration works.

According to a Health Financing Reforms Expert Panel report, which reviewed administrative costs of health insurance schemes in 58 countries, the cut to 10 per cent as proposed by the NHIF board is too high since the other countries averaged at 4.7 per cent.

"This shows that it is feasible to achieve much lower administrative costs if efficiency-enhancing interventions are adopted," the report states.


According to the report, NHIF benefit payout as a percentage of contributions was 86 per cent in 2018. Out of this, private providers were the main beneficiaries, receiving over 80 per cent of all claims payouts.

Inpatient claims constitute the largest share of claims (48 per cent), with an average cost per claim of about Sh22,000.

Specialised surgery and major surgery recorded the highest average cost per claim of Sh263,000 and Sh86,592, respectively.

Mr Duba said Kenyans should brace for reforms which will be subjected to stakeholders' participation before implementation.

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