Kenya Health Sector: History & Financing of the Health Sector

Adequate resources are critical to sustainable provision of health services. The Kenya policy framework
of 1994 identified several methods of health sector financing, including taxation, user fees, donor funds,
and health insurance. These methods have evolved into important mechanisms for funding health services
in the country. They should reflect the cost of service provision as well as the ability of the population to
pay. In the non-governmental sector, health services are financed primarily through the revenue collected
from fees and insurance premiums charged to service users. These are based on costs of service provision
and on ability to pay.

Current Financing Trends, Policies, and Expenditures

Over the past decades, real financing allocations to the public sector have declined or remained constant.
Reviews of public expenditures and budgets in Kenya show that total health spending constitutes about 8
percent of the total government expenditure and that recurrent expenditures have been consistently higher
than the development expenditures, both in absolute terms, and as a percentage of the GDP. Per capita
total health spending stands at about Ksh. 500 (US$6.2), far below the WHO’s recommended level of
US$34 per capita.

In 2005–06, the health insurance market in Kenya handled 9.1% of health care funds in and covered 10% of the population. Private insurers control about 60% of the market while the National Hospital Insurance Fund (NHIF) manages the rest. Established in 1966, the NHIF is Kenya’s equivalent of a social health insurance fund. All employees in formal employment who earn greater than KSh 6,000 make contributions to the social health insurance fund. Coverage now extends to volunteer members in formal and informal employment, and they contribute Ksh 500 per month. The fund has expanded its benefit package from only inpatient services to include outpatient services. Recent health-care financing reforms have been characterized by a move away from OOP payments towards universal access to health care with financing through the National Health Insurance Fund. The phased expansion of the NHIF has met with opposition due, in particular, to a perceived lack of good governance and lack of capacity among other reasons. Three years on, progress towards universal access to health care through the expansion of the NHIF still faces significant challenges.

The health budget allocation has continued to be skewed in favor of tertiary and secondary care facilities, which absorb 70 percent of health expenditures. Yet primary care units, being the first line of contact with the population, provide the bulk of health services and are cost effective in dealing with the disease conditions prevalent in communities.

Health personnel expenditures are high, compared to expenditures on drugs, pharmaceuticals, and other
medical inputs such as medical equipment and supplies. Personnel spending accounts for about 50 percent
of the budget, leaving 30 percent for drugs and medical supplies, 11 percent for operations and maintenance (O&M) at the facility level and 10 percent for other recurrent expenses. Expenditures for curative care constitute more than 48 percent of the total MOH budget.

The GOK works closely with development partners to raise money for the health sector. Donor contributions to the health sector have been on the increase up to 2010, but then in later years Kenya faces substantial, albeit declining, donor dependency across its health sector. From 2001-2016, donor spending was at least 50 percent greater than domestic government expenditures for health. In some years (e.g., 2005-2006 and 2009-2010) donors spent double the amount spent by the government of Kenya on health.

In summary, the Ministry of Health Public Expenditure Review reported that the flow of funding to health facilities, especially at the primary care level, is still poor. Leakages amount to 25 percent of the user fee revenue collected. The review advised allocating more resources to community based facilities, where health resources have been shown to be most effective in dealing with prevailing disease conditions and in promoting and improving people’s health.