Taming Runaway Healthcare Costs

On various occasions I have elaborated my ideas on different aspects of healthcare systems and service delivery. I hold my own beliefs as relates Universal Health Coverage that could be divergent with some of my friends and colleagues but we all agree the status quo in healthcare is not sustainable and should be reformed. Today, I seek to jot a few eye openers to elicit conversation and critical thinking on key reforms in payment and pooling of resources and whether it could be the way to go in health service delivery reforms.

Pooling of resources

The whole idea behind medical insurance is one of pooling resources into a common fund to protect against a future unexpected health emergency. Scholars agree that the bigger the pooled health fund, the better the coverage against unexpected catastrophic health expenditure. This is truly noble and engrained in our cultures. We all engage in it in an informal way through constant medical appeals to which we contribute. This could be considered our “premium”, so that if we ever fell into same situation we would be assisted in the same way. But shockingly the concept of pooled resources in a formal way in Kenya is very low. Medical insurance uptake in Kenya is less than 2%, and if you were to include NHIF as a form of health insurance then 8% coverage. Most of the members of insurance schemes are employees in a fund mostly contributed by the employers. This has its origins in post-World war II America where the labour laws necessitated a cap on salaries but the benefits due to employees were not capped. This made it easy for big corporates to lure the workers through a good medical or dental plan. The same replicated itself all over the world and now the nascent Kenyan economy has to contend with a burden of medical care as a cost of production and it is an important consideration for many while selecting a job.

The extensive use of Out-Of-Pocket (OOP) payments for health services is a recipe for financial ruin for many families. Annually many are forced to sell off their prized possessions including land and driven to bankruptcy due to unexpected high cost of health care in an emergency. So either through my idea of government Universal health coverage scheme or pooled resources in the form of social health insurances or private health insurances, individuals need to cushion themselves against the potential catastrophic expenditure and bankruptcy.

While still waiting for the concept of universal health coverage to be accepted as a mass movement and implemented through improvement of service in public healthcare facilities, I urge you to take up at least an NHIF cover and if you can afford an individual health insurance cover that too.(Don’t Thank me for that).

Review of our healthcare payment system

Further to the above, as healthcare management professions need to call for a review of the payment methods in our health facilities as it contributes to the high cost of care.

Fee-for-Service payment method

The prevalent payment system for health services in Kenya is a fee for service system. This is a demand driven system with the health service providers and users of the medical schemes holding the ace. The providers dictate how much the cost of service will be through costing for overheads and their mark-up. Through this system, providers do not have an incentive to control cost of care because it is not in their interest to do so. As long as the gravy train continuous they are ok with it. These results in increased claim payments or in case of OOP expenditure, high medical bills. The users for whom the insurance is procured do not seem to understand the basics of how modern health insurance works and end up adopting a kamikaze approach. It is not a secret that as the financial year closes most employees make a queue to the nearest facilities to make use of the cover they never utilized because they were healthy throughout the year. The pathetic excuse given in most instances is that, “I am covered for Shs 1,000,000 and I have not been admitted even once, so I should make use of it because it will expire in 15days.” This is called moral hazard in health economics. I guess majority of policy holders do not realize they are slaying their goose that lays the golden egg until itself to late and the goose is already cooked and on the table. A last supper!

Capitation system

One of system that could be used is one of capitation where the health service provider is entrusted with a fixed amount per scheme per period. This would enable cost containment and a level of sanity among providers. But without checks and measures the quality of care provided would be jeopardized.

Bundled payment

Another payment for services system could be the bundled care approach for services. In this system costs of care for a hospitalization episode is batched and one does not need to run like a headless chicken all over the hospital to enquire on the actual cost of hospitalization during discharge. For example if you were to have an emergency appendectomy, you would be able to know the expected number of days of stay in hospital and the cost of treatment on admission. Once the cost of care to the patient is known, hospitals of similar size could be made to standardize their costs or risk getting only partial remittance from insurance companies. This openness in billing system would force providers to look at improving efficiencies of their system to reduce their expenses and thus further reducing the cost of healthcare.

This system is only partially in use in Kenyan hospitals with packages for maternity and other surgical cases. But it can be expanded with stakeholders involvement in order to tame the runaway cost of healthcare.

I do not have foolproof answers to the challenges but I can only hope that attempts are made to reform the system as the current fee for service system is untenable. There is a need to study the Kenyan health seeking behavior and devise a system that takes this into consideration.  

All these can only be achieved if there is better coordination and cooperation among the industry players .The status quo can however be maintained if we seek to kill a useful feature of our health system and to cause a regression in attainment of international standards of life indicators. This is not so bad if we seek to promote the coffin industry and by extension the printing industry, for the obituaries will be many.