SHIF's low contributor rate exposes deep flaws in the plan, needs rethink

The admission by the Ministry of Health that only 3.3 million of the registered 19 million Kenyans actively contribute to the Social Health Insurance Fund (SHIF) must be a shocker to the policy and political elites of Kenya Kwanza (KK).

However, from an evidential point of view, this data is perfectly consistent with the rest of the economy.

For better context, these active contributors translate to 17 per cent of the total 19 million registered. Compare this proportion with the employment data in the country.

According to the Economic Survey Report of 2024, the average employment in the formal sector between 2019 -2023 averaged 16.7 per cent of the total employment over the five year period.

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The long short of it is that SHIF has potentially platooned in as far as the number of contributors to the scheme is concerned. That means like its predecessor, the National Health Insurance Fund (NHIF), the scheme will chronically be deprived of cash to meet the huge healthcare burden unless alternative sources of funding are found.

While individual contributions from employees may have been significantly increased from the amended laws, the active contributors to the scheme are unlikely going to change, consistent with the rest of economic data available.

Flawed evidence

While the Ministry officials have been quick to take the glory in the growth of registration numbers to the scheme and lament on the few active contributors, they have remained cagey on amounts collected under the 2.75 per cent levy over the past four months. This alone fuels the suspicion of would be voluntary contributors.

As argued on this column before, deploying statistical jargon like ‘Mean Testing’ cannot translate into real cash flows to the fund outside the underlying economic fundamentals. The fact that only about 17 per cent of individuals and businesses in the formal sector shield the largest tax burden in the country speaks of a systemic flaw in the design of the economy.

KK policy and political elites imagined they could cure a systemic problem of the economy through punitive laws and unnecessary levy to an already burdened minority that carries the rest of the country. At this point, it would be safe to assume that the anticipated annual collections of Sh133 billion may remain just a pipe dream. With raised expectations on the performance of the fund in the court of public opinion due to hyped political rhetoric, the fund is likely going to suffer perennial cash flows challenges for a long time to come.

If this happens, the fund will join the ranks of other failed KK programs like the University Funding Model (similarly built on Mean Testing) and Hustler Fund. This has left university managers, thousands of students and parents/guardians in confusion as to the future of funding higher education.

On his X-handle this week, government economic advisor, Dr David Ndii, now admits that the Hustler Fund was never meant to be a loan scheme but a credit score alignment scheme for hustlers. This is the boldest admission so far that the billions sunk into the fund were possibly a token to say ‘thank you’ to millions of hustlers who voted them into power.

Options into future

This brings us to the fundamental question on the future of SHIF and the dream for a functional universal healthcare system in the country.

The World Health Organization describes universal health coverage to be a state where all people have access to the full range of quality health services they need, when and where they need them, without financial hardships.

On account of this definition and the fact that SHIF is unlikely to enroll a significant number of voluntary contributors, the initiative collapses from financing deficits. The only outcome we can hope for is likely another corruption-riddled and grossly incompetent agency. In addition to the direct levies robbed of employees, the status quo of community and household-level black taxes towards healthcare shall remain intact.

Thus, the government would have effectively placed an additional burden on suffering employees without bringing relief to local and vulnerable households and communities. The best we can hope for now would be to line the pockets of profiteers and cartels that have made healthcare their playing ground.

While President Ruto may have tried to bite a whole elephant in a single bite, the evidential burden leans towards a completely different strategy and solution. To solve our perennial healthcare problems, it would not take a hazily done policy intervention and laws. The medium and long-term solution would come from a deliberate re-design to shift the economy into a more formal system, grow household incomes and establish a robust enabling environment for sustained job creation.

Two, while it may not sound politically popular, it is time for the President to refer his team of advisors back to the drawing board. Institutional reforms in the healthcare system in the country are possibly more appropriate than the appetite for the 2.75 per cent levy. This would demand a suspension of the levy, revert to the old system and solve the systemic issues that bedeviled NHIF.

That way, the president will have bought some time to think through a more sustainable alternative, buy back some credibility capital, and a better chance to communicate more effectively for a wider buy-in. The ongoing weekly briefings are an attempt to replay the Covid-19 script for a completely different problem in a different context and environment.

As I conclude this debate today, what if the policymakers threw away the box and re-thought our entire healthcare system afresh?

How much of the national disease burden can be mitigated by promoting and undertaking effective civic education on healthy lifestyles at the community level?

How much more can be solved by integrating broad-based modern and traditional healthcare approaches? Why does policy thinking only lean towards collecting more billions?

A potentially good case study would be the Chinese model. While I did not collect formal data on their healthcare system for this article, my lived three-year experience in Beijing is that healthcare is integrated into their cultural heritage, domestic tourism, individual and community-level developmental goals.

In pharmaceutical outlets and healthcare facilities in China, a patient is given a choice between Chinese and English medicines. Furthermore, despite being a formally atheist country, good health is among the ideals the Chinese people worship alongside wealth and long life!