How Healthcare is Funded in Nigeria
Healthcare financing in Nigeria goes beyond how Nigerians pay for healthcare when they need it. It also includes how money is generated, mobilised, and utilised by the healthcare sector in the country.
A recent interaction I had with my peers showed that quite a number of young people are only familiar with out-of-pocket spending on healthcare. This is not far-fetched considering how often Nigerians have to pay before receiving treatment.
While I try to break this down further, it is important to note that the Nigerian Healthcare System relies on several means to financially support its vision of providing affordable health services to millions of Nigerians yet, the impact of these means towards achieving Universal Health Coverage has been ineffectual –a discussion for another day.
Healthcare in Nigeria is majorly financed through Out-of-Pocket Payments (OOPs), the National Health Insurance Authority (NHIA), Private funding, Donor Funding, and Budgetary Allocation by the federal, state, and local governments. Other health financing mechanisms include demand-side financing through Conditional Cash Transfers (CCT), and so on.
Out-of-Pocket Payments (OOPs)
An out-of-pocket payment is the direct payment you make from your finances to a healthcare provider. We experience this every day when we have to make over-the-counter payments for medicines or pay consultation fees before seeing a specialist.
For decades now, Nigeria has been heavily reliant on OOPs, with 72% of the total health expenditure coming from it, the highest in Africa.
It is worth mentioning that OOPs are not in any way sustainable. The cost of healthcare has increased remarkably within the last few years making it impossible for minimum-salary earners and vulnerable groups to afford it. Sadly, this has influenced the health-seeking behaviour of Nigerians who would rather find cheaper alternatives or worst still, wait for the illness to ‘pass’ than pay for healthcare.
To tackle the burden of OOPs and the negative effect it has on health equity, the federal government established a corporate body tasked with making healthcare affordable to all Nigerians.
The National Health Insurance Authority (NHIA)
The National Health Insurance Authority (NHIA), formerly known as National Health Insurance Scheme (NHIS) is a social security system that guarantees access to free health services through prepayments made at regular intervals. It was established under Act 35 of the 1999 constitution but became fully operational in 2005. However, to date, this scheme covers 3–5% of the general population with only about 30% of healthcare facilities in the country under its coverage.
The NHIA is a public-private partnership between the NHIA, Health Maintenance Organizations (HMOs), and healthcare facilities. HMOs are registered under the scheme and serve as an intermediary between the NHIA and healthcare facilities by paying the capitation directly to healthcare providers on behalf of the insured (you).
In order to increase the penetration rate of the health insurance scheme at the grass-root level, in 2015, the National Council on Health approved the decentralization of the NHIS. Thus, state governments were to set their own insurance agencies immediately. However, as of 2019, only 18 states made an attempt in signing the State Social Health Insurance Scheme (SSHI) into law, with Lagos State being the first in 2015.
The NHIA has 3 main branches under the Social Health Insurance model that cater to the health needs of different segments of the population.
They are:
- The Formal Sector Social Health Insurance Programme (FSSHIP);
- Public Sector (Federal, State, and Local Governments) Social Health Insurance Programmes
- Organized Private Sector Social Health Insurance Programmes
- Armed Forces, Police, and Other Uniformed Services Social Health Insurance Programmes
- Students of Tertiary Institution Social Health Insurance Programmes
2. The Informal Sector Social Health Insurance Programme (ISSHIP);
- Community-Based Social Health Insurance Programmes
- Voluntary contributors Social Health Insurance Programmes
3. Vulnerable Group Social Health Insurance Programme (VGSHIP)
- Physically Challenged Persons Social Health Insurance Programme
- Prisons Inmates Social Health Insurance Programme
- Children under Five Social Health Insurance Programme
- Refugees, Victims Of Human Trafficking, Internally Displaced Persons And Immigrants Social Health Insurance Programme
- Pregnant Women
The Formal Sector Social Health Insurance Programme (FSSHIP) is a social health security system that covers the health expenses of employees in the public sector, armed forces, organised private sector, the Police and other Uniformed Services, and students of tertiary institutions. Revenue is raised by pooling a fixed percentage of funds from both employees and employers. The employer (usually the government) liaises with an NHIA-approved HMO which then provides the employees with a list of NHIA-accredited hospitals. The employee is allowed to register all family members (a spouse and a maximum of 4 kids under 18 years) at any centre of choice after which an identity card is given to every dependent and the employee.
The Community Based Social Health Insurance Programmes and the Voluntary Contributors Social Health Insurance Programmes are voluntary non-profit segments of the NHIA created specifically for the informal sector, especially the self-employed in both urban and rural areas. A contribution fee dependent on the selected insurance package is paid every month to the NHIA by the enrollee.
Now, the informal sector makes up over 70% of Nigeria’s labor force, still there have been low enrolment rates, limited resource mobilisation, and poor sustainability of both programmes. The ISSHIP remains untapped and somewhat nonexistent.
Unfortunately, without the informal sector being insured by the NHIA, OOPs will continue to thrive and universal health coverage will not be achieved in Nigeria.
The last segment of the population covered by the NHIA has been described as vulnerable. These are people who make little or no contribution to economic activity, and therefore, lack the financial ability to cover their healthcare costs. This is a recent addition to the NHIA and is yet to fully take effect. Nonetheless, the federal, state, and local governments, including Civil Society Organisations are expected to make contributions in advance to the Vulnerable Group Fund as every Nigerian is now mandated by law to have access to health insurance.
Private Funding
The private sector in Nigeria, called the Organised Private Sector of Nigeria (OPSN) comprising bodies such as the Manufacturers Association of Nigeria (MAN), the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Nigerian Employers Consultative Association (NECA), Nigerian Association of Small-Scale Industries and the Nigerian Association of Small and Medium Enterprises (NASME) has made significant contributions to the healthcare system through the Private Sector Health Alliance of Nigeria (PSHAN). In fact, through major initiatives like the Adopt-a-Health Facility Programme (ADHFP), PSHAN has commenced upgrading all primary healthcare centers in the 774 local government areas in Nigeria.
While I believe that the government should bear the bigger responsibility of transforming the healthcare system, private sector partnerships are also important in achieving faster results.
Donor Funding
Donor funding by agencies, organisations, and philanthropists is essentially financial or in-kind donations given to improve the healthcare sector of low-and-middle-income countries like Nigeria. Over the years, Nigeria has received robust sums from foundations, development agencies, and developed nations to tackle various health issues. For example; the Global Fund to Fight AIDS, Tuberculosis, and Malaria gave about US$2.3 billion in grants to Nigeria for over a decade. Likewise, the Gates Foundation with over $1 billion in donations so far. While these aids are very generous, the decision-making for priority setting is oftentimes heavily dependent on the interests of the donors, thereby sidelining other important health issues that need immediate attention.
Donor funding is plagued with numerous challenges and should be considered a complementary method of health financing.
Budgetary Allocation
The federal government allocates a percentage of the annual budget to the healthcare sector annually. This method is predominantly funded through general tax revenue and is not specific to only the healthcare sector as the revenue generated is shared with other public sectors.
The budget mainly funds tertiary hospitals, national agencies, and future health emergencies alongside the National Primary Health Care Development Agency (NPHCDA); a body tasked with the responsibility of improving primary health care, and the National Health Insurance Authority.
Furthermore, the state and local governments are not left out too as they contribute to the running of the State Ministries of Health (SMoH), and Local Government Areas’ Health Authorities (LGAHA), respectively. The SMoH releases resources to Primary Health Centres (PHCs) and pays the salaries of state health workers while the Local Government, in turn, pays the salaries of PHC workers.
Over the years, the amount set aside for the healthcare sector declined significantly and public healthcare facilities are still severely affected. The Abuja summit of 2001 called for African union countries to set a target to commit 15% of the annual government budgets to their health sectors. It is 22 years since the summit and yet it is still very unlikely for Nigeria to hit that number anytime soon. It is obvious that the government has other conflicting spending priorities.
In summary, healthcare is expensive for many.
For Nigeria to take giant strides towards achieving Universal Health Coverage, the government has to show commitment to strengthening healthcare systems –right from the leadership down to service delivery. I consider the National Health Insurance Authority (NHIA) and Budgetary Allocation to be the most important drivers in the UHC decision-making processes and should therefore be regulated and strengthened.
Feel free to share ways you think health financing can be improved on!
Thanks for making it to the end!
