“Funding healthcare is like throwing money in a bottomless pit. The more money you put in, the more it requires. It is not only a political problem; it also has financial and moral dimensions”. –
Dr. Olukayode Akinlade . former President . Nigerian Medical Association (2007)
It is time to reform the way healthcare is financed in Nigeria. For instance, between 2009 and 2010, Lagos State spent over N38b on healthcare. Over 40% or about N15.4b went to salaries, over 51% or over N20b went to capital expenditure and over 8% or about N3.2b on overhead. The next obvious question is where are the deliverables from the over N20b healthcare CAPEX between 2009 and 2010?
Victor Olapojoye . Founder . Orisun Health Partners
I think the time has come for the Federal and State governments to admit their failure in the healthcare sector, take a step back and re-strategize. These failures are evident everywhere. If it’s not doctors striking in Lagos, it would be nurses striking in Oyo, and when these events take place, the people bear the brunt. The latest action of the Lagos State Government, while objectionable, begs the question – What is the alternative? Doctors are asking for better conditions of service, including more money, LASG is saying the Doctor’s demands will bankrupt the government. Meanwhile, the sick continue to die for lack of care. Just like some of the patients it treats, our public healthcare system in Nigeria is gravely sick, but its cure will not come from any pharmacological invention or even the idea that only Medical Doctors can run hospital facilities, it will come from new ideas. The ability of States and Federal Government to listen to these ideas is, however, the wild card. My candid opinion is that government brought all these troubles onto itself. It is hard for anyone to be surprised at the level of rot in the public healthcare system, especially when you have had the opportunity to take a look at the administration and operation of public healthcare facilities in Nigeria.
From Primary Health Centers (PHCs) controlled by the Local Governments to the General, State, Specialist, and State University Teaching Hospitals owned and operated by state governments, to the Federal Medical Centers, National Hospitals, and Federal University Teaching Hospitals that are heavily subsidized by the Federal Government, the story is the same – corruption, negligence, and crumbling infrastructure. Can you imagine wards at a teaching hospital without toilets? That is exactly where public healthcare is at this point.
One thing all the healthcare facilities I mentioned earlier have in common is that they are all heavily subsidized by all tiers of government, year in – year out, without any discernible, not even commensurate, but discernible improvement in quality and range of care. Another thing they have in common is that the subsidy they all enjoy is currently misapplied on the supply side, thereby continuing to feed the culture of corruption, which has been institutionalized in the civil service (some people call them evil servants, not civil servants), and while the Jonathan administration has taken steps to correct the same anomaly in the oil and gas sector, nothing has been done till date to correct this gross misapplication of healthcare Naira. This misapplication of resources has also had the consequence of saddling government with the responsibility of paying the salaries of the army of doctors, nurses, and other healthcare workers employed directly by local, state and federal government. This has proved to be unbearable and has led in many cases to strike actions by healthcare workers. These actions have further conspired with others to accelerate the downward spiral.
I have always argued that it is not government’s role to provide healthcare services to its people. Rather government’s role is to ENSURE the provision of these services to its people through professional healthcare providers, which could either be private organizations and/or NGOs. I remember making this same argument with a Lagos State government official in 2010. The look on his face was that of surprise, but I explained to him that my argument is the basis for the great healthcare systems of Europe and North America.
To buttress my point, I’ll go down memory lane for a minute by looking at the US and UK. By the 1960s, a big problem began to afflict medicine in the United States, and it hit public hospitals especially hard. The prosperous country that boomed after World War II revealed an impoverished underbelly that could not be ignored. Health care for the urban and rural poor alike was sorely lacking in a society regarded as the wealthiest on earth. In this context, many of the largest public hospitals became places of conflict where physicians, nurses, and hospital staff struggled to provide adequate care in deteriorating facilities that were often ill-equipped and poorly provisioned.
Health and hospital insurance was another matter in the post-war public hospital blues. It was largely a feature of business expansion, when employers in all sectors typically covered employees on every rung. However, this system, which eventually eroded for millions of Americans, left the indigent and elderly without resources at a time when medicine had grown capable of treating literally thousands of diseases in new and effective ways. (These facts should remind you of Nigeria of today?)
All these eventually led to the US Congress passing the Medicare and Medicaid law in 1965. This law in itself did not improve the situation, because fundamental structural changes still needed to be implemented at public hospitals. Additionally, the US government needed to apply the Medicare and Medicaid funds appropriately. By the mid 1970s, non-profit organizations and religious organizations that have traditionally ran hospitals, began to expand by converting existing government hospitals to non-profits, thereby providing the much needed structure and discipline needed in these government hospitals. By 1998, 60% of all hospitals in the US (over 6,000) were non-profits, 17% by Federal Government hospitals (VA Hospitals), and 23% by State and LGs. The number has continued to rise on the non-profit side. The one common thing among all these owners and operators is that they are all competing for the same pot of money (mainly Medicare-Medicaid and private, employer-based health insurance). Essentially, what the US government did was to create a Medicare-Medicaid Trust fund, where the relevant appropriations go, and from where hospitals that provide services to individuals and families covered under the program are paid through a reimbursement process. This model is complemented by private insurance, which is employer-based.
Even with all these improvements there are still about 40m Americans without healthcare coverage (these are mainly people who are unemployed, do not qualify for employer-based insurance, and/or do not qualify for Medicare-Medicaid). Even though, according to the US Bureau of Labour, by 2014, over 18m Americans will be employed either directly or indirectly in the healthcare industry. This is a little above 11% of the total estimated American workforce in 2014. So, while America’s healthcare system has not been able to cover everybody, it will employ over 11% of the working population by 2014, about 18m people.
Let us look at the UK which is more straight-forward. Prior to the Second World War, Britain’s hospitals were run by charities or local councils, and the only people entitled to free treatment were those with jobs. However, the 2nd world war and under-investment in the years preceding the war had essentially reduced the system to a state in which medical personnel were being asked to work almost for nothing.
In 1945, the new Labour government came in on a manifesto that promised a revolution in health care, and the lot to reform healthcare in Britain fell on a major Labour Party political figure named Aneurin Bevan. His stated ambition was to build a health service based on four principles: it was to be free at the point of use, available to everyone who needed it, paid for out of general taxation, and used responsibly. The result was the National Health Service Bill. That bill gave the Brits the National Health Service (NHS). The way the system works is very simple. Citizens pay a national insurance tax. The money goes into a trust. Hospitals were also re-organized to be managed by Trusts and operated by professional hospital managers, led by a CEO, not a CMD. Every citizen is issued a National Insurance card that provides access to care at all levels, through a network of General Practitioners (GPs) for primary care, and Trust-managed hospitals for secondary and tertiary care.
Just like the American model, the British model is not without its own problems of long waiting times for critical surgery and high out-of-pocket costs for services not covered by NHS. In terms of the number of jobs created by the NHS, the only thing we need to know is that the NHS is the fourth largest employer of labour in the world, with only the Chinese military, Indian Railways, and Walmart employing more people.
Let us look at Nigeria’s case. When the Health Reform agenda of the OBJ administration took shape, the FG decided to adopt an employer-based private insurance model to pool healthcare cost risk. Almost 10 years, after the program started, it only covers less than 7% of Nigerians. This is not surprising to me, because when you look back at the histories of countries that have attempted to reform healthcare, it has never been an easy task. However, it is also surprising when one considers the capabilities that have been unleashed by information technology, and with that, the ability to leap frog into the new healthcare economy. While the wisdom of implementing an employer-based health insurance scheme in a country with unofficial unemployment rate of between 45 and 48% can forever be questioned, my objective in this write up is to offer a way forward.
In 2007, The IFC of the World Bank released a report, titled: “The Business of Healthcare in Africa”. In it they argued that there were five main imperatives in healthcare delivery;
1. Developing mechanisms for creating and enforcing quality standards for health services and medical product manufacturing and distribution;
2. Including as many of the population as possible in risk pooling programs;
3. Channeling a portion of public and donor funds through the private health sector;
4. Enacting local regulations that are more encouraging of a private health care sector; and
5. Improving access to capital, including by increasing the ability of local financial institutions to support private health care enterprises.
Can any government hospital in Nigeria, as currently constituted, achieve any of these milestones? The answer is no.
It is time to reform the way healthcare is financed in Nigeria. For instance, between 2009 and 2010, Lagos State spent over N38b on healthcare. Over 40% or about N15.4b went to salaries, over 51% or over N20b went to capital expenditure and over 8% or about N3.2b on overhead. The next obvious question is where are the deliverables from the over N20b healthcare CAPEX between 2009 and 2010? Government will respond by saying the needs are enormous and N20b is a drop in the bucket and that government cannot do it alone. That, right there is my point. Governments need to learn how to effectively leverage their limited resources to achieve acceptable outcomes, especially in healthcare, and the time-tested way of achieving this, is to, like I mentioned earlier, move healthcare spending away from the supply side to the demand side. This will allow government to start getting out of the business of providing healthcare, making room for professionals in the field of healthcare business to come in and act as service providers. Non-governmental organizations too, have a role to play in this inevitable transition.
One of the ways that government can achieve this is to enter into Joint Venture agreements with private investors or NGOs with social investment money. The JV company will then own and operate government hospitals. The private sector/NGO brings in equipment, capital and expertise and also provides funding and expertise towards creating a State Community Health Insurance Program, which will essentially be the anchor revenue source for the hospital(s) under management by the JV. The government provides the facility and commits to appropriating a certain percentage of the state budget into a State Health Insurance Trust Fund, which will fund the Community Health Insurance Program (CHIP). CHIP makes it possible for subscribers to access healthcare at a government hospital, without the need to pay out of pocket. CHIP, apart from providing services to the elderly and indigent, will also be heavily marketed to the almost 93% of Nigerians currently not covered under NHIS. People will be encouraged to subscribe through their various affinity groups – Community Development Association, Okada Riders Association, Welders, Mechanics, and other self-employed groups. Because the groups guarantee a larger risk pool, the premiums could actually be as low as N4,000 per annum for basic coverage. An additional advantage is that because the affinity group bears responsibility for premium collection, subscribers can even pay month to month.
This model does not privatize government hospitals, they remain public. The model may actually lower cost for the hospitals, some of which they can pass to their consumers through lower prices. Some of the advantages for government are that responsibility for staff salary will be transferred to the JV owners. Thus, government is relieved of this burden. It also relieves government of the burden of capital expenditure, because all CAPEX will be planned for and borne by the JV. When the healthcare market in Nigeria is organized, its potential to generate millions of jobs directly and indirectly is also enormous.
Now, this is by no means a complete plan, but I can say for sure that the private sector is seeking opportunities to partner with governments in the area of healthcare. The inflow of private equity money into healthcare in Nigeria is a clear signal, and what that means is that if we don’t take advantage of this opportunity, someone else will. The question we will be asking ourselves 10 years down the line is who are the people running government hospitals in Nigeria? Will it be Europeans, Indians, Jordanians or Nigerians?
Email. oolapojoye@orisunhealth.com