The National Health Insurance: More than meets the Eye

By Felix Mwenge

The recent introduction of the National Health Insurance (NHI) Bill has sparked raging public debate across the country. However, this debate is primarily being based on assumptions as the salient features of the proposed NHI remain unclear. I outline some of the generic expectations of the NHI and provide comments on some aspects of the Bill to add to the debate.

NHI is one way of financing a country’s health care services using mandatory financial contributions by citizens as a primary source of funds. NHI works in the same way as private health insurance except that the former is established by the Government and obliges all eligible citizens to contribute. Currently, Zambia finances public healthcare through appropriations from the national budget based on various sources of Government revenue.

One main reason for considering NHI to finance healthcare is that current financing to health is insufficient. For instance, budgetary allocations to health averaged 9% of the total for the past five years, which is below the target of at least 15% agreed by African leaders under the 2001 Abuja Declaration. This underspending has resulted in an inadequate provision of quality health services to all. Consequently, public health services in the country have had to charge user fees to supplement the limited health resources. This exposes patients to out-of-pocket payments that the majority of the population can only ill afford or not at all, thereby creating financial barriers to health access.

Another reason for considering NHI is that it tends to be a more predictable financing mechanism as contributions come from a clearly defined constituency and are usually earmarked, compared to budgetary allocations. Further, budgetary allocations also tend to fluctuate annually and lack consistence. Additionally, NHI facilitates for income and risk cross-subsidies, a situation whereby wealthier groups make greater contributions to health care funding than the poor but all have access to the same range of health services while high risk groups are able to use more health services than those who are healthy, irrespective of the contribution made by each group.

In terms of the operations of the NHI, the Bill states that an authority or a parastatal similar to NAPSA will be established to manage an insurance scheme. The authority will be responsible for a number of functions including collecting and pooling of financial contributions; defining the health services contributors will receive; accredit/approve health service providers; design exemption mechanisms for the poor and vulnerable; and many others. Some people have asked whether NHI will replace budgetary allocations to health. The Bill is silent on this, but it appears NHI will supplement rather than replace budgetary allocations.

It is also important to realise that the NHI may have implications on the general well-being of the economy. The main source of NHI funds, according to the Bill, will be employer and employee contributions through payroll deductions. This means NHI will primarily rely on the formal sector which accounts for only 16% of total employment. It is well known that Zambia already has a narrow tax base, which limits general revenue collection. As the base for NHI will be even narrower, the rates may have to be very high in order to raise enough resources, thus potentially overburdening citizens already bearing numerous other taxes. While the Bill indicates that informal sector players and the self-employed will be expected to contribute to the scheme, it is unclear how this will be implemented when Zambia already struggles to collect taxes from this part of the economy.

Moreover, relying on a small formal sector means contributions may be limited. This implies that the NHI may only cover a small share of health financing and the treasury would be expected to bridge the gap. However, given the current state of public finance, and especially the debt repayment obligations Zambia faces, the NHI should aim to provide relief rather than put additional pressure on the fiscus.

As for employer contributions, these are principally an added cost to doing business. Additionally, some employers already have private health insurance schemes for their employees which they would want to maintain as NHI cannot guarantee comparable services to the private sector, at least in the short run. Thus, NHI is likely to be an added cost or tax.

To conclude, many issues still remain unclear about the NHI which the Bill cannot address it merely being a law. For example, will NHI cover a basic health care package, and if yes, what will it look like? What services will be free, at what levels? How will issues of moral hazard be guarded against? How will the NHI address issues of contribution equity? How will NHI account for contributors whose practices entail lower health-risks, to ensure that the contribution premiums are lower for such contributors? What sort of due diligence mechanisms will be established to determine the right level of contribution? Until these and many other issues are clarified, it is difficult for the public to have informed debates.

The author is a researcher at the Zambia Institute for Policy Analysis and Research (ZIPAR).