Kenya’s National Health Insurance Fund (NHIF) overpaid hospitals by KES 367.8 million in the last fiscal year, according to a damning audit report that raises serious questions about the fund’s financial management and claims processing systems.
The report by Kenya’s Auditor-General, released this week, found that while hospitals billed the NHIF KES 447.1 million for services provided to members, the fund paid out KES 814.9 million—a 82% overpayment that the auditors say is “unexplained.”
This discrepancy was just one of many financial irregularities highlighted in the Auditor-General’s report on the NHIF for the year ended June 30, 2023. The audit paints a picture of an organization plagued by weak internal controls, questionable procurement practices, and ineffective claims management.
“In the circumstances, the accuracy, completeness, and regularity of the claims paid amount of KES 814,893,467 could not be confirmed,” the report states.
The NHIF, established in 1966, is Kenya’s state health insurer tasked with providing accessible, affordable, sustainable, and quality health insurance to all Kenyans. It covers over 16 million principal members and their dependents.
However, the fund has been dogged by allegations of corruption and mismanagement for years. This latest audit suggests deep-rooted problems persist despite government pledges to reform the institution.
Among the most serious issues flagged was the fund’s overall benefit expenses, which totaled KES 70.9 billion in the 2022/23 fiscal year. The auditors found numerous irregularities in how these claims were processed and paid out.
For instance, the report identified KES 247 million in duplicate claim payments across various insurance schemes. It also uncovered KES 51.1 million paid out for 2,808 claims where “the same patient was admitted in different hospitals at the same time”—a red flag for potential fraud.
The auditors also questioned KES 463.9 million in payments that exceeded specified limits for various medical procedures under the National Health Scheme. For example, while the limit for major surgery claims was set at KES 402 million, the NHIF paid out KES 687.8 million—an overpayment of KES 285.8 million.
“In the circumstances, the accuracy and completeness of the National Health Scheme expenses of KES 963,737,709 could not be confirmed,” the report states.
The audit raised concerns about the fund’s claims management system, noting instances where “the system merges some case codes and gives wrong claims values.” It also flagged the use of two separate IT systems with overlapping capabilities as inefficient and potentially compromising data integrity.
Beyond claims issues, the report highlighted several instances of non-compliance with procurement laws and regulations. This included KES 239.7 million paid to suppliers whose purchase orders were issued after invoices were presented—”indicative of regularizing the procurement process after the delivery of goods or services,” according to the auditors.
The fund also failed to meet the statutory requirement to allocate 30% of procurement to businesses owned by women, youth, and persons with disabilities. Only 7% of its KES 6.4 billion procurement went to these groups.
Financial management concerns extended to the fund’s investments as well. While the NHIF held KES 8.2 billion in short-term deposits, it had outstanding payables of KES 17.2 billion. The auditors suggested this indicated “management prioritizing investments which may negate providing medical insurance cover to all its members.”
Human resource issues were also flagged, including understaffing by 339 positions and the prolonged use of acting appointments. Thirty officers had been in acting roles for over six months, contrary to the fund’s HR policies.
The audit raised questions about the fund’s ability to effectively monitor healthcare providers. Many NHIF branches had only one or two quality assurance officers covering hundreds of facilities. The Kisii branch, responsible for 200 health facilities, had no quality assurance officer at all.
“In the circumstances, the monitoring of NHIF patient admissions or performance of surprise checks to confirm treatments are as per the requests authorized by the Fund could not be confirmed,” the report states.
In a particularly concerning finding, the auditors noted that 23 branch managers and 29 quality assurance officers had been in the same positions for 5-13 years. This “may result to familiarity or friendly approach to clients which is likely to compromise surveillance and enforcement duties,” they warned.
The report concluded that based on the audit findings, “public resources have not been applied lawfully and effectively” by the NHIF. It also determined that “internal controls, risk management, and overall governance were not effective.”
These findings come at a critical time for Kenya’s health insurance sector. The government is in the process of transitioning from the NHIF to a new Social Health Authority under reforms aimed at achieving universal health coverage.
