Healthcare Affordability

Abstract

The cost of healthcare is an enormous financial burden for the government, families, and individuals. When talking about paying medical bills, the common financial resource includes personal income and savings, as well as support from the government. Therefore, this chapter investigates insurance coverage, government expenditure on healthcare, and individual affordability, aiming at understanding the financial burden that the patient may bear when seeking medical services. Among the studied countries, only Algeria managed to provide free healthcare through insurance. The other countries tend to have a complete insurance scheme and have the choice of enrolling in private and public insurance. However, issues like public insurance are often underfunded, the claims take too long to process and the insurance is not reinforced, leaving the patients any choice but to cover the medical bills out-of-pocket upfront. Therefore, individual affordability becomes crucial when people make medical decisions. Thus, in the investigation, individual affordability is further broken down into the cost of a single hospital visit and hospitalization, the average income, and the poverty in the country, trying to understand to what extent a patient is likely to have the financial ability to cover the bills.

To determine the affordability of healthcare, understanding the healthcare financial system is essential. Hospital bills are usually paid by insurance companies, by patients, and by governments. Therefore, this section investigates current insurance plans in each of the studied countries, admission fees for hospitals, and government health expenditures.

5.1 Insurance Coverage

Universal health coverage refers to a government system that ensures all people have access to necessary and high-quality health services (i.e., essential medicines, vaccines, preventive care) without causing financial hardship. Universal health coverage aims at removing financial barriers to accessing primary health care, particularly for the poor and vulnerable. Healthcare insurance covers all or part of the risk incurred by medical expenses by funding health services. Health insurance coverage is often proportional to government healthcare expenditure. For example, in 2017, South Africa, Kenya, and Nigeria had a coverage rate of 17%, 10%, and 3%, respectively, and their health expenditure was 4.35%, 2.05%, and 0.53%, respectively.¹ Kenya and Nigeria’s community health insurance has a flatter structure of payment that is independent of income and poorly developed; thus health insurance coverage is low.

Citizens in Algeria are insured by the Caisse Nationale de la Sécurité Sociale des Travailleurs Salariés (National Fund for Employed Workers’ Insurances), which covers salaried employees and their dependents, or by the Caisse Nationale de Sécurité Sociale des Non-salariés (National Social Security Fund for Workers and Self-Employed Persons), which covers independent workers and their dependents. Both funds cover healthcare provided through state-run facilities or the transfer-abroad program. Even though insurance agreements can be made in some cases between public and private treatment centers, 85% of Algerians are covered by public schemes.

Côte d'Ivoire established a compulsory national system of coverage, couverture maladie universelle (“universal health coverage”) in October 2019. The system is regulated by the National Health Insurance Fund of Côte d'Ivoire. Its objective is to guarantee all residents access to high-quality, low-cost healthcare, including 85% of global drugs. It has two plans: a contributory scheme known as the Régime Générale de Base (Basic General Scheme) that costs 1,000 francs per person per month and a non-contributory scheme known as the Régime d'Assurance Médicale (Medical Assistance Regime) that is targeted at low-income beneficiaries. Other health insurance, such as Mutuelle de Crédit et d'Epargne pour les Fonctionnaires de Côte d'Ivoire and Caisse Nationale de Prévoyance Sociale, are complementary. By the end of June 2020, almost 300,000 beneficiaries had universal health coverage; 102,231 were treated, and 174,165 had consultations.

Ghana practices a graded premium payment method. The premium is calculated according to earnings, and an exemption is provided for extremely low-income beneficiaries. The government of Ghana introduced the National Health Insurance Scheme in 2005, with the goal of removing financial barriers to healthcare and protecting all citizens from financial burdens. It covers 95% of the medicines in the Essential Medicines List for about 30% of Ghanaians. It includes a nationally standardized package intended to cover 95% of disease conditions and includes primary, tertiary, and pharmaceutical goods and services. It also provides access benefits to accredited public and private providers. It does not cover some treatments, such as cancer treatment other than breast and cervical cancers, dialysis for chronic renal failure, organ transplant, and services provided under government vertical programs (ARV treatment for HIV/AIDS, immunizations, and family planning). However, the government is planning to include and moderately increase its investment in breast, childhood, cervical, and other cancers, as well as renal disease. Ghana still reports poor patient experiences and increased cost of care. Most Ghanaians still pay out-of-pocket for healthcare. Exemptions from co-payments or fees at the point of service are mandated by law but not enforced, so patients are charged co-payments for services that should be fully subsidized. Ghana also has private healthcare, which is necessary for those who want shorter wait times, modern equipment, and high-quality medication, though private facility standards vary. For example, those in areas with big expat communities are well equipped. Private health insurance coverage has stalled due to risk aversion related to oncology and other high-risk care, though some providers offer limited coverage of chronic illnesses as part of their marketing strategies.

In Kenya, less than 20% of the population has medical insurance, though it is targeting universal coverage by 2022. Kenya has three types of insurance: the National Health Insurance Fund, private insurance, and community-based healthcare insurance schemes. The National Health Insurance Fund is supported by the government and covers a large portion of Kenya’s population. It costs approximately US$5 per month, covers the principal member and beneficiaries, and includes some inpatient and outpatient services in various hospitals. It is mandatory for all formal-sector employees (public and private) and voluntary for those in the informal sector. As part of the universal health coverage target, the government hopes to expand coverage of the National Health Insurance Fund with significant reforms aimed at enrolling more people and expanding the range of services. Kenya’s private health insurance is mainly purchased by wealthier citizens, such as employed and urban residents who tend to be better educated than rural residents and have access to more information on private health insurance. Kenya has 22 private insurers mostly in urban areas, each with different packages at different prices. Patients can use both the National Health Insurance Fund and private insurance. Finally, community-based health insurance schemes are suitable alternatives to the more expensive conventional ones. These schemes are mainly initiated and managed by community members to ensure access to healthcare with minimal financial burden. The schemes generally follow the primary healthcare model by providing curative (e.g. illness and injury) treatment and preventive (e.g. education, immunization, and well-child) health services. Costs vary from community to community, but most have a one-time lifetime fee of $2 or a set contribution per month. Overall, Kenya shows some geographic disparities in health insurance coverage. Nearly 30% of people in urban areas have some form of health insurance, whereas coverage is only about 14% in rural areas (KNBS 2018). This disparity may reflect the higher levels of informal sector employment in rural areas and less awareness of insurance options.

In Nigeria, health insurance is mostly available to civil servants and private employees. New polls by private institutions suggest that about 15% of Nigerians have either private or social health insurance, which is more than the 5% previously thought. That means about 83% of Nigerians pay medical bills out-of-pocket, and the remaining 2% get support from family and friends. Further, cancer care is excluded from the National Health Insurance Scheme. Private healthcare is relatively expensive, as all equipment and supplies must be imported and are subject to customs duties. The National Health Insurance Scheme provides social (compulsory) health insurance. Private health maintenance organizations (HMOs) also provide voluntary health insurance. The Formal Sector Social Health Insurance Programme provides insurance through accredited HMOs. Public employees contribute 5.25% of their salary, and private employees contribute 15% of their basic salary to health insurance. The Vital Contributors Social Health Insurance Program is voluntary with a premium rate of approximately US$403 annually per person. For private insurance by HMOs, plans start at US$92 per person. The government recently launched a new insurance scheme, the Group Individual and Family Social Health Insurance Programme, which targets more individuals.

South Africa has large private insurance companies and different medical schemes that are highly fragmented. However, the government is currently developing a National Health Insurance system to provide access to affordable, high-quality personal health services for all South Africans, irrespective of socio-economic status. Since 2012, the system has been implemented in phases and is primarily funded by general taxes.

5.2 Government Health Expenditure

Government health spending should be the primary source of funding in the health sector, but only a third of total health expenditure was sourced from the government in sub-Saharan Africa in 2015,² as confirmed by a WHO dashboard report.³ As Fig. 5.1 illustrates, insurance covers a small portion of the total health expenditure. Around one-third is paid out-of-pocket by patients.

Fig. 5.1

(Data source World Health Organization. Graph source World Health Organization)

Structure of health expenditure in sub-Saharan Africa, by financing source

Among the eight countries studied in this report, South Africa has the highest health expenditure as a share of GDP. Nigeria used to have the lowest share but was replaced by Ghana when it decreased its government healthcare expenditure (Fig. 5.2).

Fig. 5.2

(Data source World Bank. Graph source the author)

Government health expenditure in the eight studied countries as a share of GDP

Kenya’s health expenditure as a share of GDP was 5.2% in 2018, up from 4.8% in the previous year. Health expenditure per capita in Kenya increased from US$27 in 2004 to US$88 in 2018, an average annual growth of 9.21% (Fig. 5.3).

Fig. 5.3

(Data source Kenya Health Accounts. Graph source Kenya Health Accounts)

Health expenditure in Kenya; THE: total health expenditure

The 2012–2013 Kenya Health Accounts provide some fascinating insights. Kenya spent KES 234 billion (US$2,743 million) on health-related expenditures, which is equivalent to 7% of the country’s GDP or the total value of Kenya’s production in agriculture plus revenue from tourism and other sectors. In concrete terms, that is seven times the cost of the Thika Superhighway, “our national pride,” as President Kibaki called it in 2012. Most of Kenya’s health expenditure was spent on salaries, allowances, drug supplies, and other regular costs. Only 7% went to building new facilities or purchasing equipment. Kenya spent 60% of recurrent expenditures on curative care, but only 16% on vaccination, HIV/TB prevention, insecticide-treated nets, and epidemic preparedness. As a country, Kenya devotes a higher share of health expenditure (20%) on governance, such as the health system and financing administration; in other words, it spends more on salaries for people in the ministries of health who do not see any patient than it does on disease prevention or health promotion. Kenya’s recurrent healthcare is funded almost equally by direct, out-of-pocket payments from households (32%) and taxes (31%), followed by donor contributions (26%), and finally health insurance (13%). See Figs. 5.4 and 5.5.

Fig. 5.4

(Data source Kenya Health Accounts. Graph source Kenya Health Accounts)

Health financing sources in Kenya as a percentage of total health expenditure

Fig. 5.5

(Data source Kenya Health Accounts. Graph source Kenya Health Accounts)

Health financing schemes in Kenya as a percentage of total health expenditure

The Nigerian government allocated 4.42% (NGN 600.52 billion) of its NGN 13.58 trillion total budget to the health sector, which falls short of the 15% benchmark in the 2014 National Health Act. Health expenditure as a share of GDP has been mostly stable from 2006 to 2018, with a 4% share of health expenditure in 2006.

Based on the Health Budget Brief South Africa report, the consolidated national and provincial health allocations and estimates are indicated in Fig. 5.6.

Fig. 5.6

(Data source UNICEF. Graph source Funani Mpande)

Consolidated national and provincial health allocation in South Africa

According to the Health Budget Brief South Africa report of 2019/2020, the National Department of Health projected to spend R216 billion for the nine provincial health departments. This constituted 11.8% of government resources and 4% of the country’s GDP in 2019 (Figs. 5.7 and 5.8).

Fig. 5.7

(Data source National Department of Health, South Africa. Graph source Funani Mpande)

Budget allocation to the health sector

Fig. 5.8

(Data source National Department of Health, South Africa. Table source Funani Mpande)

Health spending in South Africa

5.3 Individual Healthcare Affordability

This section assesses the individual affordability of hospital costs based on average and minimum income and poverty level.

5.3.1 Hospital Costs

The hospital costs in this report mainly involve the cost per bed per day and the cost per outpatient visit by hospital level based on average and minimum income. This approach helps assess the financial burden on patients paying out-of-pocket. Table 5.1 presents estimated costs in Kenya for public hospitals with an occupancy rate of 80%. Costs include personnel and food costs but not drug and diagnostic test fees. The results are presented in USD in 2000 and 2015.

Table 5.1 Hospital costs in Kenya, 2000–2015

In Nigeria, consultation with a general practitioner or private specialist costs between 10,000 and 40,000 Naira (£22–£87 or US$27.5–$110) in 2018, depending on the doctor and institution. This cost excludes treatment and medical examination fees. A one-night hospital stay in a single room costs between 30,000 and 100,000 Naira (£65–£218 or US$82–$275) but includes treatment and medical examinations.⁴ According to a study done at a public Nigerian hospital in 2012, the cost of stay per patient ranged from 12,745 to 238,123 Naira (US$82.23–$1536.28), depending on the medical severity. The average cost per day was 19,506 Naira (US$125.85). In comparison, a study conducted by the Hospital Association of South Africa in 2013 to compare the cost of hospital services indicated that patients at public facilities do not pay a value-added tax. The average difference per day was 122.97 Euros (Fig. 5.9).

Fig. 5.9

(Data source National Department of Health, South Africa. Table source Funani Mpande)

Hospital Association of South Africa 2013 costs

The cost of hospitals is generally understudied, as prices vary between private institutions and public institutions, hospital to hospital, and region to region. However, according to data collected from Nigeria and South Africa, the average cost per patient is approximately US$100–$200 per day. The average GDP per capita in 2018 in the eight studied countries was US$2,717. Even without accounting for inflation, these data indicate most patients would incur financial hardship from healthcare expenses.

5.3.2 Income

This section looks at average and minimum incomes in the eight studied countries. Overall, average and minimum incomes have increased in the past 50 years along with rapid economic growth. However, a huge gap remains between income and expenditure, especially for healthcare products.

Minimum wages in Kenya remained unchanged at 13,572 KES/month in 2019 and 2020 (Figs. 5.10 and 5.11).

Fig. 5.10

(Data source National Bureau of Statistics, Kenya. Graph by Beatrice Birir)

Wages in Kenya, 1994–2020

Fig. 5.11

(Data source National Bureau of Statistics, Kenya. Graph by Beatrice Birir)

Wages in Kenya, 2004–2019

In Nigeria, salaries range from a minimum of 85,700 NGN (US$209) per month to 1,510,000 NGN (US$3,680) per month maximum average salary (the actual maximum is higher). The minimum wage has undergone a two-fold increase since 2004. As of 2021, the current monthly minimum wage is NGN30,000 (US$73 at the official rate in 2021, US$62 at the parallel rate in 2021). Some states in Nigeria have yet to implement this wage and still pay NGN18,000 (US$44 at the official rate in 2021, and US$37 at the parallel rate in 2021). As of May 2020, 40% of Nigerians lived below the poverty line (the only data ever published on this issue). However, poverty levels may be overestimated due to a lack of information on the large, informal sector of the economy.

Due to the inequality in South Africa, the average monthly household income varies by race. Black South African household income is eight times less than that of White South African households. During 2006–2008, Black South African household income increased slightly (exchange rate for June 28, 2021, R1 = US$0.070 or 0.059 Euro) but decreased in White households (Finn, Leibbrandt, and Woolard 2009). Annual income increased from 2006 to 2015 to US$265.45 or 222.17 Euro (Statistics South Africa 2019). The Minister of Employment and Labour announced a national minimum wage increase from R20.69 to R21.69, effective March 2021. Currently, the hourly wage is US$1.52 or 1.28 Euros (Figs. 5.12 and 5.13).

Fig. 5.12

(Data source Minister of Employment and Labour, South Africa. Graph source Funani Mpande)

Average annual labor market income in South Africa, 2006–2015

Fig. 5.13

(Data source Minister of Employment and Labour, South Africa. Graph source Funani Mpande)

Average household per capita monthly income per racial group in South Africa, 2008

5.3.3 Poverty

Chronic poverty refers to those who are likely to remain poor. Transitory refers to those who are more likely to move to the middle class. Vulnerable refers to those who are currently in the middle class but are likely to become poor (Fig. 5.14). Extreme poverty is defined as living on less than US$1.90 per day.

Fig. 5.14

(Source Schotte et al. (2018))

Schema of social stratification: a poverty dynamics approach to structured inequality

In 2018, 40% of the population in Africa lived in extreme poverty, accounting for two-thirds of the globe. The percentage has decreased by 1.6% since 2015, which is not fast enough to keep up with population growth. If the specified number of extreme poverty populations is inspected, the number of people in poverty in Africa actually increased (Figs. 5.15, 5.16 and 5.17).⁵

Fig. 5.15

(Source World Bank)

Those living in poverty around the world

Fig. 5.16

(Source World Bank)

The poverty rate in Africa

Fig. 5.17

(Source World Bank)

The number of poor in Africa

Extreme poverty will become the most predominant problem in Africa in the coming decades, as half of the countries had an extreme poverty rate higher than 35% in 2017. Nigeria has the largest poor population in sub-Saharan Africa, where 79 million people are extremely poor, followed by Kenya (17 million), South Africa (11 million), Côte d'Ivoire (6 million), and Ghana (4 million).⁶

Kenya's poverty level has decreased since 2005. The ratio at the national poverty line was 36.1% in 2015, down by 22.86% from 2005. The national poverty headcount ratio refers to the percentage of the population living below the national poverty line. National estimates are based on population-weighted subgroup estimates from household surveys (Fig. 5.18).

Fig. 5.18

(Source Poverty and Equity Database)

Poverty in Kenya

Based on a 2019 report by the National Bureau of Statistics in Nigeria, 40% of its population lived below the poverty line of 137,430 Naira per year (US$381.75), and 25% were vulnerable to falling below the poverty line. Figure 5.19 shows how the poverty level decreased by 26.56% from 2010 to 2018 (although there is no data for 2015–2018). With the recent COVID-19 outbreak and fall in global oil prices, which Nigeria heavily relies on for its revenue, there is a strong chance that these numbers might increase.

Fig. 5.19

(Data source World Bank. Graph source Abdelkader Bouregag)

Poverty in Nigeria

The population that is chronically poor in South Africa has declined by 10% from 2008 to 2017. The number in transitory poverty has been fairly consistent, whereas those vulnerable to poverty have increased by 5.8% (Statistics South Africa 2019; Fig. 5.20).

Fig. 5.20

(Data source Statistics South Africa. Graph source Funani Mpande)

Socio-economic classes in South Africa, 2008–2017

5.4 Summary

The cost of healthcare is an enormous financial burden for the government, families, and individuals. Data from Nigeria, South Africa, and Kenya show that out-of-pocket healthcare fees are not affordable for most. For example, the average cost per day in a Nigerian hospital is almost equivalent to a month's worth of income if the patient earns minimum wage. The average monthly income of South Africa, which has the highest GDP per capita in all eight samples, is around US$500, but the average cost per hospital visit is US$100–200. Most countries have some form of health insurance, and governments are trying to provide universal healthcare to reduce financial burdens for patients. However, budget constraints mean that health insurance is not as effective as expected. Thus far, only Algeria has managed to provide free healthcare to everyone through insurance. In other samples, such as Ghana, patients still pay out-of-pocket before their insurance covers the claims.