Evaluation of Risk Taking by Cbhfs in Informal Settlements

Evaluation Of Risk Taking By Cbhfs In Informal Settlements

Erastus Thoronjo Muriuki,

PhD Entrepreneurship

Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

Abstract

Community-based health financing Schemes (CBHFs) play an increasingly important role in the health system of many low and middle-income countries. The expectation is that CBHFs mechanisms reach population groups that government and market-based health financing arrangements do not. Populations with low income, obtaining their subsistence from the informal sector (urban and rural) and/or socially excluded groups (due to cultural factors, physical or mental disability, other chronic illness) are often not able to take advantage of government and/or market based health care financing arrangements. Thus, CBHFs has been attracting widespread attention for its potential to provide these population groups with increased financial protection and access to health care. This paper sought to evaluate the risk taking by CBHFs in informal settlement. The study focused on four variables which include high Vulnerability of the Informal settlements, unsteady Income, payment schedule and poor system of enrollment. The reviewed literature is very rich in describing the phenomenon referred to as community financing in terms of scheme design and implementation. The study found that establishment of CBHFs is a challenge and risk taking in informal settlements. The sustainability of these schemes is not easy. Enrolment in CBHFs is a major challenge in informal settlement, though they can contribute significantly to financial protection and to access health facility. Another major challenge is lack of sustainability of schemes. This paper therefore recommends an establishment of an insurance mechanism so as to counter the financial risk incurred by CBHFs in informal settlement. Government can address issues such as, membership, payment schedule, pooling and the role of the community in decision-making.

This paper sought to establish some of the risks undertaken by the informal settlement. This paper established some of the risks undertaken by CBHFs. These included high vulnerability, unsteady income, poor systems of enrolment and payments schedules. The paper recommended that there be established an insurance mechanism, the CBHFs to be monitored closely and creation of a solidarity fund.

Keywords: Risk Taking Community-based financing, Kenya, Vulnerability, Enrolment, Informal settlements

1.0 INTRODUCTION AND RESEARCH OBJECTIVES

Community-based health financing (CBHF) aims to empower communities to meet their health financing needs through pooling of resources to pay for health care as a group. CBHF schemes share the goal of finding ways for communities to meet their health financing needs through pooled revenue collection and resource allocation decisions made by the community (Bennett, et al, 2004). Schemes employ a variety of financial structures including insurance, prepayment, and credit schemes with premiums ranging from a once per- annum payment during harvest season to a monthly or quarterly fee (Carrin, Waalkens and Criek, 2005). CBHF schemes can act as a resource to pay for services through a community fund or can be facility-based (Michelle and Ming-ruchu, 2006). Unlike community based health insurance schemes or mutual health organizations in West Africa, the majority of community-based health insurance schemes in Uganda are in fact facility-based schemes that target community groups as clients. The said are owned by the facility itself and are managed by the facility staff, thus resembling health maintenance organizations.

The 2002-2008 Kenya government development plans indicated that, the health targets attained in the past have been reversed by the impact of HIV/AIDS coupled with poor economic performance (GOK, 2002). Even where facilities exist, they suffer from shortages of trained personnel, inadequate supplies and poor management, all translating to limited services (MOH, 2004). The high cost of western pharmaceuticals puts health care services out of reach of a big proportion of African population especially the poor. Lack of good health facilities in hospitals is a major indicator of the health care situation in the country.

In the pre-independence period, the colonial government adopted a segregation policy dividing the urban population into separate enclaves for Africans, Asians and Europeans. This created a great inequality in terms of housing and infrastructures from the outset, for public resources were allocated to these three sections in a unbalanced way. However, after independence, this spatial segregation has been reinforced as a result of socio-economic and cultural stratification (Umande trust, 2007).

Many African countries began the post-colonial period with the intention of providing free or heavily subsidized health care to their citizens. Difficult economic times in the 1970s and 1980s resulted in the abandonment of this universal health goal by virtually all Sub-Saharan African countries. In the late 1980s, African health ministries, guided in part by UNICEF (United Nations Children's Fund), the World Health Organization and the World Bank, shifted their health care strategies to a subsidized, fee-for-service model that involved active community participation. Researchers vary in their analyses of the historical roots of CBHFs. Despite the different analyses of the origins of community-based health financing, it is clear that from the early 1990s to the present there has been an exponential growth in the number of these organizations in Africa (Ndiaye et al., 2007). While the growth rate for these schemes has been impressive, it is important to keep in mind the small proportion of the population that is insured by them. For example, the estimated number of beneficiaries in Benin, Burkina Faso and Mali in 2006 was a little over half a million people out of a combined population of about 36 million in the three countries (Ndiaye et al., 2007).

Most schemes in sub-Saharan Africa have relatively few members, with 95% of the schemes having less than 1,000 members (Ndiaye et al., 2007). While their small sizes limit the amount of risk-pooling that can be done, small CBHF schemes also have the benefit of having members that know one another and are actively involved in the management of the scheme (Ndiaye et al., 2007). While praised for being rooted in local communities and addressing health care needs that may otherwise go unmet, some of these organizations have also been criticized for lacking competent and committed personnel, sound business structures and financial management systems, strategic health care plans, and effective member relations (Bennett et al., 2004). A lack of technical training and administrative skills has also been documented, with major problems in many schemes’ skills in setting premium rates, establishing benefit packages, marketing, monitoring and evaluation, contracting with providers, accounting, and collecting dues.

Over the past two decades, CBHF schemes have emerged in developing countries as a means for low-income individuals to finance the cost of basic health services. These schemes are often organized by grassroots organizations, for instance, faith based organizations, which are intended to embody many, if not all, of the cooperative principles. In some instances, they have formed secondary-level CBHF associations, and have established alliances with public health agencies, private health providers, donors, and/or NGOs to further their goals of improving access to quality health care services for their subscribers (Bennett et al., 2004).

A health system includes all activities whose primary purpose is to promote, restore or maintain individual’s physical, mental and social well-being. Health is a fundamental need for socio-economic development of any community. There is need therefore for health to be supported by fair and sustainable financing systems. This will ensure equity and efficiency in promoting universal access to quality health care and protecting people. Such an initiative requires a sustainable financial resource base in meeting the health needs of the population, without causing impoverishment, and contributing to the attainment of national development goals and economic growth through improved health status.

There is a need for the health financing system to be developed within the particular macroeconomic, socio-cultural and political context of each country. It should create balanced incentives with regard to equity, efficiency, sustainability and quality of care. In Kenya the principal Healthcare financing agents are the households which belong to the community based health financing schemes through out-of-pocket (OOP) payments (45%), followed by MOH (Ministry of Health), which handles (35%) of the total funds from the sources (National Council for Population and Développent, NCPD, 2000). Given the social, physical and demographical infrastructure, community based health financing schemes become an integral aspect of informal settlements.

In order to realize the potential for community-based health financing schemes in Kenya and elsewhere, it is important to learn from the strengths and weaknesses of existing CBHF schemes; to replicate and scale up successful schemes; to support the transformation of some of these schemes into health cooperatives, where appropriate; and to form new health cooperatives that have an increased likelihood of becoming successful, sustainable organizations. Kenya, one of the developing countries in sub-Saharan Africa have various CBHFs in the four major slums in Nairobi city, their performance have not been perfected leading to slow and low impact on growth. The underlying knowledge gap on the factors influencing performance of community based health financing schemes in Kenya call for a solution on CBHF schemes registered in Kenya to promote accessibility to basic healthcare. The socio-economic status characterized by poverty, poor housing and inaccessibility to basic healthcare underpin the essence of examining risk takings in community based health financing schemes in informal settlement.

Scarce economic resources, low or modest economic growth, constraints on the public sector and low organizational capacity explain why the design of adequate health financing systems in developing countries, especially the low income ones, remains cumbersome and the subject of significant debate. Earlier on, cost-recovery for health care via user fees was established in many developing countries usually as a response to severe constraints on government finance. However, most studies alert decision-makers to the negative effects of user fees on the demand for care, especially that of the poorest households.

Alternative health financing systems exist, de-linking utilization from direct payment, and thereby protecting the population, especially the most vulnerable groups, from having to resort to various coping mechanisms. Financing is based either on general tax revenues and/or social health insurance contributions. Risk-pooling is a core characteristic of these systems, enabling health services to be provided according to people’s need rather than to their individual capacity to pay for health services. A tax funded health system may not be easy to develop, due to the lack of a robust tax base and a low institutional capacity to collect taxes and weak tax compliance. Social health insurance has traditionally started by insuring workers. A further nationally organized expansion of social health insurance to the self-employed and non-formal sector is especially demanding. Other financing methods which would circumvent these organizational difficulties are therefore explored, including the direct involvement of communities in health financing

The hypothesized relationship between risk taking and CBHFS in informal settlement is as shown in figure 1.1.

.This paper sought to evaluate risk taking by CBHFs in informal settlement through the following objectives.

1. To establish the influence of high Vulnerability of the Informal settlements on CBHFs
2. To determine the effects of unsteady Income on CBHFs in informal settlement
3. To find out the effects of poor system of enrollment on CBHFs in informal settlement
4. To determine the effects of payment schedule on CBHFs in informal settlement

The study offers valuable contributions from both a theoretical and practical standpoint. From a theoretical standpoint, it contributes to the general understanding of the risk taking in CBHFs in informal settlement.Study also provides the stakeholders with deeper insights into what the CBHFs need to do to mitigate the risks involved. The research findings also provide vital information that would assist government particularly policy makers, planners and programme implementers to formulate policies and strategies to lower the risks taken by CBHFs.The study provides vital information to act as base for any other future studies related to informal settlement and risks taken in informal settlement CBHFs.

2.0 THEORETICAL BACKGROUND AND INFORMING LITERATURE

2.1 Rationale of CBFS in informal settlement

Insurance is not the only way of dealing with risks, and not all risks are insurable. However, health riskssuch as those relating to illness, injury, disability, maternity and the like are considered to be eminently insurable as these risks are mostly independent or idiosyncratic, that is, not correlated among community members. Moreover, among several risks facing poor households, health riskis considered to be crucial as it has destabilizing effect on household finances: directly, by thrusting health expenditure in the event of illness and indirectly, by affecting the income earning capacity of households (Asfaw et al. 2002). Hence the need for a two-pronged strategy: one, aimed at improving the health status of the poor, and two, protecting them from the financial consequences in the event of illness.

For this reason CBHFs that essentially protects households against the financial consequence of illness is regarded as a complement to, and not as a substitute for, other health interventions. Amidst shrinking government budgets, failure of the markets to reach the poor and widespread criticism of levying user charges, community based arrangements have aroused much interest and hope in meeting health care challenges facing the poor, and CBHFs is considered to be an important financing tool for protecting the poor from adverse financial consequences in the event of sickness. While the out-of-pocket expenditure on illness in spot payments imposes great financial hardship on the poor, community based health insurance is seen as an effective way in financing health care costs. Health insurance by pooling of risks across members who participate in health insurance lessens the financial burden of members affected by illness. Indeed, several types of community based health insurance schemes have emerged in Sub-Saharan Africa (Wiesmann and Jütting 2001, Atim 1998), Asia (Krause 2000) and in other regions (Bennett et al. 1998, Jakab and Krishnan 2001). Some of these are community based, while others are based on membership to a particular group.

In this paper these community-based and member-based arrangements are collectively referred as community financing schemes. In some cases, health insurance feature is embedded in the other types of functions that a community or member based organizations provide.

Community based financing schemes are usually based on the following characteristics: voluntary membership, non-profit objective, link to a health care provider (often hospital in the area), risk pooling and relying on an ethic of mutual aid/solidarity. Their advantage lies in being able to reach low-income people in rural areas and working in the informal sector that are otherwise difficult to reach, able to exploit social capital in bringing about greater awareness, correcting for adverse selection and moral hazard problems and encouraging preventive measures, and increased access to health care.

Community based schemes also have certain weaknesses such as low capital base, low level of revenue mobilization, frequent exclusion of the poorest of the poor, small size of risk pool, limited management capacity, isolation from more comprehensive benefits. However, the reach of the existing schemes is still low and attempts are being made to bring more and more people under its ambit, by up-scaling and extending and replicating the schemes. In extending the reach of micro insurance, demandsideand supply sidefactors and factors relating to design anddevelopment of scheme are important (Dror and Jacquier 1999, Wiesmann and Jütting 2000).

However, the focus of the present paper is only on the demand side factors and in particular on the issue of affordability. By and large the literature on demand side is still thin.16 A few micro-level studies that have tried to estimate demand for health insurance based on the willingness-and ability- to-pay for health insurance have come out with positive findings. A survey-based study on the willingness to pay even in case of Ethiopia - one of the poorest countries in the Sub-Sahara Africa - shows that the poor are willing to pay up to 5 % of their monthly income (Asfaw et al. 2002) for having a scheme that can take care of their costs of illness.

A review of various existing schemes by Jakab and Krishnan (2001) highlights that CBHFs can raise substantial resources but need to get additional funds by donor agencies, the state or health care providers, and the poorest of the poor in a community are often excluded from the schemes. In order to increase the access of these people some schemes have developed mechanisms which lower entrance barriers for the poorest, e.g. flexibility in premium collection and exemption mechanisms.