Proposal for Enhancing the Sustainability of Zambia’s National Health Insurance Scheme (NHIS) through Diversified Funding Sources and Private Sector Cost Controls
By Dr. Mpuma Kamanga
Background and Problem Statement
The National Health Insurance Management Authority (NHIMA) currently faces significant financial distress due to unsustainable expenditure patterns. Monthly contributions collected amount to approximately ZMW 100 million, while monthly hospital claims paid out total ZMW 160 million. This mismatch is unsustainable and threatens the viability of the scheme.
A deeper analysis reveals that over 70% of these claims are driven by private sector facilities, which charge higher fees than public health facilities. Additionally, the current contribution rates — a 2% deduction from the formal sector and a flat ZMW 50 per month from the informal sector — are inadequate to cover escalating costs. These issues necessitate urgent reforms to ensure the sustainability of NHIMA.
Proposal for Reforms
To address these challenges, the following measures are proposed:
1. Diversification of Funding Sources
NHIMA should diversify its revenue base by tapping into additional sources of funding beyond the formal and informal sector contributions. Below are proposed sources:
Proposed Funding Source Rationale
Mobile Money Transactions Levy a small percentage on mobile money transfers to capture contributions from the informal sector.
Remittances Apply a health levy on international remittances received by individuals.
Gambling and Betting Introduce a health tax on lottery and gambling winnings.
Value Added Tax (VAT) Dedicate a percentage of VAT collections towards the NHIS.
Car Insurance and Road Tax Introduce a health levy on motor vehicle insurance and road tax payments.
Mining and Extractive Industry Establish a health levy on mining revenues, given the industry’s significant contribution to the economy.
Food Reserve Agency (FRA) Sales Allocate a portion of proceeds from FRA grain sales to NHIMA.
Constituency Development Fund (CDF) Allocate a portion of the CDF for health insurance, ensuring equity in health financing.
Expected Impact:
Diversifying funding sources will reduce the burden on formal and informal sector contributions, ensuring more sustainable revenue streams for NHIMA. This approach will also align with Zambia’s broader goal of achieving Universal Health Coverage (UHC) by engaging multiple sectors in health financing.
2. Introduction of Co-Payments and limits for Private Sector Facility Use
To reduce the financial strain from private sector claims, the following policy changes are proposed:
Outpatient Department (OPD) Visits in Private Sector:
After the first four visits per year to a private sector facility, beneficiaries should be required to pay 20% co-payment of the bill.
Objective: Encourage beneficiaries to use public health facilities, which are more cost-effective, thereby reducing NHIMA’s expenditure.
Public Sector Services:
NHIMA should continue to cover 100% of the costs for beneficiaries using public health facilities to incentivize the use of public services and reduce the claims burden from private providers.
Expected Impact:
This measure will reduce NHIMA’s expenditure on private sector claims by encouraging beneficiaries to seek care in public health facilities. Additionally, the introduction of co-payments will deter unnecessary utilization of private health services, thus promoting cost-effective care-seeking behavior.
3. Adjusting Contribution Rates
To further ensure financial sustainability, NHIMA should revise its contribution rates:
Formal Sector: Maintain the 2% deduction but introduce tiered contribution levels based on income brackets, ensuring higher earners contribute more.
Informal Sector: The ZMW 50 monthly contribution is insufficient. Introduce tiered contributions based on income levels, ranging from ZMW 50 to ZMW 200, depending on the individual’s capacity to pay.
Expected Impact:
Adjusting contribution rates will increase revenue collections without overburdening any specific income group. The tiered system will ensure that contributions are fair and proportionate to earnings.
Projected Financial Impact of Proposed Reforms:
The proposed reforms are expected to have the following financial impact on NHIMA:
Measure Projected Monthly Revenue (ZMW)
Mobile Money Transactions 30 million
Remittances 15 million
Gambling and Betting 10 million
VAT Allocation 40 million
Car Insurance/Road Tax Levy 20 million
Mining and Extractive Industry Levy 25 million
FRA Sales Allocation 10 million
CDF Allocation 10 million
Total Additional Revenue 160 million
These additional revenue streams could potentially double NHIMA’s current monthly revenue, ensuring financial sustainability.
Conclusion:
The sustainability of Zambia’s National Health Insurance Scheme is at risk due to the current imbalance between revenue collection and expenditure. To address this, NHIMA must diversify its funding sources and implement cost controls on private sector claims.
By introducing new revenue streams and co-payments for private sector visits, NHIMA can reduce its financial distress and continue to provide comprehensive health coverage to Zambians. These reforms will also help achieve the government’s broader goal of Universal Health Coverage, ensuring that all citizens have access to quality healthcare without facing financial hardship.
Recommendations for Implementation:
Conduct stakeholder consultations to gather input and secure buy-in for proposed reforms.
Develop legislation and revise SI 63 of 2019 to facilitate the introduction of new health levies and taxes.
Launch public awareness campaigns to educate beneficiaries on the changes and their benefits.
Establish monitoring mechanisms to track the financial impact of the reforms and adjust as necessary.
With these reforms, NHIMA can transition from a financially distressed scheme to a sustainable and resilient health insurance system that supports Zambia’s health sector and promotes equity in healthcare financing.