Tax net expansion vital for health sector growth – AIICO MD
The Chairman, Health and Managed Care Association of Nigeria, and Managing Director at AIICO Multishield Limited, Dr. Leke Oshunniyi, speaks with LARA ADEJORO on the challenges in the health sector and how to invest in the sector
What are the challenges facing healthcare delivery in Nigeria?
It is said that Sub-Saharan Africa bears 40 per cent of the global health burden and Nigeria represents approximately one-quarter of Sub-Saharan Africa; in effect, Nigeria bears about 10 per cent of the global health burden, which means if you add up all the illnesses worldwide, 10 per cent of them reside in Nigeria, and that is a huge number considering that the population of Nigeria is about 2.5 per cent of the population of the world. That gives you an idea of the kind of disease burden we are carrying. We define health as being not just the absence of infirmity but the complete state of mental, physical, and social well-being.
We have a huge health challenge, but we do not have the resources to meet the challenge. Even without our nurses, doctors, and pharmacists travelling abroad, we had a manpower deficit. The deficit has worsened now that every trained health worker wants to travel abroad and render services there because of the higher standard of living. So, on the one hand, manpower is a factor.
Then we have issues with infrastructure and medical equipment. Then, we have issues with consumables, tools to do the work, and medication, and the cost of drugs is skyrocketing because of the dropping value of the naira. There are problems in all aspects of healthcare. Over 70 per cent of healthcare delivery in Nigeria is through the private sector, and most of it is out-of-pocket. People are paying out of pocket to receive healthcare. The point of insurance is that we do not have to pay for healthcare at the point-of-service because you’ve either paid or some entity has paid on your behalf into a pool. From that pool, whenever anyone falls ill, money is drawn to pay for the care.
Since the first law, the National Health Insurance Scheme Act, was passed in 1999, the idea of health insurance has been gaining currency. The challenges are huge. When compared to other countries’ expenditure patterns, financing healthcare is a major undertaking. In the United Kingdom, an average of $4,000 per person per year is spent, which is about two million naira per person at the official rate or four million naira at the prevailing parallel market rate. In the United States, the average “health spend” per person is $10,000, which is nearly five million naira per year at the official rate and double that at the parallel rate. In the UK, the budget is £170bn for a country of 60 million people; they don’t have malaria, very little HIV, no mosquitoes, no snakes; they have electricity 24/7 and an almost 100 per cent literacy rate, and they still spend that kind of money. Our budget for the year is N20tn, which, at the official rate, is less than $50bn. But the UK is spending more than four times that just for health; our budget is for our entire expenditure, including health, education, defence, works and housing, roads, etc., etc. Yet, all of us desire the standards of healthcare delivered abroad. It’s a huge gap because almost everything we use to deliver healthcare here comes from abroad. There’s a huge funding gap.
Cuba spends about $200 per person per year; this is a fraction of what the US or UK are spending, but the Cuban health outcomes are comparable to those of the developed countries. They have excellent primary health care, they manufacture vaccines, and they use many of these things in healthcare delivery. How much do we spend in Nigeria? The 2019 pre-COVID-19 national budget for health was N360bn, which was about $1bn at the time. Of that amount, $800m was recurrent expenditure, leaving an equivalent of $200m for capital expenditure, which is $1 per Nigerian. That is not enough. A lot of work needs to go into the health sector so that we can deliver quality and affordable healthcare.
Stakeholders have been asking the Federal Government to declare a state of emergency in the health sector. What do you say to this?
There should be a state of emergency in every sector. Every sector in the country is underserved. You can’t think about health in isolation. Six of my doctors have travelled abroad in the past year. I can’t even find doctors willing to work. I’ve offered to increase the salary, but they are not even applying. So, it’s a general issue. The reason they are leaving is that they are better paid abroad and the standard of living is better. They want to live in areas with 24-hour power, running water, good schools, and good roads, where they can eat well and are not at risk of being kidnapped on the roads.
Every sector in Nigeria has a problem, and that problem links to the health industry and vice versa. It’s not just about the health sector. We have a pan-Nigerian issue that we need to address.
What can be done to strengthen the health sector?
From the financial aspect, Nigerians don’t pay enough taxes. The tax-to-GDP ratio is approximately six per cent. If you put our GDP at about $400bn, it means we are only collecting $24bn in taxes. When you compare that to European countries, they are doing between 30 and 45 per cent. South Africa’s ratio is four times higher than what we collect. Many social services are best funded by taxes; if we are not paying taxes, we can’t afford so many of the things that we need. France is one of the countries with the best social services in the world, but tax to GDP in France is about 45 per cent, if we collect 45 per cent tax per GDP in Nigeria, we will be earning more than seven times what we are earning in Nigeria, and a lot of this can be put into our social services. We need to deepen and widen our tax net. Funding our services from oil sales is not the way to go; we are not like the small countries with huge oil reserves that can afford to do that. We are a country with a huge population and moderate oil sales.
The years of our oil boom have altered our perspective on the ideal way we need to be earning money to provide services. The ideal method is through taxation, which is why the tax services of other countries are very serious operations. As they say in the USA, “the only things that are certain are death and taxes.”
We need to raise money and we need to grow our economy because tax returns are a proportion of the size of the economy. We need to really open up the economy to growth. We need to grow our economy at a minimum of 10 per cent per year for decades to meet our obligations. Otherwise, there is no way out of this trap. Our debt rate is huge, but our economy is not growing commensurately.
Six months after the National Health Insurance Act was signed, we are yet to start its implementation. What is delaying this?
The National Health Insurance Authority is doing a lot of work behind the scenes to ensure that the act can be implemented. It is difficult to put into effect a law that is now mandatory and obligatory. The old agency was the NHIS, which was looking after 5 million people. The new NHIA has to prepare to look after 200 million people, so trainings, seminars, and discussions have been going on. Thereafter, guidelines that will operationalise the Act have to be articulated. That process is ongoing, and we are in contact with the very committed and sincere leadership of the NHIA. We are delighted that all hands are “on deck” in this patriotic endeavour.
But don’t you think the delays will have an impact on the cost of care?
If the foundation of a building is not well laid, the superstructure will be unstable. An attempt to implement the NHIA Act without sufficient preparation will cause even more problems. I am aware that the necessary preparations are being made. We have waited for the law for almost 23 years. I must admit that the passage of the law took the industry by surprise, because the industry had tried to do so with every administration since 1999. With the untiring efforts of the DG of the NHIA, the desired change came to fruition. Proper preparation is imperative. It is not easy to change course after 23 years of travelling in another direction.
I have a lot of confidence in the leadership of NHIA, which has demonstrated sincerity in the great task of pursuing this objective.
How will mandatory health insurance contribute to universal health coverage?
The UHC is a journey, but one way to look at it is that there is now a law that is mandatory for every Nigerian, so if you don’t have health insurance, you are breaking the law. The new law says before you buy private health insurance, you must first subscribe to the government-run social health insurance, at either the state or federal level.
This may sound simple, but it is a very complex process that has to be laid out step by step; otherwise, it would be impossible to implement it and operationalise the law. When the law is operationalised, I am optimistic that we will be able to sweep tens of millions of Nigerians into health insurance coverage. There are numerous advantages to be gained. For example, healthcare providers would be assigned a dedicated population of subscribers for whom periodic payments would be made. These guaranteed cash flows would help investors in the health sector plan their businesses, in diametric contrast to the fragmented cash flows that now exist.
In the past, the absence of dedicated demand restricted the growth of the industry. Now that there is a dedicated demand, it will help the industry grow, and people will acquire the habit of planning ahead for their health.
If funds are raised for every Nigerian, for instance, at N12,000 per Nigerian for 200 million people, it means that you are looking at N2.4 trillion coming into the industry. So, with appropriate supervision, the quality of healthcare is bound to improve.
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