NICHOLAS OKUMU: Kenya’s health reform will fail if we don't fix the way it is funded

Kenya is in the midst of a bold health financing overhaul. The government has launched the Social Health Authority, replacing the widely criticised National Health Insurance Fund.

At the centre of this transformation is the Social Health Insurance Fund, a mandatory scheme requiring contributions from formal sector workers to pool risk and fund care.

But Kenya’s economic fundamentals suggest this model is deeply flawed. With over 80 per cent of the labour force in informal employment, a payroll-based insurance fund will struggle to raise sufficient revenue.

Worse, it may inadvertently penalise formal employment, pushing more firms and workers into informality to avoid added labour costs.

Meanwhile, the macroeconomic environment is deteriorating. Public debt is now over 68 per cent of GDP. Nearly 40 per cent of all government revenue goes to interest payments.

Once you account for debt service, county transfers, salaries and pensions, only 14 per cent of revenue remains to fund development.

In this context, expecting SHIF to close the healthcare funding gap is not only unrealistic—it risks creating public disillusionment with the promise of universal health coverage.

The World Bank’s 2025 Public Finance Review is blunt: unless Kenya undertakes structural fiscal reforms, there will be no space to finance ambitious programmes.

This includes health, where a fragmented system of new funds—including the Primary Health Care Fund and Emergency, Chronic and Critical Illness Fund—adds administrative complexity without addressing the underlying shortfalls in revenue generation and trust.

Kenya needs a bolder solution: a constitutionally protected Health Endowment Fund. As I have argued elsewhere, this model would allow the country to pool public, private and philanthropic capital into a long-term sovereign vehicle insulated from political interference.

It would invest funds strategically and sustainably, and only release earnings—not principal—to finance essential health services.

Such a mechanism could de-risk health spending, attract co-financing and provide predictability amid Kenya’s fiscal turbulence.

Relying on year-to-year budget allocations for healthcare is risky, especially in a country where political turnover often results in shifting priorities.

An endowment fund, backed by constitutional protections and transparent governance, would help shield the health sector from the volatility that has plagued other programmes.

Countries like Ghana and Chile offer examples of such fiscal buffers being used effectively in health and education.

Health is not just a social good—it’s a productive investment. When Kenyans fall sick and cannot afford care, it erodes household savings, limits educational attainment and reduces workforce productivity.

Out-of-pocket spending now accounts for more than 25 per cent of all health financing. This is not just regressive—it is economically unsound.

Delayed treatment, catastrophic expenditures and health-driven poverty are not just moral failures—they are macroeconomic liabilities.

The SHA reforms should focus less on institutional rebranding and more on establishing a sustainable, equitable funding model. The formal sector alone cannot carry the burden of universal health coverage. A general revenue approach—anchored in broader taxation, including on wealth and capital gains—combined with a well-managed endowment fund, could offer Kenya a pathway toward credible and resilient health financing.

To build public trust, SHA must adopt a radical transparency agenda. Real-time financial reporting, independent audits and performance-based payments are essential. Funds must follow value, not bureaucracy.

Technology, from biometric identification to mobile payments, can also be leveraged to cut fraud and improve efficiency.

Kenya has a brief window of opportunity. Inflation is stabilising. The currency has recovered from its sharp slide.

Support from multilateral lenders has resumed. But unless health financing is treated as both a fiscal and a development priority, these reforms will stall.

No country can achieve economic growth while its people are too sick—or too poor—to work, invest or learn.

If Kenya is serious about universal health coverage, it must stop trying to finance 21st-century healthcare using 20th-century fiscal tools.

We need a new architecture—one that protects health budgets, attracts long-term capital, and insulates essential services from short-term politics. The Health Endowment Fund offers that possibility.

Okumu is a surgeon, writer and advocate of healthcare reform and leadership in Africa.