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Issue hospital with Treasury bonds against pending Sh30bn NHIF debts
Issuing bonds is the most practical , cheap solution to the NHIF debt issue. It also solves a political issue that has been a headache to the government.
According to press reports, the defunct National Health Insurance Fund (NHIF) owes hospitals Sh30 billion. In October, Health Cabinet Principal Secretary Deborah Barasa, claimed they had paid Sh1.5 billion of that debt—about five percent of the outstanding amount.
On December 16, 2024, the Rural and Urban Private Hospitals Association, which represents about 500 private hospitals, issued a notice that they will stop providing treatment to SHA (Social Health Authority) patients—the new social healthcare provider—starting January 1, 2025, unless the Sh30 billion owed by the defunct NHIF is paid.
The majority of Kenyans, especially those from lower-income classes, rely entirely on the social healthcare fund.
Even individuals with private insurance depend on SHA to subsidise part of their medical expenses through a rebate system. Certain services, such as dialysis and oncology, depend on SHA. The inability of hospitals to provide these services will undoubtedly cause patients to suffer.
The government has, on several occasions, admitted to being heavily indebted and unable to borrow further. Recent reports have it the government owes Sh10.6 trillion in debt. It is currently seeking to borrow Sh25 billion in long-term bonds and an additional Sh24 billion in Treasury bills for short-term funding.
Debt is not inherently bad. Borrowing to fund healthcare services is an example of beneficial debt. In the early 2000s, the Kibaki administration issued bonds to contractors.
Allegedly, this is what solved our roads problems from the previous regime when roads were not done because contractors had not been paid. Kenya today is touted as having some of the best road networks in Africa.
The government should similarly issue long-term bonds to compensate hospitals for the debt owed by the NHIF. This approach would provide hospitals with the liquidity they require to continue offering services.
Hospitals could choose to sell the bonds in the secondary market to raise cash for payroll, debt repayment, or investment. Alternatively, they could hold the bonds to earn interest or use them as collateral for borrowing. Such flexibility provides hospitals with several financial options.
Issuing bonds is the most practical , cheap solution to the NHIF debt issue. It also solves a political issue that has been a headache to the government.
This action would have significant economic implications for the healthcare ecosystem. Hospitals would have the liquidity to purchase medical equipment, benefitting equipment suppliers. Many hospitals would pay off bank loans, improving the liquidity of banks and their debt portfolios. Some hospitals might expand, creating employment opportunities.
This proposal would also close down the NHIF, enabling a concentrated focus on SHA. It would demonstrate the government’s commitment to the healthcare sector and ensure hospital owners receive their rightful dues.
The government recently announced that it had collected Sh14 billion from SHA contributions over the past two months. It also projected monthly collections of Sh15 billion. By allocating Sh1–2 billion monthly to repay the bonds, the government could clear this debt in under three years.
The writer is the executive director of Luton Media Hospital
