A DISTRIBUTIONAL ANALYSIS OF HOUSEHOLD HEALTH EXPENDITURE IN NIGERIA

A DISTRIBUTIONAL ANALYSIS OF HOUSEHOLD HEALTH EXPENDITURE IN NIGERIA

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

There is a growing consensus among researchers and health policy makers that out-of-pocket expenditure on health is the most inequitable means of financing healthcare because of its impoverishing and catastrophic effects on households’ living standards. This is because financing structure of healthcare system can be associated with multiple adverse effects on households’ living standards, which severely threaten their income sufficiency; disrupt their positions in the socioeconomic hierarchy thus, deepening overall inequalities in the distribution of income (Van Doorslaer et al., 2006). Unequal access to healthcare is particularly prevalent in a situation where, out-of-pocket payment at point of service is the major means of financing healthcare among other financing mechanisms.

For African countries, total health expenditure (including public components) is certainly important contributor to health outcomes (Anyanwu & Erhijakpor, 2007). The principal challenges bedeviling healthcare financing in Nigeria as in most Sub-Saharan African (SSA) countries lies not primarily in the acute scarcity of resources, but in the absence of intermediation and insurance mechanisms to manage risk, inefficiency in resource allocation and purchasing practices (Onwujekwe, et al., 2010). Hence, out-of-pocket expenditure remains the major source of financing healthcare in SSA.

The National Health Insurance Scheme (NHIS) is one medium of reducing the financial burden of paying for healthcare directly out-of-pocket. According to Odeyemi and Nixon (2013) establishment of the NHIS in Nigeria was to ensure ‘universal coverage’ and access to adequate and affordable healthcare services, so as to improve the health status of Nigerians. It is important to note that, even in the context of other African countries, the prepayment mechanism of health insurance in Nigeria still lag behind. This is because comparing Nigeria and Ghana in terms of each country’s NHIS membership reveals that on average, Nigeria has 3.5% of her population covered by the scheme while Ghana has 65% of her population covered by her health insurance scheme (Odeyemi & Nixon, 2013).

The current level of participation in NHIS for Nigeria is relatively poor, as only the formal sector scheme was launched and operational with enrolment covering federal civil servants


(Onwujekwe, et al., 2010). Community based health insurance scheme which was targeted at the larger informal sector is yet to gather momentum. Even though pilot schemes were launched, the federal government has been unable to scale it up to significant levels, while there is minimal participation by the private financing agents (Nwoli & Ejunjobi, 2006). In that case, the vulnerable members of the society; the poor, may not be able to finance health needs through prepayment mechanism of health insurance because they may be mostly foundin the informal sector of the economy and as such not covered by the NHIS in Nigeria.

When a large proportion of a country’s population are excluded from financial risk protection mechanism of health insurance, catastrophic health expenditure, defined as a situation where health payment exceeds a threshold level of household income necessitating households to forgo the consumption of other items necessary for their wellbeing, is bound to occur (Onoka, Onwujekwe, Hanson, & Uzochukwu, 2012; Xu, et al., 2003). This is the case with Nigeria, where less than 5% of the entire population is covered by health insurance (World Health Organization WHO, 2015).

Out-of-pocket payments for healthcare at point of service dominate healthcare financing in Nigeria. According to the WHO, (2015) public health expenditure in Nigeria accounts for 20-30% of total health expenditure, while private health expenditure accounts for 70 to 80% of total health expenditure and the proportion of household health expenditure as a percentage of private health expenditure has been consistently over 90%.

Reports also shows that out-of-pocket expenditure increased with the introduction of user fees (payment for healthcare at point of service) in the health sector and like most African countries, Nigeria introduced user fee as a mode of financing government health services within the framework of the Bamako Initiative drug funds (Onwujekwe, et al. 2010). The Federal Ministry of Health FMoH (2004) asserts that the essence of introducing user fees was arguably in response to the rigorous problems of financing health services in Nigeria, like in most countries in SSA, government health budgets declined in real terms in response to macroeconomic problems at the time, while demand for health services increased, partly because of population growth and successful social mobilization. Currently user fees apply to government owned healthcare services in Nigeria with the major aim being to generate more funds for the health sector for the purpose of improving the quality of services. Likewise in the private sector, patients are charged fees which they mostly pay out-of-pocket (Onwujekwe, et al., 2010).

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Despite increased funding to the health sector averaging over 6% of the total budget since 2003; government health expenditure still lag behind the 15% of commitment to the Abuja declaration 2000 and the Gaborone declaration 2005 (Ichoku, Fonta & Araar, 2009). Nigeria is still not close to achieving the requirements of these declaration for which she is a signatory. Ichoku, et al., (2009) also observed that in Nigeria households pay for every healthcare cost directly on a ‘cash and carry’ basis as a result of lack of health insurance coverage for the majority of the population, hence the dominance of the Nigerian health system by ‘for-profit providers’ could interact with poor public financing and out-of-pocket expenditure to escalate the ‘disequalizing’ and impoverishing effects of healthcare.

One important goal of any health system is equity and it features in the Nigerian health system. Despite series of pro-poor intervention, inequity in healthcare access still persist (Olaniyan, Oburota & Babafemi, 2013).The effort of the Nigerian healthcare system to widen health services of satisfactory quality to the vast majority of the citizens is increasingly facing various threats. These include lack of access to quality healthcare by the poor, severe budgetary constraints, uneven distribution of resources among the urban and rural areas, as well as across the geographical regions of the country, inequitable financial system resulting in increasing dependency on out-of-pocket expenditure at point of seeking health services (Olaniyan & Lawson, 2010).

The threats posed on households’ living standards by out-of-pocket payments on health are matters of policy concern for three reasons which according to Kimani (2014) include; the unpredictability of out-of-pocket expenditures; their large magnitude relative to household resources; and their uneven distribution in relation to that of income. Therefore, any health system with the welfare of its citizens in mind must work towards reducing the effect of out-of-pocket expenditure on it citizenry.

To bring forth policies and programmes that will affect the cost of healthcare for households there is need for an in-depth understanding of the distribution of household health expenditure in Nigeria.

1.2 STATEMENT OF PROBLEM

In Nigeria, the proportion of public health expenditure as percentage of total health expenditure is worrisome. The World Health Organization observed that public health expenditure in Nigeria accounts for just 20 – 30% of total health expenditure, while private

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health expenditure accounts for 70-80% of total health expenditure. The dominant private expenditure is out-of-pocket, and that accounts for more than 90% of private expenditure (WHO, 2015). In a country where over 70% of the population are living below the 1.25 dollar per day, out-of-pocket spending curb healthcare consumption, intensify the already inequity in access to quality healthcare and exposes household to financial risk of expensive illness (Onwejekwe, et al., 2010).

Nigerians are particularly prone to incurring catastrophic health expenditure because of the high incidence of prevalent user fees and predominant use of out-of-pocket spending to settle healthcare needs (Onwujekwe et al., 2012). This would vary across socioeconomic groups and the incidence is expected to be high on those with low purchasing power (the poor) since a greater percentage of their income may be expended on healthcare.

In 2010, the WHO suggests that, it is only when out-of-pocket direct payments fall below 20% of total health expenditure that a country can achieve financial protection which is demonstrated by a negligible incidence of financial catastrophe and impoverishment (WHO, 2010). In Nigeria, out-of-pocket payment at point of service remains the major means of financing health payments, since health insurance coverage is poor.

The poor are less likely to be insured in a country where the NHIS covers mainly federal civil servants (Nwali & Egunjobi, 2006) this may be because the poor are mostly found in the informal sector of the economy. Olaniyan et.al., (2013) reported that the Nigerian Living Standard Survey NLSS 2003/2004 shows that the poor spend seven times more than the better-off on total per-capital health expenditure. This raises concern for the poor as some may avoid seeking healthcare because they cannot pay the cost, others may be seeking health services at great ‘displacement effects’ of other essential household needs (Ichoku, 2005). This implies that the poor seek healthcare at greater opportunity cost than the better-off.

Health indicators for Nigeria are among the worst in world. 28% of the under-five sleep under Insecticide Treated Nets (ITNs), just 38% of women delivers under the supervision of qualified attendants, 36% of women delivered in health facility. This was far lower in three states of Jigawa (7.6%), Kano (13.7%), and Bauchi (16.3%) (Nigerian Demographic and Health Survey (NDHS), 2013). Life expectancy at birth is 49 years, while the disability adjusted life expectancy at birth is 38.3years; vaccine preventable diseases, infections and parasitic diseases continue to exert their toll on health and survival of Nigerians, being the

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main causes of morbidity and mortality. Nigeria has the highest Tuberculosis burden in the world (Strategic Health Development Plan Framework (SHDPF), 2012).

Immunization coverage in Nigeria is poor and varies with geographical zones. Generally 25% of the under-five are fully immunized. Nationally the proportion of fully immunized children aged 12 to 23 months ranges from 4.7% in the North-West zone to 40.7 % in the South West zone. Coverage in rural areas was 13.4% compared with 32.6% in the urban areas. Nigeria is facing difficulties in progress towards achieving the measles vaccination target of 95% by 2015 and large equity gap persist among zones and between urban and rural areas. Malaria contributes 30% to childhood mortality (WHO Country Co-operation Strategy, 2014). It was also observed by WHO (2014) that Nigeria is responsible for 29% of the global gap in reaching 90% of women living with HIV who need antiretroviral therapy for prevention of mother to child transmission. 5% of maternal and under-five death is associated with HIV/AIDS.

The National Bureau of Statistics (NBS) reports, that health indicator for infant mortality and life expectancy over the past decades for Nigeria have worsened. One million Nigerian children die annually before the age of five and the main causes of death are attributed to neonatal causes, communicable diseases, malaria and pneumonia (NBS, 2006). Low level of public spending on health is attributed to these poor health outcomes (Olaniyan, et al., 2013). The poor will experience these outcomes the more, since they will not be able to relatively bear the burden of health costs posed by paying for health services out-of-pocket as compared to the better-off.

Generally, studies relating to distributional analysis of out-of-pocket health financing, shows that, there exist inequality in the distribution of out-of-pock


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