2
Tanzania HEALTH
FINANCING Policy
Notes
March 2020
2
1. COMPLEMENTARY FINANCING MECHANISMS IN
TANZANIA
on health. Complementary financing is
This note reviews the role of domestic received and spent at the facility level.
financing sources other than general These sources represent only a small
government budget allocations in percentage of total public spending on
Tanzania’s health financing architecture. health and is ranging from 1 to 2 percent of
These include funds raised from user fees total public spending (Table 1). Revenues
or cost sharing, reimbursements from the from complementary financing are eclipsed
national health insurance fund (NHIF), by government budget provisions, which
funds made available from the improved are predominantly allocated for wages and
community health fund (iCHF), insurance infrastructure investments. Donors also
for workers in the urban informal sector contribute significantly, especially for
(TIKA), and other private insurance. In vertical programs, medical supplies and
Tanzania, these are referred to as vaccines, which diminishes the relative
complimentary financing mechanisms. share of complimentary financing sources
further.
Complementary financing sources make
up a small share of total public spending
Table 1: Domestic Financing for Health (in US$ Millions and percentages)
2013 2014 2015 2016 2017
Government expenditure 529.4 558.5 509.8 546.1 662.1
(98.7%) (97.9%) (98.0%) (97.7%) (98.2%)
NHIF 1.3 2.8 2.5 3.8 3.8
(0.2%) (0.5%) (0.5%) (0.7%) (0.6%)
CHF/TIKA 2.0 3.2 2.9 2.8 2.7
(0.4%) (0.6%) (0.6%) (0.5%) (0.4%)
User Fees in Public Facilities (Out of pocket) 3.8 5.7 5.1 6.4 5.5
(0.7%) (1.0%) (1.0%) (1.1%) (0.8%)
Total 1,466 1,459 1,240 1,417 1,633
(100%) (100%) (100%) (100%) (100%)
Source: Government FMIS, PlanRep1.
Complementary financing sources make from complementary financing
up an important share of facility mechanisms has increased steadily over the
revenue. While these sources are small in last 5 years from all sources.
terms of total public financing for health,
they make up an important and growing The increase in complementary financing
share of total revenue availability at the has protected providers from a decline in
provider level. Total revenue collected funding from the government’s non-wage
recurrent budget. The “other charge�? budget
1
PlanRep is a planning and reporting database used by local government authorities. Data on private
spending on private providers were not available. All figures are in current US dollars. Estimated using
the calendar year interbank exchange rate.
3
category is meant to cover operational higher than the regular government budget
expenditures. At the local government level, allocations for health. Furthermore, the
spending at this level has declined significantly government’s “other charges�? budget
while complementary financing has become allocations were given to the councils, and there
increasingly necessary (Figures 1 and 2). In is some evidence that these resources did not
2016 and 2017, the amount of complementary always reach providers.2
financing available to health facilities was
Figure 1: Complimentary Financing Compared Figure 2: Complimentary Financing Compared to Other
to Other Charges (Absolute) Charges (Relative)
60,000 M 100%
90%
50,000 M
80%
40,000 M 70%
60%
TZS
30,000 M
50%
20,000 M 40%
10,000 M 30%
20%
0M
10%
0%
2012-13 2013-14 2014-15 2015-16 2016-17
OC ComplFin OC ComplFin
Source: PlanRep.
Note: OC = “Other Charges�? from the government budget. ComplFin = the sum of all complimentary financing
mechanisms.
The Health Basket Fund (HBF) is an important foundation for the transition
additional revenue stream to providers. toward the SNHIF.
The HBF is entirely financed by donors and
has recently been reformed so that funds are Figure 3: OC and Basket Compared to
provided directly to service providers Complimentary Financing Mechanisms
instead of to districts and councils. When 100%
the HBF is included, complimentary 80%
financing resources still constitute about 30
60%
percent of total spending at the facility level
(Figure 3). However, the long-term 40%
viability of donor financing support is 20%
uncertain. Being able to generate own 0%
revenue is a sign of the potential 2012-13 2013-14 2014-15 2015-16 2016-17
sustainability of the direct health financing
facility modality, which will be an OC and Basket ComplFin
User fees have become an increasingly concerns about the ability of poorer
important source of funding. At the households to access care, especially as
facility level, user fees constitute 40 to 50 fees have also been collected at primary
percent of all revenue from complimentary levels of care (Figure 5). 3 Tanzania already
financing sources (Figure 4). This raises follows good practice by allowing facilities
2 3
Kapologwe et al (2019) and Boex et al (2015) Lagarde and Palmer (2008)
4
to retain revenue from user fees and by to account for the revenues collected at that
giving them some discretion over how they level. This has increased accountability and
are spent. Most revenue from user fees is the general efficiency of fund management
collected by council and district hospitals and reduced the likelihood of informal
given the type of care that they provide. The payments. The system operates in parallel
government has introduced electronic with other financial management systems
financial management and accounting in the health sector and needs to be better
systems in all council and district hospitals integrated with them.
Figure 4: Trend in User Fees Revenues at Figure 5: Complimentary Financing by Type
Facilities of Provider, 2017
16,000 M 14,000 M
12,000 M
14,000 M
10,000 M
12,000 M 8,000 M
6,000 M
10,000 M
4,000 M
TZS
8,000 M 2,000 M
6,000 M 0M
4,000 M
2,000 M
0M
User Fees NHIF CHF TIKA
2. NATIONAL HEALTH INSURANCE FUND: DESIGN
AND OPERATIONS
The NHIF is a publicly managed There has been significant growth in
insurance scheme that provides membership of Community Health
affordable and accessible health services Funds (CHF). The concept of a CHF was
to employees, mostly in the formal sector. piloted in the Igunga district in 1996 in an
As of 2017, NHIF population coverage was attempt to make health care more
about 8 percent. The NHIF Act specified affordable and available to the rural
that all employers and employees in the population and the informal sector, and
public sector must register themselves and there are now CHFs in all districts in
no more than five of their legal dependents Tanzania. Currently about 16 million
in the NHIF. The NHIF has been striving to Tanzanians, or 28 percent of the population,
increase enrollment but has struggled to are covered by either the NHIF or a CHF
make significant inroads into the broader (Figure 6). The CHF almost tripled the
population, especially those working in the number of its beneficiaries to over 18
informal sector. million between 2011/12 and 2016/17.4
This was partly due to the simplification of
the procedures to access matching funds as
4
NHIF (2019).
5
well as to the expansion and introduction of of drug dispensing outlets has made drugs
new initiatives like the Health Systems more widely available but has also resulted
Strengthening project in Dodoma, in challenges related to administration and
Morogoro, and Shinyanga and innovations claims management. According to NHIF
taken by Pharm Access in the Kilimanjaro regulations, facilities’ claims should not
and Manyara regions. The CHFs have also paid within 60 days. Investments have been
received a lot of political support, which made in IT to simplify claims management
has increased knowledge of them among in large health facilities with a high number
local communities. Membership of the of claims, but these challenges are still
NHIF has grown more slowly as it targets being faced by smaller providers.
the formal sector.5
The NHIF’s revenue comes from the 3
Figure 6: Number of Beneficiaries of the percent payroll contributions from both
NHIF and CHFs employees and employers. The
Government of Tanzania is the largest
employer in – and contributor to – the
2015/16 NHIF. NHIF revenues have been growing
2013/14 as a result of increases in both salaries and
2011/12
membership. Investments yield only about
15 percent of the NHIF’s total income.
0M 5M 10M 15M 20M
Other sources of income such as service
Beneficiaries
fees and minor payments are negligible
(Table 2).
TOTAL CHF NHIF
Figure 7: Trend in Accredited Providers
The NHIF has been accrediting health
facilities at a rapid pace with the aim of
expanding the number of health facilities
across the country, including primary
care providers (Figure 7). Given the speed
of this mass accreditation, significant
quality differences have been found to exist
between accredited providers, especially
among primary care facilities, most of
which are in rural areas.6 The accreditation
5 family enrollment (through private companies). This
There are several types of members in the NHIF,
including members of cooperatives, employees of has created an adverse selection problem as healthy
public institutions, retirees, interfaith staff, and people opt to not purchase health insurance or to
dependents (for example, children and students). wait until they need health services.
6
Contribution levels and enrollment arrangements The providers accredited in 2017 consisted of
differ for these different types of members, but the government facilities (75 percent), faith-based
benefit package is the same for all categories. Some providers (11 percent), and private providers (14
categories allow for single-person enrollment (for percent).
example, for children), while others require in
6
Table 2: NHIF Sources of Income
TZS Millions 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Contributions 163,458 207,502 245,176 286,702 352,763 417,197
Investment income 38,035 54,739 72,030 82,385 99,611 78,396
Other income* 2,518 4,292 859 1,388 1,623 843
Total 204,010 266,533 318,066 370,476 453,997 496,435
Source: Authors, based on NHIF (2019).
Notes: *Other income includes funds collected from service fees and related minor payments.
Total NHIF spending consists of percent of total spending, which is
payment of benefit claims, relatively high but has decreased over time
administrative costs, and capital due to the introduction of an automated
investments. About 79 percent of the claims management system and the use of
expenditure goes on paying benefit claims. better IT equipment. About 6 percent is
Administrative costs made up about 15 spent on capital investments (Table 3).
Table 3: NHIF Expenditure Categories, TZS millions
TZS millions 2012/13 2013/14 2014/15 2015/16 2016/17
Benefits 97,924.61 132,033.59 156,710.21 220,088.33 263,487.42
Payment
Administrative 26,563.34 37,329.85 50,224.31 48,707.72 49,786.78
Expenditure
Other/Capital 8,163.77 12,949.19 20,726.14 18,174.78 20,132.75
Expenditures
Total 132,651.72 182,312.63 227,660.66 286,970.83 333,406.95
Source: Authors, based on NHIF (2019).
NHIF revenue has been exceeding making better access of claims, but such
expenditures, at times by over 10 percent decreases should be carefully monitored as
(Table 4). As a result, the NHIF has they can be a source of contingent
consistently had a surplus of funds, though liabilities. Furthermore, the benefit package
the size of this surplus has diminished over should be revisited after an actuarial study
time. As surpluses indicate inherent is conducted to ensure that services are both
inefficiencies, any decrease would be a adequate to meet demand and financially
positive development if it reflected sustainable.
increased access to services, and providers
Table 4: NHIF Income, Expenditure, and Balance
TZS Millions 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
Total Income 204,010 266,533 318,066 370,476 453,997 496,435
Total Expenses 86,808 132,652 182,313 227,661 286,971 333,407
Surplus 117,202 133,881 135,753 142,815 167,026 163,028
Rate of change 14% 1% 5% 17% -2%
Source: Authors, based on NHIF (2019).
7
it raises also raises concerns about whether
Referral hospitals are largest recipient of public providers are submitting claims
NHIF payments. They receive more than sufficiently for the services that have
two-thirds of NHIF payments, while the actually been rendered. This may in part
remainder is reimbursed to health centers, reflect that staff in public facilities have no
dispensaries, and pharmacies at the primary incentives to improve claims management.
care level (Figure 8). The majority of NHIF payments that have
been made were found to cover medicines
Figure 8:Proportion of NHIF Benefit and consumables.
Payments by Level of Facilities, 2017
Figure 9: Distribution of NHIF
ADDO Reimbursements to Facilities by
Laboratores and… Ownership, 2017
Specialized Clinics
Dispensary
Health Centre
District Hospital
Pharmacy
Regional Referral…
Zonal Referral Hospital
National Referral…
0% 10% 20% 30% 40%
While most patients seek care from
public providers (especially in rural
areas for primary care), only about one-
third of NHIF payments are made to
public providers (Figure 9). This is partly
due to an increase in the use of private
providers for more complex procedures, but
8
3. CONCLUSIONS AND RECOMMENDATIONS
Pre-payment schemes generate limited Public facilities should manage their
resources for health care through claims and get reimbursed for services
member contributions. Policymakers will provided. The majority of NHIF
need to give careful consideration to the reimbursements are to private providers,
financial viability of expanding access to even though there is considerable use of
insurance through the proposed SNHIF. public and faith-based providers (especially
The government should explore options for in rural areas). These too should be
providing subsidies from the general reimbursed adequately to ensure sufficient
budget. service standards.
Complementary financing is critical for
the operation expenditure of facilities.
Government resources for the operational
cost of service providers is limited.
Complementary financing sources provide
important resources to fill this gap.
Out of pocket spending is high and
increasing. Revenues from OOP spending
is increasing, even at lowest level of care.
This raises concerns about financial access
to essential services. The impact this may NHIF needs to be operationally efficient.
have on financial hardship should be NHIF has been running an operation
carefully studied and actions taken to surplus for many years, which is slowly
protect the poor and vulnerable. diminishing. Care should be taken that the
surplus is efficiently invested after all
Insurance membership has grown claims have been met. There may be scope
steadily. Especially CHF has expanded its to revisit the benefit package.
member base considerably, and about 1/3rd
of Tanzanian’s are estimated to enjoy NHIF capacity needs to be strengthened
coverage. This trend should be encouraged in preparation for the transition to the
further, through reaching out to the SNHIF. The government seeks to pursue a
informal sector. This may require subsidies SNHIF. If the NHIF is to take the sole
and an assessment of the financial viability responsibility of serving about 58 million
of the iCHF. Tanzanians, its capacity needs to be
strengthened. A more systematic support
Accredited providers have grown system through the government budget in
rapidly. Providers across the health system form of subsidies may need to be
can now get reimbursed for the services considered. The NHIF mainly serves
provided to members. However, a recent curative services. It may be beneficial to
push to include providers has been with extend its mandate to preventive services.
insufficient regard to quality. This should This may be cost reducing in the medium
be carefully reviewed. term and there is a precedent of other
countries such as Ghana who have explored
similar arrangements.
9
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