Paying For Health in Nigeria Part 1

The difficulty of paying out of pockets put most Nigerians in a great deal of financial risk and restricts them from having direct access to health care when they need it. Majority are even forced to sell their assets or go into debt in order to pay for health care costs.

How is health care paid for in Nigeria? If you find it difficult to answer this question, you may want to read this. This article is the first in a series that will try to explain how Nigeria’s health financing system works and how it hinders people from accessing care at the time of need.

How health care is paid for is part of the major functions of the health system of any country called health financing. According to the World Health Organisation (WHO), health financing is concerned with the mobilisation, accumulation and allocation of money to cover the health needs of the people, individually and collectively in the health system. This simply means the ability of the system to organise health care in such a way that even the poorest households living in the remote villages can receive needed care anytime without having to worry about the financial cost of the health services. This is one of the hallmarks of an equitable or fair health system.

In Nigeria, health care is paid for through an uneven combination of different mechanisms. First is through allocation from government’s budget; secondly, through out-of-pocket payments; thirdly, via health insurance (social and private) and lastly through external funding.

Each of these mechanisms can be grouped under either private financing or public financing. Private financing refers to health care costs paid via private out-of-pocket, private health insurance and direct service payments by corporations. When it is financed through allocation from government budgets, external funding (which includes external borrowings, donations from international agencies and NGOs) and social health insurance funds, it is regarded as public financing.

So the question is, how does the current health financing system hinder people from accessing care at the time of need? Let me first expound on the private financing mechanisms. In my following article I will discuss in details the public financing mechanisms.

In Nigeria, majority of health care is currently financed privately. Private expenditure on health as a percentage of total health expenditure is 63.3%¹; that is about two-thirds of the total amount spent on health care. And out of this, prepayment through private health insurance plans is only 3.1% and a huge 95.4% is paid out-of-pocket. Multinational companies usually sponsor the very few Nigerians covered under the private insurance. This means that an extremely large percentage of the population including the poor pay for health care out of their pockets at the time of access. As stated earlier, one of the hallmarks of a good health system is to be equitable and allow for the financial risk of paying for health care to be evenly spread among members of the population, whether rich or poor. A health system where most of the health care costs are paid by individuals out of their own pockets at the moment of seeking treatment is not equitable as it undeniably limits access to only those who can afford it (the rich), and leave out the poorest members of the society.

Nigeria is characterised by a very high level of inequality – as rich as having Africa’s richest man and the richest black person in the world, with a net worth of $11.2 billion, and as poor as having about 70% of its population living on less than $1 a day. With a large informal sector and over half of its population living in the rural areas, it is the poor that bear the brunt. The difficulty of paying out of pockets put most Nigerians in a great deal of financial risk and restricts them from having direct access to health care when they need it. Majority are even forced to sell their assets or go into debt in order to pay for health care costs.

No wonder we are still lagging behind in achieving most of the millennium development goals¹ (MDGs). The private out-of-pocket payments, which is the major way health care costs are being paid for in our country has created a barrier and is therefore not equitable in providing care to all members of the population.