Kenya’s Social Health Authority (SHA) is grappling with major funding, operational, and digital challenges that threaten service delivery in both public and private facilities.
The Institute of Economic Affairs (IEA) Kenya reports that the authority faces a shortfall of Sh116 billion, a gap that could destabilize its ambitious benefits package and delay reimbursements to healthcare providers.
Speaking on Tuesday at a media briefing at Sarova Stanley Hotel, IEA Programme Coordinator John Mutua said the shortfall is linked to low compliance, outstanding NHIF debts, and instances of fraud.
“SHA’s system is still evolving and maturing, which has created gaps in its effectiveness. First, there are significant funding shortfalls, largely due to low compliance rates and cases of fraud. In addition, NHIF debt continues to affect facilities, although the current status is unclear. The benefits package is ambitious and costly, and there is a serious crisis with claims and reimbursements, which impacts service delivery,” he said.
Mutua added that operational and capacity limitations persist, including poor digital connectivity. Despite improvements, many facilities still struggle with limited system integration.
“Operational and capacity gaps remain, including suboptimal digital connectivity. Even though SHA has enhanced its systems, digital connectivity across facilities is still limited.”
The IEA assessment examined SHA’s design and implementation, tracing its evolution from the now-defunct National Health Insurance Fund (NHIF). Established in 1966, NHIF had limited coverage, reaching only 21 per cent of Kenyans, and focused primarily on inpatient services.
The Institute noted that fragmented programs like EduAfya and Linda Mama created inequities, while reimbursement and cross-subsidization patterns disproportionately favored a handful of private facilities.
SHA receives funding from three main sources: the Social Health Insurance Fund (SHIF), the Primary Health Care Fund (PHC Fund), and the Emergency and Critical Care Insurance Fund (ECCIF). SHIF is funded through a 2.75 per cent payroll contribution and premiums from indigent households, while PHC and ECCIF rely largely on general taxation.
However, the Institute highlighted significant collection challenges that undermine SHA’s revenue. Low retention rates and weaknesses in the means-testing tool have contributed to a financial shortfall.
“The shortfall in revenue projection is attributed to low retention rate, weaknesses of the means testing tool, destabilisation of SHIF with an expected loss ratio of 84.5 per cent in FY 2024/25, down from 88 per cent, and low active informal sector membership of just 4 per cent. This lowers the financial sustainability of SHIF, leading to delayed payments and reduced service quality,” the report reads.
It also shows that from January to October 2025, SHIF collected an average of Sh6.5 billion per month, below the required Sh8.3 billion, reflecting weak compliance, technical gaps and difficulties in reaching informal sector members.
The SHA benefits package, while comprehensive, remains costly.
“Many SHA tariffs do not reflect the real cost of service. Tariffs do not cover the cost for medications and consumables, diagnostics and imaging, and staff time and specialist fees. As a result, some providers limit services, ask for co-payments, or opt out. Some tariffs are standardized, ignoring cost variation by location, facility levels, patient volume and case load. The benefits package is expensive, and projected financial resources are not sufficient to fund it due to Kenya’s narrow fiscal space,” IEA said.
The assessment also highlighted challenges with provider payment mechanisms. IEA notes that SHA has moved to a Global Budget Capitation model for primary healthcare, but delays in reimbursements and widespread fraud, upcoding, falsification of records, multiple billing, and ghost patients, remain significant risks.
“Chronic reimbursement delays, the most visible crisis, is the liquidity crunch facing both public and private hospitals. The government has intensified its crackdown on fraud, with media reports of claims rejected amounting to over Sh11 billion in SHA’s first six months,” reads the report.
Administrative and management challenges are further straining SHA’s operations. The IEA points out that SHA currently serves as both regulator and purchaser of health services, raising accountability concerns. Weak coordination between national and county governments, inadequate health infrastructure, and shortages of specialized personnel also hinder service delivery.
Mutua highlighted that digital registration systems have a 74 per cent success rate, but interoperability between SHA platforms, county systems, and facility electronic medical records remains limited.
“SHA’s ability to process and manage claims is now enhanced, but no consolidated public report exists on the actual status of claims submitted, approved, and paid. Rejection of claims is partly attributed to user constraints. Forty-three per cent of providers require training during system updates; in-person requests increased by 5 per cent and online requests rose by 19 per cent,” Mutua said.
To address these issues, the IEA recommended refining the means-testing tool, improving compliance through community validation, enhancing digital enrollment, rationalizing the benefits package to align with fiscal capacity, and separating SHA’s regulatory and purchasing roles.
“SHA systems are still evolving. Funding gaps, ambitious benefit packages and operational deficiencies continue to impact service delivery, but strengthened oversight and strategic reforms can improve sustainability and effectiveness,” the Institute said.
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