Journal of Medicine and Medical Sciences Vol. 3(4) pp. 226-231, April 2012
Available online@ http://www.interesjournals.org/JMMS
Copyright © 2012 International Research Journals
Full Length Research Paper
A review of the Nigerian health care funding system
and how it compares to that of South Africa, Europe
and America
Onotai Lucky O.1*, Nwankwo N. C.2
1
Department of E.N.T Surgery UPTH, Port Harcourt, Nigeria
2
Department of Radiology UPTH, Port Harcourt, Nigeria
ABSTRACT
The health care funding system in Nigeria is predominantly from general taxation by the government
which is never sufficient for the provision of good health care service delivery in the country. It is
presently facing numerous challenges. This paper sets out to critically review the Nigerian health care
funding system and how it compares to the experiences in South Africa, some European countries and
United State of America. It will also highlight the challenges facing the Nigerian health care funding
system and recommend ways of tackling them. A search of relevant articles on health care funding
systems using the Google and Yahoo search engine facilities helped to gain access to general
information on the title. To make the searching robust, we also searched the EMBASE and
OVIDMEDLINE data bases using the health care management information consortium (HMIC) search
strategy template. There are several methods of describing the funding of health care systems. These
usually consider both the funding and service delivery arrangements of the system. There are
essentially four methods of funding health care services; they are general taxation, social health
insurance, private health insurance and direct payments by patients. Different combination of these
exists in practice. Sustainable health care systems are built on dependable access to human, capital
and consumable resources. Securing these inputs require financial resources and how these resources
are generated and managed. Health care funding systems have various effects on cost of running
health care services, equity and access to health care services and patient’s choice and power. World
Health Organization (WHO) 2000 report on ranking of national health system performance done in 1997
put Nigeria in 187th position out of 191 member countries. Nigeria needs a health care funding system
that can sustain and improve health care service delivery to the whole population irrespective of
patients’ financial status. This exploit can only be accomplished if the government increases funding by
putting more resources into the health care sector and restructures the NHIS in such a way that it
encompasses community based health insurance schemes.
Keywords: Health care, Funding, Systems, Comparison, Nigeria, South Africa, European countries, America.
INTRODUCTION
Health care financing has in recent times received
extensive research and policy attention in both
developed and developing countries. One of the
foremost issues is how to raise sufficient resources to
*Corresponding Author E-mail: onotailuckinx@yahoo.co.uk
finance health care needs for all citizens (WHO, 2000).
Health care provision in Nigeria is a concurrent
responsibility of the three tiers of government namely
Local, State and Federal governments. Nigeria operates
a mixed economy therefore private providers of health
care have role to play in health care service delivery.
The federal government role is mostly limited to
coordinating the affairs of the University Teaching
Hospitals (Tertiary health care system) and federal
Onotai and Nwankwo 227
Table 1. Search Strategy
Keywords
Nigerian health care funding
system
Health care funding system
in South Africa
Health care funding system
in Europe and America
Combining 1 and 2
Combining 1 and 3
medical centers while the state governments manage
the various general hospitals (secondary health care
system) and the local government focuses on
dispensaries and health centers (Primary health care
system) which are regulated by the federal government
(Rais, 1991).
It can be difficult to say exactly what a health care
system is, what it consists of, and where it begins and
ends. However, it can be considered to include all the
activities whose primary purpose is to promote, restore
or maintain health. Formal health services, including the
professional delivery of personal medical attention are
clearly within these boundaries. So are actions by
traditional healers, and all use of medications, whether
prescribed by a provider or not. So is home care of the
sick, traditional public health activities such as health
promotion, disease prevention and other health
enhancing interventions like road and environmental
safety improvement are also part of the system (Hsiao,
1992; Mossialos et al., 2002).
Beyond the boundaries of this definition are those
activities whose primary purpose is something other than
health. Health systems have a responsibility not just to
improve people’s health but to protect them against the
financial costs of illness and to treat them with self
respect. Health systems thus have three main
objectives, these are: improving the health of the
population they serve, responding to people’s
expectations and providing financial protection against
the costs of ill-health (Murray and Frenk 2000; WHO,
2000). The Nigerian health care system is not
indigenous to Africa. It is comparable to what is
obtainable in other parts of Africa. However, it is a hybrid
of European and American health care systems.
There is dearth of information on Nigerian health care
funding system coupled with agitations by well meaning
Nigerians for health care system reforms (FMOH, 2004).
This paper therefore, sets out to critically review the
Nigerian health care funding system and compares it to
France and United Kingdom (UK) health care funding
systems. Besides, it shall compare it to the American
and South African health care funding systems. Finally, it
shall bring to light the challenges facing the Nigerian
Results
15
Search type
Advanced
45
Advanced
260
Advanced
25
156
Advanced
Advanced
health care funding system and recommend ways of
tackling these challenges.
MATERIALS AND METHODS
A practical but systematic method for literature searching
was adopted; the search included published articles in
peer reviewed journals. Current information on health
care funding systems was obtained by using Google and
Yahoo search engine facilities. Relevant articles on
health care systems helped to gain access to general
information on the subject matter. To make the
searching robust, we also searched the EMBASE and
OVIDMEDLINE data bases using the health care
management information consortium (HMIC) search
strategy template (Advanced HMIC, 2011).
Search Technique
We began the search by using the Google and Yahoo
search engine facilities to gain access to wide-ranging
information on the subject matter. First of all, we broke
down the title of the paper into the following search
phrases (Table 1).
1. Nigerian health care funding system
2. Health care funding system in South Africa
3. Health care funding system in Europe and America
Next, with the phrases above we began the literature
search which led us mainly to web sites such as Nigeria
federal ministry of Health, World Health Organization
(WHO), United Kingdom (UK) department of Health and
American college of physicians. They all provided
several reports and various policy articles on the topic.
Subsequently, we searched for articles on some specific
aspects of health care funding system such as equity,
coverage, access, cost, choice and power.
The HMIC search strategy template
• Step (1): A list of the possible key words of the
phrases was made.
228 J. Med. Med. Sci.
• Step (2): We took the keywords for phrases (1), (2)
and (3) and used them to search HMIC using free text
searching after carrying out an initial subject search.
• Step (3). We combined them together using the
“OR” as well as the “AND” buttons. These found
references which contain all the terms that have been
searched.
• Step (4). We then repeated steps 1-3 for all the
phrases before applying limits where appropriate such
as those papers that are focused on the title of this
paper and those that dealt with specific aspects of health
care funding system such as equity, cost, access, power
and patient choice. Finally, the results were evaluated.
Table 1 outlines the search strategy used in conducting
the literature search.
From the search, several articles that were relevant to
the title of the paper were identified. In other to reduce
the number of articles we selected articles that are
focused on the title of the paper.
RESULTS
Health care funding systems
There are several methods of describing the funding of
health care systems. These usually consider both the
funding and service delivery arrangements of the system
(Rovira et al., 1998). Health care funding in developed
countries accounts for a large percentage of gross
domestic product (GDP) and is usually the largest single
industry in most countries (Walshe and Smith, 2006).
The financing and provision of health care is simply a
transaction between the providers who transfer
resources to patients and the patients or third party who
transfer resources to the providers (Mossialos et al.,
2000).
In spite of the fact that countries have different funding
systems in operation the underlying logic is the same.
The simplest transaction occurs when direct payments
are made between the patient and the provider of the
health care service. Furthermore, the uncertainty which
surrounds ill health and the need for expensive health
care means that most health care systems have a third
party element; that is a body that collects resource from
individual and makes decision as to how to allocate that
resource to providers (Walshe and Smith, 2006).
There are essentially four methods of funding health
care, although different combination of these exists in
practice (Mossialos et al., 2002). The UK has a famous
National Health Service (NHS) it is a splendid example
of a health care system that is funded mainly through
general taxation. This system of funding is often referred
to as the ‘Beveridge system’ which is also considered as
a public insurance system (DoH, 2005; Savedoff, 2004).
France has a well established social health insurance
system called the Bismarckian system’ of health care
financing as it was first introduced by Bismarck in
Germany in 1883.This is a variant of private insurance
but it is distinguished from it by the fact that in most
countries in which it exists, it is compulsory and operates
in effects as a form of taxation. Besides, it is based on
the collective risk of the insured group. This is the
predominant system in several European countries; the
government is the regulator of the system while the main
source of funding is through compulsory social insurance
(Walshe and Smith, 2006).
Private health insurance may be found in all countries.
However, it is a significant source of funding in the
United State of America (USA). This type of funding is
called the ‘Market system’, Health care is seen to be like
other commodities, the government has a limited role
and private provision (often for profit) predominates.
However, public involvement in finance and regulation is
substantial probably because private insurance
predominates (Walshe and Smith, 2006).
The health care funding system in Nigeria is
predominantly by general taxation which is never
sufficient for the provision of good health care services.
Direct payment is mostly utilized by the affluent in the
society. Donor agencies sometimes provide funds for
some aspect of health care services like free National
Immunization Programmes for children and child bearing
women, the treatment of tuberculosis and prevention of
the transmission of Human Immunodeficiency Virus
(Ronald, 1993).
The Nigerian NHIS is a variant of the SHI found in
France and other European countries; it has the same
underlying principles (NHIS, 2005). Health care is
provided by government through a special health
insurance scheme for government employers and
private firms entering contracts with private health care
providers (Ronald, 1993). The scheme encompasses
government employees, the organized private sector
and the informal sector (Darlene et al., 2006). Legislative
wise the scheme also cover children under five years
old, disabled persons and prison inmates (Felicia, 1999;
NHIS, 2005).
This scheme is supposed to guarantee easy access to
health care for the working population. The participation
in the programme involves a contributor registering with
NHIS approved Health Maintainace Organisation (HMO)
which are limited liability companies which may be
formed by private or public establishments registered by
the scheme to facilitate the provision of health care
benefits to the contributors (Nigeria FMOH, 1986).
Thereafter, the contributors are to register with a primary
health care provider of his choice (private or public) from
an NHIS approved list of providers. The HMO will make
payment for services rendered to the health care
provider. Under the NHIS scheme, individuals are
required to deduct from their basic salary 15% of their
salary which will be set aside to cover health needs. Of
the total contribution of 15%, the employer is expected to
Onotai and Nwankwo 229
contribute 10% and the employee 5% (Felicia, 1999;
NHIS, 2005). Only patients that are under the NHIS will
have access to health care services without much stress
because their funds are pooled over time and the risk
they bear is reduced.
In South Africa, health care is financed through a
combination of mechanisms.
Allocations from the
government come from general taxation, private medical
schemes are well developed and out-of-pocket
payments account for a considerable amount of total
health care financing similar to what is obtainable in
Nigeria (Ataguba and McIntyre, 2009).
The process of collecting revenue and pooling funds
raises important issues for policy makers and planners
faced with the challenge of designing systems of funding
that meet specific objectives related to social policy,
politics and economics (Mossialos et al., 2002;
HERFON, 2007 ). Health care funding in most
developing countries is complemented by direct
payments and or out-of-pocket expenses. Out-of-pocket
payments have been described as the most regressive
way to pay for health and the way that most exposes the
population to catastrophic financial risk (Mossialos et al.,
2002).
Equity and health care system funding
All types of taxes have varying implications for equity. In
the UK health care is mainly funded from direct taxation.
In a general taxation funding system, where people with
the same income and wealth pay the same tax will
produce horizontal equity in other words, treating
individuals with the same income level differently gives
rise to horizontal inequity (Mossialos et al., 2002).
Financing of services is divorced from provision and
there is progressive tax system redistribution of
resources from rich to poor, healthy to sick and working
age to young and old. Even so, patients will have a
universal coverage which may have a great impact on
equity. Equity of access is greater when health care is
funded through taxation or social health insurance than
when funded from private health insurance or out-ofpocket payments (Ikegami, 1992; DoH, 2010).
difficulty in controlling the cost of health care services. In
social health insurance system the coverage is not
necessarily universal rather eligibility may be limited to
certain income groups or may depend on contribution
made (Onotai and Brisibe, 2010).
Cost
Total health care expenditure in some Western Europe
countries is lower on average in systems mainly funded
through general taxation. However, the system can be
abused by general practitioners (Tussing and
Wojtowycz, 1986). In social health insurance system,
because of its high level of transparency it is less
abused and it weakens resistance to contribution
compared with general taxation. The public will accept
increases in insurance contributions if the health care
provided in return is perceived as efficient. On the other
hand, in a general taxation system the public do not
want tax to be increased, and this can make raising
revenue difficult (Rovira et al, 1998; Mossialos et al,
2002).
Remarkably, the private health insurance is associated
with high spending because of extra costs of
administration. In theory collecting health care revenue
from general taxation or social health insurance can be
associated with improve better cost control. Tax funded
systems are theoretically better able to contain costs
than systems funded by social health insurance.
Meanwhile, this may not necessarily improve resource
allocation (Mossialos et al, 2002).
Choice and power
Patient choice and power are important aspects in health
care system; it gives patient some degree of satisfaction.
Also, it may give a patient power to take some health
decisions. A patient tend to have more choice in a health
care system funded by private insurance as against a
system of general taxation (UK) where the government
is less responsive to patients needs and choices( Lilley,
2000).
Coverage and access
WHO ranking of national health system performance
The system of revenue collection may affect both
access to insurance coverage and access to health care
services. The Countries in which private health
insurance is the sole form of funding like the United
States of America. It allows quicker access to services
and more choice to the patients. Its disadvantage is
based on equity issues; patient access is determined by
the ability to pay for health care services. On the other
hand, in private health insurance system there will be
According to the WHO (2000) report which presented a
ranking of national health system performance in their
effort to achieve good health, responsiveness to the
expectations of the population and fairness of financial
contribution, placed France with social insurance in the
1st position out of 191 countries, the UK with general
taxation 18th position, USA with voluntary private health
insurance 37th position, South Africa with a combination
of different funding mechanisms 175th position.
230 J. Med. Med. Sci.
Whereas, Nigeria with her recently introduced NHIS
th
was placed in 187 position (WHO, 2000; Murray and
Frenk 2000).
DISCUSSION
The Nigerian health care funding system is still evolving
despite the numerous challenges facing the system.
Amongst the challenges are shortage of manpower, poor
implementation of good programs, poor funding and lack
of political will on the part of government (Kumar, 2007).
The Nigerian NHIS was created to tackle these
challenges and to move the country towards achieving
universal coverage. Its creation was a desired
development in the history of Nigeria. However, it has
lost focus.
The major setback of NHIS is that the unemployed
citizens which constitute a larger percentage of the
population will not have access to health care service
delivery which further widens the gap of health
inequalities in the society. More so, the principal funding
is from the government which is already associated with
poor political drive and commitment. It therefore, implies
that the quality of health care services in the country
may continue to dwindle and remain unsatisfactory
unless the government embarks on a drastic health
reformation exercise ((Adinma and Adinma, 2010).
Comparing it with SHI in France, it is still rudimentary
and is yet to achieve its purpose of creation.
It is obvious that the United Kingdom NHS is far ahead
of the Nigerian NHIS because it ensured equal access to
medical care for all citizens with no cost at the point of
delivery that takes care of all the health challenges of the
citizens with the majority of services being free to users
at the point of provision (Walshe and Smith, 2006;
Delamothe, 2008). The modern NHS is a proud British
achievement and is totally committed to the belief that
effective health care should be provided as a public
service to all those who need it (Mossialos et al., 2002).
However, the association of the NHS funding system
with the government is a draw back because it may lead
to excessive rationing, poor quality of service and to
some extent closely tied to the economy and
government taxation policies.
Furthermore, Nigeria cannot adopt the private health
insurance system obtainable in the USA because
widespread poverty and unemployment would not allow
private health insurance to thrive well in the country. The
gap of health inequities and lack of access to health care
services will widen in the Nigerian society. (Adinma and
Adinma, 2010). Health care funding in the United States
of America is primarily a part of the private sector in
which private entrepreneurs is free to sell their services
for a profit to those who are willing and able to pay. The
cost fall directly on the patient whose bills are usually
picked up by insurance companies to which their clients
pay regular premiums (American college of physicians,
2008).
Meanwhile, in South African health care system the
government funds it through general taxation. Direct
payments and out- of- pocket expenses prevail like the
Nigerian system. However, the South African system
differs in terms of having a better private health sector
involvement and enhanced government funding
(Ataguba and McIntyre, 2009).
Worldwide, there is no perfect health care funding
system; all have their own merits and demerits. It is clear
that a country’s health care system can only be
understood through its history, value base and ideology.
The UK model is one built upon notions of equality and
social justice. The US system represents the free
enterprise culture of the country (Walshe and Smith,
2006).
In Africa social solidarity and brotherliness is
enshrined in the culture, community based health care
financing could be tapped to enhance the movement of
the continent towards achieving a more effective health
care funding system. Individuals, families and
communities can make voluntary contributions to
support the cost of health care services (Adinma and
Adinma, 2010).
CONCLUSION
Nigeria needs a health care funding system that can
sustain and improve health care service delivery to the
whole population irrespective of patients’ financial status.
The government should embark on the following. Firstly,
increase health care funding by putting more resources
into the sector. Secondly, restructure the NHIS in such a
way that it encompasses community based health
insurance schemes to enable better coverage of the
grass root population. Thirdly, resuscitate the public
health facilities. Fourthly, eradicate corruption from the
health care sector. Lastly, tackle poverty by providing
jobs for majority of the population. Consequently, health
inequalities, inequities in access and utilization of health
care services will no longer place a burden on the poor
and vulnerable in the society.
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