GPOBA Commitment Paper: Nigeria Pre-Paid Health Scheme Project June 20, 2007
GPOBA COMMITMENT DOCUMENT
Project Name: Nigeria Pre-Paid Health Scheme Project (P104405)
Executive Summary: The proposed Pre-Paid Health Scheme aims at increasing access to quality basic health care in Nigeria. The scheme is a 10 year program divided into two phases. As GPOBA’s contribution will only occur during the project’s first phase, the Project Commitment Document only refers to the initial five years of the scheme. The project consists of establishing a community health scheme that will provide affordable pre-paid health insurance plans to low-income employees (and their families) of small businesses in an IT village association (the Computer and Allied Products Association – “CAPDAN”) in Lagos. The scheme is a replication of an existing program[1] which was established by two Dutch non-profit organizations, the Health Insurance Fund (HIF) and PharmAccess Foundation (PAF) in partnership with a local private sector health insurance entity, Hygeia Health Maintenance Organization (HHMO), using €25 million from the Dutch Ministry of Development Cooperation. The Pre-Paid Health Scheme will rely on a similar provider network as well as monitoring and evaluation practices that are already used through the existing program. The existing program and this proposed replication are the only community health insurance schemes of their kipnd in Nigeria, offering affordable and reliable medical treatment to low-income populations through a primary care plan (including HIV/AIDS) and a network of providers.
The pre-paid health insurance plan will cover primary care, maternal health services, and screening and treatment for HIV/AIDS, malaria and tuberculosis through the service provider network. HHMO will offer the insurance plan to beneficiaries for one-year periods. HHMO would start with a marketing and outreach campaign to familiarize the target population with the product. Premium costs for this insurance package are derived from comparable plans that Nigeria’s National Health Insurance Scheme (NHIS) already regulates. The premium for the insurance product is expected to be NGN8,000 (US$60) annually per person in year one and is expected to increase by 8% per annum to reflect the rate of local inflation. Beneficiaries will contribute a co-payment to encourage ownership, empowerment and increase utilization of the services. Initially this co-payment will be 15% of total premium costs (US$9 in year 1), but is expected to increase to 55% of total premium costs (i.e., US$53) by the end of Phase I and to 100% by the end of Phase II.
The GPOBA subsidy will cover premium payments, marketing costs and the upgrading of two service providers. GPOBA will also provide technical assistance funding, as well as funding to implement, monitor, evaluate and supervise the project. A research component will be considered.
The project structure consists of five parties (see diagram below): 1) HIF as the grant recipient; 2) PAF (with offices both in Amsterdam and Lagos) as HIF’s implementation, monitoring and evaluation partner; 3) HHMO as PAF’s local execution partner in Nigeria with responsibilities including outreach, marketing, enrollment, administration, managing the provider network, and ensuring quality of care; 4) a network of 15 healthcare providers from HHMO’s existing provider network; and 5) the beneficiaries to be targeted for enrollment in the pre-paid health insurance scheme. Both PAF and HHMO have good reputations in Nigeria and each has sufficient capacity to implement this scheme.
Sustainability was a central consideration when selecting the target group for this scheme. Unlike the current HIF program, which targets very low income market women in Lagos and rural families in Kwara state, the GPOBA project will target a slightly higher income segment from employees of small and medium sized enterprises. While this target population is still considered poor, they are expected to be able and willing to pay the full insurance premium when the subsidy is phased out in ten years. During Phase I, HIF plans to lobby for alternative sources of financing from both public and private donors to continue the program in Phase II. Some donors have already expressed interest in contributing to HIF and supporting a target group in a similar way as the GPOBA is now considering. The ability to secure donor money from alternate sources will largely depend on the success of this project during its first few years. This is not expected to be an issue, given that PAF’s monitoring and evaluation framework will allow HIF to modify elements of the program every six months to address any problems that may arise. In addition, HIF and PAF have well-established funding networks, including the Nigerian and Dutch governments, along with a number of large private donors and Dutch corporations. Moreover, the World Bank is already actively engaged in supporting the new health insurance program in Nigeria and will be exploring various policy options on how to scale up and mainstream type of projects such as this GPOBA project at a national level. This will be done through impact and feasibility analysis similar to the work that was done in other African countries such as Ghana and Tanzania.
Total Project Costs: US$10,051,904
· GPOBA Contribution: US$7,046,198
· User contribution (co-payment): US$3,005,706
· Netherlands Ministry of Development Cooperation: US$1,390,000 (see below for more details)
Total GPOBA Contribution Requested: US$7,046,198
· Subsidy funding (W3) = US$4,860,364
· Technical Assistance for focus group study (W1) = US$31,706
· Project Management for Grant Recipient (W3) = US$258,632
· Monitoring & Evaluation (W3) = US$945,993
· Auditing (W3) = US$106,900
· Research (W1) = US$468,530 (Optional component. Funding source to be determined)
· WB/GPOBA supervision = US$250,000
· Contingency (W3) = US$124,072
GPOBA contribution as % of total cost: 70%
GPOBA Window 3 Funding: 100% IFC contribution
Additional Funding Sources:
· Netherlands Ministry of Development Cooperation: US$1,390,000 (from cost savings from replication of the current program; please refer to Section B.1 below on Economies of Scale)
Outputs: (i) number of people enrolled in the insurance scheme from the target group, and (ii) provision of service to meet pre-defined quality standards as specified by PAF.
Targeting the poor and expected beneficiaries: The project will target employees from 2nd and 3rd tier small companies who will be able to contribute to the premium costs on an increasing scale throughout the project. The envisioned target group consists of approximately 24,000 beneficiaries of employees and their families from the CAPDAN IT village. Approximately 80% of the employees at the IT village earn between US$722 and US$1,353 a year (roughly US$1.98/day to US$3.71/day). While these figures seem large relatively to per capita income averages in Nigeria, it is important to consider that each wage earner support an average family of 4 people. When dividing incomes over such a family size, the income per household member is well below poverty thresholds. As a point of reference, the premium for the insurance package in the first year is US$60 per person per year, with an envisioned user contribution per capita of US$9.
GPOBA subsidy “efficiency”/ Value for money: subsidy per capita: GPOBA provides an average of US$43.31 subsidy for insurance premium per annual package, or US$60.80 (including implementation costs) subsidy for insurance premium per annual package.
Grant Recipient: HIF
Economic rate of return (EIRR) or Financial Rate of Return (FIRR): FIRR: 11%; ERR not calculated.
Disbursement: GPOBA will disburse to HIF, and HIF to PAF, based on six month projected budget. PAF will then disburse to Hygeia monthly based on actual enrollment (50% of premium subsidy) and compliance with quality standards (50% of premium subsidy, payable after six months of enrollment).
Financial Management: Pending Clearance. A draft FM annex is expected the week of June 4th, 2007
Procurement: Pending Clearance. A draft Procurement annex is expected the week of June 4th, 2007
Environmental: Clearance received (Annex 6)
Government Endorsement: Yes, endorsement received from the Minister of Health (February 2007) – annex 9.
Exchange rate: 1.34 € / USD
127.50 NGN / USD
Comments of Panel of Experts at Eligibility/Concept Stage:
(1) The Panel’s suggestion on target groups being 2nd and 3rd tier companies has been incorporated in the project design;
(2) The Panel’s recommendation to include at least two HMOs in the project design has not been incorporated. HHMO was selected as the sole HMO based the fact that it was accredited as the highest quality provider in the Nigerian market. The introduction of competition among HMOs during the nascent stage of the program might preclude the elevation of healthcare standards among private providers, a key element for the success of the scheme. It should be noted that there is competition at the provider level. HHMO will use a network of 15 providers for this project and beneficiaries will have the option of using any provider in the network. HIF and PAF do agree, however, that competition among HMOs should be encouraged in the medium to long-term, and this will be explored once reliable standards of care in the private sector are established;
(3) The Panel’s suggestion on group enrollment has been incorporated in the project design;
(4) The Panel’s concern about sustainability is addressed in the Executive Summary.
ABBREVIATIONS
CAPDAN / Computer and Allied Products AssociationCPCD / Center for Poverty and Communicable Diseases
EBITDA / Earnings Before Interest, Taxes, Depreciation & Amortization
GoN / Government of Nigeria
GPOBA / Global Partnership for Output Based Aid
HHMO / Hygeia Health Maintenance Organization
HIF / Health Insurance Fund
HMO / Health Maintenance Organization
HHMO / Hygeia Health Maintenance Organization
IRR / Internal Rate of Return
IT / Information Technology
NHIS / National Health Insurance Scheme
PAF / PharmAccess Foundation
Table of Contents
A. Strategic Context and Rationale 7
A.1. Country and Sector Issues 7
A.2. Rationale for GPOBA Involvement 7
A.3. Higher level objectives to which the project contributes 8
B. The Project 9
B.1. Project and Services Overview 9
B.2. Project Development Objectives 12
B.3. Project Components 12
B.4. Key Performance Indicators and GPOBA subsidy 15
B.5. Lessons learned and reflected in the project design 16
B.6. Alternatives considered and rejected 17
B.7. Economic and Financial Analysis 17
C. Implementation 18
C.1. Milestones for project implementation 18
C.2. Partners and Implementation arrangements and funds flow 19
C.3. Monitoring and evaluation of outcomes 23
C.4. Sustainability 24
C.5. Critical risks and mitigation measures 25
Annex 1: PROJECT COSTS & SCHEDULE 27
annex 2: Hygeia Process Diagrams 28
Annex 3: subsidy trigger illustration 30
Annex 4: economic and financial analysis 31
Annex 5: financial management assessment 32
Annex 6: Environment and Social Safeguard Policies 33
ANNEX 7: PROCUREMENT ASSESSMENT 34
Annex 8: Project preparation and supervision 35
Annex 9: government endorsement letter 36
Annex 10: Research Proposal from CPCD 37
A. Strategic Context and Rationale
A.1. Country and Sector Issues
Nigeria has the second largest economy in Sub-Saharan Africa and has enjoyed strong average annual economic growth of 6.2% between 2001 and 2005. However, despite the country’s large oil wealth, it still remains one of the world’s poorer countries, with a per capita gross national income of US$390 for an estimated population of 132 million. In Nigeria, 70% of the population lives on less than one dollar a day and 91% lives on less than two dollars a day. Throughout the past decade, the country’s health indicators stagnated or worsened, while the 2000 World Health Report ranked Nigeria near the bottom in terms of performance of its health system (187 out of 191 countries). Public expenditure on health care is only about US$25 per capita in Nigeria (less than five percent of total public revenues), one of the lowest in relative terms in the Africa region. Life expectancy stands at only 44 years, lower than the African average of 49 and the developing country average of 65 years. Infant mortality is very high at 111 deaths per 1,000 live births, compared to the developing country average of 62. Other health statistics, such as beds per 1,000 population and maternal mortality, rank Nigeria below many other African countries, including those with much lower per capita gross domestic product. Moreover, with a national HIV prevalence rate of 5.4%, an estimated 3.5 million Nigerians are HIV-infected. Access to HIV/AIDS prevention, treatment and care is low. Around 520,000 people are estimated to require anti-retroviral therapy today, of whom only 3% currently receive treatment.
Consequently, the need for high quality medical services in Nigeria is acute, given the population’s poor health status and public health system’s inability to adequately meet the country’s needs. Moreover, a lack of quality standards among private health care providers has eroded consumer confidence, causing an unwillingness to purchase private pre-paid health insurance. As such private healthcare and treatment schemes for HIV/AIDS, malaria and tuberculosis remain unaffordable to the vast majority of Nigerians.
One of the most acute problems in health care financing in Nigeria is the very high level of out-of-pocket expenditure on health and related lack of effective risk sharing arrangements, especially for the poor. In the private sector, 91% of health expenditures are out-of-pocket and 43% of Nigerians, when seeking healthcare outside the home, seek it from the private sector. Currently only 1,000,000 people, or 0.8% of population, are covered by health insurance schemes. This leaves health care providers vulnerable to irregular and unpredictable funding flows and the population, especially the poor, vulnerable to the impoverishing effects of medical care. It is in this context that the Federal Minister of Health called for fast-track measures in 2004 to set a goal for improving the health status of the population and introducing a new three phased contributory health insurance system, the National Health Insurance Scheme (NHIS). The first phase of this reform includes expanding coverage for federal employees and later other public sector workers. The plans are to expand this coverage to the informal and later the private sector. The first stage is under implementation as the government started enrolling government employees in private HMOs under the NHIS.
A.2. Rationale for GPOBA Involvement
This project meets GPOBA operational criteria, as well as the core OBA principals of: