**Figure 3.**

*Breakdown of THE by private financing sources, 2006, 2007, 2008 and 2009. (Source: National Health Accounts 2006-2009).*

county's total health spending [18, 29]. Moreover, the funding administration is bedevilled with numerous challenges such as a high technical assistance cost, unevenness in sponsored activities, poor fund tracking, and counterpart funding issues [18]. In essence, DAH is not a reliable mechanism of healthcare financing in the country.

To achieve UHC, Nigeria adopted a social health insurance scheme known as the National Health Insurance Scheme (NHIS) in 2005 through an Act of Parliament. This is now known as Cap N42 Laws of the Federation of Nigeria, 2004 [11, 30]. However, after more than a decade, this scheme has not covered more than 4% of Nigerians [3, 16]. Despite its enormous potential in Africa, Nigeria's NHIS has performed worse than many countries on the continent [4, 5, 31]. This poor performance can be attributed to several policy deficiencies. First, the scheme is fragmented, being divided into Formal Sector, Informal Sector and Vulnerable Group categories and other sub-categories [32]. Second, despite commencing operation with the formal sector, it has not moved beyond the federal civil servants (constituting only 4% of the country's population). These federal employees have refused to

#### **Figure 4.**

*Health Funding in Nigeria. (Source: National Health Account 2006-2009).*

**Figure 5.**

*Capital budget implementation across selected Ministries Departments and Agencies (MDas), 2016 [26].*

*The Implications of Health Financing for Health Access and Equity in Nigeria DOI: http://dx.doi.org/10.5772/intechopen.98565*

contribute their 5% counterpart share of the 15% required. Therefore, the federal government is subsidising the health of a more affluent segment of the population by 10% at the expense of the poor and vulnerable people, the informal sector and the state employees, worsening the inequality situation [16, 17, 33]. Third, many states have not embraced the NHIS because the Act that set up the scheme did not capture the states in its operation [3, 14]. Even the Community Based Health Insurance (CBHI) that was recently inaugurated to cover the rural population and the informal sector has fared poorly with less than 3% enrolment. This insufficient enrolment has been attributed to unaffordable premiums, lack of trust, and poor quality of health [14, 34, 35]. Fourth, the Act that established NHIS made it voluntary for enrollees. It stripped the NHIS of the power to enforce the regulation guiding its operations, thereby causing poor participation and ineffective functioning of NHIS [33]. Fifth, the vulnerable group has not yet been covered. For example, Raji et al. discovered that retirees were not covered [36]. Sixth, the scheme's fragmentation has prevented it from having adequate resource pooling [3]. Therefore, these problems are possibly responsible for the failure of NHIS to fulfil its goal of saving Nigerians from regressive OOP health spending, which stands at 95% of the private health expenditures and 69% of the Total Health Expenditures (THE) (see **Figure 4**).

## **2. Healthcare financing mechanisms**

Substantial evidence has proven that OPP health expenditures, rampant in LMICs, are the most regressive, inefficient and inequitable healthcare financing method [2, 24, 37]. While there is a concession that LMICs need to discard OPP expenditure, the debate is about which of the pre-payment health financial mechanisms will be the best. There is no silver bullet mechanism since each country's challenges are different [38, 39]. Moreover, each country is unique in its sociodemographic, economic and political structure. However, a health finance mechanism that can produce equitable access in LMICs must be based on compulsory pre-payment, fund pooling/risk-sharing and subsidisation, for those who cannot afford to pay [39–41]. Fund pooling and risk-sharing involves aggregating funds and redistributing them equitably between the rich and the poor, the employed and the unemployed, and the healthy and the sick [6, 14, 41]. Therefore, an exploration of different health financing mechanism follows in the next section.

#### **2.1 Developmental assistance for health (DAH)**

External funding in the form of DAH is becoming a vital funding mechanism in LMICs, especially in SSA [42]. As pointed out earlier, it is an unreliable mechanism of funding. Although DAH has decreased in the last two decades, there has not been a commensurate increase in SSA domestic financing [29]. This development could worsen the existing access, equity and financial risk problem in those countries [42]. However, DAH may be required, in the short to medium term, as complementary or supplementary funding for UHC in LMICs [40].

#### **2.2 Community-based health insurance (CBHI)**

CBHI is a form of private health insurance in which a group of people in a community contributes to financing their healthcare. It is used in LMIC to cater for the rural population and the informal workers usually not covered by other health insurance. CBHI suffers adverse selection and low participation and retention, resulting in low fund pooling and risk-sharing like any voluntary insurance scheme. The poor resource pooled also produces high administrative costs and sustainability issues. Moreover, no matter how small, the premium may be unaffordable for the poorest members of the community [18, 42]. Although CBHI can potentially protect the enrollee from OOP spending, the very poor, who are not covered suffer financial risk, poor access and inequity. Therefore, CBHI is only helpful as a short-term measure against OOP spending [35, 42].

#### **2.3 Social health insurance**

Most developed countries have protected people from financial risk using social health insurance (SHI) or a tax-based funding mechanism [37]. SHI is a scheme in which the government mandates people to contribute to financing their health. It is usually funded jointly by the employees and their employers. The government pays for those who cannot pay, such as the poor, unemployed and vulnerable. SHI became the predominant health financing method in LMICs having been adopted by the African Union Conference of health ministers in 2007 [1, 37, 42]. While some countries such as Kenya, Tanzania and Nigeria introduced their SHI beginning with the formal sector and planned to expand it later, others like Ghana, Rwanda and Mali began with the entire population. Generally, countries in the latter group have successfully covered a more significant population, while the former has been unable to move beyond the formal sector. This issue has generated a severe equity problem of leaving behind the poor community of informal employees [42]. Consequently, a bottom-up approach, starting with the poor and vulnerable group and then the informal sector, has been suggested if this scaling-up approach is adopted [43].

SHI's success story in high-income countries like Germany has not been replicated in LMICs because of the mostly poor, unemployed and informal population. Moreover, LMICs cannot wait the length of time usually required for SHI to achieve UHC. Germany had to wait for 127 years [40]. Ghana and Rwanda's success stories with SHI have been made possible by subsidising mandatory enrolment for the poor and vulnerable group, a large percentage of their population, through tax revenue and donor funds [42].

#### **2.4 Domestic government funding through taxation**

A mechanism in which government funds healthcare mainly from its revenue or general taxation is called tax-based health financing [1, 18]. by Wagstaff et al. in their study of thirteen OECD countries, proved that direct taxes are progressive and indirect taxes are regressive in all the countries. It, however, shows that SHI is only progressive in eleven countries [44]. In contrast, a global review by Aurelio Mejía shows that direct and, even, indirect tax-funded systems are generally more progressive than SHI in LMICs [45].

A growing body of evidence has shown that tax-generated revenue is a significant potential source for expanding domestic fiscal space for health (DFSH) [42, 46]. Some consumption taxes on products (such as tobacco, alcohol and sugar) that are harmful to health (the so-called "sin tax") could be earmarked for healthcare financing as has been carried out in Thailand [42, 47]. Mobile phone usage tax is another revenue source for healthcare, considering the sizeable mobile phone subscriber base in Nigeria [48]. Subsidy from petroleum products can also be used to fund healthcare as is done in Indonesia [49]. It has been established that an increase in health expenditure can increase the economic growth of LMIC by 0.4 [10]. However, governments in LMIC must prioritise health financing following the example of countries like China, Cuba and South Korea [29, 50].

Two approaches to healthcare financing have shown consistent results in LMICs. First, the adoption of a tax-based health financing mechanism for population coverage as used with great success in Sri Lanka, Malaysia and Brazil. Second, SHI and general tax use to target the formal sector and the rest of the country, respectively. This approach was employed to achieve UHC in Thailand, Mexico and Kyrgyzstan [40].
