Who benefits from new government levies?
One of the questions that increasingly occupies my mind whenever a new government levy, contribution or mandatory payment is introduced is not simply how much money will be collected, but who ultimately benefits from collecting and administering it.
The Vendor Model
There appears to be a recurring pattern in the current Kenya Kwanza administration’s approach to public financing. Whether one calls it the Vendor Economy, the Vendor Model, or simply the privatization of public administration, the sequence often appears remarkably similar.
It begins with a simple question:
“Where can government obtain more money?”
When conventional taxation reaches its limits, another question follows:
“Which public service can be made compulsory so that citizens have no option but to pay?”
Once such a service is identified, attention then shifts to another question:
“Who will build, manage, process or intermediate the system through which that money flows?”
Finally comes perhaps the most important question:
“How can the system be designed so that vendor revenues remain protected even when delivery of the underlying public service struggles?”
This, in my view, is the essence of what I describe as the Vendor Economy.
Healthcare as the latest example
SHA – The Healthcare Vendor Model
The Social Health Authority (SHA) presents perhaps the clearest illustration of this model.
Universal Health Coverage is a constitutional aspiration and an important national objective. Few would argue against ensuring that every Kenyan has access to healthcare.
The concern is not the objective.
The concern is the architecture.
Instead of designing financing systems whose primary purpose is paying hospitals promptly and ensuring patients receive care, the system increasingly appears structured around numerous technology vendors and intermediaries.
As a result, healthcare providers frequently report:
– delayed reimbursements;
– rejected claims;
– increasing debt owed to facilities;
– growing administrative requirements before payment can be made.
Hospitals continue treating patients while waiting months for reimbursement.
Yet many technology contracts reportedly continue generating revenue based on transactions, processing, subscriptions or system usage regardless of whether providers themselves have been paid.
The financial risk
That creates a troubling question.
Who carries the financial risk?
Increasingly, it appears to be the hospitals and healthcare workers rather than the intermediaries.
The incentives matter
Good public policy depends upon aligning incentives.
When hospitals are rewarded for treating patients, patients benefit.
When government is rewarded for improving health outcomes, citizens benefit.
But if intermediaries are rewarded primarily for processing transactions rather than improving health outcomes, incentives inevitably shift.
The system begins to optimise for administration instead of healthcare.
Instead of asking,
“How quickly can we pay providers?”
the question risks becoming,
“How efficiently can we process another claim?”
Those are very different objectives.
The digital transition
Kenya is now accelerating implementation of the Digital Superhighway within healthcare.
Digital health is not the problem.
Indeed, Kenya needs digital health.
Electronic medical records, interoperability, data exchange and efficient claims management should reduce costs while improving patient care.
The concern arises if compatibility requirements unintentionally narrow provider choice or concentrate market opportunities among a limited number of vendors.
Where hospitals are required within short timelines to migrate to approved systems, legitimate questions arise regarding competition, procurement, interoperability and whether sufficient safeguards exist against vendor lock-in.
Digital transformation should create an open ecosystem.
It should not become a mechanism through which participation in healthcare depends upon purchasing services from a small group of private intermediaries.
Tourism healthcare
Recent proposals requiring mandatory health cover for tourists illustrate the broader concern.
The stated objective may be understandable: ensuring visitors can access emergency healthcare without imposing unexpected costs on the country.
However, every compulsory payment deserves scrutiny.
Citizens should ask:
Who collects the money?
Who administers it?
Who earns fees from it?
How much reaches actual healthcare?
How much remains within administrative structures and vendor payments?
These are questions of public accountability rather than opposition to healthcare financing.
Public service or vendor opportunity?
The purpose of public services is to serve citizens.
Technology vendors undoubtedly have an important role in modern government.
Private companies innovate.
They build systems government cannot always develop internally.
They deserve fair payment.
The problem arises when the vendor becomes the principal beneficiary while hospitals, healthcare workers and patients struggle.
That is when public service begins to resemble a commercial marketplace in which every interaction creates another opportunity for someone to extract value before the service itself is delivered.
The test of every reform
Every new reform should pass one simple test.
If more money is collected from citizens:
Are patients receiving better healthcare?
Are providers being paid faster?
Are administrative costs falling?
Is transparency improving?
Are health outcomes improving?
Or are more intermediaries simply earning revenue while frontline healthcare providers shoulder increasing financial risk?
Universal Health Coverage should first strengthen the relationship between the patient and the healthcare provider.
Technology should support that relationship.
It should never become the principal beneficiary of it.
That is why the conversation Kenya must have is not whether we embrace digital health or Universal Health Coverage.
It is whether our public systems are being designed primarily to improve public services — or to create expanding opportunities for private vendors to sit between citizens and the services their taxes and mandatory contributions are intended to finance.
That is the defining question of what I call the Vendor Economy.
And to put the final nail in the coffin is an authority cooking in Parliament of Kenya – QUALITY AUTHORITY a new body being legislated purpotedly to bring quality healthcare but is actually a way to control healthcare away from the professionals.
Watch this Vendor space.
Dr Simon Kigondu is a close observer of the evolution of Kenya’s Public Health System to vendor economy.