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					                       Republic of Kenya




                       Ministry of Health




             Public Expenditure Review
                        2008




                             Theme:
Realizing Vision 2030 Goals through Effective and Efficient Public
                            Spending
Contents

Abbreviations .........................................................................................................................iii
Executive Summary ............................................................................................................... iv
1      Introduction ..................................................................................................................... 1
    1.1        Ministry’s vision, mission and policy objectives ............................................ 2
    1.2        Priority areas of expenditure within MOH and links to vision 2030 .......... 3
    1.3     Improving the health outcomes and the role of other Ministries and
    agencies ................................................................................................................................ 4
       1.3.1     Other ministries ............................................................................................... 4
    1.4        Key Performance Indicators for the Ministry................................................... 8
    1.5     Broad outputs, outcomes and impacts of ministerial spending in the
    period 2002/03 - 2006/07 ................................................................................................... 10
       1.5.1    Output, outcomes and impact of increased spending on MOH ............ 11
         1.5.1.1 Aggregate measures of technical efficiency ..................................... 11
         1.5.1.2 Other Outcomes .............................................................................. 12
    1.6     Situational analysis and key recent reforms reforms/changes recently
    effected in the Ministry .................................................................................................. 13
       1.6.1    Sector-wide approach in health (SWAp) ................................................... 14
       1.6.2    Rationalization of Functions under the Ministry ..................................... 15
       1.6.3    Structural changes......................................................................................... 15
       1.6.4    Capacity strengthening ................................................................................ 15
       1.6.5    Staff related reforms ..................................................................................... 16
       1.6.6    Community Strategy .................................................................................... 16
       1.6.7    Health Sector Services Fund ........................................................................ 16
2      Expenditure Analysis of 2002/03 – 2006/07 ............................................................... 18
    2.1     Government Spending on Health: Aggregate Levels and Trends ............. 18
       2.1.1   Government expenditures on health in terms of per capita, share of
       GOK and GDP ............................................................................................................... 19
       2.1.2   Policy and health financing implications of public funding on health in
       Kenya 21
       2.1.3   Reported Cost-Sharing Revenues ............................................................... 23
    2.2     Recurrent and Development Expenditure for 2002/03-2006/07 ................... 23
       2.2.1    Expenditures by Functional Classification...................................................... 24
         2.2.1.1 Distribution of recurrent and development expenditures ............... 28
       2.2.2    Expenditure by Economic Classification ......................................................... 30


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       2.2.3   Overview of budget allocation vis-à-vis budget requested, actual
       expenditures and implications thereof. ..................................................................... 32
       2.2.4   Budget Implementation by Function: Actual Expenditures versus Approved
       Budgets 33
    2.3     Expenditure Analysis of Semi Autonomous Government Agencies
    (SAGAs) ............................................................................................................................. 36
       2.3.1    Kenyatta National Hospital ......................................................................... 36
       2.3.2    Kenya Medical Research Institute (KEMRI) ............................................. 37
       2.3.3    Kenya Medical Training College ................................................................ 37
       2.3.4    Kenya Medical Supplies Agency ................................................................ 38
       2.3.5    Moi Teaching and Referral Hospital .......................................................... 39
       2.3.6    National Hospital Insurance Fund ............................................................ 40
3      Review of Projects/Programs related to the Ministry ............................................ 42
    3.1        Core Poverty Programmes .................................................................................... 42
    3.2        Expenditure performance under Core Poverty Programmes 2006/07 ........ 43
4      Review of Pending Bills ............................................................................................... 47
5      Analysis of Ministry Outputs and Corresponding Performance Indicators ....... 48
    5.1     Outcomes 2006/07 ................................................................................................. 49
       5.1.1    Access to ARVs ................................................................................................ 49
       5.1.2    Re-organisation of the Ministry .................................................................. 50
    5.2        Patients Satisfaction ............................................................................................ 50
6      Public Financial Management (PFM) Issues ............................................................ 51
    6.1        Challenges ............................................................................................................. 52
    6.2        Resource requests and exchequer releases...................................................... 52
    6.3        Accounting, recording and reporting of the expenditures........................... 52
    6.4        Strengths and weaknesses in the current system .......................................... 52
    6.5        Recommendations................................................................................................ 53
7      Human Resources Management and Capacity Building ........................................ 54
    7.1        Key Personnel Changes ...................................................................................... 54
    7.2        Constraints to Service Delivery......................................................................... 55
    7.3        Efforts Undertaken To Combat HIV/AIDS in the Ministry Of Health .... 55
    7.4        Way Forward ......................................................................................................... 56
8      Challenges and Constraints ........................................................................................ 57
9      Conclusions and Key Recommendations .................................................................. 59
References ............................................................................................................................... 61
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Abbreviations

      AOP              Annual Operations Plan
      BOPA             Budget outlook Paper
      BSP              Budget strategy Paper
      CDF              Constituency Development Fund
      DHMT             District Health Management Team
      ERS              Economic Recovery Strategy
      GDP              Gross Domestic Product
      GoK              Government of Kenya
      HCF              Health Care Financing
      HCFS             Health Care Financing Strategy
      HIV / AIDS       Human Immunodeficiency Virus / Acquired Immune Deficiency Syndrome
      HMT              Health Management Team
      HRH              Human Resources for Health
      HSSF             Health Sector services Fund
      HSSF             Health Sector Support Fund
      KDHS             Kenya Demographic and Health Survey
      KEMRI            Kenya Medical Research Institute
      KEMSA            Kenya Medical Supplies Agency
      KEPH             Kenya Essential Package for Health
      KEPI             Kenya Expanded Programme on Immunization
      KMTC             Kenya Medical Training College
      KNH              Kenyatta National Hospital
      MDGs             Millennium Development Goals
      MOH              Ministry of Health
      MPER             Ministerial Public Expenditure Reviews
      MTEF             Medium Term Expenditure Framework
      MTR              Medium Term Review
      NGOs             Non Governmental Organization
      NHIF             National Hospital Insurance Fund
      NHSSP            National Health Sector Strategic Plan
      O&M              Operations and Maintenance
      OBA              Output Based Analysis
      PEM              Public Expenditure Management
      PEM              Public Expenditure Management
      PER              Public Expenditure Reviews
      PFM              Public Financial Management
      PHMT             Provincial Health Management Team
      PPP              Public Private partnerships
      SAGAs            Semi Autonomous Government Agencies
      SWAP             Sector Wide Approach
      TB               Tuberculosis
      VCT              Voluntary Counselling and Testing
      WHO              World Health Organisation




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Executive Summary

The objectives of the health MPER were to provide an analysis of:
     public health sector performance in terms of allocations and expenditures;
     linkage between stated sector policies and priorities and public health sector
       expenditures; and
     Sector expenditure and budgeting performance.

Vision and mission

         The health sector’s vision is “creating an efficient and high quality health system
         that is accessible, equitable and affordable for every Kenyan household”. Its mission
         is to “promote and participate in the provision of integrated and high quality
         curative, preventive, promotive and rehabilitative health care services to all Kenyans”.

         National Health Sector Strategic Plan (NHSSP II 2005 – 2010)

         The overall goal set out in the strategic plan is to reduce health inequalities
         and reverse the downward trends in health related indicators by pursuing six
         broad policy objectives, which are directly linked, to the ERS, vision 2030, and
         the MDGs as listed:

                   a)   Increasing equitable access to health services;
                   b)   Improving quality and the responsiveness of services in the sector ;
                   c)   Improving the efficiency and effectiveness of service delivery;
                   d)   Enhancing the regulatory capacity of MOH;
                   e)   Fostering partnerships in improving health and delivering services.
                   f)   Improving financing of the health sector.

         Consistent with the Ministry’s choice to dedicate more resources on pro-poor
         health programmes, the priority areas core poverty programmes identified
         are:
                 preventive and promotive health (malaria control, EPI, IMCI,
                  control of environmentally related diseases and improved nutrition);
                 curative services (drugs, personnel, and equipment) to manage top
                  ten killer diseases; maintenance of health equipment and facilities;
                  HIV/AIDS and STIs; occupational health and safety; and
                 health insurance.




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Kenya’s Vision 2030

         Vision 2030 expresses the commitment to provide an efficient and high
         quality health care system with the best standards focusing on public health,
         and by this reduce health inequalities and improve infant, child and maternal
         health. Strategies outlined in vision 2030 include:

                   a) establishing a robust network of health infrastructure;
                   b) improving the quality of health service delivery to the highest
                      standard;
                   c) promoting partnerships with the private sector; and
                   d) Develop mechanisms to increase access to health services by the
                      poor and vulnerable groups.

Important Outcomes of key health Indicators

         HIV/AIDS
            HIV/AIDS prevalence reduced to 5.1% in 2006;
            Provided Anti Retroviral Treatment to 161,000 people.

         Maternal Health
            Increased the number of women in the reproductive age accessing
              family planning services from 1.6 million in 2005 to 2.6 million by mid
              2006;
            Provided two doses of Intermittent Presumptive Treatment to 506,000
              pregnant women attending Antenatal Clinic;
            Provided delivery kits to Hospitals and Health Centres;
            Purchased 180 ambulances to improve referral especially for delivery
              cases.

         Improvement in Child Health
            Fully immunisation rate increased to 75%;
            Prevention from Mother to Child Treatment services provided to
              701,000 women to reduce infections in children;
            Over 10,000 children on Anti Retroviral Treatment.

         Reduction of Malaria Burden
             Introduced artemether lumefantrine (AL), a more effective anti-
               malarial treatment;
             9 million nets issued to protect children and pregnant women against
               malaria;
             Over 600,000 Households sprayed through in-door residual in malaria
               epidemic areas ;
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                  Reduced admissions                   due to malaria by 20% due to above
                   interventions.

         Support to Faith based organizations

              Seconded 70 doctors and 379 nurses to selected Faith Based
               Organisation facilities;
         Provided 30 ambulances to selected facilities

Recent reforms reforms/changes recently

The recent reforms/ changes include:

Sector-wide approach in health (SWAp) with the goal is to enhance coordination
and harmonisation of government and partner efforts (service delivery and funding)
to achieve greater effectiveness and efficiency through the adoption of country-led
plan for service delivery, a single monitoring and evaluation framework, as well as
strengthening and use of country’s systems of financial management and
procurement.




Rationalization of Functions under the Ministry with a new outlook to the
management structure and resource distribution by service and level of care.



Staff related reforms - staffing norms for key cadres have been developed for
deployment purposes while a health manpower policy and improvement plan has
also been developed to address the development and retention of human resources
in the sector.

Health Sector Services Fund- the Ministry has developed regulations for the Health
Sector Services Fund (HSSF, in order to improve disbursements to lower level of
health facilities,)

Overall MOH Spending
Overall, the total actual public expenditure in the Ministry of Health increased from
KShs.16 billion (2003/04) to KShs.27 billion (2006/07). The recurrent expenditures in
the Ministry of Health increased in aggregate terms from KSh 14.4 billion in 2002/03
period to KSh. 21.5 billion in 2006/07.

According to economic categories of recurrent spending, the share going to
personnel and staff costs are the largest followed by KNH, drugs and medical
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consumables, operating and maintenance costs, in a descending order. Overall, an
analysis of the economic classification of expenditures shows that:

                  the recurrent expenditures have increased in nominal terms during the period
                   from 2002/03 to 2006/07 by 49.5%;

                  All the economic categories showed increases from 2002/03 to 2006/07 in
                   excess of 40%, except KNH that recorded an increase of 33% during the
                   period.

                  Personnel expenditures: Of the total KShs.21, 542 million spent on recurrent
                   vote in 2006/07, 52.7% (or KShs.11,347 billion) was spent on staff salaries
                   and emoluments.

                  Expenditures on Purchase of Plant & Equipment increased substantially in
                   excess of 400% during the period on account of procurement of medical
                   equipments and ambulances.

In 2006/07, approved development budget was KShs.11 billion, but the reported
actual spending was only KShs.6 billion, about half of the approved budget. As has
been the case in the past, there are difficulties in capturing expenditures on donor A-
in-A due to non-submission of expenditure documents from development partners.
Hence, the full actual expenditure could have been higher than that reported in the
analyses in this report.



Expenditure Trends

There has been a downward trend of total recurrent spending from 94% of the
total MOH expenditures in 2002/03 to 91% in 2004/05 and further to 78% in 2006/07.
However, expenditures on development have increased from 6% of the total MOH
expenditures in 2002/03 to 9% in 2004/05, and to 22% in 2006/07. This trend, no
doubt, reflects the shift of resources towards development in line with the overall
government focus on capital and infrastructure improvement.

Per capita expenditures
The per capita public expenditures on health have increased over the years, rising
from US$6.4 in 2003/04 to US$10.9 in 2006/07. However, the figures are still lower
than the WHO recommended US$35.

Budget Implementation - Actual Expenditures versus Approved Budgets


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         Between the period 2002/03 to 2006/07, total expenditures have oscillated at
         80% level of the approved budget, with a higher share of the variance being
         accounted for by the large under spending of the development component of
         the budget. While the recurrent budget was nearly fully utilized, expenditures
         on development remained at an average of 34% of the budget (54% was
         recorded in 2006/07 financial year).

Semi Autonomous Government Agencies

There are six parastatals in the Ministry of Health. These Semi Autonomous
Government Agencies (SAGAs) have budgetary implications in the Ministry’s
expenditure.



Pending Bills

The volume of pending bills for both recurrent and development component of the
budget totalled KShs.310.4 million in 2006/07, with recurrent budget accounting for
up to 66% of the total mainly as a result of accumulated bills for water and telephone
services. Compared with the previous year, the stock of pending bills in 2006/07
represents an increase of about 38%, and about 118% increase from the 2004/05
financial year.

Patients Satisfaction survey

The Ministry of Health conducted a Patients/Clients Satisfaction Survey in May/ June
2007 in 129 public health facilities (14 hospitals, 38 health centres and 77
dispensaries) located in eight districts distributed through out the country. The
survey showed that there has been substantial improvement in services offered as
shown below:
              Satisfaction with health care service received (94%);
              Improved supply of medication (72%);
              Shorter waiting time (57%).

Health Personnel Changes

The period between 2003 and 2007 witnessed tremendous changes in key health
personnel. These key cadres include doctors, nurses, clinical officers, public health
officers, laboratory technologists, nutritionists, physiotherapists and radiographers.
The number of doctors increased from 1,380 in 2003 to 1,763 in 2007 while the
number of nursed rose from 15,581 (2003) to 21,981 (2007).

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Concluding remarks

To address the numerous challenges facing the Ministry of Health there is need to:

                    Increased financing of the health sector;
                    Increased cross-sectoral collaboration as achieving the MDG goals
                     related to health (goals 4, 5, 6) requires a multi-sectoral approach;
                    Improve access to funds to rural health facilities, by working on
                     modalities for directing funds of these facilities.




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1         Introduction
Faced with scarcity of financial resources in the midst of increasing demand for
health services, attention of most governments especially in the developing countries
has focused on ensuring efficiency of the expenditures on health. Consequently,
greater attention is being placed on ensuring that the available health resources are
allocated on targeted interventions that address main health conditions, and that the
management of the expenditures of the resources is done in ways that guarantee the
effectiveness of the interventions, and their impact on improving health status of the
population.

Consistent with the efficiency and effectiveness concerns, increased attention has
been placed on ways of measuring and documenting the resource flows, allocation
and management of resources. Public expenditure review provides one source of
information for measuring:

     a)   the structure and composition of health expenditures;
     b)   allocation of the expenditures;
     c)   efficiency and effectiveness of expenditures;
     d)   impact of the expenditures; and
     e)   Areas that need strengthening in order to increase the efficiency of health
          expenditures (i.e. institutional mechanisms).

The objectives of the health MPER are therefore to provide an analysis of:
     public health sector performance in terms of allocations and expenditures;
     linkage between stated sector policies and priorities and public health sector
       expenditures;
     Expenditure and performance of the health sector budget.

The 2008 Public Expenditure Review builds on the 2007 MPER. It assesses the extent
to which the additional funds to the health sector have been directed to key priority
areas, utilization capacity of allocated funds and whether the beneficiaries are feeling
the impact of the resource flows in terms of service improvements. In 2007 MPER,
the issues of streamlining financial flows to health facilities, increasing absorption
capacity, strengthening procurement and distribution systems and rational
deployment of human resources were identified as critical areas, in order to
accelerate implementation of health service delivery.

The MPER findings will facilitate effective and evidence based policy dialogue on
management of resources and expenditure on a medium-term basis. It aims at
supporting the preparation of the Medium Term Expenditure Framework (MTEF) in
order to strengthen and guide investments of resources in the health sector.
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  1.1     Ministry’s vision, mission and policy objectives


The second National Health Sector Strategic Plan (NHSSP II 2005 – 2010), which was
launched in 2005 by the GOK/MOH set out the agenda for the sector, and defined
the vision of “creating an efficient and high quality health system that is accessible,
equitable and affordable for every Kenyan household”. Its mission is to “promote and
participate in the provision of integrated and high quality curative, preventive, promotive
and rehabilitative health care services to all Kenyans”.

The overall goal set out in the strategic plan is to reduce health inequalities and
reverse the downward trends in health related indicators by pursuing six broad
policy objectives that are directly linked to the ERS, vision 2030, and the MDGs as
listed:

        Increasing equitable access to health services
        Improving quality and the responsiveness of services in the sector
        Improving the efficiency and effectiveness of service delivery
        Enhancing the regulatory capacity of MOH
        Fostering partnerships in improving health and delivering services
        Improving financing of the health sector.

The above objectives informed the service delivery approach as well as the
formulation of the core functions of the Ministry of Health.

First, the NHSSP II adopted as its guiding principles human capital development
and right approach to service delivery. In this framework, service delivery was to be
organised around the Kenyan Essential Package for Health (KEPH). KEPH is
focused on the health needs of the individual based on the six life cycles namely
pregnancy and the newborn (up to 2 weeks of age); early childhood (2 weeks to 5
years); late childhood (6– 12 years); youth and adolescence (13–24 years); adulthood
(25–59 yrs) and elderly (60+ yrs). Its approach aims at shifting interventions
towards the promotion of healthy lifestyles, integration of vertical services and
ensuring continuum of care, through strengthening the various levels of care (from
community to national referral hospital).

Second, an operational structure outlining and delineating the levels of
responsibility at different levels (central MOH, Provincial and District) in the
management and delivery of health services was developed. Responsibilities and
core functions at the various levels were defined as follows: central MOH (policy
formulation, regulation, resource allocation and monitoring of performance);
provincial (supervision); and districts (delivery of KEPH). At the same time, reforms
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were proposed on human resources, financial management, M&E and institutional
reforms, including a Sector Wide Approach (SWAp) were proposed to facilitate the
delivery of KEPH.


  1.2     Priority areas of expenditure within MOH and links to vision 2030


Consistent with the Ministry’s choice to dedicate more resources on pro-poor health
programmes, the priority areas of expenditure include improving the overall supply
of relevant personal health services and making them more accessible to the poor –
specifically by allocating resources in favour of poorer geographic areas through
systematic shifts in the expenditure between tertiary, secondary and primary care.

Specific core poverty programmes identified are:
        preventive and promotive health (malaria control, EPI, IMCI, control of
          environmentally related diseases and improved nutrition);
        curative services (drugs, personnel, and equipment) to manage top ten
          killer diseases; maintenance of health equipment and facilities; HIV/AIDS
          and STIs; occupational health and safety; and
        health insurance.

Vision 2030 expresses the commitment to provide an efficient and high quality
health care system with the best standards focusing on public health, and by this
reduce health inequalities and improve infant, child and maternal health. Strategies
outlined in vision 2030 include:

            establishing a robust network of health infrastructure;
            improving the quality of health service delivery to the highest standard;
            promoting partnerships with the private sector; and
            develop mechanisms to increase access to health services by the poor and
             vulnerable groups.

In order to support the objectives of Vision 2030, the Ministry has identified the
flagship projects for the health sector (Box 1). The flagship programmes aim at
making the Ministry respond to the emerging needs of the health sector. Through
implementation of these projects, the focus will be to increase access to services
especially by the poor.




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                                                 Box 1
                         The health sector’s flagship projects for 2012 are to:

            Create a national health insurance scheme in order to promote equity in
             Kenya’s health care financing;
            Channel funds directly to hospitals and health centres ( as opposed to district
             headquarters)
            Scale up the out put based approach system to enable disadvantaged groups (e.g.
             the poor and orphans) to access health care from preferred institutions;
            Revitalise community health centres to promote preventive health care (as
             opposed to curative interventions) and promote healthy individual lifestyles;
            De-link the Ministry of Health from service delivery in order to improve
             management of the country’s health institutions (primarily by encouraging
             independent operations at district, provincial and national hospitals).



  1.3       Improving the health outcomes and the role of other Ministries and agencies


        1.3.1       Other ministries

    The policy objectives of the NHSSP recognises implicitly that improving health
    outcomes is not just a responsibility of the Ministry of Health, but that there are
    other agencies from both the public and private sector that are important
    participants. One of the NHSSP objectives is to expand safe water supply,
    improve food control measures and sanitation facilities. These activities are
    firmly in the control of other agencies, but their development is vitally important
    for the delivery of the preventive element of health policy. The proper design of
    school buildings ensuring adequate water supply and sanitation facilities is an
    important element of improving better health. Indeed only 42% of the population
    had access to safe drinking water in 2002.

    Among other agencies in the Government of Kenya that are involved in activities
    that relate to health, include the National AIDS Control Council (NACC), which
    is under Office of the President. NACC was established in 1999 to provide policy
    and strategic framework for mobilising and co-ordinating resources for the
    prevention of HIV transmission and provision of care and support to those
    infected and affected by the disease. Each ministry has set up an AIDS Control
    Unit to address the issue of HIV/AIDS among its staff with respect to prevention
    and general counselling. Treatment of HIV/AIDS remains the responsibility of
    the Ministry of Health through its normal operations.



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         1.2.2     Semi Autonomous Government Agencies (SAGAs):
                   contributions to core functions of the Ministry of Health

    There are six parastatals in the Ministry of Health. These institutions are the
    Kenya Medical Research Institute (KEMRI), Kenya Medical Training College
    (KMTC), Kenyatta National Hospital (KNH), Moi Teaching and Referral Hospital
    (MT&RH), Kenya Medical Supplies Agency (KEMSA), and the National Hospital
    Insurance Fund (NHIF). All these parastatals complement the work of the
    ministry in discharging its core functions through service delivery, research and
    training, and procurement and distribution of drugs to support service delivery.

    Kenya Medical Research Institute (KEMRI)

    The Kenya Medical Research Institute (KEMRI) was established in 1979 through
    an Act of Parliament to carry out health research in Kenya. KEMRI has made
    remarkable achievements in medical research. For instance, kits, developed by
    KEMRI for the diagnosis of infectious hepatitis and HIV/AIDS have improved
    the detection, and treatment and management of these conditions. Similarly,
    KEMRI research has led to reduction of the treatment of leprosy from 18 to 3
    months and tuberculosis from 6 months to 3 weeks.

    Other important contributions by the Institute towards the MOH’s mission
    include mapping of disease incidence in the country, which generates
    information that guides the formulation of Vitamin Supplementation Policy, and
    development of a number of drugs for treating malaria, resulting in reduced
    infant mortality, reduced adult morbidity and mortality in the country. The
    distribution of KEMRI’s research stations in different parts of the country has
    made it easy to achieve wide population coverage, and better understanding of
    geographic variations in disease conditions and health problems.

    KEMRI depends on the government for up to 60% of its funding, with the
    balance generated through its research activities and from external partners.

    Kenya Medical Training College (KMTC)

    Established in 1990, responsibilities of KMTC are as follows:

             Provide facilities for education in health manpower personnel training
             Facilitate the development and expansion of opportunities for Kenyans for
              continuing education in various disciplines of medical training
             Provide consultancy and technical advice in health related training and
              research

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             Empower health trainers with the capacity to conduct research, develop
              usable and relevant health learning materials, and manage health-related
              training institutions
             Provide guidance and leadership for the establishment of constituent
              training centres and facilities.

    Under the KMTC there are a number of constituent colleges in various district
    hospitals. These colleges have managed to train a large number of health
    personnel, many of whom are currently providing services in different
    institutions in the country. KMTC relies on the government for up to 80% of the
    funding, with the rest generated from student fees, investments, and external
    grants.

    Kenyatta National Hospital (KNH)

    KNH gained state corporation status in 1987, with the mandate to:

         a) Receive and treat patients on referral for specialized care from other
            hospitals and health institutions within and outside Kenya
         b) Provide facilities for medical education for the University of Nairobi and
            for research by directly or indirectly cooperating with other health
            institutions within or outside Kenya
         c) Provide facilities for education and training in nursing and other health
            and allied professions
         d) Play the role of a national referral hospital in national health planning.

    The hospital has grown over the years, and is currently leading in handling
    outpatient and referral cases in the country. In the recent past, KNH has
    established a 200-bed private wing facility to diversify the type and number of
    patients served by the hospital. Apart from raising its own revenues through
    patient fees, research activities, and grants by external organizations, KNH relies
    on the government through the MOH for its wage related recurrent costs. In the
    financial year 2006/07, the Government grant through the MOH to KNH totalled
    KShs. 3.1 billion, representing about 14% of MOH’s total recurrent expenditures.

    Moi Teaching and Referral Hospital (MT&RH)

    The Moi Teaching and Referral Hospital was established in 1998 with state
    corporation status. As a referral hospital, it is mandated to carry out the
    following functions:

         a) Receive patients on referral from other hospitals and institutions within
            and outside the country for specialized health care
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         b) Provide facilities for medical education for Moi University, and for
            research in collaboration with other health institutions
         c) Provide facilities for education and training in nursing and other health
            and allied professions and
         d) Serve as a national referral hospital in national health planning.

    The hospital has a 500-bed capacity, and achieved significant increases in the
    number of major surgical operations rising from 300 in 1999 to 393 in the year
    2000. In addition, MT&RH has trained up to 922 health professionals, comprising
    student directly admitted to the University or those from other institutions such
    as KMTC, Baraton University, and others in the region.

    National Hospital Insurance Fund (NHIF)

    The NHIF was established in 1966 by an Act of Parliament to provide for
    contributions to and payment of benefits to people engaged in formal
    employment in Kenya. In 1975, the Act was reviewed to expand its coverage and
    include those operating in the informal sector. In 1998, it became a state
    corporation.

    The Fund’s membership has increased over the years to about 1.8 million, and
    covering approximately 10 million Kenyans. The Fund has accredited some 370
    hospitals to provide inpatient care services. In 2002, the Fund revised upwards its
    benefits to allow its members 40% rebate increments so they can be covered in
    higher cost accredited hospitals.

    In line with the Health Sector Strategic Plan II, the ERS objective and the Vision
    2030 of improving access to health care, the Government intends to transform
    NHIF into a social health insurance fund. In pursuant to improving access to
    health care, NHIF has also enhanced the benefit package to members by
    establishing a comprehensive in-patient package by extending coverage to
    include consultation and diagnostic services.

    Kenya Medical Supplies Agency (KEMSA)

    KEMSA was established in 2000 as a state corporation to:

         a) Procure, offer for sale and supply drugs and medical supplies.
         b) Establish warehouse facilities in Nairobi, or other towns in Kenya for the
            purpose of storage, packaging and sale of drugs and medical supplies to
            health institutions.


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         c) Carry out technical and laboratory analysis of drugs and medical supplies
            to determine their suitability for procurement, sale, use, storage or
            disposal by the agency.
         d) Advise consumers and health providers on the national and cost effective
            use of drugs; and
         e) Make available facilities for use by educational institutions for learning.


  1.4     Key Performance Indicators for the Ministry


Despite divergent views on what constitutes pro-poor health interventions, there is
wide consensus on the processes for ensuring pro-poor health policy interventions.
To realize the objective of making health interventions pro-poor, the Ministry of
Health has defined specific policy measures:

         a)   Revisit the financing of the sector: Introduce the NSHIF in a phased
              approach to eventually achieve universal coverage;
         b)   Focus investments to benefit the poor: Re-allocate resources towards
              promotive, preventive and basic health services and enlist additional
              capacity through partnership;
         c)   Improve effectiveness of service delivery: Reorienting programme
              activities towards the various age groups defined in KEPH;
         d)   Strengthen cross-sector cooperation: Strengthen ties and collaboration
              across all sectors in the areas of, reproductive health, gender, HIV/AIDS,
              water and sanitation, etc; and
         e)   Increase efficiency and effectiveness by adopting a programmatic
              approach with all partners involved (sector wide) leading to jointly
              agreed NHSSP II, M&E framework, and operational coordination
              framework.

In order to monitor the progress in the achievement in providing quality health care
for Kenyans, the following impact, input and output indicators (Table 1.1) will assist
the ministry to assess progress towards attainment of NHSSPII targets and MDGs
goals and the long term Kenya Vision 2030. These targets will be revised once the
2008 Kenya Demographic and Health Survey (KDHS) and new data become
available. Whenever possible, indicators will be monitored by gender and
socioeconomic status (especially for health status indicators), by urban versus rural,
by district and provinces to ensure equity and gender focus.




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Table 1.1: Key Health Performance Indicators
Objective                                           Impact indicator

To increase equitable access to affordable          Health impact indicators
quality basic health services for all                Reduce infant mortality from 77 per 1,000 live births in
Kenyans, especially the poor and                       2003 to 63 by 2010;
vulnerable                                           Reduce MMR from 414 per 100,000 in 2003 to 370 by 2010;
                                                     Reduce Inpatient malaria morbidity as percentage of total
                                                       in-patient morbidity to 10% by 2010.
                                                    User satisfaction indicator:
                                                     Increase the proportion of users satisfied with health
                                                       services to 80% (as monitored by the Customer Satisfaction
                                                       Survey)
                                                    Financial protection indicators:
                                                     Reduce by 20% the % of households which had to borrow
                                                       money or sell assets for hospitalization in the last 12
                                                       months (as monitored by the Kenya Integrated Household
                                                       Budget Survey or KIHBS and/or NHA)
Project Input/Output                                Input/Output indicator

1. Improved sector finance and efficiency           - Increase the share of public spending on levels 1-3 from
of expenditures                                     10.5% in 2007/8 to 13% in 2010/11

3. Improved human resources for health                 100% of dispensaries would be manned by qualified
                                                         health workers;
                                                       75% of level three facilities meet the norms in terms of
                                                         staffing;
                                                       Customize the computerized HRH database system to
                                                         monitor staffing at all levels.
4. Strengthened service delivery                       Increase health facilities offering basic EMoC from 9% in
                                                         2005 to 20% by 2010;
                                                       50% of health facilities receiving regular structured
                                                         supervisory visits from DHMTs at least quarterly
                                                       Health facilities with tracer drugs available increased
                                                         from 35% in 2005 to 80% by 2010
5. Financial protection mechanisms for               A health financing policy with mechanisms to protect the
the poor                                               poor developed

6. Strengthened partnerships for service             Mechanisms to contract private-not-for-profit providers
delivery                                              developed and implemented by 2009.

7. Increased community participation in              30% of communities have active Community Health
health                                                 Committees by 2010;
                                                     - 75% of facilities have active facility committees by 2010.
8.  Improved     planning,             financial     Successfully develop and adopt annual sector plans and
management and procurement                             budgets (AOP aligned with MTEF) with consensus from all
                                                       stakeholders
                                                     Successfully conduct Annual Joint Reviews.
                                                     Successfully implement the procurement improvement
                                                       plan (e.g. number of agreed actions accomplished);
                                                     Conduct independent annual audits by the Kenya National
                                                       Audit Office.

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  1.5     Broad outputs, outcomes and impacts of ministerial spending in the period 2002/03 -

          2006/07


Tracking outputs, outcomes and impact represents one way of measuring how
inputs purchased through the expenditure of health resources are being converted to
produce health benefits, and therefore the efficiency of the expenditures. One level of
efficiency is whether the outputs delivered are adequate given the cost of inputs
applied to deliver a combination or quantity of the services. Another aspect of
efficiency is the allocative or distributional impact of the spending, which measures
whether the services delivered are appropriate given the health needs of the
population, and are consistent with the priorities as well as benefits to all especially
the poor.

During the period 2002/03 to 2006/07, expenditures in the Ministry of Health
increased in aggregate terms from KShs 14.4 billion in 2002/03 period to KShs. 21.5
billion in 2006/07. The expenditures have been used on inputs such as human
resources, drugs and non-pharmaceuticals, infrastructure improvements and
maintenance, purchase of equipment and vehicles as well as for general operating
and maintenance. Table 1.2 presents a detailed breakdown of total MOH recurrent
expenditures for 2002/03 to 2006/07 by categories of spending. Clearly, the share
going to personnel and staff costs are the largest followed by KNH, drugs and
medical consumables, operating and maintenance costs, in a descending order.

Table 1.2 : Trend in recurrent (gross) expenditure by economic categories (% share
of total MOH recurrent expenditures)
                                       2002/03 2003/04 2004/05    2005/06 2006/07
Salaries and Other Personnel costs     54.1    52.5     51.9      52.7     52.7
Transfers, Subsidies & Grants          8.0     9.4      9.0       8.3      7.7
Drugs and Medical Consumables          9.4     11.1     10.6      10.5     11.1
Operating & Maintenance                8.7     8.3      10.1      7.5      8.2
Purchase of Plant & Equipment          0.7     0.1      0.5       2.9      2.4
Kenyatta National Hospital             16.2    15.6     15.3      14.5     14.4
Moi Referral & Teaching Hospital       2.9     3.0      2.6       3.6      3.5
Total %                                100.0   100.0    100.0     100.0    100.0




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       1.5.1        Output, outcomes and impact of increased spending on MOH

Despite limitations of inadequate data, it is possible to carry limited aggregate and
sub-aggregate measures of technical efficiency. At the aggregate level, the level of
outpatient and inpatient utilization of services at public health facilities can be used
to determine the impact of increased expenditures. At the same time, it is also
possible to assess the changes in service coverage following increases in health
spending.


                 1.5.1.1 Aggregate measures of technical efficiency

The measures of efficiency presented below are based on total health expenditures
for services provided in the public sector. Because of constraints, the figures shown
cover only 2005/06 financial year, and provincial and district hospitals.

Average cost of inpatient day: In 2005/06 financial year, the total expenditures was
Kshs.7.616 billion, and the total inpatient days in provincial and district hospitals
was 3,973,864. Therefore, the average cost per inpatient day = 7,616,094,827/3,973,864
= Kshs.1916.54 or $26.62 (at 1$=72 KShs.).

Average cost per ambulatory visit: In 2005, there was a total of 4,447,825 outpatient
visits to district and provincial hospitals. Therefore average cost per visit =
7,616,094,827/4,447,825 = Kshs.1,712.31 (or $23.78). Obviously, a breakdown of the
total costs between in-patient and outpatient activity would be needed to get a more
accurate figure.

Average cost per admission: In 2005 there were 647,391 admissions in district and
provincial hospitals. The average cost per admission was: 7,616,094,827/647,391=
Kshs.11,764.20 ($163.3).

Average length of stay: In 2005, the total inpatient day was 3,973,864 and the total
number of beds were 10,992 giving the total available bed days as (10,992 * 365 days)
= 4,012,080 available bed days annually. To get the average length of stay, we use
total number of admissions of 647,391 as a proxy for total discharges, so ALOS =
IPD/Admissions is: 3,973,864/647,391 = 6.14.

Doctors and nurses per inpatient day: In 2005, there were 706 doctors and 8,133
nurses in provincial and district government hospitals in Kenya, and a total of
3,973,864 inpatient days. There were also 1,270 clinical officers. The total number of
doctors and nurses were 8,839 bring the number of doctors and nurses per inpatient
day to: 450 i.e. there was on average 1 doctor/nurse for 450 inpatient days or more
broadly (1 doctor/nurse/clinical officers for 393 inpatient days). Breaking this
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down, there was 1 doctor for 5,628 inpatient days (or 25 beds at 90 percent
occupancy, 250 working days per year per doctor), 1 nurse for 488 inpatient days (or
2.2 beds), and 1 clinical officer for 3,129 inpatient days (or 13.9 beds).

Doctors and nurses per ambulatory visit: Doctors per ambulatory visits = 1 doctor
per 6,300 visits, 1 nurse per 547 visits, and 1 clinical officer per 3,502 ambulatory
visits in provincial and district hospitals in Kenya.


                 1.5.1.2 Other Outcomes

The main cross cutting programmes of the Ministry of Health developed annual
target indicators designed to measure the effectiveness of the programmes in
improving health outcomes in the country. The following are some outcomes:

HIV/AIDS
   HIV/AIDS prevalence reduced to 5.1% in 2006;
   Provided Anti Retroviral Treatment to 161,000 people.

Maternal Health
   Increased the number of women in the reproductive age accessing family
     planning services from 1.6 million in 2005 to 2.6 million by mid 2006;
   Provided two doses of Intermittent Presumptive Treatment to 506,000
     pregnant women attending Antenatal Clinic;
   Provided delivery kits to Hospitals and Health Centres;
   Purchased 180 ambulances to improve referral especially for delivery cases.

Improvement in Child Health
   Fully immunisation rate increased to 75%;
   Prevention from Mother to Child Treatment services provided to 701,000
     women to reduce infections in children;
   Over 10,000 children on Anti Retroviral Treatment.

Reduction of Malaria Burden
   Introduced artemether lumefantrine (AL), a more effective anti-malarial
     treatment;
   9 million nets issued to protect children and pregnant women against malaria;
   Over 600,000 Households sprayed through in-door residual in malaria
     epidemic areas ;
   Reduced admissions due to malaria by 20% due to above interventions.




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Support to Faith based organizations

        Seconded 70 doctors and 379 nurses to selected Faith Based Organisation
         facilities;
        Provided 30 ambulances to selected facilities.


  1.6     Situational analysis and key recent reforms reforms/changes recently effected in the

          Ministry


  For a period spanning over one decade between 1993 and 2003, as evidenced from
  Kenya Demographic and Health Surveys, Kenya had faced a worsening health
  situation, characterised with increasing infant and child mortality, rising maternal
  mortality ratios, and increasing incidence of HIV/AIDS, malaria and other diseases.
  Persistence of this situation despite increased investments and expenditures as
  well as existence of policies and programmes aimed at improving the health status
  of the population raised concerns whether Kenya would be on track to meeting the
  MDGs.

  Top six causes of morbidity are malaria, upper respiratory diseases, skin diseases,
  diarrhoea, intestinal diseases, and malnutrition/anaemia. Other significant causes
  (in the top ten) of morbidity are STI, HIV/AIDS and injury.

  Recent data show a reversal of some of the declining trends. Data reported in
  NHSSP II MTR reveal that immunization coverage has increased in recent years.
  The NHSSP II situation analysis recognized that the declines experienced in the
  past were related to the declining availability, access to and quality of public health
  services as well as persistence of malaria, malnutrition, and the HIV/AIDS
  epidemic. A related factor identified by the NHSSP II development was the
  increasing level of poverty, and the factor that a large proportion of the population
  had inadequate access to clean water and sanitation.

  Furthermore, Kenya is committed to the achievement of the Millennium
  Development Goals, and the Abuja Declaration of April 2001, which required
  countries to contribute to the reduction of the burden of selected health problems
  (malaria, TB, HIV/AIDS, maternal mortality, under-five mortality) between 1999
  and 2015. This required countries to, among other things, allocate increased
  resources to health. According to the commitment reached at the Abuja meeting in
  2000, countries in Africa agreed to increase government expenditures on health to
  reach 15% of their annual budgets by 2015. WHO’s Commission on
  Macroeconomics and Health report of 2000 recommended that countries at less
  than US$1,200 per capita GNP required to raise health spending to US$35 annually
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  by 2015, and raise the share of health spending to GDP by 1 - 2% annually in order
  to provide a basic package of essential health services. With health expenditures at
  8% of total government expenditures, 1.7% of GDP, and US$8.3 per capita the level
  of public expenditures on health remained inadequate compared with
  internationally agreed benchmarks.



  Between 2005 and 2006, the ministry utilization of the budget increased from 76%
  in 2005/6 to 83% in 2006/7 largely as a result of proper management of donor
  resources, notably enhanced reporting rates of donor expenditures, as well as
  improved cash flow projections, which has enhanced exchequer releases.

  Apart from measures undertaken to improve the allocation of resources by levels
  of care, and across inputs, additional reforms to enhance the management and
  delivery of services have been initiated.

       1.6.1        Sector-wide approach in health (SWAp)

Fostering partnership in the health sector has been one of the goals of health
reforms. Partnership has been seen as one way of recognizing the contributions to
service delivery and financing of other partners such as NGOs and faith-based
organisations, and donors. Building on the goodwill created by efforts at the global
level to increase aid harmonisation and effectiveness based on the Paris Declaration
in 2000, beginning July 2005 the ministry embarked on a Kenya Health SWAp
design process.

Like all SWAps, the goal is to enhance coordination and harmonisation of
government and partner efforts (service delivery and funding) to achieve greater
effectiveness and efficiency through the adoption of country-led plan for service
delivery, a single monitoring and evaluation framework, as well as strengthening
and use of country’s systems of financial management and procurement.

As part of the SWAp process, a Joint Program of Work and Funding (JPWF) for
2006-2010 were developed in 2006 to elaborate the priority health interventions to
achieve the NHSSP II policy objectives. The JPWF was adopted in 2006 and is
currently being used to guide and coordinate the activities implemented by all
players in the health sector, with most partners (implementing donors) focusing
their support to specific aspects of the JPWF and the annual operational plans
(AOPs) that are developed in line with JPWF.

The adoption of the SWAp in health has provided a framework for a structured
engagement between partners and the Ministry, and enhanced the stewardship
function of the MOH. Notable developments in this regard include the adoption of
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joint annual implementation planning, and annual review of sector performance.
Through these processes, it is increasingly becoming possible to determine the level
of donor and partner resources available for health through either budget support or
off budget, which is important for determining the sector’s resource envelope as part
of the MTEF.

       1.6.2        Rationalization of Functions under the Ministry

The adoption of KEPH constituted a paradigm shift in the delivery of health
services. Its emphasis on life-cycle cohorts and a shift from disease orientation to
health promotion has meant that service delivery efforts are focused at primary and
lower levels of care such as district health services including the community level.
These changes have implied a need for a new outlook to the management structure
and resource distribution by services and levels of care.

       1.6.3        Structural changes

The cohort approach to service delivery implies need for greater integration of
services more than programme based approach to service delivery, a phenomenon
that culminated in vertical programmes. As a response, the ministry has initiated a
process of redefining its new organisational structure to accommodate the new
approach to the organisation of service delivery. While integration of service
delivery is expected to take place at the district levels, it will inevitably affect the
configuration of the central level units and departments in ways that strengthen the
support they provide to districts to enable them deliver the services. At the same
time, the reconfiguration of the structure at the central level will take into account
the role of ministry in policy formulation and standard setting and regulation. In
order to prepare for these new roles, the Ministry has contracted a consultant to
review the structure and roles of each department.

       1.6.4        Capacity strengthening

Apart from requiring a new approach to service delivery, the adoption of KEPH has
meant a re-look at the resource requirements to deliver the services defined in KEPH
at the various levels: community (level I); dispensary (level II); health centre (level
III); district hospital (level IV), and provincial hospital (level V) and tertiary hospital
(level VI).

The JPWF elaborated the resource requirements for KEPH implementation over the
period 2006 – 2010 focusing on: human resources; drugs and non-pharmaceuticals;
infrastructure and equipment at the various levels, including the community as well
as the support systems.

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       1.6.5        Staff related reforms

Staffing norms for key cadres have been developed for deployment purposes. A
health manpower policy and improvement plan has also been developed to address
the development and retention of human resources in the sector.

Furthermore, to address regional imbalance in the distribution of health personnel
especially in the remote and hard to reach semi-arid areas, the Ministry embarked
on a process to hire staff on contract and post them to these areas with the plan to
have them serve in those areas for the entire period of the contracts. This
arrangement seems to have succeeded in ensuring key staff categories are available
in the hardship areas. Available information shows that most of health facilities
which had closed especially in North Eastern province are now operational thus
translating into availability of health services.

       1.6.6        Community Strategy

The community strategy approach is intended to promote the participation of
individuals and communities to take charge of their health. The Community
strategy framework paper has been developed.

       1.6.7        Health Sector Services Fund

To facilitate the implementation of KEPH especially its focus on district level
services, the MOH sought to identify ways to ensure that resource flow and
utilization at the district level is smooth, and also that necessary support is provided
to non-public institutions such as NGOs/FBOs to enable them offer appropriate
health care.

Past Public Expenditure Tracking Surveys reveal that only 44% of the resources
earmarked for lower level health facilities reach these units. In order to improve
disbursements as recommend in 2007 MPER, the Ministry has developed regulations
for the Health Sector Services Fund (HSSF). The HSSF regulations, which have been
approved by the Minister for Finance, are awaiting gazettement.

The objects and purposes of the Fund are to:

         (a) provide financial resources for medical supplies, construction and
             equipment of health facilities in the country;
         (b) support capacity building in management of health facilities;
         (c) support and empower rural communities to take charge of improving
             their own health;

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         (d) provide grants for strengthening of faith based health facilities through
             their respective secretariats; and
         (e) improve the quality of health care services in the health facilities.

The Ministry intends to spend the first half of 2008 to build capacity for rolling out
the HSSF in all the facilities. This being an interim arrangement the ministry will also
undertake a review of the Public Health Act to allow disbursement of funds as
grants to health facilities.




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2         Expenditure Analysis of 2002/03 – 2006/07
  2.1     Government Spending on Health: Aggregate Levels and Trends
Overall government expenditures on health have increased in the recent past.
Between 2003/04 and 2006/07, total actual expenditures increased from KShs.16
billion (2003/04) to KShs.27 billion (2006/07). Table 2.1 shows both absolute and
percentage increases in government expenditures over the five year period.

Table 2.1: Ministry of Health Actual Expenditure (Gross) KSh. million
                               2002/03    2003/04     2004/05    2005/06                     2006/07        2007/08
                               Actual     Actual      Actual     Actual                      Actual          Estimates
Recurrent (KShs. million)      14,405     15,438      17,417     19,765                      21,484.40      22,745
Development            (KShs.
million)                       945        1,003       1,741      3,242                       5,987.60       9,609
Total (KShs. million)          15,351     16,441      19,158     23,007                      27,472.00      32,354
Recurrent (%)                  94         94          91         86                          78             70
Development (%)                6          6           9          14                          22             30
Total (%)                      100        100         100        100                         100            100

Per Capita (KShs)             469.4        487.9                  552.9          646.3       750.6          983
Per Capita (US$)              6.1          6.4                    7.4            9.1         10.9           13.8
Ministry of Health Expenditure (Gross)
as % of Total Government
      Recurrent               8.69         7.76                   7.66           6.29                       6.7
      Development             5.12         2.77                   2.01           3.73                       5.8
      Total                   8.33         6.99                   6.1            5.73                       6.4
Ministry of Health Expenditure (Gross) as % of GDP
      Recurrent               1.4          1.4                    1.4            1.3         1.2            1.1
      Development             0.1          0.1                    0.1            0.2         0.3            0.6
      Total                   1.5          1.5                    1.6            1.5         1.5            1.7


Table 2.1 and Figure 2.1 show trends in recurrent and development expenditures of
the Ministry. Recurrent expenditures are consistently higher than development
expenditures over the five-year period. As a share of total MOH expenditures,
recurrent spending accounted for 94% of the total in 2002/03, 91% in 2004/05 and
78% in 2006/07. While there was a downward trend in recurrent expenditures as a
share of the total MOH spending, expenditures on development increased,
accounting for 6% in 2002/03, 9% in 2004/05, and 22% in 2006/07. Between 2003/04
and 2006/07 development expenditures increased both as a proportion of total MOH
and overall government spending, reflecting the shift of resources towards
development in line with the overall government focus on capital and infrastructure
improvement.




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         Figure 2.1: Trend in Total MOH expenditure by vote (KShs. billion)




                                           30
                                                     Recurrent    Development
                           KShs. billion   25

                                           20

                                           15

                                           10

                                           5

                                           0
                                                 2002/03    2003/04     2004/05    2005/06      2006/07



In 2006/07, approved development budget was KShs.11 billion, but the reported
actual spending was only KShs.6 billion, about half of the approved budget. As has
been the case in the past, there are difficulties in capturing expenditures on donor A-
in-A due to non-submission of expenditure documents from development partners.
Hence, the full actual expenditure could have been higher than that reported in the
analyses in this report.

       2.1.1        Government expenditures on health in terms of per capita, share of
                    GOK and GDP

Health expenditures expressed in terms of per capita, share of government
expenditures and as a proportion of the GDP are some of the important measures of
aggregate public expenditures. They signify primarily the importance attached to the
sector, and secondly the ability to finance a desired package of services to meet the
health needs. With the adoption of MDGs, the international community has
committed to increase expenditures on health. WHO’s Macroeconomics and Health
Commission estimates that countries spend US$35 per capita on health if they have
to meet the MDG targets. At the country level, for instance, African Heads of States
have made commitment to increase to 15% by 2015 their expenditures on health in
order to provide adequate resources to meet increased demand for health care
arising from the burden of malaria, HIV/AIDS, TB and other infectious diseases.

In Kenya, the government’s recognition of the role of health in economic
development and poverty alleviation was expressed in the ERS, and recently in
vision 2030, with successive Budget Strategy Papers outlining increased projections
and commitment to spend more on health.
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Per capita expenditures: Although still lower than the WHO recommended US$35,
per capita government expenditures on health have increased over the years, rising
from US$6.4 in 2003/04 to US$10.9 in 2006/07. The increase reflects the growth in
absolute amount of expenditures allocated to health, which increased sharply
between 2003/04 and 2006/07. The expenditure in 2003/04 increased by 7.1% over
expenditure in 2002/03, while in 2006/07, the increase was 19.4% over the 2005/06.

Figure 2.2: Per capita MOH Expenditure


                        800                                                                750.6        12

                        700                                                      646.3
                                                                                               10.9     10
                        600                                       552.9
                                                                                     9.1
                                                  487.9                                                 8
                        500        469.4
                                                                   7.4
                  KSh




                                                                                                             US$
                        400          6.1            6.4                                                 6

                        300
                                                                                                        4
                        200
                                                                                                        2
                        100

                         0                                                                              0
                               2002/03        2003/04        2004/05            2005/06      2006/07

                                                            KSh           US$




Health expenditures as a share of total GOK and GDP: As a share of total
government spending and GDP, the proportion of expenditures on health has
stagnated at an average of 6% and 1.5%, respectively over the years (Figure 2.3). This
contrast with the increase in per capita spending reflects the higher growth in the
denominator (total government spending and GDP) being more than the growth in
the amount of resources allocated to health. The increase in GDP growth rate is
evident.




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Figure 2.3: Share of GDP spending on health compared with rate of GDP growth


                              8
                                                                                       6.9
                              7                                            6.1
                                                               5.8
                              6
                                                  4.9
                              5
                            % 4
                                       3
                              3
                              2            1.5          1.5          1.6         1.5         1.5
                              1
                              0
                                      2003        2004         2005        2006        2007

                                    GDP Growth Rate           Healt Spending as % GDP




       2.1.2        Policy and health financing implications of public funding on
                    health in Kenya

Despite the increase in the level of public funding on health summarised above, a
number of issues of policy and health financing implications stand out as outlined
below.

First, the Kenya public expenditures on health have been under 2% of GDP, making
the level of public spending on health in Kenya lower than in other countries in
eastern and southern African at similar or lower levels of development ( Table 2.2 (a)).
With 1.7% of GDP public spending on health, the level of expenditures remain lower
than in Tanzania (2.4%), Uganda (2.2%), Zambia (2.8%), Malawi (3.3%). Interestingly,
because of the difference in the absolute size of the economies, GDP per capita (US$)
in Kenya is the highest at US$481 compared with other countries in Eastern and
Southern African countries, followed closely by Zambia at US$471 GDP per capita.
However, with 2.8% of GDP spending on health in Zambia compared with Kenya’s
1.7%, public spending in Zambia translates into US$13.1, and US$8.1 in Kenya, and
Zimbabwe (US$10.1) (Source: UNDP: Human Development Report 2006)




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Table 2.2 (a): Total Public Spending on Health - Selected East and Central African
Countries.


                            Country    Public expenditure     GDP per
                                       on health (% of GDP)   Capita (US$)
                                       2003–04
                            Kenya      1.7                    481
                            Tanzania   2.4                    288
                            Uganda     2.2                    245
                            Zambia     2.8                    471
                            Malawi     3.3                    149
                            Zimbabwe 2.8                      363
                            Rwanda     1.6                    208
                            Burundi    0.7                    90
                            Ethiopia   3.4                    114
                            Source: UNDP: Human Development Report 2006




Secondly, the level of public spending on health as a share of GDP varies when the
approved budget is compared with actual expenditures, with the level being lower
as a percent of GDP in the case of actual expenditures, generally reflecting the
recurring under spending of the budget that leads into a wide variance between
actual expenditures and approved allocations. If approved budget is considered
public spending on health in 2006/07 would have reached 1.91% as a share of GDP
and not the reported level of 1.5% of GDP in respect of actual expenditures.

Thirdly, apart from the variance between approved budget and actual spending,
government allocations to MOH are also characterised with divergence between
projections and actual allocations (Table 2.2 (b)). . As outlined in the 2007 budget
outlook paper, health expenditures were set to increase marginally, reaching about
14 per cent of the total revenues in 2006, and at 7 per cent of total GOK expenditures
between 2006 and 2010.

Table 2.2 (b): Allocations Projections
                                                         2006            2007             2008             2009
Total GOK Expenditure                                    457.0           526.7            581.1            650.3
Total MOH Expenditure (excl. aid)                        35.0            38.9             43.1             53.0
% of total GOK                                           7.7             7.4              7.4              8.2
Total MOH Expenditure (incl. aid)                        53.7            61.4             48.6             58.3
% of total GOK                                           11.8            11.7             8.4              9.0
Total MOH as share of Total Revenue                      14.9%           18.5%            12.0%            14.6%
Source: BSP 2007


The expected increase per capita spending on health is shown in Table 2.2 (b).


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Table 2.2 (b): Expected per capita spending on health

Per capita expenditures
                                                               2006           2007           2008           2009
Total GOK Expenditure Per Capita                               204            235.1          259.4          290.3
Total MOH Expenditure Per Capita (incl. aid)                   23             27             21.7           26
Total MOH Expenditure Per Capita (excl. aid)                   15.6           17.3           19.2           23.6
User fee revenues (GOK & KNH)                                  3.3            0              0              0


As at 2006/07 public spending on health as a share of total government expenditures,
and per capita stood at 6% and US$10.9, respectively. The divergence between
projections and actual allocations on health imply that planning for service delivery
is often affected by the variations between commitments and actual budgets.

        2.1.3       Reported Cost-Sharing Revenues

Realizing higher levels of government spending commitments if combined with
management improvements and better coordination of extra budgetary resources
(user fee revenues and off-budget donor spending) for health can help raise the level
of overall expenditures to generate more funding to help achieve both the technical
and allocative efficiencies necessary to reverse the declining trend in health
indicators. For instance, user fee revenues in public health facilities have increased to
KShs.1.4 billion as at 2006/7 (Table 2.3), although not to the KShs.3.3 billion
projected in the 2007 BSP. Despite, though under performance of user fees, it
remains a promising source of additional revenues for financing health care
especially if it is combined with measures that identify and guarantee access to
services by all, especially the needy.



Table 2.3: Total Reported Cost-Sharing Revenues by Financial Year
          Financial year              Total (KSh. Million)
          2002/03                     1,032.9
          2003/04                     1,004.9
          2004/05                     1,099.5
          2005/06                     1,468.8
          2006/07*                    1,418.5
             Source: Facts and Figures at a glance (MOH, Division of Policy and Planning),
                    * Financial Information Systems, Ministry of Health.


  2.2     Recurrent and Development Expenditure for 2002/03-2006/07


Despite the low MTEF ceilings, the ministry has made efforts to improve the
efficiency of its expenditures by: efficiency in expenditure management; and
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allocating the expenditures to correspond to its core functions but at the same time
ensuring it is consistent with the priorities.

The analysis below shows the breakdown of MOH expenditure by sub vote and
economic category of spending to support the core functions namely policy and
regulation; service delivery; training and research and to ensure availability and
accessibility of quality services.

       2.2.1        Expenditures by Functional Classification

In line with its structure and to respond to its functions, expenditures of the MOH
have traditionally been distributed across eight sub votes, namely: administration
and planning; curative health; preventive and promotive services; rural health
services; health training and research; medical supplies coordinating unit; and
tertiary hospitals (Kenyatta and Moi).

General administration and planning constitute headquarters functions as well as
personnel as well as some of the roles that are administered at the centre on behalf of
the provincial and district levels such as procurement of goods and services,
financial management, standards and quality assurance, etc. Curative health
comprises expenditures on provincial and district/sub-district hospitals, and for
specialised hospitals (mental and spinal injury). Expenditures on preventive and
promotive services support public goods interventions mainly control of diseases
and health problems such as environmental problems, malaria, immunization,
communicable and infectious diseases e.g. TB, HIV/AIDS/STIs, maternal and
reproductive health, etc. At the same time, spending on rural health services support
the provision of primary care at the dispensary and health centres levels, while
health research and training at present include grants provided to KEMRI and
KMTC for the research and training conducted by the two institutions. Another
category of spending is the grant to KNH and Moi for the tertiary and specialised
care they offer to support the overall provision of health services in the country.

In the recent years, especially following the publication of the PRSP and ERS, and
subsequent adoption of the KEPH framework, the priority areas of expenditures of
the ministry were identified as: preventive and promotive health services, primary
care, with the bulk of the services under preventive and promotive as well as rural
health services categorised as core poverty programmes of the ministry. As a result,
the objective was to raise budget allocation and spending on these interventions.
Expenditures on curative health and on tertiary hospitals were set to decrease over
time to release resources to be shifted more towards preventive and promotive
health and to rural health services.


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       Table 2.4 and Figure 2.4 show the distribution of the total MOH expenditures by
       sub-votes. It is clear that expenditures of the Ministry of Health are distributed, in
       order of size, by curative health, KNH, rural health and preventive & promotive
       health. Although its share of expenditures is reducing over the years, curative health
       still accounts for 45% of the total expenditures of the ministry.


       Table 2.4: Actual expenditures (gross): recurrent and development by sub vote (KShs Millions)

Code      Sub-Vote                                          2002/03         2003/04         2004/05          2005/06         2006/07
110      General Admin. and Planning                         1,147.3           957.3         1,381.7         1,269.7             1,647.7
           Sub vote total as % Total MoH                         7.5              5.8             7.2             5.5                6.0
111      Curative Health                                     7,797.7         7,974.5         8,801.5        10,699.5        12,386.7
           Sub vote total as % Total MoH                        50.8            48.5            45.9             46.5              45.0
112      Preventive and Promotive                              815.6           951.5         1,729.9         1,919.3             2,709.2
           Sub vote total as % Total MoH                         5.3              5.8             9.0             8.3                9.8
113      Rural Health Services                               1,634.8         2,133.7         2,507.7         3,795.2             4,111.9
           Sub vote total as % Total MoH                        10.6            13.0            13.1             16.5              14.9
114      Health Training and Research                        1,172.7         1,525.4         1,487.7         1,567.9             1,600.0
           Sub vote total as % Total MoH                         7.6              9.3             7.8             6.8                5.8
116      Medical Supplies Coordinating Unit                     34.2            32.0           132.6           183.2              272.8
           Sub vote total as % Total MoH                         0.2              0.2             0.7             0.8                1.0
117      Kenyatta National Hospital                          2,327.0         2,409.0         2,659.0         2,858.0             3,985.2
           Sub vote total as % Total MoH                        15.2            14.7            13.9             12.4              14.5
118      Moi Teaching and Referral                             421.5           458.1           458.1           714.1              816.7
           Sub vote total as % Total MoH                         2.7              2.8             2.4             3.1                3.0
         Total MoH                                         15,350.8         16,441.5        19,158.2        23,006.9        27,530.0
           Total as % Total MoH                                100.0           100.0           100.0           100.0              100.0



       Another important feature of the distribution of expenditures relates to spending on
       KNH and Moi referral hospitals. Combined spending on these institutions absorb
       the second largest share of the expenditures, accounting for 17.9% in 2002/03, 17.5%
       in 2003/04, 16.3% in 2004/05, 15.5% in 2005/06 and 17.5% in 2006/07. Further,
       expenditures on rural health services and on preventive and promotive health have
       been increasing steadily over the period.




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Figure 2.4(a): Actual expenditures (gross) of recurrent and development by sub
vote (%)


                  60

                  50

                  40

                  30

                  20

                  10

                   0
                          2002/03           2003/04      2004/05         2005/06          2006/07

                       General Admin. and Planning                Curative Health
                       Preventive and Promotive                   Rural Health Services
                       Health Training and Research               Medical Supplies Coordinating Unit
                       Tertiary Hospitals




Analysis of the expenditures by recurrent and development, and by specific
economic categories reveals further the salient features, and the efforts being made
to make spending consistent with the policies and priorities of the ministry (Tables
2.5, 2.6 and 2.7).

An inspection of Tables 2.5 shows that expenditures on curative health and on KNH
and Moi T&RH absorbed about 70% of the recurrent expenditures, with the rest
spent on rural health services, health research and training, and preventive and
promotive health services.

On the other hand, when development expenditures are considered, a different
pattern in the distribution of expenditure emerge with spending on preventive and
promotive and rural health services becoming dominant ( Table 2.6).

The two scenarios of expenditure distribution within recurrent and development
show the significance of wage related spending especially on curative health mainly
hospitals (Provincial and District), as well as the grants provided to the tertiary
hospitals and the research and training institutions for wage related expenditures,
and for operations and maintenance.

As shown on Table 2.6, expenditures on Preventive and Promotive dominated the
expenditures on development budget, accounting for 29%, and Rural Health
Services (22%), while Curative Health accounted for 19% of the development
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spending of the MOH in 2006/07. The dominance of preventive and promotive and
on rural health services in development expenditures is largely due to the
concentration of spending on drugs and medical supplies, infrastructure and
equipment. The expenditures are mainly for inputs on health interventions of public
goods nature, namely HIV/AIDS; malaria control; reproductive health; TB and
immunization programmes.

Tables 2.5: Recurrent Actual Expenditures (gross) by Sub Vote in KSh Million

Code     Sub-Vote                                 2002/03       2003/04         2004/05        2005/06         2006/07
         General Admin. and
110      Planning                                   714.8          760.4        1,223.0           912.5         1,006.7

         As % of total MoH                             5.0           4.9             7.0             4.6             4.7

111      Curative Health                          7,677.6        7,768.0        8,639.5         9,996.8        11,223.3

          As % of total MoH                           53.3          50.3            49.6           50.6             52.1

112      Preventive and Promotive                   632.2          863.6          795.9           757.0           997.7

         As % of total MoH                             4.4           5.6             4.6             3.8             4.6

113      Rural Health Services                    1,436.4        1,687.6        2,041.5         2,881.7         2,784.0

          As % of total MoH                           10.0          10.9            11.7           14.6             12.9

114      Health Training and Research             1,161.8        1,459.8        1,467.7         1,511.9         1,550.0

          As % of total MoH                            8.1           9.5             8.4             7.6             7.2
         Medical Supplies
116      Coordinating Unit                            34.2          32.0          132.6           133.2           134.5

          As % of total MoH                            0.2           0.2             0.8             0.7             0.6

117      Kenyatta National Hospital               2,327.0        2,409.0        2,659.0         2,858.0         3,099.6

          As % of total MoH                           16.2          15.6            15.3           14.5             14.4

118      Moi Teaching and Referral                  421.5          458.1          458.1           714.1           746.7

          As % of total MoH                            2.9           3.0             2.6             3.6             3.5

         Total MoH                               14,405.5      15,438.5        17,417.3        19,765.1        21,542.4

          Total                                     100.0          100.0          100.0           100.0           100.0




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 Table 2.6: Actual Development Expenditures (gross) by Sub Vote in KSh Million

Code    Sub-Vote                                             2002/03      2003/04       2004/05      2005/06       2006/07
110     General Admin. and Planning                             432.5        196.9         158.7        357.2         641.0
          Sub vote total as % Total MoH                          45.8         19.6           9.1         11.0          10.7
111     Curative Health                                         120.1        206.5         162.0        702.8       1,163.3
          Sub vote total as % Total MoH                          12.7         20.6           9.3         21.7          19.4
                                                                                                       1,162.
112     Preventive and Promotive                                183.4         87.9         934.0            3       1,711.5
          Sub vote total as % Total MoH                          19.4          8.8          53.6         35.9          28.6
113     Rural Health Services                                   198.4        446.1         466.2        913.5       1,327.9
         Sub vote total as % Total MoH                           21.0         44.5          26.8         28.2          22.2
114     Health Training and Research                             10.9         65.6          20.0         56.0          50.0
          Sub vote total as % Total MoH                           1.2          6.5           1.1          1.7              0.8
116     Medical Supplies Coordinating Unit                                                               50.0         138.3
          Sub vote total as % Total MoH                                                                   1.5              2.3
117     Kenyatta National Hospital                                                                                    885.6


         Sub vote total as % Total MoH                                                                                 14.8
118     Moi Teaching and Referral                                                                                      70.0


          Sub vote total as % Total MoH                                                                                    1.2
                                                                            1,003.                     3,241.
        Total MoH                                               945.3           0        1,741.0           9        5,987.6
        % Total                                                 100.0        100.0         100.0        100.0         100.0



                  2.2.1.1 Distribution of recurrent and development expenditures

                    Recurrent expenditures

 Analysis of recurrent expenditures shows the dominance of curative health and on
 KNH and Moi referral hospitals, with the two sub votes accounting for 70% of the
 expenditures (Figure 2.4(b). The rest of the expenditures are spread across rural
 health services, health research and training, and preventive and promotive.




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                                                              Figure 2.4 (b): Composition of recurrent expenditures

                                       60


                                       50
    percent share of total recurrent




                                                                                                                 Curative Health

                                                                                                                 KNH & Moi
                                       40

                                                                                                                 Preventive and Promotive
                                       30
                                                                                                                 Rrural Health


                                       20                                                                        Health Training &
                                                                                                                 Research
                                                                                                                 MSCU
                                       10


                                       0
                                            2001/02 2002/03 2003/04 2004/05 2005/06 2006/07
                                                                                year



                                                                  Development expenditures

On the other hand, disaggregating the development expenditures shows a different
pattern characterised by dominance of preventive and promotive and rural health
services.

                                                                            Figure 2.4 c: Composition of Development
                                                                                           Expenditures

                                                                  60
                                                                  50                                              Preventive
                                                  percent share




                                                                  40                                              Rural Health
                                                                  30
                                                                                                                  Curative Health
                                                                  20
                                                                  10                                              KNH & Moi
                                                                                                                  Hospitals
                                                                  0                                               Research
                                                                       2002/03 2003/04 2004/05 2005/06 2006/07
                                                                                        year


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From Figure 2.4c, expenditures on preventive and promotive health are the largest,
constituting 29% of the expenditures on the development budget, followed by Rural
Health Services (22%), while Curative Health accounted for 19% of the development
spending of the MOH in 2006/07. The dominance of preventive and promotive and
on rural health services in development expenditures is largely due to the
concentration of spending on drugs and medical supplies, infrastructure and
equipment. The expenditures are mainly for inputs on health interventions of public
goods nature, namely HIV/AIDS; malaria control; reproductive health; TB and
immunization programmes.

        2.2.2       Expenditure by Economic Classification

Further analysis of MOH spending reveals that there was an increase in excess of
40% in expenditures on all the economic categories, except for the spending on KNH
that recorded an increase of 33% over the period 2002/03 and 2006/07 (Table 2.7: ).

Overall, an analysis of the economic classification of expenditures shows that:

        First, recurrent expenditures have increased in nominal terms during the period from
         2002/03 to 2006/07 by 49.5%;

        All the economic categories showed increases from 2002/03 to 2006/07 in excess of
         40%, except KNH that recorded an increase of 33% during the period.

        Personnel expenditures: Of the total KShs.21, 542 million spent on recurrent vote
         in 2006/07, 52.7% (or KShs.11,347 billion) was spent on staff salaries and
         emoluments.

        Expenditures on Purchase of Plant & Equipment increased substantially in excess of
         400% during the period on account of procurement of medical equipments and
         ambulances.

The salaries and other personnel emoluments component has continued to receive
the largest share of recurrent expenditures, reflecting the large importance of human
resources in the provision of health services. It is difficult to say what share of
spending constitutes a reasonable level for salaries and other personnel emoluments.
Internationally, ratios for salary spending vary widely from 20-30 percent in some
Central Asian countries to more than 70 percent in some OECD, and some African,
countries.

There has been gradual increase in nominal expenditure on salary and personnel
emoluments from KSh 8.1 billion in 2003/04 to KSh 11.4 billion in 2006/07, an
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increase of 40%. The consistent rise in salary provision in the budget throughout the
period is due to a combination of individual and group effects. At the individual
level are such things as incremental creep – the rise in salary payments due to annual
increments and grade changes – and the across-the-board salary increases for the
staff. Some of the rise can also be accounted for by the hiring of extra staff. The share
of wage-related expenditures becomes even more significant if the grants to tertiary
hospitals and other semi autonomous institutions (KEMRI, KMTC, and KEMSA),
which are largely for personnel costs is added to the wage-related expenditures.

The second largest component of recurrent spending has been the drugs and medical
consumables. The two national hospitals (Kenyatta National Hospital and the Moi
Teaching & Referral Hospital) attracted close to 18% of total MOH recurrent
expenditure.

The main question, at least at the macroeconomic level, concerns whether the
proportion devoted to supplies, operations and maintenance is sufficient for the
existing staff to do their job satisfactorily while at the same time providing adequate
remuneration to ensure that they work effectively.

Table 2.7: Actual Recurrent (gross) Expenditure by Economic Category (KSh million)
                                          2002/03 2003/04       2004/05 2005/06 2006/07
Salaries and Other Personnel                          7,798        8,101           9,035      10,407      11,347
  as % Total MOH Recurrent                              54.1        52.5            51.9        52.7         52.7
Transfers, Subsidies and Grants                       1,157        1,455           1,563       1,635        1,667
  as % Total MOH Recurrent                               8.0          9.4            9.0          8.3         7.7
Drugs and Medical Consumables                         1,350        1,716           1,866       2,074        2,388
  as % Total Recurrent                                   9.4        11.1            10.6        10.5         11.1
Other Operations & Maintenance                        1,257        1,285           1,756       1,481        1,767
as % Total MOH Recurrent                                 8.7          8.3           10.1          7.5         8.2
Purchase of Plant & Equipment                             95          15              81         596          527
  as % Total Recurrent                                   0.7          0.1            0.5          2.9         2.4
Kenyatta National Hospital                            2,327        2,409           2,659       2,858        3,100
  as % Total MOH Recurrent                              16.2        15.6            15.3        14.5         14.4
Moi Teaching & Referral Hospital                        422          458             458         714          747
  as % Total MOH Recurrent                               2.9          3.0            2.6          3.6         3.5
Total Recurrent (Gross)                              14,405       15,439         17,417       19,765      21,542
                      %                               100.0        100.0           100.0       100.0        100.0


         Policy issues

From the analysis of Tables 2.5, 2.6 and 2.7, the following observations arise:
      a) dominance of human resources expenditure on the overall MOH budget;
      b) continued support and dependence of SAGAs on MOH;
      c) increased allocations on preventive and promotive health;
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            d) increased allocation on drugs and medical supplies; infrastructure and
               equipment; and on services targeting common diseases and health
               problems;
            e) allocation of more resources at the district level services (district hospitals
               and health centres & dispensaries).



          2.2.3        Overview of budget allocation vis-à-vis budget requested, actual
                                       expenditures and implications thereof.

Budgeting in the Ministry of Health is dictated by the ceilings set out in the Budget
Outlook Paper and Budget Strategy Paper. Going by this process, the ministry uses the
ceilings to distribute across the programmes, with special attention given to core
poverty programmes.

In the recent past budgetary allocations to the health sector have increased, rising from
Kshs.18.3 billion in 2002/3 to KShs. 33.3 billion in 2006/7, an increase of over 82%.
However, the increase is not adequate to meet the estimated resource requirements in
the health sector, which is pegged on the requirements to finance the package of
services identified in the new strategic plan. The costing and estimates of resource
requirements contained in the NHSSP II launched by the Ministry in 2005 was based on
the analyses and growth in budgetary allocations projected in the BSP 2003 – 2007/08.

Ceilings to the Ministry of Health as a ratio of government expenditures were to
increase from 7.66% in 2004/05 and progressively reach 9.32% in 2006/07. These
projections meant that public expenditure on health would grow in absolute terms, as
well as in proportion to GDP, overall government expenditures, and in per capita terms.
The commitment to increase spending on health was to allow increased access to quality
health care, especially through improvement in the provision of drugs, and staff
improvement and skills strengthening. Table 2.8 summarises the funding flows by size
and source.

   Table 2.8: Projected funding on Ministry of Health
    Source of funding        2005/06    2006/07      2007/08                                  2008/09           2009/10
    GOK                      34,635     40,203       45,217                                   50,606            56,611
    Donor                    4,910      5,277.00     2,703.00                                 2,716             2,869
    Total all sources        39,545     45,480       47,920                                   53,322            59,480

At the present level of budgetary allocations to Ministry of Health, it is clear that the
financing targets have not been achieved, with the consequence that there is a funding
gap. In particular, per capita spending stood at US$11 in 2006/07, and the ratio of health


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                            Ministry of Health - MPER 2008 Report
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spending compared to total government and GDP have remained lower than was
projected.

The funding gap can be visualized if the per capita resources required to implement
KEPH is compared with the current levels of per capita spending ( Table 2.9). The
implication of the funding gap is that the ministry is forced to scale down certain
operation in order to be within the budget ceilings, hampering the progress being made
towards achieving the MDGs.


                       Table 2.9: Per capita spending required for KEPH (US$)

                                                        2004/05            2005/06       2006/07
                    Current level                       7.4                9.1           10.9
                    KEPH requirement                    25.8               25.8          28.8
                    WHO 2000                            35                 35            35




          2.2.4        Budget Implementation by Function: Actual Expenditures versus
                       Approved Budgets

   Considering the period 2002/03 to 2006/07, total expenditures have oscillated at 80%
   level of the approved budget, with a higher share of the variance being accounted
   for by the large under spending of the development component of the budget (Table
   2.10). For instance over the period 2002/03 to 2006/07, while the recurrent budget was
   nearly fully utilized, expenditures on development remained at an average of 34% of
   the budget, with a jump to 54% of expenditures recorded in 2006/07 financial year.
   Figures 2.5 and 2.5 illustrate the actual expenditure versus approved budget.


   Table 2.10(a): Actual expenditures as a % of approved (recurrent and development) budget by sub-
   votes (%)


   Sub- vote                                               2002/03       2003/04       2004/05       2005/06      2006/07
   Administration and Planning                                   74            83            90            71            70
   Curative Health                                              140           146            96            90            94
   Preventive and Promotive
                                                                 51            47            54            33            46
   Rural Health Services
                                                                 25            32            81            77            84
   Health Training and Research
                                                                 85            95            85            74            98
   Medical Supplies Coordinating Unit
                                                                 50            46            91            60            76

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                            Ministry of Health - MPER 2008 Report
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Sub- vote                                               2002/03       2003/04       2004/05       2005/06      2006/07
Kenyatta National Hospital
                                                             105           100           100          100             93
Moi Teaching and Referral
                                                             100           100           100          100           100
Total                                                         79            83            87           76            83


Table 2.10: (b) Actual expenditures as % of approved budget (recurrent) by sub vote

Sub-Vote                                                2002/03       2003/04      2004/05       2005/06       2006/07
Administration and Planning                                 132           141           97            84            92
Curative Health                                             152           152           99            98            97
Preventive and Promotive                                     94            86           94            74            83
Rural Health Services                                        33            34          102            96            95
Health Training and Research                                 100           100          100           100           100

Medical Supplies Coordinating Unit                             50           46            98            97           97
Kenyatta National Hospital                                   105           100          100           100           100
Moi Teaching and Referral                                    100           100          100           100           100
Total                                                        100            97           99            96            96

Table 2.10: (c)   Actual expenditures as % of approved budget (development) by sub
vote

Sub-Vote                                               2002/03 2003/04 2004/05 2005/06 2006/07
General Admin. and Planning                                 43      32      57      51      51
Curative Health                                                23           60            38           41            73
Preventive and Promotive                                       20            8            39           24            37

Rural Health Services                                           9           25            43           47            69

Health Training and Research                                    5           46             7             9           66

Medical Supplies Coordinating Unit                                                                     30            63
Kenyatta National Hospital                                                                                          74
Moi Teaching Hospital                                                                                              100
Total                                                          19           26            39           33           54




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          Figure 2.5: Actual expenditures as % of approved budget

                                             100                 97                99                 96                  96
                                      100
                                                                                              87
                                       90                                   83                                                        83
            Actual as % of Approved




                                                        79                                                      76
                                       80
                                       70
                                       60                                                                                        54
                                       50                                                39
                                       40                                                                  33
                                       30                             26
                                                   19
                                       20
                                       10
                                        0
                                              2002/2003          2003/2004           2004/05          2005/06                  2006/07

                                                                      Recurrent      Development       Total




                                                  Figure 2.6: Actual expenditure as % of Approved Recurrent budget by sub vote

    160

    140

    120

    100
%




     80

     60

     40

     20

      0
                                      2002/2003                 2003/2004                 2004/05                    2005/06               2006/07




                                  General Admin. and Planning          Curative Health                      Preventive and Promotive
                                  Rural Health Services                Health Training and Research         Medical Supplies Coord Unit
                                  Kenyatta National Hospital           Moi Teaching and Referral            Total




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  2.3     Expenditure Analysis of Semi Autonomous Government Agencies (SAGAs)


Semi Autonomous Government Agencies have budgetary implications in the
Ministry’s expenditure. This section provides budgetary analysis of each of the
SAGAs while fulfilling their contribution to the core functions of the ministry.

        2.3.1       Kenyatta National Hospital

The Kenyatta National Hospital (KNH), the apex of the health care sector in Kenya,
has 50 wards, 20 out patient clinics, 24 theatres (16 specialized) and an accident and
emergency department. Out of the 1,800 beds, 225 beds are for the private Wing.
There is a Doctors Plaza consisting of 60 suites for various specialities.

Over the last three years, there has been improved revenue generation and collection
mainly due to computerization of patient registration and billing leading to effective
collection and accounting for revenue. Currently, the hospital is collecting KShs 1.8
billion annually. The KNH has also established a debt management unit to manage
and develop mechanisms to mitigate the high debt portfolio amounting to almost
30% of revenue collections every year.

During 2006/07, the operations of the KNH were funded through GoK grants (66%),
cost sharing revenue (32%) and other incomes and projects grants/donations from
partners (1%). Over time, GoK grants have increased marginally by 7% and were
mainly used to fund staff costs occasioned by harmonisation of salaries and payment
for collective bargaining agreement for unionisable staff (Table 2.11).

There has been a marked increase in cost sharing revenue generation and collection
which is attributed to improved financial and operational controls, efficiency in
revenue collection and automation of some operations (Table 2.11). However, the
revenue collection is still below the expected levels. In 2005/06, the Private Wing,
with average bed occupancy of 74%, earned total revenue of KSh 491 million against
a target of KSh 381million. During the year 2006/07, 61% of total expenditure was
utilised on staff costs, while the remainder (39%) was on operation and maintenance
related costs.

Table 2.11: Income and Expenditure Analysis

 Description                                         2005/06                      2006/07
 Income                                                  KSh        %                 KSh         %
 Government of Kenya – Grants                 2,858,010,960       67.2      3,272,808,344      66.0
 Others                                           62,764,066       1.5         79,093,119        1.6
 Sub total                                    2,920,775,026       68.7      3,351,901,463      67.6

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 Description                                         2005/06                       2006/07
 Cost Sharing/A-in- A
 Gross revenues                                1,329,136,208      31.3      1,573,843,746      31.7
 Investment Income                                 9,872,867       0.2         13,701,465        0.3
 Surplus/(Deficit ) Private Wing                 (7,445,371)      (0.2)        19,117,028        0.4
 Gain on disposal of fixed Assets                    408,480       0.0
 Sub total                                     1,331,972,184      31.3      1,606,662,239      32.4


 TOTAL INCOME                                  4,252,747,210     100.0      4,958,563,702     100.0


 Total Expenditure                             3,867,180,460       100      4,632,964,280     100.0
 Stock Decrease(increase)                         13,128,261                 (13,979,462)
 TOTAL EXPENDITURE                             3,880,308,721                4,618,984,818
 Surplus for the year                           372,438,489                   339,578,884


       2.3.2        Kenya Medical Research Institute (KEMRI)

As seen in Table 2.12, 99% of total income to KEMRI is grants. About a quarter of all
expenditures, meet staff costs.

Table 2.12: Income and expenditure statistics
                               2005/06                              2006/07
 Income                        KSh                      %           KSh               %
 Grants                        2,765,855,675            98.6        3,392,553,818     98.5
 Others                        39,760,015               1.4         50,750,672        1.5
 TOTAL                         2,805,615,690            100.0       3,443,304,490     100.0

 Expenditure
 Staff Costs                   773,002,348              26.7        814,719,390       23.1
 Operating costs               2,067,156,282            71.5        2,651,517,369     75.3
 Non- financial costs          52,846,463               1.8         53,278,210        1.5
 Total Expenditure             2,893,005,093            100.0       3,519,514,969     100.0

 Deficit                       (87,389,403)                         (76,210,479)



       2.3.3        Kenya Medical Training College

Table 2.13 shows the analysis of the budgeted expenditure versus actual
expenditure. As seen, there was a surplus of KSh 27.5 million (total revenues and
grants less total expenditures). Of total expenditures, 45% was the GoK contribution.
The bulk of the remainder was revenues raised by the College mainly in form of
boarding and tuition fees and application fees.



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Table 2.13: Analysis of the Budgeted expenditure versus Actual Expenditure
                                                                                                         % of actual
 Description                                    Actual              Budget              Actual
                                                                                                        over Budget
                                                2005/06             2006/07            2006/07               2006/07
 Recurrent Expenditure
 Operations and maintenance                                     608,765,000        634,351,712                  104.2
 Personal emoluments                                            657,000,000        609,679,602                   92.8
 TOTAL                                                        1,265,765,000      1,244,031,314                   98.3

 Development expenditure                                        129,800,000        200,410,927                  154.4

 Grants
 Grants from GOK- Recurrent                                     615,409,002        615,409,002                  100.0
 Grants from GOK- Development                                    50,000,000         50,000,000                  100.0
 USAID Grant                                                                        15,193,640
 VVOB                                                            23,536,050
 TOTAL                                     651,593,841          688,945,052        680,602,642

 Other Sources of Revenue
 Boarding & Tuition fees                                        630,596,182        745,533,027                  118.2
 Application fees                                                23,000,000         32,214,653                  140.1
 Sale of tender documents                                         1,200,000            859,400                   71.6
 Rental income                                                   27,209,200          4,973,260                   18.3
 Sale of non- capital goods                                         500,000              1,639                    0.3
 Miscellaneous receipts                                           2,250,000          7,770,442                  345.4
 TOTAL                                     653,941,609          684,755,382        791,352,421                  115.6

 Total (grants & Revenues)                                    1,373,700,434      1,471,955,063                  107.2
 Total Expenditure                                            1,395,565,000      1,444,442,241                  103.5
 Surplus                                                       (21,864,566)         27,512,822

 GOK grants as % of total
                                                                         48.4              45.2
 Funds available


       2.3.4        Kenya Medical Supplies Agency

Table 2.14 shows the income by source and the expenditures for KEMSA. Of the
KSh 169.8 million (40% of total income) received as grants from the MOH in 2006/07,
KSh 119.8 million was recurrent grants while the balance of KSh 50 million was the
development grant. In addition, total reimbursements from the MOH were KSh
162.7 million (38% of total income).

Out of the total expenditure (KSh 372.4 million), 41% was for Transport operating
expenses and a further 26.5% was for salaries and wages. A surplus of KSh 53.7
million was recorded in 2006/07. This surplus was not because of gains in operations,
but because of timing differences in expenditure and the differences between wear
and tear and capital expenditure.
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Table 2.14: Income and Expenditure by year
 Description                                     2005/06                               2006/07
 Income                                                      KSh             %                   KSh       %
     Grants from MOH                                 169,800,000           51.3           169,800,000    39.9
     Reimbursement from MOH                                                               162,656,279    38.2
     Sale of tender documents                           2,902,258            0.9            3,070,000     0.7
     Profit/loss on disposal of FAs                                                           892,746     0.2
     Other Mission Pharm                                                                      351,138     0.1
     European Union                                                                        55,120,553    12.9
     Sale of scrap                                                                            695,676     0.2
     USAID                                             3,881,037            1.2             3,881,037     0.9
     Global Fund                                      10,532,290            3.2            15,882,769     3.7
     World Bank                                        6,343,675            1.9             6,343,675     1.5
     E-sokoni Project                                136,202,964           41.2             4,864,499     1.1
     Interest on deposits                              1,019,720            0.3             2,470,882     0.6
 TOTAL INCOME                                        330,681,944          100.0           426,029,254   100.0

 Expenditure
     Administrative expenses                           26,783,266           6.8            44,745,734    12.0
     Transport operating                               66,764,537          16.9           152,504,869    41.0
     Travelling and Accommodation                      14,123,516           3.6            12,658,020     3.4
     Board Allowances & Conferences                    14,590,948           3.7             9,476,496     2.5
     Insurance                                          6,396,368           1.6            10,460,599     2.8
     General Office expenses                           14,950,594           3.8            22,539,479     6.1
     Maintenance of Building &
 Machinery                                                421,084           0.1             2,613,080     0.7
     Audit Fees                                           148,720           0.0               213,562     0.1
     Salaries & wages                                  94,009,236          23.8            98,826,716    26.5
     E-sokoni Project                                136,202,964           34.5
     Depreciation                                      20,963,361           5.3            18,329,295     4.9
 TOTAL Expenditure                                   395,354,594          100.0           372,367,850   100.0
     Surplus                                          (64,672,650)                         53,661,404


       2.3.5        Moi Teaching and Referral Hospital

The Government allocation to Moi Teaching and Referral Hospital in 2006/07 was
KSh 746 million. Table 2.15 gives an analysis of the income and expenditure.

Table 2.15: Income and Expenditure by year

                                                             2005/06                               2006/07
Description                                                      KSh               %                   KSh            %
Income
Government Grants                                         714,072,072         69.9               746,671,706        64.2
Cost Sharing                                              212,736,790         20.8               286,789,569        24.7
Income generating unit                                     47,652,103          4.7                59,306,595         5.1
Other Income                                               47,517,865          4.6                70,289,717         6.0
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TOTAL                                                   1,021,978,830          100.0             1,163,057,587      100.0
Expenditure
Personnel Emoluments                                        679,647,980         89.4              805,532,014        87.1
Administrative costs                                         42,848,619          5.6               44,183,812         4.8
General and Operation expenses                               33,677,608          4.4               70,299,609         7.6
Miscellaneous expenses                                        1,794,206          0.2                2,860,732         0.3
Legal and provision for audit                                 2,073,317          0.3                1,511,609         0.2
Total Expenditure                                           760,041,730        100.0              924,387,776       100.0



       2.3.6        National Hospital Insurance Fund

The National Hospital Insurance Fund NHIF strengthened its financial position in
2006/07 with realized revenue from contributions amounting to KSh 3.95 billion over
the previous year contribution revenue of KSh 3.46 billion, an increase of 14% (Table
2.16). The excess of revenues over expenses (surplus) declined to KSh 978 million in
2006/07 compared to KSh 1,015 million in 2005/06. This performance may be
attributed to higher reimbursements, which increased by 28% from KSh 1.1 billion in
2005/06 to 1.4 billion in 2006/07. In addition, administrative expenditures increased
by 25% in 2006/07 compared to previous year.

Revenues from “other incomes”, increased by 81 per cent in 2006/07 over the
previous year. Better performance is expected as more voluntary members enrol
with NHIF and more formal employees join the Fund as incomes rise due to
improved economic performance. Although NHIF does not have budgetary
implication on ministry’s allocation, it has a role to play in the strengthening of
current user fees programme, and a platform for establishment of social health
insurance.

Table 2.16: Trends in NHIF Income and Expenditure- NHIF
                           2002/03            2003/04            2004/05               2005/06            2006/07

REVENUES

                           2,523,876,081      2,639,883,578      3,117,241,202         3,458,847,816         3,954,939,675
Contributions
            Other
                           210,992,974        72,358,041         157,349,232           188,463,585               340,665,322
Income
TOTAL REVENUES             2,734,869,055      2,712,241,619      3,274,590,433         3,647,311,401         4,295,604,997



EXPENDITURE

Reimbursements             822,014,878        713,297,431        685,490,051           1,105,875,734         1,414,859,280

Administration

   Personnel              776,263,163        827,258,377        1,040,765,820         1,030,516,535         1,194,522,344


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                         Ministry of Health - MPER 2008 Report
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   Other
                                    846,506,931          704,478,176         538,018,321            496,191,147           707,984,621
    administration
Total admin expenses                1,622,770,094        1,531,736,553       1,578,784,141          1,526,707,682        1,902,506,965
TOTAL
                                    2,444,828,033        2,245,033,984       2,264,274,192             2,632,583,416     3,317,366,245
EXPENDITURE
Reimbursements as %
                                    30                   26                  21                                     30            33
of total revenue
Total admin as a % of
                                    59.3                            56.5                     48.2                 41.9          44.3
total revenue
Surplus for the year                      290,041,022         467,207,635         1,010,316,241        1,014,727,985      978,238,752

Less withholding tax                       27,549,491          4,164,702            15,027,888           23,783,687        44,059,805

Net surplus after tax                     262,491,531         463,042,933          995,288,353           990,944,298      934,178,947


Figure 2.6 compares contribution with benefits between 2000/01 and 2006/07. There
has been tremendous increase in revenue on contributions. However, although the
gap between contributions and benefits has not narrowed, it is too wide compared to
international norms.

Figure      2.6: NHIF Trends in Contributions and Benefits


                        4,000




                        3,000
         KShs Million




                        2,000




                        1,000




                           0
                                2000/01    2001/02      20020/3    2003/04    2004/05        2005/06   2006/07


                                                         Contributions            Benefits




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3         Review of Projects/Programs related to the Ministry

    3.1   Core Poverty Programmes


Since the publication of the PRSP, the Ministerial Public Expenditure Reviews
(MPERs) have become a feature of the budget process in Kenya. A common feature
has been recognition that the Core Poverty Expenditures in the Health Sector may
not represent an optimum configuration. As a result, of this the MOH Planning
Department carried out an assessment of the Core Poverty Programmes in 2005. 1
The findings and recommendations of the study are as follows.

The Core Poverty expenditures in the health sector comprise sub votes in the
following twenty programmes.
Health Dev. Project - IDA DARE       Sexually Transmitted Infections
Revolving Drug Fund                  District Hospitals
Supply of Medical equipment          Mental Health Services
Decentralisation of District Health  Spinal Injury Hospitals
Health Sector Reform                 Dental Health Services
Environmental Health Services        Communicable and Vector borne Diseases
Rural Health Centres & Dispensaries  Nutrition Programme
                                     Family Planning Maternal & Child Health
Rehabilitation of District Hospitals Care
Rehabilitation of Mortuaries         Rural Health Centres & Dispensaries
                                     Rural Health Training and Demonstration
National AIDS Control Programme      Centres

There is a consistent theme which is to focus expenditures on rural health services
and preventive and promotive health services and reduce the share of the total that
curative health services consume. In the ERS, affordability and accessibility of health
services for the poor is emphasised.

In Kenya, the evidence is that:
      a) The poor use health centres and dispensaries more than hospitals for
          outpatient treatment.
      b) The poor use hospitals less and health centres more than the rich for
          inpatient services.
      c) Delivery of inpatient services through health centres is cheaper than
          through hospitals.


1
    Review of Poverty Based Expenditures in Health Draft May 2005
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         d) Cost of service and quality of service are important considerations in
            selecting health service providers.
         e) The poor are willing to pay a higher proportion of total income than the
            rich for health services even though most of the payment is funded from
            cash rather than an insurance scheme.
         f) Payment for medicines is by far the biggest out-of-pocket expense.
         g) Malaria is the single biggest reason for seeking medical treatment at both
            inpatient and outpatient facilities.

In the review of the literature on focusing health services and the poor, the emerging
guidelines with respect to ensuring prioritization of health expenditures are:

         a) Focus on diseases that affect the poor.
         b) Focus on under 5 and maternal health.
         c) Focus on services that benefit the poor more than the non poor – primary
            care and promotive health.
         d) Improve accessibility of health services by the poor to:
                    Reduce out-of-pocket costs and other constraints such as long
                      travel.
                    Ensure that services are effectively delivered by having staff and
                      supplies in place.

In addition, the following should support this focus on expenditures:

        Ensure that these services are well staffed and equipped and therefore
         effective.
        Ensure waiver and exemption scheme is effective so that:
                     The poor seeking curative hospital care are not denied
                      treatment.
                     Under 5 and maternal health care continues to be free.
                     Key diseases that affect the poor qualify.

This typology would guide the allocation of resources within the Ministry of Health
to be focused on the poor and be consistent with the overall strategy of the Ministry
of Health to implement the Government’s health policy.


  3.2     Expenditure performance under Core Poverty Programmes 2006/07


Table 3.1 presents the recurrent non-wage expenditure under the core poverty
programmes. Most of core projects spent nearly 95% of their allocations under the
year the review period (2006/07).

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Two projects (National TB and Leprosy, Rural Health Training and Demonstration
Centres) out of 11 spent less than 60% of their non-wage allocations.

The under-spending noted above may have been due to under-funding. In line with
the core poverty requirement that they be ring-fenced, there is need to provide them
with funds as budgeted. It may also be necessary to prioritize the core poverty
projects/ Programmes in line with MDGs and Medium Term Plan as spelt in ERS
and the vision 2030.

Table 3.1: Recurrent (Vote) Expenditure (KSh): Non-Wage 2006/07

Head-     Priority Programme              Revised Estimates             Payments             Balance      Actual as %
Sub                                                   (NET)               (actual)                        of Revised
Head                                                                                                       Estimates
          Health                                              A                   B          C= A-B
                                                                                                           D=B/A*100
454       National Aids                             10,684,457           9,909,637           774,820
          Control Programme                                                                                         92.7
317       District Hospitals                    1,401,822,942       1,168,545,897        233,277,045                83.4
318       Mental Health                             77,776,738          64,438,058        13,338,680
          Services                                                                                                  82.9
320       Spinal Injury Hospital                    12,134,443           7,650,549         4,483,894                63.0
323       Environmental                             86,001,801          82,652,177         3,349,624
          Health Services                                                                                           96.1
325       Communicable and                        102,596,190           72,048,734        30,547,456
          Vector borne Diseases                                                                                     70.2
327       Nutrition programme                        4,669,173           4,612,787             56,386               98.8
328       Family planning,                          46,875,192          33,005,052        13,870,140
          Maternal & child
          Health care                                                                                               70.4
335       Rural Health Centres                  2,345,810,484       2,193,182,004        152,628,480
          & Dispensaries                                                                                            93.5
336       Rural Health Training                     43,680,732          24,551,288        19,129,444
          & Demonstration
          Centres                                                                                                   56.2
332       Drug Control                               1,448,898             996,308           452,590
          Inspectorate                                                                                              68.8
622       National Leprosy &                      100,590,000           23,065,999        77,524,001
          Tuberculosis                                                                                              22.9
          TOTAL                                 4,234,091,050       3,684,658,490        549,432,560                87.0



Table 3.2 gives information on development expenditure under the core poverty
programmes. The activities presented are recurrent in nature.



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The data indicate that there is very low level of spending in most of the programmes
apart from Global Fund (malaria) which spent over 70 of its allocation. The reasons
of low spending can be attributed to inadequate capture of expenditure returns as
most of allocations are A-in-A.

Table 3.2: Development (Vote) Expenditure (KSh):Non-Wage 2006/07
Head-      Priority Programme                           Revised            Payments           Balance     Actual as %
Sub                                                    Estimates            (Actual)                      of Revised
Head                                                       (NET)                                           Estimates t
                                                               A                    B          C=A- B       D=B/A*100
317        District Health Hospitals               1,436,327,507          395,713,354    1,040,614,153              27.6
594        Integrated Rural Health                   108,000,005            6,628,223
           Services                                                                        101,371,782               6.1
323        Environmental Health Services              73,000,000           16,365,010       56,634,990              22.4
643        Establishment & equipping for                2,353,000                    0
           parasite centre
                                                                                             2,353,000               0.0
355        KEMSA                                     219,500,000           87,500,000      132,000,000              39.9
510        KEPI                                      232,382,804           68,105,165      164,277,639              29.3
778        Specialized Global Fund-                1,744,104,461           31,330,000
           HIV/AIDS
                                                                                         1,712,774,461               1.8
779        Special Global Fund TB                    398,655,220          115,562,613      283,092,607              29.0
780        Special Global Fund Malaria             1,932,273,777        1,387,117,494      545,156,283              71.8
325        Communicable Disease Control               33,703,840            2,829,725       30,874,115               8.4
           TOTAL                                   6,180,300,614        2,111,151,584    4,069,149,030              34.2




3.3     Allocations and expenditures to key programmes



As seen from Table 3.3, there has been a substantial increase in allocation especially
for the recurrent expenditure for selected key programmes. The immunization
programme recurrent allocation increased almost by seven times from KSh 32.6
million in 2003/04 to KSh254.8 million in 2006/07. A large portion of the allocated
funds to KEPI were for provision of vaccine supplies.

A closer look at Table 3.3 also reveals, however, that the development partners and
the Global Funds continued to dominate the development expenditures for
reproductive health and HIV/AIDS, Malaria and TB respectively.




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Table 3.3: Allocations to key programmes

Programme                                           2003/04   2004/05      2005/06                             2006/07
                                                 RECURRENT Printed Estimates (KSH million)
KEPI                                                       32.6             32.5             42.8                 254.8
Reproductive Health                                        99.7             98.9             51.6                  49.6
NASCOP                                                     12.8             12.1             16.8                  17.4

                                                          DEVELOPMENT Printed Estimates (KSH million)

                                 Source of funds
                                    GoK                    40.0             40.0           265.1                   40.6
KEPI                              DONORS                   93.0             54.0            32.2                  191.7
                                  Total                  133.0              94.0           297.3                  232.3

                                     GoK                   0.9              0.5               6.3                     -
MALARIA                           DONORS                 241.8            294.6              45.1                 166.3
                                  Total                  242.7            295.1              51.4                 166.3


                                     GoK                  21.2              0.4            201.1                  18.7
Reproductive Health               DONORS                 684.8            708.1            540.0               2,166.9
                                  Total                  706.0            708.5            741.1               2,185.6




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4         Review of Pending Bills

The volume of pending bills for both recurrent and development component of the
budget totalled KShs.310.4 million in 2006/07, with recurrent budget accounting for
up to 66% of the total mainly as a result of accumulated bills for water and telephone
services (Table 4.1). Compared with the previous year, the stock of pending bills in
2006/07 represents an increase of about 38%, and about 118% increase from the
2004/05 financial year.

      Table 4.1: Total pending bills (2004/05 to 2006/07)
                                                                     2004/05          2005/06             2006/07
                                                                     KSh
Vote head/type                            Description                million          KSh million         KSh million
                                          Utilities      (mainly
                                          water)                     57,781,145       35,275,301           109,000,000
                                          Telephone                  11,000,000       4,527,230
Recurrent                                 Other                      25,449,434                             96,400,000
Total recurrent                                                      94,230,579       39,802,531           205,400,000
Development                                                          3,447,390        118,479,103.30       105,000,000


Total (recurrent + Development)                                       97,677,969         158,281,634       310,400,000


      Historically, the stock and growth of recurrent pending bills has arisen due to
      two main factors: inadequate budget provision compared with the total
      requirements; and an accumulation of unpaid bills as at the closure of the
      financial year.

      The stock of pending bills under the Development Budget as of 2006/07 was
      Shs.105.0 million, representing a substantial increase from a level of KShs.3.4
      million in 2004/05. The increase was due to liquidity problems during the
      financial year.




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5      Analysis of Ministry Outputs and Corresponding
     Performance Indicators

Table 5.1 shows the key health monitoring indicators. It is seen that there was
improvement in performance for the four indicators against the ERS targets. The
immunization coverage stood at 72% (2006/07) up from 57 % in 2003 (the set target
was 70 % in the 2006/07 period). The proportion of pregnant women aged between
15 and 24 years attending ANC who are HIV positive was 6.3%. However, the
malaria target (Inpatient malaria mortality as % of total inpatient morbidity) was not
met. It is nevertheless, apparent that the contribution of malaria mortality to total in
patient morbidity is on the decline. This is to some extent due to the effort by the
MoH’s introduction of a new treatment policy on malaria using Artemisinin
Combination Therapy (ACT) to address the problem of resistance to Sulphadoxine
Pyremethamine (SP). In addition, aggressive malaria campaigns have been
undertaken with a focus to eradicate the disease. Accompanying the effort, in 2006
the MoH issued more than 3.4 million long life treated nets targeting children and
pregnant women. Through this campaign, 68 percent of children aged below 5 years
received nets and it is estimated that 52 percent of them sleep under a net. In
addition, over 600,000 households have been sprayed in 16 malaria epidemic prone
districts. Again, this effort is expected to contain the vector considerably.

Table 5.1: Key Health Monitoring Indicators

Objectives   Indicators           Base        Achieved                            Targets
                                  2003/04     2004/05     2005/06     2006/07     2004/05     2005/06     2006/07
Reduce       IMR Proxy: Fully
infant       immunized
mortality    children as a
                                  57          57          61          722         65.0(R)     67.0(R)     70.0(R)
             percentage of the
             population    less
             than 12 months
Reduce       Proxy            :
HIV          Proportion      of
prevalence   pregnant women
             aged between 15
                                  13          10          6.4         6.33        9.2         8.4         8
             and 24       years
             attending ANC
             who are HIV
             positive
Reduce       Proxy for MMR:
maternal     Proportion      of
                                  42          42          56          374         60.0 (R)    65.0 (R)    70.0(R)
mortality    births   attended
             by skilled health


2
  KEPI
3
  SOURCE: NASCOP
4
  Source: Annual Operation Plan2 performance report, based on routine reporting. The figure would
be validated when next KDHS is done.
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Objectives   Indicators           Base        Achieved                            Targets
                                  2003/04     2004/05     2005/06     2006/07     2004/05     2005/06     2006/07
             personnel.




Reduce the   Inpatient malaria
burden of    mortality as % of
                                  30          26          18          17          16.0 (R)    15.0 (R)    14.0 (R)
disease      total    inpatient
             morbidity




  5.1     Outcomes 2006/07


        5.1.1       Access to ARVs

The HIV/AIDS pandemic has posed and continues to pose tremendous challenges to
the health system in Kenya. The Government has, therefore, placed high-level
attention in the war against HIV/AIDS. It is recognised that HIV/AIDS increases
overall health expenditures for both medical care and social support. In order to
remove this barrier, user fees have been scraped altogether. This policy initiative
resulted to the increase in the provision of ARVs.


Numerous outcomes have been achieved and include:
  a) HIV/AIDS essential drugs with the number of ARV users increase from 2,000
     in 2003 to 20,000 in 2004 and further to 140,000 by 2007. They are now being
     dispensed freely in public health facilities.

    b) Strengthening of National Aids Control Council; constitution of Aids Control
       Units in all the ministries;

    c) Strengthening Government’s partnership with stakeholders and particularly
       the communities through capacity building. Training on Home based care,
       nutrition and provision of necessary medical care material.

    d) HIV/AIDS spread rapidly in Kenya during the 1990s, reaching prevalence
       rates of 20-30 per cent in certain areas of the country. However, the national
       prevalence rates have significantly declined, from a peak of about 13 per cent
       to 5.1 per cent by 2006/7.

    e) The National HIV Prevalence is estimated at 5.1% (2006/7). The National
       AIDS Control Council estimated that there are 1.2 million people currently
       infected with HIV/AIDS and about 85,000 people die of AIDS related
       complication annually, leaving behind over 2.4 million orphans. The number
       of AIDS related deaths has declined from 120,000 annually in 2003 to the
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         current 85,000 because of the availability of the ARVs.

    f) In terms of condom supply, reports from NACC show increase in condom
       distribution from 28,372,264 in 2005 to 36,218,799 in 2006 and further
       64,472,518 in 2007. This is attributed to the increase in demand and
       availability of funds.

5.1.2               Re-organisation of the Ministry

In line with the current National Health Sector Strategic Plan 2005-2010, the current
structure of the Ministry is not appropriate for efficient delivery of services. In line
with the Kenya’s Vision 2030, the focus in the restructuring process, will be on a
leaner centre, which will provide policy and regulation, while building capacity at
the district level to deliver health care services.


  5.2     Patients Satisfaction


The Ministry of Health conducted a Patients/Clients Satisfaction Survey in May/ June
2007 to:
        Assess the level of patient satisfaction in the provision of health services;

              Identify factors affecting satisfaction among outpatients and;

              Establish a baseline for future comparison.

The patients participating in this survey were selected from 129 public health
facilities (14 hospitals, 38 health centres and 77 dispensaries) located in eight districts
distributed through out the country.

The survey showed that there has been substantial improvement in services offered
as shown below:
       Satisfaction with health care service received ( 94%);
       Improved supply of medication ( 72%);
       Shorter waiting time (57%).




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6         Public Financial Management (PFM) Issues
Well planned and properly implemented public spending is necessary to enhance
both technical and allocative efficiency, and equity of services provided by the public
sector. The budget process starts with the review of the five-year strategic plans
followed by three year rolling MTEF budgets. Through the MTEF budget process,
budget managers prioritize activities in line with available resources after which
budget proposals from various departments are consolidated, itemized and
submitted to Treasury.



    Budget preparation/cycle

Budget preparation is set in the context of a Medium Term Expenditure Framework
process. Indicative ceilings are specified for each of the next three years in aggregate
and for each sector/ministry. The Chief Finance Officer (CFO) co-ordinates the
ministry’s budget preparation process after receiving the budget/MTEF Guidelines
from the Ministry of Finance.

The Department of Policy, Planning and Development coordinates the submissions
from the various departments and associated institutions which are presented to the
Ministerial Budget Committee, chaired by the CFO with the aim of sharing out the
resources between departments. The departments allocate the funds to their
respective activities in accordance to their priorities.

    Budget implementation

To enhance accountability and speed up service delivery, budget implementation in
the Ministry of Health is devolved to spending units which are managed by officers
(also known as AIE holders) appointed by the accounting officer to implement the
budget.

The ministry’s budget implementation process involves preparation of annual
operating plans (AOPs) by the various budget managers, issuance of Authority to
incur Expenditure (AIEs) to the budget managers and issuing of cheques to finance
the AIEs.




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  6.1     Challenges


    a) Institutions from the level of sub-district hospitals and above receive specific
       allocations, funds for health centres and dispensaries are allocated through
       the district medical officer of health (DMOH) who is in charge of rural health
       services in the district. As observed in the public expenditure tracking survey
       (PETS) report only 44% of the funds allocated towards rural health services
       reach the dispensaries and health centres which are the focal point for rural
       health.

    b) The AIE system of disbursing funds to the spending units is usually
       cumbersome leading to delays in funds reaching the spending points. In
       addition to these delays, AIEs are not usually accompanied by cheques to
       finance the same leading to delays in the budget implementation.


  6.2     Resource requests and exchequer releases


With the introduction of the zero balance drawing accounts and the cash flow
projections system, expenditure on the recurrent budget is financed as per the
ministry’s cash flow projections, which has resulted in improved recurrent budget
performance. However, development expenditure financing is based on the
ministry’s requests for exchequer, which at times takes a long time to process
resulting to delays in project implementation.


  6.3     Accounting, recording and reporting of the expenditures


Budget implementation monitoring is done through analysis of monthly expenditure
returns prepared by various spending units and through audits carried out by the
ministry auditors. However, there are delays in submission of expenditure
documents on direct payments (AIA) by the budget managers, which leads to under
reporting of AIA budget performance.


  6.4     Strengths and weaknesses in the current system


    a) Non achievement of targets due to funds not reaching the intended
       beneficiaries e.g. health centres and dispensaries;
    b) The five year strategic planning cycle is not aligned to the three year MTEF
       cycle which brings challenges in multi-year project implementation;
    c) Delays in release of development exchequer which affect project
       implementation;
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    d) Resource ceilings are not adequate given the ministry’s requirements, thus
       resulting to non-implementation of some projects. This has a negative impact
       on service delivery.


  6.5     Recommendations


    a) Capacity building on costing of activities;
    b) Development exchequer release to be based on cash flow projections to speed
       up project implementation;
    c) The planning and budgeting cycles to be aligned;
    d) Resource ceilings to be set based on the ministry requirements; and
    e) Develop a system of disbursing funds for rural health services to the health
       centres and dispensaries to ensure achievement of the rural health service
       objectives.




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7         Human Resources Management and Capacity Building

Human Resources management services are critical to the achievement of the
Ministry’s vision of provision of an efficient and high quality health care system
accessible to all Kenyans. This is also consistent with the Kenya’s Vision 2030. For
the past five years, human resource services included recruitment, appraisal
procedures; provision of pay and, employee relations; safety, health and welfare
services. The manner in which these services are offered would determine the
employee commitment to the challenging Ministry goals and this can be fostered by
encouraging personal initiative with teams under sensitive leadership.


    7.1   Key Personnel Changes


The period between 2003 and 2007 witnessed tremendous personnel changes across
all cadres and particularly the technical staff. These key cadres include doctors,
nurses, clinical officers, public health officers, laboratory technologists, nutritionists,
physiotherapists and radiographers. Table 7.1 presents the trend of the human
resources during the period 2003 – 2007.

             Table 7.1: Trend in Human Resources Development - 2003 – 2007

             Cadre                            2003         2004         2005        2006         2007
             Medical Doctors                  1,380        1,496        1,501       1,553        1,763
             Pharmacists                      160          171          130         109          119
             Dentists                         281          284          400         382          409
             Nurses                           15,581       16,123       15,899      15,082       21,981
             Clinical Officers                2,019        2,145        2,143       1,908        2,165
             Public Health Officer            2,019        2,145        2,143       3,908        4,115
             Laboratory                       1,508        1,611        1,630       1,699        1,748
             Nutritionists                    353          348          394         405          417
             Physiotherapists                 420          411          440         450          453
             Radiographers                    263          278          205         248          267
             Population (million)             33.2         34.2         35.1        36.1         37.1

From the above analysis, it is noted that staffing levels across all cadres remained
relatively low. This is attributed to inappropriate working conditions, lack of
additional employment opportunities, low staff remuneration, staff stagnation and
inadequate incentives resulting to some extent, migration abroad especially nurses.

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Currently, the trend has reversed and indications are that more technical staff are
being attracted to offer their services to the Ministry. This improvement can be
attested to the adoption of comprehensive retention strategy by expansion of
employment opportunities to absorb more medical staff and meet the local
requirements created by health care service demand (e.g. construction of CDF health
facilities). The on-going improvements in pay packages for health workers are
important attributes associated to the upsurge trend in staffing levels.


  7.2     Constraints to Service Delivery


Service delivery of the Ministry of Health has been hampered by: -

        Minimized field supervision, follow up and lack of training workshops on
         human resources issues for those at managerial level;
        Occasional absence of functioning coordination between various divisions
         and the responsible departments;
        Inadequate staff and equipment to undertake the intended interventions at all
         levels of care.


  7.3     Efforts Undertaken To Combat HIV/AIDS in the Ministry Of Health


Human Resource is the most important factor of production in any organization as it
controls all others. Success and failure of an organization depends largely on the
human resources and it is therefore necessary to examine issues that affect it.

Since the year 2003 to 2007, HIV and AIDS has been a threat to the Ministry as it
affects the most productive segment of the labour force. With its huge costs, the
health sector has registered declining productivity, increasing labour costs and loss
of skills and experience. This has also led to high staff turnover, high costs in
training and replacement, high health care and employee welfare costs including
funeral expenses.

Due to such reasons, the Ministry has put in place measures to combat the pandemic
through collaborative approach to help mitigate the negative socio-economic impact.
These include prevention and advocacy as well as establishment of care and support
system of the infected and affected.

These activities particularly covers:

    a) Sensitization of health workers on the HIV/AIDS workplace policy;
    b) Establishment of AIDS Control Unit (ACU) and Sub-ACU`s in the Districts;
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    c) There are efforts to destigmatize the scourge by encouraging Voluntary
       Counselling and Testing;
    d) A VCT centre has been set up at Afya House and;
    e) More importantly, Committees have been formed to coordinate the HIV/AIDS
       workplace policy in every district using DHMTs and PHMTs.


  7.4     Way Forward


In order to address the above Human resource challenges, the Ministry needs to
ensure alignment of planning and budgeting through development of functional
budget.

          Timely availability of financial resources to implement respective
            workplans should be ensured;

          The Ministry should adopt a completely flexible approach to staff
            deployment and a deployment policy is being formulated; and

          Lastly, there should be maintenance of employee motivation by means of
            fair and equitable payment systems, adequate personal development
            opportunities, and encourage action in relation to change management
            (e.g. adoption of new technology).




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8         Challenges and Constraints

The health sector is faced with numerous challenges. The key ones include:

         a) The health sector remains under funded to allow for adequate medical
            supplies and drugs, support operations and maintenance and facilitate
            requisite capital investments. The combined recurrent and development
            expenditures represent about 2% of the GDP. The per capita public
            expenditure on health is 13 US Dollars in 2007/08. The World Health
            Organization recommends 34 US Dollars be spent per capita. The public
            health allocation averages 8 percent compared to a recommendation by
            the Abuja Declaration where African governments made a commitment
            to allocate 15 % of their spending on health care.

         b) In the recurrent expenditures in 2006/07, personnel (53%) absorbed the
            largest share while the two national referral hospitals Kenyatta National
            Hospital and Moi Teaching and Referral Hospital accounted for 17.5% of
            total MOH recurrent allocation. There is high spending on curative
            compared to preventive and promotive care. In 2006/07, for example,
            curative services accounted for 52% of the recurrent expenditure, while
            preventive and promotive care accounted for about 5%;

         c) The sector suffers from insufficient human resources. Moreover, there is
            mal-distribution of the available health personnel, with some rural
            dispensaries being unmanned. The situation is being complicated by
            additional dispensaries constructed under CDF funding;

         d) The increased utilization of health care services in public health facilities
            because of improved availability of services and drugs has had a negative
            impact on demand for services offered by other providers especially the
            Faith Based Organizations. Due to reduction in workload in Faith Based
            Organization facilities, their revenues have declined substantially to the
            extent that most of them are finding it difficult to stay afloat. In
            recognition of the Faith Based Organizations role as major providers of
            health care services especially in the rural areas; the Government
            continued and will continue to extend support to these providers to
            escape from eminent collapse. In this regard, a total of 70 doctors and 379
            nurses have been seconded to the Faith Based Organizations. Further
            support to Faith Based Organizations in 2007/8 in form of drug kit every
            three months to their dispensaries is planned.


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         e) Under the CDF, nearly 1,000 dispensaries have been constructed. While
            these are expected to greatly assist in expanding the health facility
            network; thereby increasing access to health services especially in
            underserved parts of the country, they pose special challenge in terms of
            staffing and medical supplies. This has called for their adoption in phases.
            Thus, some 294 such facilities have been gazetted and a further 336 are
            planned for gazettement in due course. In order to undertake
            development of health infrastructure in a rational approach to ensure
            equity, the MoH will undertake a comprehensive heath facility mapping,
            which will provide the necessary information for policy development.
            This information will also assist in allocating Constituency Development
            Fund appropriately;

         f) Assessment of performance against health indicators has been a challenge
            considering that proxies are used to assess performance. The problem has
            been further compounded by the fact that field surveys to generate data
            to the indicators are conducted several years apart.




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9         Conclusions and Key Recommendations

To address the challenges, the government has put in place certain measures, which
include:

    a) Increased financing of the health sector. According to the Budget Outlook
       Paper 2007/08-2009/2010, the Ministry of Health is expected to receive an
       increased allocation of Government budget’s of 9.9% by 2009/10. The
       proposed National Social Health Insurance is also seen as an alternative
       source to enhanced accessibility and affordability of health services
       particularly by the poor;

    b) Increased cross-sectoral collaboration as achieving the MDG goals related to
       health (goals 4, 5, 6) requires a multi-sectoral approach. No doubt, achieving
       these three health goals will greatly depend on achievement of the other
       MDGs. For example, alleviating poverty and hunger (Goal 1), and goal 7,
       which targets access to clean drinking water, sanitation and decent housing
       respectively could be met, they would greatly improve health goals. The need
       to monitor progress for other goals to determine the impact on public health
       can’t be over-emphasized.

    c) In order to increase the access to funds on time by the rural health facilities,
       the MoH has prepared a Position Paper on funds flow to these facilities as
       well as Guidelines. Consultations are currently under way with the Ministry
       of Finance with a view to streamlining and enhancing community
       participation and ownership in the management of health resources at the
       local level, through a review of the legal and administrative framework. Soon,
       amendments to the Public Health Act will be tabled in Parliament to facilitate
       disbursement of funds to the health institutions. In order to ensure
       accountability at the health facility level, health facility committees will be
       trained while the Boards will be empowered to become public watchdogs for
       funds and commodities issued to these institutions.

    d) In recognition of the fact that health care expenditures impoverish households
       and hence the need to reduce the household burden to seeking health care,
       the Government         will continue to provide free drugs for malaria,
       Tuberculosis, HIV/AIDS in public and Faith Based health facilities. User fees
       for maternity delivery services in all dispensaries and health centres have
       been removed in order to encourage mothers to deliver at the nearest facility
       under the supervision of a skilled health worker. This will go along way in
       reducing the high maternal mortality rate especially among the poor women;

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    e) Efficient delivery of drugs to health facilities has improved since 2005/06 as
       KEMSA deliver drug kits directly to the rural health facilities;

    f) The above initiatives have brought back the consumers confidence to the
       public health care system leading to increase in workload by 50% in public
       health facilities in 2006/2007. According to a Client/patient satisfaction survey
       undertaken in May 2007, 76% of the respondents reported that the services
       were friendlier, while 72% reported improved availability of medical supplies
       in our health facilities.

Table 1.1: Projected Resource Requirements by Programmes (KShs. million)

    Programme                                        Estimates Estimates
                                                     2007/08     2008/09                 Projected Estimates
                                                                                         2009/10 2010/2011
  Preventive Health                                                         28,229        30,942       35,671
  Curative Health
                                                                            20,373         22,913            23,483
  Quality assurance and standards                                            8,945           9200            10,500

  Technical Support Services                                                13,980         14,560            16,745

  Administration Support services                                           16,230         18,459            20,643

  TOTAL                                                                     87,757         96,074          107,042

NB: include resource requirements for SAGAs




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References

a) Ministry of Health. 2007. “Public Expenditure Review, 2007.”

b) Ministry Of Health: RHF Unit Cost/Cost Sharing Review Study & The Impact Of The
   10:20 Policy, 2005

c) Kenyatta National Hospital, Strategic Plan 2005-2010

d) Kenya Medical Research Institute, Strategic Master Plan 2005-1015. (2005);

e) Ministry of Health, Report on Human Resource Mapping And Verification
   Exercise

f) Central Bureau of Statistics (CBS) [Kenya], Ministry of Health (MOH) [Kenya],
   and ORC Macro. 2004. Kenya Demographic and Health Survey 2003. Calverton,
   Maryland: CBS, MOH and ORC Macro

g) Central Bureau of Statistics, Economic Survey, 2007

h) Republic of Kenya, Ministry of Finance, Budget Outlook Paper, 2007/08 – 2009/10,
   Jan 2007.

i) Kenyatta National Hospital: Annual Report, 2005/2006

j) Kenya Medical Supplies Agency , Financial Statements for the Year ending 30 June
   2007

k) Kenya Medical Training College , Financial Statements and Reports for the Year
   ending 30 June 2007

l) National Hospital Insurance Fund, Financial Statements for the Year ending 30 June
   2007

m) Kenya Medical Research Institute, Financial Statements for the Year ending 30 June
   2007
n) Moi Teaching and Referral Hospital, Financial Statements for the Year ending 30
   June 2007
o) Paris Declaration in 2000,




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Annex 1: Actual Expenditures compared to Approved Annual Budgets for
Expenditures on Health, Ministry of Health, and 2001/02 -2006/07
                                               2002/2003        2003/2004        2004/05         2005/06         2006/07
                                               Actual as %      Actual as %      Actual as %     Actual as %     Actual as %
                                               of               of               of              of              of
                                               Approved         Approved         Approved        Approved        Approved
Code      Sub-Vote
          Recurrent
          General Admin. and
110       Planning                             132              141              97              84              92
111       Curative Health                      152              152              99              98              97
112       Preventive and Promotive             94               86               94              74              83
113       Rural Health Services                33               34               102             96              95
          Health Training and
114       Research                             100              100              100             100             100
          Medical Supplies
116       Coordinating Unit                    50               46               98              97              97
117       Kenyatta National Hospital           105              100              100             100             100
118       Moi Teaching and Referral            100              100              100             100             100
          Total                                100              97               99              96              96
          Development
          General Admin. and
110       Planning                             43               32               57              51              51
111       Curative Health                      23               60                         38            41      73
112       Preventive and Promotive             20               8                          39            24      37
113       Rural Health Services                9                25                         43            47      69
          Health Training and
114       Research                             5                46                          7              9     66
          Medical Supplies
116       Coordinating Unit                                                                              30      63
117       Kenyatta National Hospital                                                                             74
118       Moi Teaching and Referral                                                                              100
          Total                                19               26               39                      33      54
          Combined
          General Admin. and
110       Planning                             74               83               90                      71      70
111       Curative Health                      140              146              96                      90      94
112       Preventive and Promotive             51               47               54                      33      46
113       Rural Health Services                25               32               81                      77      84
          Health Training and
114       Research                             85               95               85                      74      98
          Medical Supplies
116       Coordinating Unit                    50               46               91                      60      76
117       Kenyatta National Hospital           105              100              100                   100       93
118       Moi Teaching and Referral            100              100              100                   100       100
          Total                                79               83               87                      76      83


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