Category Archives: medical insurance

Is Wealth a Disadvantage to Health?

It is now widely accepted that there are ‘diseases for the rich’ or ‘western diseases’ and ‘diseases for the poor.’ A World health organization’s (WHO) 2011 report published in June 2011 which analysed the top ten killers in the world showed that, the rich are most likely to die from strokes and heart-related diseases, while the poor are likely to die from pneumonia and diarrhoea.

Also in June, Kenya’s Daily Nation newspaper published an article derived from the WHO data with a catchy title ‘The rich more likely to die from heart disease’. Does it mean wealth is a disadvantage to health? No! – The ‘real wealthy’ are not the victims of heart diseases but the ‘average rich’.

When health and wealth are put in the same sentence, it is very important to differentiate between those that are in high income, middle income and low income categories. According to WHO report, highest number of those that die from ‘western diseases’ are from medium income countries as opposed to high income countries. This is contrary to the notion that wealth per se is the risk factor for heart diseases.

Out of 1,000 deaths related to strokes and heart-related diseases;

• 39 were from high-income countries like United Arab Emirates, United Kingdom and United States of America.
• 179 were from middle-income countries such as South Africa, Nigeria, Thailand and Tunisia. i.e the number of people from middle-class category that will die from ‘western diseases’ is three times higher than that from high income category.
• ‘Kenya together with Zambia, Zimbabwe and Tanzania are on the low-income category and the majority will die from pneumonia and diarrhoea’ says the report. Ideally, a high number of the so-called ‘the rich’ in the low-income countries fall in the middle-class category globally. This may explain why the rich among the low-income countries have the highest prevalence of ‘western diseases’.

The WHO also found that while the USA is in the high-income category, the majority of Americans who succumb to strokes and heart-related diseases are the less wealthy. Other University research in the US found that when they compared wealth and prevalence of obesity, hypertension and related diseases, there was an inverse relationship between wealth and these diseases – meaning that less wealthy were more likely to suffer from them than the wealthy.

To understand why the middle-income populations are most likely to suffer from stroke and heart-related diseases, it is essential to outline the key major and contributing risk factors. Major risk factors are those that have been proven to increase risk of heart disease and these include high blood pressure, high blood cholesterol, diabetes, obesity, overweight, smoking, physical inactivity, heredity and age. Contributing risk factors are those that doctors think can lead to an increased risk of heart disease, but their exact role has not been defined and these include stress and alcohol.

Clearly, the major and contributing factors of heart diseases are results of lifestyles. The poor cannot afford these lifestyles, however, as they say, ‘poverty is not permanent’.

• Low-income populations work extra hard to get out of the lower income cadre, while envying lifestyles of the middle-income populations.
• As soon as they join the middle-income category, they desperately imitate what they perceive as lifestyles of the rich. That is; eating on the go, consume fatty foods, processed foods, ready to eat foods, smoke, have high alcohol consumption, and assume sedentary lifestyles.
• On the other hand, the high-income countries have always enjoyed these foods and lifestyles while in the middle-income category and they have witnessed first hand the adverse consequences among their populations and peers. The rich countries are cutting on deadly foods such as high saturated fats, processed foods, high alcohol content drinks and sedentary lifestyles. Meanwhile, the emerging economies and the middle class among rich countries are embracing these renegade lifestyles full throttle.

For example, the biggest supermarket in UK and Ireland, Tesco does not stock any solid cooking fat or hydrogenated cooking fats which are associated with high trans and saturated fats. On the other hand, solid cooking fats occupy the biggest shelf space in supermarkets in Kenya. Also beer drinks sold in developing countries have higher alcohol content than their counterparts in developed countries.

‘I have to enjoy life’, ‘I don’t have to live a boring life’, and ‘I have to live like a rich man’. These are common justifications among the middle class when engaging in life shattering lifestyles

It is not true that the rich are most likely to die from heart disease. ‘Out of 13 million people who died from strokes and heart-related diseases worldwide in 2008, 1 million were from low-income countries, 2 million were from high-income countries and 10 million (5X higher) were from middle-income countries’ adds the WHO report. And, in the high-income countries, it is their low-income population that is at the highest risk of heart diseases. In the middle-income countries, the majority are at risk. In low-income countries, the so-called ‘the rich’ are at the highest risk.

Overcoming Risks Posed by Wealth to Health: Many will argue that with wealth you can afford the medication. However, health is not a financial muscle competition and prevention pays dividends than struggling to cure.

Understanding the consequences of different lifestyles brought about by wealth is key to coping well. The majority who move from low to middle-income category of wealth are ill-prepared to cope with what wealth throws at them. It is important for governments and other agencies to educate their people on the relationship between health and wealth and if possible entrench the course in school curriculums.

Simple lifestyles tips to opt for include cutting salt intake, adopting regular exercise regime, cutting back on fatty foods (in particular saturated and trans fats), moderating alcohol consumption and balancing between work and social activities.

A guest post by Joshua Arimi of Arimi Foods

Medical Investments in East Africa – Part II

Rising Prices: In November last year, AAR Health sent a casual letter announcing some new medical insurance services they would be offering such as extending the membership age to 80 years, free basic health checks on appointment, out of country cover extended to 90 days, psychiatric benefit increase, a 24 hour help line, and ATM (forced) robbery compensation.

Ambulance in Lamu (picture courtesy of @azthedance)

Their CEO also noted that in the last three years there has been a consistent increase in costs of drugs, medical equipment, hospital charges, and doctor’s fees that after an actuarial review they would marginally adjust the premiums
on an age-band basis is.

However the sticker shock came, this month with a renewal notice letter that was 67% more than last year – shocking given that there were no claims. It has not been clear what caused this and various from AAR include, doctors fees have gone up, the enhanced payments will go towards the new services, the company was hit by several claims last year, they have to pay for their own clinics & ambulances unlike other insurers etc.

But a rival CEO on twitter wrote that increases should not be more than 25% a year, and this is borne out by Government and other insurers statistics that indicate changes & inflation in the sector are about 20% per year.

Money going in to healthcare: A previous post touched on the finances and the Nairobi Hospital surplus and how their financial picture is much healthier some of than its patients.

The medical sector has also attracted a some recent investments including:

– A few days prior to the AAR November letter, a Dutch company – Investment Fund for Health in Africa (IFHA) took up a 20% stake in AAR at a cost of Kshs. 750 million (then about $10 million). From media reports on the deal, IFHA will over the next two years increase its stake to 60% and exit by way of an IPO at the Nairobi Stock Exchange in about 5 years

– TBL Mirror Fund has an investment in Meridian Medical Centres

– In January this year, Resolution Health which had 2010 revenue of Kshs 1.12 billion and income of Kshs. 208 million sold a 25% stake in the company to a German private equity fund Africa Development Corporation (ADC), for KES184m. Resolution, which has 42,000 members, is also eying a stock exchange listing.

– In this week’s East African is a story of a new Aureos Health Fund that is being set up.

Urban Inflation Index September 2010

Tracking changes from three months ago – in June and one year ago

Quarterly ReviewYoung population: The results of the Kenya’s national census done in 2009 were released last month and the results are still being interpreted. Politicians obsess on tribal numbers, economists caution on birth rates, while businesses can look to demographics like the number of mobile phone owners, the number of youth in the country, along with other intriguing findings such as the population of Kibera (largest slum in Africa) being 1/3 of previous claims, and remote Mandera is the 4th most populated constituency in Kenya (after Embakasi, Kasarani and Juja which are all in Nairobi environs). It confirms other findings like the Safaricom 2010 A/R which notes that “…with the North Eastern
region’s economy growing by over 200%, owing to improved security & enhanced economic activities, the area is no longer ‘served’ from Nairobi.”

Price control: A price control bill was rejected by the President who referred it back to Parliament for amendments.

Costly Health Insurance: The National Hospital Insurance Fund set in motion a plan to roll out a rather expensive health plan by increasing mandatory deductions from 320 per month to up to Kshs 2,000 ($25) for anyone earning over 100,000 ($1,200) per month. The matter has been challenged in court and the agency has been accused of not consulting widely with other health sector players and employers in a bid to revive earlier health bill

On to the index

Gotten CheaperStaple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs 65 compared to Kshs. 71 three months ago and 84 a year ago.

Communications: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings per minute to call across networks. Exactly a year ago Safaricom has launched super ongea tariff, which promised rates of as low as 0.8 shillings, but from a base of Kshs. 8 within network. What has changed? The arrival of airtel in Kenya who will pursue a low cost high volume model though outsourcing of services among other measures. i.e. today it was announced in India that they will sell their African mobile base stations to a subsidiary company (Bharti Infratel) that will re-sell them to private equity funds.

Even as Kenyans have celebrated the new chap call rates, Airtel have ruffled many feathers in the last month, forcing Safaricom and the other smaller mobile companies to match the very low tariffs, and this has been called unsustainable by some, a dis-incentive to investors by others, and even a situation which may result in a mobile operator closing shop. Two years ago, Safaricom had launched ‘ongea tariff’ which was a Kshs 10/= rate

About the same Utilities: Latest electricity bill is Kshs 1,700 ($21 for a month) up from Kshs 1,450 on June, but better than 1,900 a year ago when there was drought in the country.

Other food item: Sugar : A 2 kg. Mumias pack is Kshs 200, unchanged over the last year. Two years ago, it cost 145, a price we may see next year when the COMESA regional sugar quotas are done away with. Already, leading sugar company Mumias has diversified into electricity co-generation, bottled water, and soon, ethanol production.

Foreign Exchange: 1 US$ equals Kshs 80.8 compared to 80.6 in June. BUT, Two years ago it was Kshs 67.

Beer/Entertainment: A bottle of Tusker beer is Kshs 170 ($2.1) (at a local pub) compared to Kshs. 160 three months ago. However it is tough to find a perennial location to keep track in Nairobi’s fast changing pub scene, where even Nairobi’s favorite sports pub Hooters closed last month. What needs to happen is a combination of Murua’s Tusker Index with this interactive beer map from the Czech Republic!

More ExpensiveFuel: A litre of petrol fuel (at local petrol station) is now Kshs 94.5 ($5.25 gallon) up from Kshs 90.9 per litre in June. The back and forth petrol war continues between leading oil distributor Kenol and the Ministry of Energy officials who include the Kenya pipeline company, the Kenya oil refinery and the energy regulatory commission about the issue of preferential allocation of space and who owes who more. On their side Kenol can count on some political muscle, the fact that they blew the whistle on Triton Oil before it collapsed, they are the country largest corporate taxpayers. High prices at the pump are not unusual, as two years ago petrol was retailing at Kshs 101

Medical Investments in East Africa

Reading the Nairobi Hospital tea leaves

Had a mini-debate (with @matrixster) about the potential returns of investing with AAR or another medical sector firm in Kenya (if it is well run). Kenya and the region’s population has been steadily growing (good or bad thing?) and with more people accessing formal medical care would that not be a growth opportunity? While it is tough to get a true picture of the many private firms that operate in the sector, there has been quite a bit of banking and VC interest, with some local venture capital firms specifically seeking out medical investees.

Kenya’s premier hospital, Nairobi Hospital, which is owned by an association of members, also has its results out for 2009. It is considered a hospital for the middle and upper class in Kenya and the region. But, you can also get admitted to Nairobi Hospital if you observe the Underwear Rule (hilariously illustrated here by Kuweni Serious)

Anyway, while I was in Nairobi Hospital, which is not a bad place to stay and recupearate, I had these illustrative numbers to ponder from their annual report.

– Turnover of Kshs 3.98 billion ($50 million) up from 3.3 billion in 2008
– A surplus of 832 million ($10.5 million) up from 564 million the year before
– Some income items: Medicine sales of 1.194 billion, inpatient bed income of 809m, radiology 400m, lab income of 628m, theatre/HDU/ICU income of 300 million, student fee income of 33m, and finance income of 47m.
– Some expense items: staff costs of over 1 billion, bought medicine costing 894m, cleaning costs of 70m, oxygen 16m, and financial costs of 22m (with 11m paid to credit card companies)
– Some operational numbers for the hospital: They had 106,242 visits to the accident & emergency centre, carried out 427,725 lab tests, handed out 269,302 prescriptions, and did 93,755 radiology procedures. They also have an occupancy level of 80%, up from 77% on their 272 beds, and had a slightly improved customer satisfaction measure of 79.1%

They promote their service locally and abroad; Since, in Nairobi, there are firms who advertise for medical procedures to be performed in India, the Nairobi hospital also competes for the same customers; last year they continued a medical tourism program that targeted 8 African counties and their teams made visits to DRC and Uganda, which may have contributed to their 50% increase in the number of foreign patients. Domestically, they participated in 16 expos and 36 corporate sessions, had open days (kidney, cardiology) and sponsored programs on Radio Waumini, and K24 TV.

Microfinance Moment

A peek at the microfinance institutions sector (MFI) the cousin to the banking sector. During the Africa -Middle East Regional micro-credit summit held in Nairobi in April 2010, several participants also exhibited their MFI products and services

Services to MFI
AMFI the association of microfinance institutions – Kenya offers capacity building, industry lobbying, performance monitoring and linkages to members. On a larger international scale, you have the UN! Doing this through the UN Advisors Group
– Bridging the branchless banking gap by CGAP
Branchless banking equipment includes devices from ingenico and craft silicon and a micro-payment (mobile and online) from Impala to deliver low cost financial and transactional services

MFI product advisory services from MicroSave as well as research and capacity building in micro saving and product delivery techniques – they have advised Equity Bank, Family bank and consulted on MPesa formulation.
Hedging for MFI’s to eliminate currency risk from MFX Solutions
– MFI support from the Grameen Foundation has funded $16 million to MFI’s in Ethiopia, Kenya, Ghana and Nigeria and supported Applab partnership with Google) for information to rural Uganda farmers and Ghana to help new expectant and new-born mothers access medical care via mobile phone.
Management services, and technical advisory to MFI’s from ACCION
– Private finance to MFI’s from Oiko Credit examples of which was Kshs. 71 million to Githunguri Dairy Farmers Society as well as to Uganda Women Finance Trusts, Nyeri Tea Growers, Daystar University (partially supported by Grameen). Also, another from Unitus which raises funds & grants, advises & arranges capital to grow innovative MFI’s 23 in 9 countries worldwide including Jamii Bora Kenya and SKS India.
– Loans in local currency in Africa from BlueOrchard to established MFI’s (minimum $1 million total assets, and at least 2 years old)
– MFI lending cost comparison (APR based) by the MFTransparency (report covering 90% of Kenyan MFI’s will be on their site in a few weeks)
Software to administer MFI loans from Loan Performer a highly rated package.
– Recycle your cell phone into MFI loans with Chiapas

Unique products
Matatu loan insurance accessible to members of the Jitegemea credit scheme
Micro health (Bima Ya Jamii), home beautification and other loans from SMEP and their loans are repayable by MPesa
Medical health (Faulu Afya) plans from Faulu Kenya which can provide inpatient cover up to 1 million (~$13,000) as well as from AAR Credit to pay for AAR Health packages in low installments
Micro-insurance from Microensure. A similar product on livestock insurance was featured in the Economist recently
Goat meat and poultry boiler accessible to Yehu MFI (operates at Kenya Coast
Livestock trading, micro health, business acquisition and other loans from KADET – The Kenya Agency for the Development of Enterprise & Technology, which is an affiliate of World Vision.
– The world famous Money-maker water pumps from Kickstart helping small-scale farmers out of poverty
Venture capital (equity partnership loans up to 150 million or ~$2 million) as well as contract financing and industrial finance from Fusion Capital targeted at SME’s (not MFI’s)
– Various loans for women entrepreneurs from the PAWDEP – the Pamoja Women Development Program
Start-up loans from Elmseed ($2,000 first year, 10% simple interest) small loans, big futures, and Kenya government Women Enterprise Fund and Youth Enterprise Development Fund borrowing is secured by group collateral)

Village savings & loan associations (VSLA) from CARE introduces more people in Africa to financial services than any other international organization

Local Banks
– Citi whose Citi Foundation has lent $80 million to MFI’s over the last 11 years in 88 countries in areas like colleges and neighborhood revitalization.
Equity bank with Vijana business loans targeted at members of youth groups as well as fish loans uvuvi biashara to finance nets, cooling equipment, boats etc.
– KCB with bankika a business package targeted at young entrepreneurs

New Banks
Jamii Bora Bank which bought a small bank in a reverse merger claims that with its over 200,000 members is the largest MFI in Kenya.
KWFT – the Kenya Women Finance Trust Deposit that was licensed this week deposit-taking MFI by the Central Bank of Kenya offers startup funding and LPG (gas) among many other loans. KWFT which claims over 334,000 members slots in as a mid-tier bank