Introduction
Access to affordable and quality healthcare remains at the heart of Ghana’s pursuit of Universal Health Coverage (UHC). Since the creation of the National Health Insurance Scheme (NHIS) in 2003, the scheme has relied heavily on the National Health Insurance Levy (NHIL), which contributes nearly 70% of its total funding. However, the 2017 Earmarked Funds Capping and Realignment Act redirected a substantial share of NHIL revenue to other areas of the national budget, weakening NHIS’s financial base and disrupting healthcare service delivery. In response to growing financial challenges and stakeholder advocacy, the government uncapped the NHIL in March 2025, fully restoring its revenue stream to support the NHIS. This article examines the impact of the capping policy and considers how the 2025 uncapping may strengthen Ghana’s health financing system.
Background and Contribution of NHIL
Introduced in 2003, Ghana’s National Health Insurance Levy (NHIL) was designed to fund the NHIS and replace the inequitable “cash-and-carry” system. The NHIL is a 2.5% VAT applied to select goods and services, excluding essentials like medicines, water, and education, to shield low-income groups. The levy aimed to create a pooled financing mechanism to reduce out-of-pocket payments and improve access to healthcare. Over time, the NHIL has remained the NHIS’s most critical funding stream, contributing about 70% of total revenue. Other sources include payroll deductions (23%), member premiums (5%), and a small fraction from donor funds or investments. NHIL funding plays a vital role in covering provider claims, administrative costs, and expanding services to vulnerable groups, making it central to the scheme’s ability to function and grow.
Key roles of NHIL funding include:
- Provider Claims: The NHIL funds are primarily used to reimburse healthcare providers for services rendered to NHIS beneficiaries, ensuring that members can access care without direct payment at the point of service (Sarkodie, 2021)
- Administrative Costs: A portion of NHIL revenue supports the operational and administrative expenses of the National Health Insurance Authority (NHIA).
- Service Expansion: NHIL resources have enabled the NHIS to expand its benefit package and reach more Ghanaians, including vulnerable groups exempted from premium payments.
Capping of the NHIL and Its Consequences
In 2017, Ghana introduced the Earmarked Funds Capping and Realignment Act (Act 947), which limited the proportion of National Health Insurance Levy (NHIL) funds allocated to the National Health Insurance Scheme (NHIS). While the policy aimed to create fiscal space for other national priorities, it severely weakened NHIS’s financial capacity. By 2025, less than 60% of NHIL revenue was reaching the NHIS, despite increases in overall contributions from GHS 2.5 billion in 2020 to nearly GHS 9 billion in 2024. Actual disbursements to the National Health Fund (NHF) were inconsistent due to capping and administrative delays, especially in 2021 and 2023.
The consequences of this capping policy were far-reaching. First, persistent funding shortfalls meant that NHIS consistently received less than it was due, undermining its ability to operate effectively and plan long-term. Second, delays in reimbursing healthcare providers led to over GH₵1 billion in arrears, causing drug shortages, reduced quality of care, and diminished trust in the system. Providers also became reluctant to serve NHIS patients due to these delays. Third, many patients especially those with chronic or non-communicable diseases faced increased out-of-pocket costs as the NHIS struggled to cover essential services. Finally, the funding gap forced health facilities to depend more on internally generated funds (IGFs), including user fees, which increased the financial burden on patients and contradicted the NHIS’s goal of equitable, affordable healthcare.
Uncapping the NHIL
Recognizing the effect of the capping policy on healthcare delivery and financial protection, stakeholders, including civil society organizations, the Ghana Non-Communicable Diseases Alliance, and development partners, amplified calls for the government to uncap the NHIL and restore full access to its revenues for health purposes. In March 2025, Ghana’s government announced the uncapping of the National Health Insurance Levy (NHIL) as part of the 2025 Budget Statement. Under the new policy, 100% of NHIL proceeds (a 2.5% VAT on select goods/services) will go directly to the National Health Insurance Fund (NHIF). The government’s decision to uncap NHIL in the 2025 budget marks a significant shift in health financing, with an allocation of GHS 9.93 billion to enhance healthcare access and service delivery.
The 2025 budget earmarks GHS 9.93 billion for the NHIS, covering the following areas:
- Claim Payments: Ensuring timely reimbursement to healthcare providers, reducing service disruptions.
- Essential Medicines and Vaccines: Strengthening pharmaceutical supplies for disease prevention and management.
- Bridging USAID Financial Shortfall: Addressing gaps created by reduced donor funding.
- Free Primary Healthcare: Expanding access to essential health services for underserved populations.
- MahamaCares Initiative: A targeted social intervention program aimed at improving maternal and child health.
Uncapping the NHIL: A Step Forward Amid Persistent Financial Pressures
- Improved Funding and Access
The 2025 uncapping of the NHIL has stabilized the financial base of the NHIS, enabling better planning, reduced out-of-pocket costs, and expanded investment in primary healthcare. This shift is expected to enhance equitable access and reduce pressure on hospitals by strengthening frontline services.
- Addressing External Funding Gaps
The restored NHIL funding provides an opportunity to fill critical donor funding shortfalls especially from USAID that have threatened key programs in reproductive, maternal, newborn, and child health (RMNCH). This ensures continuity of life-saving services and reduces Ghana’s dependency on unpredictable donor support.
- Lingering Debt and Budgetary Silence
Despite the uncapping, the NHIS faces a GHS 2.5 billion debt due to prior underfunding, and the broader health sector holds GHS 10.35 billion in arrears. The 2025 budget offers no clear strategy for settling these debts, posing risks to service continuity and provider trust.
- Risks of New Policy Commitments
New initiatives like the Free Primary Healthcare Scheme and MahamaCare add financial strain to the NHIS. Without new funding streams or operational clarity, these well-meaning policies could overstretch the scheme, delay reimbursements, and compromise essential services.
- Recommendations for Financial Sustainability
To protect and sustain the gains from uncapping, the government must:
- Establish a roadmap for clearing NHIS arrears.
- Ring-fence a portion of NHIL funds for core NHIS operations.
- Explore additional revenue streams such as sin taxes and public-private partnerships.
- Strengthen accountability and monitoring systems to ensure efficient use of funds and build public trust.
Conclusion
The government’s decision to uncap the National Health Insurance Levy (NHIL) in 2025 marks a critical step toward strengthening Ghana’s health financing and advancing Universal Health Coverage. By restoring full access to NHIL revenues, the policy promises improved provider reimbursements, reduced out-of-pocket payments, and sustained delivery of essential services. However, its success depends on addressing unresolved debts, safeguarding core NHIS functions against competing policy demands, and implementing sustainable financing and accountability measures to ensure long-term viability.
