Cabinet Secretary for Health Aden Duale told Members of Parliament that the missing SHA funds were lost through fraud and not because of delays or system errors.
He said the Social Health Authority blocked billions of shillings in false claims after its system detected widespread abuse by health facilities across the country.
Duale explained that within six months of SHA starting operations, the system rejected claims worth about Ksh11 billion. He said many hospitals quickly adjusted old NHIF fraud methods to fit the new system.
According to him, some facilities had long experience in stealing from public health insurance and only changed tactics after SHA replaced NHIF.
The losses kept growing because fraud attempts did not stop, even after the new system was introduced.He told MPs that SHA uses an AI-driven system that reviews claims in real time.
The system compares medical claims with global medical standards and local treatment rules. When hospitals submit claims that clearly break these rules, the system automatically blocks payment.
Duale said this process exposed how deeply fraud is rooted in the healthcare system.Duale gave examples that shocked the committee.
He said some private hospitals submitted maternity claims showing that all mothers delivered through caesarean section.
He reminded MPs that the World Health Organization recommends a C-section rate of between 10 and 15 per cent. Any hospital reporting figures far beyond this range was immediately flagged.
In Tharaka Nithi County, one private hospital claimed that all 500 women who delivered at the facility had caesarean sections.
The SHA system rejected every single claim from that hospital. Duale also said many hospitals submitted maternity claims without birth notification documents, which are mandatory. Such claims were rejected automatically, blocking billions of shillings.
The system also flagged dialysis claims that exceeded approved treatment limits. Duale said some facilities billed for up to ten dialysis sessions per patient, yet SHA only covers two sessions under its medical guidelines.
These repeated patterns explained why the amount of rejected claims kept increasing.
Duale revealed that investigations uncovered even more serious schemes. Some healthcare workers registered themselves as fake patients in order to generate claims.
In one county, ghost patients were recorded visiting primary healthcare facilities up to ten times a day to inflate capitation payments.
In Kwale County, one individual registered 381 children as dependents under one SHA account.
Duale said the case was handed over to the Directorate of Criminal Investigations.
Audits also found forged claim forms, with the same handwriting and pen used for patient, doctor, and administrator signatures. Any claim that failed proper verification was rejected.
Duale admitted that governance weaknesses also contributed to the crisis.
Auditor General Nancy Gathungu found that a private consortium allegedly linked to an Indian firm controls SHA’s core system, even though the government does not fully own it.
He said this limits accountability and state control.SHA has given hospitals 15 days to explain Ksh3 billion in flagged claims.
The ministry says it has paid Ksh11.4 billion to hospitals so far, while private hospitals claim SHA owes them Ksh76 billion. Duale maintained that the rejected funds were not lost money, but stolen money that was successfully blocked.
