User Charges for Health Care in Principle and Practice

Abstract

Health services consume valuable resources -- equipment, buildings, pharmaceuticals, supplies, and the services of highly trained professionals. How countries pay for and allocate those resources strongly influences their ability to provide adequate health care for their citizens. User fees are an under-utilized tool for achieving many financial, efficiency, equity, and management goals in the health sector in developing countries. This paper considers the economics of user fees for health care and the expected consequences of imposing fees for public medical services. Both the theory and evidence on price elasticities and expenditures suggest that the demand for most types of medical care in developing countries is quite insensitive to prices and that revenues will almost certainly rise when fees are either introduced or increased. Some of the main administrative problems in collecting user fees are discussed, although equity issues are perhaps the most vexing impediment to implementing user fees for health care. Yet the evidence suggests that the poor already pay for medical care even in ostensibly free systems, and user fees have been successfully implemented in primary health projects. The principal conclusion of the analysis is that, from a system-wide perspective, the economic benefits of user fees, the administrative problems, and equity within the health system will improve if countries concentrate first on cost recovery in hospitals.

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