1. Health Care Financing: User Fees
Health Economic Course Series
Health Care Financing: User Fees

2. The aims of financing reforms
Improve the amount of resources available (including stability/sustainability)
Improve the efficiency and equity of the allocation of resources (and thus eventually health outcomes)
Reduce catastrophic expenditure (risk-sharing / pooling, prepayment)
Support broader health sector aims such as responsiveness/quality improvement

3. Different types of reforms
Key Reforms to Financing (raising fund):
Macro-level reforms
Increases / changes to external assistance to health sector
Introduction or reform of user fees
Introduction or expansion of community health insurance
Introduction or expansion of social insurance
Reforming private sector
Reforming public sector (PP mix)
Reforms to funding / purchasing (efficiency)

4. Definition of user fees
Charges made by users of health services and goods
Payments are made at the point of use
They are related to consumption
They are at the discretion of the user (pay or not)
They can be full or partial payment (‘user-charges’ or ‘co-payments’)
It does not include informal payments or other costs of accessing services (e.g. transport)

5. Exercise

6. Main objectives of user fees
Raise stable domestic revenues (assuming demand for health care would not fall)
Address inefficiencies – discourage frivolous use and by-passing of primary services
Address inequities – funds can be used to expand rural health services, or to re-distribute between people
Reduce informal payments (impacts on catastrophic expenditure)
Encourage responsiveness, creation of “consumers” with ownership, quality of services

7. Revision: Elasticity of Demand
Quantity
Price
Demand
Supply
Inelastic
Revenue Pu Qu Pe Qe
Price
Demand
Supply
elastic Pu
Revenue Pe Qu Qe
Quantity

8. So what was the experience?
Raising stable revenue?
Raised some additional revenues, but relatively small amounts
1% - 15% of national recurrent expenditure
In some countries, this was sufficient to support drug expenditure
Dependent on income of population, strength of health system

9. Experience? Encouraging efficient use?
Can support referral, but not enough
Likely to impact on preventive care and other necessary care
Affected frivolous use but did not necessarily reduce over-provision because of supplier-induced demand
Increased perception of quality
Can motivate staff and increase responsiveness, particularly if communities are involved in spending of funds

10. Experience? Equity and impact on demand?
User fees resulted in fall in utilization (or abolishment led to increase)
Difficult to attribute effects
Low income groups more responsive
Women, non-earning members of society more responsive
Less price responsive (elastic) in the long run
People get used to paying
Funds spend on improving services (e.g. drugs supply)
But this would still lead to catastrophic health expenditures!

11. Exemption schemes Disease and age exemptions simplest
Poverty difficult to define and assess
Incentives not to treat exempted patients
Reimbursement systems possible but slow
Burden on health facility to design and implement  costly

12. Experience with exemption schemes
User fees:
Decreased necessary utilization,
Especially of the poor and vulnerable (regressive)
Exemptions:
Inaccurate
High administrative costs, slow
Adverse incentives depending on where revenu was retained
Problem of catastrophic expenditure remains

13. User fees – Policy Response
Responding to mixed effects, different political environments, different policy responses:
Negative equity impact, limited revenues, unpopular with population
Abolish user fees (e.g. Uganda)
Stable source of domestic revenue for drugs, motivation for staff
Minimize equity impact: exemptions, community health insurance (e.g. Cambodia, Ghana)

14. Thank You