User Charges for Health Care: A Review of the Underlying Theory and Assumptions

Are user charges efficiency‐ and equity‐enhancing? A critical review of economic literature with particular reference to experience from developing countries

“…Moreover, a system of moderate user charges may serve as a mechanism for curbing moral hazard behaviourÐthe tendency not to take precautionary measures against illness because treatment is freely available in government health facilities (Mwabu, 1997). The size of ef®ciency gains from increasing the role of pricing in the provision and allocation of health services are assumed to be primarily determined by: (i) the service's public goods characteristics or the level of externality; (ii) the initial market characteristics (the quality and quantity of services provided relative to the demand for these services; (iii) the responsiveness of demand and supply to price changes (price elasticities); and (iv) the administrative costs of implementing a pricing and collection scheme (Jiminez, 1987, ch.…”

“…In the long run, more revenues would also allow the governments to reorient their resources to preventive care, including public health interventions such as vector control, health education and sanitation, that by the nature of the services cannot be ef®ciently ®nanced through user charges (Grif®n, 1987). Given the cost effectiveness of preventive care relative to curative care, this reallocation of the overall health budget would lead to a more ef®cient allocation pattern (Mwabu, 1997). Finally, greater reliance on user charges as a form of community-®nancing encourages and assists communities in becoming actively involved in decision-making related to their own health, rather than being passive recipients (Abel-Smith and Dua, 1988;WHO, 1988;Chabot et al, 1991).…”

“…User charges are more often imposed on the communities by the central authorities with little or no prior consultation with the local population while seeking their collaboration to achieve a set of predetermined objectives (Oakley, 1989;Lupton, 1995;Mwabu, 1997). The theory and rhetoric of community participation in ®nancing and delivery of health services is well ahead of its practice, and community involvement in health activities has yet to move from several isolated, small privately-sponsored projects and programmes to the national level (Oakley, 1989).…”

“…The theoretical and empirical literature pertaining to this debate has been growing very rapidly during the past decade and has resulted in a number of reviews with varying scope and focus (Creese, 1991;McPake, 1993;Creese and Kutzin, 1995;Reddy and Vandemoortele, 1996;Mwabu, 1997). The primary purpose of this paper is to extend the previous reviews by providing a more comprehensive and up-to-date critical review of the main contributions to this literature.…”

User charges and priority setting in health care: balancing equity and efficiency

“…Yet it remains an inescapable fact that many health systems, particularly in low income countries, rely heavily on user charges as a source of finance, and are frequently unable to protect citizens from catastrophic health care payments (McPake, 1993;Mwabu, 2001). The World Health Organization has repeatedly drawn attention to the numerous adverse consequences of this lack of financial protection, including its macroeconomic consequences as well as its manifest direct impact on personal utility and health (World Health Organization, 2001).…”