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

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  • Ardeshir Sepehri

    (Department of Economics, University of Manitoba, Canada)

  • Robert Chernomas

    (Department of Economics, University of Manitoba, Canada)

Abstract
User charges have come to play a significant role in the financing and delivery of publicly provided health services in many developing countries. As a response to health care financing crises, user charges are often promoted as a way of rationalizing the use of care, raising revenue, and improving the coverage and quality of services. The primary purpose of this paper is to provide a critical review of the main arguments for the efficiency- and equity-enhancing potential of user charges. The extent and scope of welfare gains from user charges are found to be very limited in practice. Using a less restrictive theoretical choice model and estimation technique, the most recent demand studies' findings indicate that household's utilization of health services are more responsive to changes in price and income than was initially reported by the early demand studies. Response to price changes are also found to be greater among the poor than the rich. These findings, combined with modest retained fee revenues and the failure of exemption mechanisms to protect the poor tend to cast doubt on the net benefits of user charges policy, particularly in the area of equity. Copyright © 2001 John Wiley & Sons, Ltd.

Suggested Citation

  • Ardeshir Sepehri & Robert Chernomas, 2001. "Are user charges efficiency- and equity-enhancing? A critical review of economic literature with particular reference to experience from developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(2), pages 183-209.
    • Handle: RePEc:wly:jintdv:v:13:y:2001:i:2:p:183-209
    DOI: 10.1002/jid.726
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    2. Dickey, H. & Ikenwilo, D. & Norwood, P. & Watson, V. & Zangelidis, A., 2016. "“Doctor my eyes”: A natural experiment on the demand for eye care services," Social Science & Medicine, Elsevier, vol. 150(C), pages 117-127.
    3. Srivastava, Divya & McGuire, Alistair, 2015. "Patient access to health care and medicines across low-income countries," Social Science & Medicine, Elsevier, vol. 133(C), pages 21-27.
    4. Danyliv, Andriy & Groot, Wim & Gryga, Irena & Pavlova, Milena, 2014. "Willingness and ability to pay for physician services in six Central and Eastern European countries," Health Policy, Elsevier, vol. 117(1), pages 72-82.
    5. Johnson, Ari & Goss, Adeline & Beckerman, Jessica & Castro, Arachu, 2012. "Hidden costs: The direct and indirect impact of user fees on access to malaria treatment and primary care in Mali," Social Science & Medicine, Elsevier, vol. 75(10), pages 1786-1792.
    6. Ari D Johnson & Dana R Thomson & Sidney Atwood & Ian Alley & Jessica L Beckerman & Ichiaka Koné & Djoumé Diakité & Hamed Diallo & Boubacar Traoré & Klenon Traoré & Paul E Farmer & Megan Murray & Joia , 2013. "Assessing Early Access to Care and Child Survival during a Health System Strengthening Intervention in Mali: A Repeated Cross Sectional Survey," PLOS ONE, Public Library of Science, vol. 8(12), pages 1-9, December.
    7. Jelena Arsenijevic & Milena Pavlova & Wim Groot, 2014. "Out-of-pocket payments for public healthcare services by selected exempted groups in Serbia during the period of post-war healthcare reforms," International Journal of Health Planning and Management, Wiley Blackwell, vol. 29(4), pages 373-398, October.
    8. Alan Gilbert, 2007. "Water for All: How To Combine Public Management with Commercial Practice for the Benefit of the Poor?," Urban Studies, Urban Studies Journal Limited, vol. 44(8), pages 1559-1579, July.
    9. Tambor, Marzena & Pavlova, Milena & Rechel, Bernd & Golinowska, Stanisława & Sowada, Christoph & Groot, Wim, 2014. "Willingness to pay for publicly financed health care services in Central and Eastern Europe: Evidence from six countries based on a contingent valuation method," Social Science & Medicine, Elsevier, vol. 116(C), pages 193-201.
    10. Tambor, Marzena & Pavlova, Milena & Golinowska, Stanisława & Sowada, Christoph & Groot, Wim, 2013. "The formal–informal patient payment mix in European countries. Governance, economics, culture or all of these?," Health Policy, Elsevier, vol. 113(3), pages 284-295.

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