User charges for health services in developing countries: a review of the economic literature

Abstract

Literature suggests that in theory, the efficiency of user charges for health services is related to the level of externality, the price elasticity of demand, the proportion of total costs which are private access costs, and the level of the government budget constraint. Theoretical models predict that price elasticity of demand for health services is likely to be higher for lower income groups and that user charges are therefore unlikely to promote equity, or reduce the discrepancies between the utilisation rates of the rich and poor, 'ceteris paribus'. Empirical evidence tends to confirm the latter prediction but to suggest that user charges in many countries provide the scope for welfare gains for the majority. Unfortunately, this scope is seldom exploited in practice. It is argued that many countries have little choice but to try to exploit the potential for majority gains, but that more emphasis should be placed on ensuring quality improvements than on superficial financial measures of success.