To Retain or Remove User Fees?

Many low- and middle-income countries continue to search for better ways of financing their health systems. Common to many of these systems are problems of inadequate resource mobilisation, as well as inefficient and inequitable use of existing resources. The poor and other vulnerable groups who need healthcare the most are also the most affected by these shortcomings. In particular, these groups have a high reliance on user fees and other out-of-pocket expenditures on health which are both impoverishing and provide a financial barrier to care. It is within this context, and in light of recent policy initiatives on user fee removal, that a debate on the role of user fees in health financing systems has recently returned. This paper provides some reflections on the recent user fees debate, drawing from the evidence presented and subsequent discussions at a recent UNICEF consultation on user fees in the health sector, and relates the debate to the wider issue of access to adequate healthcare. It is argued that, from the wealth of evidence on user fees and other health system reforms, a broad consensus is emerging. First, user fees are an important barrier to accessing health services, especially for poor people. They also negatively impact on adherence to long-term expensive treatments. However, this is offset to some extent by potentially positive impacts on quality. Secondly, user fees are not the only barrier that the poor face. As well as other cost barriers, a number of quality, information and cultural barriers must also be overcome before the poor can access adequate health services. Thirdly, initial evidence on fee abolition in Uganda suggests that this policy has improved access to outpatient services for the poor. For this to be sustainable and effective in reaching the poor, fee removal needs to be part of a broader package of reforms that includes increased budgets to offset lost fee revenue (as was the case in Uganda). Fourthly, implementation matters: if fees are to be abolished, this needs clear communication with a broad stakeholder buy-in, careful monitoring to ensure that official fees are not replaced by informal fees, and appropriate management of the alternative financing mechanisms that are replacing user fees. Fifthly, context is crucial. For instance, immediate fee removal in Cambodia would be inappropriate, given that fees replaced irregular and often high informal fees. In this context, equity funds and eventual expansion of health insurance are perhaps more viable policy options. Conversely, in countries where user fees have had significant adverse effects on access and generated only limited benefits, fee abolition is probably a more attractive policy option. Removing user fees has the potential to improve access to health services, especially for the poor, but it is not appropriate in all contexts. Analysis should move on from broad evaluations of user fees towards exploring how best to dismantle the multiple barriers to access in specific contexts.     

The impact of the introduction of user fees at a district hospital in Cambodia

Proponents of user fees in the health sector in poor countries cite a number of often interrelated rationales, relating inter alia to cost recovery, improved equity and greater efficiency. Opponents argue that dramatic and sustained decreases in service utilization follow the introduction of user fees, highlighting evidence that user fees reduce service utilization when they fail to result in improved quality of care and/or when services are priced higher than those charged by private health care providers. Utilization of public health services in Cambodia is low. Supply-side factors are significant determinants of such low public sector utilization, including low official salaries of service providers (forcing many to seek additional income in the private sector), and operations budgets which are erratic and often insufficient to cover running costs of service delivery outlets. The Cambodia Ministry of Health (MOH) encourages user fee schemes at operational district level. By allowing revenue to be retained at the health facility level, the MOH aims to improve health care delivery--and consequently service utilization--through increased salaries to health facility staff and increases in operations budgets. This case study of the introduction of user fees at a district referral hospital in Kirivong Operational District in Cambodia, using the findings from empirical research, examines the impact of user fees on health-careseeking behaviour, ability to pay and consultation prices at private practitioners. The research showed that consultation fees charged by private providers increased in tandem with price increases introduced at the referral hospital. It further demonstrates--for the first time that we are aware of from the available literature--that the introduction and subsequent increase in user fees created a 'medical poverty trap', which has significant health and livelihood impact (including untreated morbidity and long-term impoverishment). Addressing the medical poverty trap will require two interventions to be implemented immediately: regulation of the private sector, and reimbursing health facilities for services provided to patients who are exempted from paying user fees because of poverty. A third, longer-term initiative is also suggested: the establishment of a social health insurance mechanism.     

Health care financing in Kenya: a simulation of welfare effects of user fees

This paper examines the efficiency and equity effects of introducing user fees in public health facilities in Kenya. These effects are studied with the aid of a simulation technique. It is found that through their favourable effects on quality of medical services, the user fees in public clinics would yield welfare gains. However, these gains might involve unacceptable equity trade-offs. Thus, in general, the net welfare effects of user charges on medical services is ambiguous. More specifically, if the user fees were imposed across the board in government health facilities, the equity trade-offs would be large, and for that reason, the user fees would be socially and politically unacceptable. But, if the user charges are restricted to government hospitals, the attendant equity problem would not be too difficult to manage.     

The revenue generating potential of user fees in Kenyan government health facilities

This paper develops and implements a methodology for estimating the total revenue that would result from a system of user fees for health services provided by public facilities in a developing country. After setting out a set of principles based on efficiency, equity, and administrative goals upon which the user fees should be founded, a formula for estimating total revenue generated is presented which reflects six different factors affecting total revenues. These factors include reductions in demand due to imposing fees, exemption of selected services from any fees, forgiving fees from those unable to pay, and 'leakage' of revenue due to bribes, etc. Three specific fee structures are then examined for Kenya, and the total revenue to be generated is predicted. The revenue totals are large, on the order of 10-22% of the government's total recurrent health costs, suggesting that even modest user fees can make a significant contribution to public health costs.     

Appropriate disclosure of a diagnosis of dementia: identifying the key behaviours of 'best practice'

Background

It has been argued that quality improvements that result from user charges reduce their negative impact on utilization especially of the poor. In Uganda, because there was no concrete evidence for improvements in quality of care following the introduction of user charges, the government abolished user fees in all public health units on 1^st March 2001. This gave us the opportunity to prospectively study how different aspects of quality of care change, as a country changes its health financing options from user charges to free services, in a developing country setting. The outcome of the study may then provide insights into policy actions to maintain quality of care following removal of user fees.

Methods

A population cohort and representative health facilities were studied longitudinally over 3 years after the abolition of user fees. Quantitative and qualitative methods were used to obtain data. Parameters evaluated in relation to quality of care included availability of drugs and supplies and; health worker variables.

Results

Different quality variables assessed showed that interventions that were put in place were able to maintain, or improve the technical quality of services. There were significant increases in utilization of services, average drug quantities and stock out days improved, and communities reported health workers to be hardworking, good and dedicated to their work to mention but a few. Communities were more appreciative of the services, though expectations were lower. However, health workers felt they were not adequately motivated given the increased workload.

Conclusion

The levels of technical quality of care attained in a system with user fees can be maintained, or even improved without the fees through adoption of basic, sustainable system modifications that are within the reach of developing countries. However, a trade-off between residual perceptions of reduced service quality, and the welfare gains from removal of user fees should guide such a policy change.     

What are the economic consequences for households of illness and of paying for health care in low- and middle-income country contexts?

This paper presents the findings of a critical review of studies carried out in low- and middle-income countries (LMICs) focusing on the economic consequences for households of illness and health care use. These include household level impacts of direct costs (medical treatment and related financial costs), indirect costs (productive time losses resulting from illness) and subsequent household responses. It highlights that health care financing strategies that place considerable emphasis on out-of-pocket payments can impoverish households. There is growing evidence of households being pushed into poverty or forced into deeper poverty when faced with substantial medical expenses, particularly when combined with a loss of household income due to ill-health. Health sector reforms in LMICs since the late 1980s have particularly focused on promoting user fees for public sector health services and increasing the role of the private for-profit sector in health care provision. This has increasingly placed the burden of paying for health care on individuals experiencing poor health. This trend seems to continue even though some countries and international organisations are considering a shift away from their previous pro-user fee agenda. Research into alternative health care financing strategies and related mechanisms for coping with the direct and indirect costs of illness is urgently required to inform the development of appropriate social policies to improve access to essential health services and break the vicious cycle between illness and poverty.     

Effect of removing user fees on attendance for curative and preventive primary health care services in rural South Africa

User fees are used to recover costs and discourage unnecessary attendance at primary care clinics in many developing countries. In South Africa, user fees for children aged under 6 years and pregnant women were removed in 1994, and in 1997 all user fees at all primary health care clinics were abolished. The intention of these policy changes was to improve access to health services for previously disadvantaged communities. We investigated the impact of these changes on clinic attendance patterns in Hlabisa health district. Average quarterly new registrations and total attendances for preventive services (antenatal care, immunization, growth monitoring) and curative services (treatment of ailments) at a mobile primary health care unit were studied from 1992 to 1998. Regression analysis was undertaken to assess whether trends were statistically significant. There was a sustained increase in new registrations (P = 0.0001) and total attendances (P = 0.0001) for curative services, and a fall in new registrations (P = 0.01) and total attendances for immunization and growth monitoring (P = 0.0002) over the study period. The upturn in demand for curative services started at the time of the first policy change. The decreases in antenatal registrations (P = 0.07) and attendances (P = 0.09) were not statistically significant. The number of new registrations for immunization and growth monitoring increased following the first policy change but declined thereafter. We found no evidence that the second policy change influenced underlying trends. The removal of user fees improved access to curative services but this may have happened at the expense of some preventive services. Governments should remain vigilant about the effects of new health policies in order to ensure that objectives are being met.     

Barriers to access and the purchasing function of health equity funds: lessons from Cambodia

Problem

High out-of-pocket payments and user fees with unfunded exemptions limit access to health services for the poor. Health equity funds (HEF) emerged in Cambodia as a strategic purchasing mechanism used to fund exemptions and reduce the burden of health-care costs on people on very low incomes. Their impact on access to health services must be carefully examined.

Approach

Evidence from the field is examined to define barriers to access, analyse the role played by HEF and identify how HEF address these barriers.

Local setting

Two-thirds of total health expenditure consists of patients’ out-of-pocket spending at the time of care, mainly for self-medication and private services. While the private sector attracts most out-of-pocket spending, user fees remain a barrier to access to public services for people on very low incomes.

Relevant changes

HEF brought new patients to public facilities, satisfying some unmet health-care needs. There was no perceived stigma for HEF patients but many of them still had to borrow money to access health care.

Lessons learned

HEF are a purchasing mechanism in the Cambodian health-care system. They exercise four essential roles: financing, community support, quality assurance and policy dialogue. These roles respond to the main barriers to access to health services. The impact is greatest where a third-party arrangement is in place. A strong and supportive policy environment is needed for the HEF to exercise their active purchasing role fully.     

Improving access for the poorest to public sector health services: insights from Kirivong Operational Health District in Cambodia

This article presents research findings into the effectiveness of an innovative equity fund approach to improving access to public sector health services for the poor in Kirivong Operational Health District in Cambodia. The operational health district is the lowest organizational level in the Cambodian health system, providing services through health centres and a single referral hospital. An equity fund involves a third party identifying the poor and paying user fees on their behalf by reimbursing the service provider, thus relieving health staff of such responsibility. We explore the appropriateness of utilizing community members to identify the poorest. The impact of newly introduced pagoda-managed equity funds on access to public health services for the poorest, and on their out-of-pocket expenditure during illness episodes, is then examined. We conclude with an evaluation of the contribution of the equity funds to community participation. The research indicates that identification by community members of those eligible for equity funds is feasible, accrues minimal direct costs, and is effective. Households identified as eligible for equity fund benefits were poorer than those identified as non-beneficiaries. Direct costs associated with seeking care were considerably lower for equity fund beneficiaries than for non-beneficiaries, and fewer beneficiaries than non-beneficiaries initially consulted the private sector, providing evidence of the equity fund's ability to attract the poorest to the public sector. The level and nature of community participation was enhanced considerably following the introduction of the pagoda-managed equity funds. In order to maximize and sustain the equity benefits of such funds, we recommend that external agencies (such as international non-governmental organizations) limit their role to the provision of technical support and advice, rather than taking the lead on implementation and administration. Facilitating the design, implementation, administration and management of equity funds by indigenous community-based organizations has the advantage of not only greatly reducing administrative costs, allowing a large proportion of the fund to be spent on services for the poor, but also of enhancing local ownership, thus increasing the likelihood of equity funds being sustained in the future.     

Spending and financing in health care: situation and trends]

Being knowledgeable about national health expenditures and sources of financing is essential for decision-making. This awareness also makes it possible to evaluate the equity of allocation and the efficiency of utilization of these resources. Changes in financing have been a substantial component of health sector reform in the Americas. The goal has shifted from merely one of financial sustainability to simultaneously seeking equitable access to quality services. In this article the Pan American Health Organization (PAHO) presents a proposal for analyzing and designing a policy on health financing. The aim of the policy is to identify the mix of financing mechanisms most likely to simultaneously produce financial sustainability, equity, access, and efficiency. The PAHO proposal combines traditional mechanisms for generating resources (public funds from taxes, as well as private health insurance, national health insurance, and user fees) with complementary subsidy mechanisms for vulnerable groups. Health financing strategies ought to explicitly consider the financing both of care for individuals and of health interventions for the general public good, for which public financing is the most equitable and efficient approach.     

Reducing user fees for primary health care in Kenya: Policy on paper or policy in practice?

Background  

Removing user fees in primary health care services is one of the most critical policy issues being considered in Africa. User fees were introduced in many African countries during the 1980s and their impacts are well documented. Concerns regarding the negative impacts of user fees have led to a recent shift in health financing debates in Africa. Kenya is one of the countries that have implemented a user fees reduction policy. Like in many other settings, the new policy was evaluated less that one year after implementation, the period when expected positive impacts are likely to be highest. This early evaluation showed that the policy was widely implemented, that levels of utilization increased and that it was popular among patients. Whether or not the positive impacts of user fees removal policies are sustained has hardly been explored. We conducted this study to document the extent to which primary health care facilities in Kenya continue to adhere to a 'new' charging policy 3 years after its implementation.     

Improving access to hospital care for the poor: comparative analysis of four health equity funds in Cambodia

There is a large body of evidence that user fees in the health sector create exclusion. Health equity funds attempt to improve access to health care services for the poorest by paying the provider on their behalf. This paper reviews four hospital-based health equity funds in Cambodia and draws lessons for future operations. It investigates the practical questions of 'who should do what and how'. It presents, in a comparative framework, similarities and differences in objectives, the actors involved, design aspects and functional modalities between the health equity funds. The results of this review are presented along the lines of identification, hospitalization rates and relative costs. The four schemes had a positive impact on the volume of utilization of hospital services by the poorest patients. They now account for 7 to 52% of total hospital use. The utilization of hospitals by paying patients has remained constant in the same period. The comparative review shows that a range of operational arrangements may be adopted to achieve the health equity fund objectives. Our study identifies essential design aspects, and leaves different options open for others.     

Overview: health financing reforms in Africa

Three broad strategies for health financing reform include: 1) cost recovery through user fees to expand access and improve quality of health services along with means testing to increase equity; 2) reallocation of existing resources to improve efficiency and access; and 3) assessment of the efficiency and quality of private health providers for making better use of the private sector in expanding access to quality health services. Research on the extent to which cost recovery reforms have improved access showed mixed results. A 1993 survey of more than 50 user fee experiences in Africa showed that in roughly half the cases, utilization either remained the same or decreased, whereas in the other cases, utilization increased after fees were introduced. Pilot tests of alternative cost recovery methods in 1993 and 1994 in rural Niger provided strong evidence that some form of social financing or risk-sharing mechanism may have advantages over pure fee-for-service methods in rural Africa. The main reason user fees are believed to be inequitable is that new or increased prices may provide a stronger disincentive to the poor than to the better-off. Informal means testing in Niger suggested that even moderately effective means testing can play a positive role for other incentives to utilization by the poor. A study identified specific measures of structure, process, and outcomes to assess quality improvement in 18 rural primary health care facilities involved in the Niger cost recovery pilot tests. Reallocation of existing resources to improve cost-effectiveness represents the second principle type of health financing reform. Private providers also play a role in promoting access in Sub-Saharan countries. Public and private sector efficiency in Senegal was also examined. Household spending to promote efficiency suggested that people could allocate money for health care more efficiently. Finally, some policy research needs were identified.     

Quality improvement and its impact on the use and equality of outpatient health services in India

This paper examines the impact of quality improvements in conjunction with user fees on the utilization and equality of outpatient services at a range of public sector health facilities in India. Project impact on outpatient visits was estimated via the difference-in-difference method using pooled time series visit data from project and control facilities. The results indicate that the quality improvements significantly increased visits at all facility types. The project effect was largest at primary health center (PHC) and community health center (CHC), followed by district hospital (DH) and female district hospital (FDH). Pro-rich inequalities in outpatient visits increased at DHs and FDHs while at CHCs and PHCs the distribution remained equitable. This suggests that quality improvements at public sector health facilities can increase utilization of outpatient services in the presence of nominal user fees, but can also promote greater inequality favoring the better-off. At the referral hospital level, quality improvements should be made in conjuction with programs which encourage utilization by the poor. In contrast, the benefit of quality improvements at PHCs and CHCs is equitably distributed.     

Analysis of hospital costs as a basis for pricing services in Mali

In a move to achieve a better equity in the funding of access to health care, particularly for the poor, a better efficiency of hospital functioning and a better financial balance, the analysis of hospital costs in Mali brings several key elements to improve the pricing of medical services. The method utilized is the classical step-down process which takes into consideration the entire set of direct and indirect costs borne by the hospital. Although this approach does not allow to estimate the economic cost of consultations, it is a useful contribution to assess the financial activity of the hospital and improve its performance, financially speaking, through a more relevant user fees policy. The study shows that there are possibilities of cross-subsidies within the hospital or within services which improve the recovery of some of the current costs. It also leads to several proposals of pricing care while taking into account the constraints, the level of the hospital its specific conditions and equity.     

Removing user fees: learning from international experience to support the process

Removing user fees could improve service coverage and access, in particular among the poorest socio-economic groups, but quick action without prior preparation could lead to unintended effects, including quality deterioration and excessive demands on health workers. This paper illustrates the process needed to make a realistic forecast of the possible resource implications of a well-implemented user fee removal programme and proposes six steps for a successful policy change: (1) analysis of a country's initial position (including user fee level, effectiveness of exemption systems and impact of fee revenues at facility level); (2) estimation of the impact of user fee removal on service utilization; (3) estimation of the additional requirements for human resources, drugs and other inputs, and corresponding financial requirements; (4) mobilization of additional resources (both domestic and external) and development of locally-tailored strategies to compensate for the revenue gap and costs associated with increased utilization; (5) building political commitment for the policy reform; (6) communicating the policy change to all stakeholders. The authors conclude that countries that intend to remove user fees can maximize benefits and avoid potential pitfalls through the utilization of the approach and tools described.     

Government policy and infant health: options for Ghana

Ghana holds an infant mortality rate (IMR) greater than 60/1000 live births, suggesting a country under poor economic and health care conditions. Despite the country's 1978 Ministry of Health Primary Health Care program, and governmental expenditures on health care in excess of 9% of total governmental expenditures overall, health conditions have grown worse. The author recommends corrective measure to implement. The IMR has halted its decline begun in the 1960s, and may once again be on the rise. The global recession of the early 1980s, followed by Ghana's 1983 economic recovery program have been cited as causing the turnabout in health progress. The recovery program's focus on productivity and efficiency has especially adversely affected society's vulnerable groups. While PAMSCAD, a government program designed to ease the social costs of structural adjustment, is mentioned as a general positive step, 3 interdependent and necessary interventions are provided. The 1st and most important intervention is the protection of family income through alternative employment and the protection of special groups. Village-level organization should also exist for development, agricultural extension, cooperatives, and marketing ventures. Finally, improvements at the health service level should include special training of technical and management personnel along with adoption of an essential-drug policy. Where user fees are charged, attention should be made to provide quality services while ensuring that accrued fees return to the health sector for the benefit of needy populations. At the broader policy level, policymakers must understand that efforts to reduce child mortality and improve child health will be for naught in the absence of efforts to protect against family-level deprivation. Attention to this concern should be taken where structural adjustment is required in other countries.     

Improving government health services through contract management: a case from Cambodia

Most government health facilities in Cambodia perform poorly, due to lack of funds, inadequate management and inefficient use of resources, but mostly due to poor motivation of staff. This paper describes contracting as a possible tool for Ministries of Health to improve health service delivery more rapidly than the more traditional reform approaches. In Cambodia, the Ministry of Health started an experiment with contracting in eight districts, covering 1 million people. Health care management in five districts was sub-contracted to private sector operators, and their results were compared with three control districts. Both internal and external reviews showed that after 3 years of implementation, the utilization of health services in the contracted districts improved significantly, in comparison with the control districts. There was adequate competition in awarding the contracts. A Ministry of Health Project Co-ordinating Unit measured the performance of the contractors, and contributed pro-actively. There was no evidence of rent-seeking practices by either the contracting agency or the contractors. This paper describes in more detail the successes and failures in one of the contracted districts, where HealthNet International applied the contracting approach. Despite significantly increased official user fees, constituting 16% of recurrent costs, the utilization of services was equally increased. Patients thought the fees were reasonable because they were still lower than the fees demanded if government health workers charged informally. They also thought that the services were of better quality than in the unregulated private sector. Another important result was that combining strict monitoring with performance-based incentives demonstrates a decrease in total family health expenditure of some 40% from US dollars 18 to US dollars 11 per capita per year. Innovative and decisive management proved to be essential, which is more likely to be achieved by a contracted manager than by regular government managers with life-long employment. This paper discusses how the contractor addressed the deeply rooted problems of informal private activities of government health workers. The NGO district management experimented with two management systems: first by individual contracts with health workers, and secondly by sub-contracting directly with the health centre chiefs and hospital directors. A reason for concern is that poli-pharmacy and excessive use of injectables continued. Also, the participation of the central level of the Ministry of Health was positive in the contracting process, but the role and participation of the provincial level of the Ministry was more tentative.     

Community health insurance amidst abolition of user fees in Uganda: the view from policy makers and health service managers

Background  

This paper investigates knowledge of Community Health Insurance (CHI) and the perception of its relevance by key policy makers and health service managers in Uganda. Community Health Insurance schemes currently operate in the private-not-for-profit sector, in settings where church-based facilities function. They operate in a wider policy environment where user fees in the public sector have been abolished.     

Ends and means in public health policy in developing countries

International discussions of public health policy strategies in developing countries have been characterized by strong and conflicting positions. Differences regarding the means of health sector improvement can often be traced to differences about the ends, that is, the goals of the health sector. Three types of health sector goals are reviewed: health status improvement, equity and poverty alleviation, and individual welfare (utility) improvement. The paper argues that all three must be considered in developing health sector reform strategies in all countries. Highly normative policy positions often can be attributed a unidimensional affiliation with one health sector goal and denial of the relevance of the others. The current global interest in using cost-effectiveness analysis to set national health priorities is assessed in light of this eclectic approach. Examples are provided of how a health sector strategy based on cost-effectiveness would give sub-optimal solutions. These examples include situations where a private health care sector exists and provides some degree of substitution for publicly provided services; significantly high income elasticities exist for health care such that higher income beneficiaries may differentially capture public subsidies; and market failures exist in insurance. It is argued that these conditions are virtually universal in developing countries. Thus, rational policy development should explicitly consider multiple goals for the health sector.