Economic contestation over user fees in low-resourced healthcare systems: A literature review

Abstract

This paper reviewed the literature on economic theory and assumptions that provide the rationale for using a price system to finance health care services in developing countries. The primary case in favor of a system of user fees for financing healthcare in these countries lies in allocative efficiency results to be achieved through a price system. The assumption being that, the price system signals to consumers what they must pay for health care services hence giving them an incentive to utilize those services well. However, this assumes perfect markets, where prices reflect the true marginal benefits of consuming healthcare goods and the marginal cost of their production. All equity concerns being addressed through price discrimination, a system of user fees can then allocate health care resources efficiently. Although the application of user fees in the health sector is justified by the perfect markets, there are concerns that a perfect market is less likely to be the case in health sector. Therefore, it will not be a viable way to rely on the price system to allocate resources to the population when markets of any healthcare goods and services are not available or are imperfect. Information asymmetry and uncertainty are the major obstacles to a proper function of a price system in healthcare service provision. Due to the inelastic nature of the demand for healthcare, charging fees for healthcare services can pose hard financial catastrophes to poor and lead into poverty. This suggests the need to establish healthfinancing policies that would facilitate the creation of new markets or which can improve the performance of existing ones in developing countries.