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Strategies for pricing publicly provided health services

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  • Gertler, Paul J.
  • Hammer, Jeffrey S.

Abstract

The authors examine how governments finance and allocate public spending, with an eye to developing strategies for pricing publicly provided health services. They also examine the implications of current policy and the possibility for rationalizing competing government priorities. Because governments face budget constraints and cannot fully subsidize all programs and activities, the authors argue the following: a) Public spending on health can (1) improve health outcomes, (2) promote nonhealth aspects of well-being (for example, reducing individuals'risk of economic losses from random health crises), and (3) finance redistribution to the poor. Optimal subsidy and fee policy will depend on how much relative weight government places on those competing objectives. Subsidies need to be reallocated toward the poor and toward public health sector can financed by increasing public subsidies. b) Prices for curative services (user fee) have two distinct roles. They can raise revenue, freeing public resources to be reallocated to public health activities and for limited cofinancing to improve the quality of curative care. More important, they can improve efficiency in the use of public facilities and the health care system as a whole. But those gains must be weighed against evidence that increased fees can compromise public health's three main goals. The literature has focused largely on how raising revenue affects the poor, but the more important effect is likely to be the guidance of resources. User fees are important in cofinancing health care but shouldn't be the primary means of finance. c) Revenue generated from user fees is sometimes used to improve the quality of, and access to, curative medical care. There is some evidence that people are willing to pay some of the cost of improving health care (especially for drugs), but the wealthy are willing to pay a lot more than the poor. If governments charge the average"willingness to pay,"the wealthy will use the services more, the poor, less. d) Prepayment social insurance plans hold promise, but there is evidence that they may introduce inefficient inflation of medical care costs that lower- and middle- income countries cannot afford.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1762.

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Date of creation: 31 May 1997
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Handle: RePEc:wbk:wbrwps:1762

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Keywords: Public Sector Economics&Finance; Health Systems Development&Reform; Environmental Economics&Policies; Payment Systems&Infrastructure; Health Economics&Finance; Environmental Economics&Policies; Public Sector Economics&Finance; Health Systems Development&Reform; Health Economics&Finance; Urban Economics;

References

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  1. Hammer, Jeffrey S, 1997. "Economic Analysis for Health Projects," World Bank Research Observer, World Bank Group, vol. 12(1), pages 47-71, February.
  2. Alderman, H. & Gertler, P., 1989. "The Substitutability Of Public And Private Health Care For The Treatment Of Children In Pakistan," Papers 57, World Bank - Living Standards Measurement.
  3. Benefo, Kofi & Schultz, T Paul, 1996. "Fertility and Child Mortality in Cote d'Ivoire and Ghana," World Bank Economic Review, World Bank Group, vol. 10(1), pages 123-58, January.
  4. Besley, T. & Coate, S., 1989. "Public Provision Of Private Goods And The Redistribution Of Income," Papers 36, Princeton, Woodrow Wilson School - Discussion Paper.
  5. Gertler, Paul & Locay, Luis & Sanderson, Warren, 1987. "Are user fees regressive? : The welfare implications of health care financing proposals in Peru," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 67-88.
  6. Hammer, Jeffrey S, 1997. "Prices and Protocols in Public Health Care," World Bank Economic Review, World Bank Group, vol. 11(3), pages 409-32, September.
  7. Vogel, R.J., 1988. "Cost Recovery In The Health Care Sector - Selected Country Studies In West Africa," Papers 82, World Bank - Technical Papers.
  8. Alderman, Harold & Lavy, Victor, 1996. "Household Responses to Public Health Services: Cost and Quality Tradeoffs," World Bank Research Observer, World Bank Group, vol. 11(1), pages 3-22, February.
  9. Weaver, Marcia & Wong, Holly & Sako, Amadou Sekou & Simon, Robert & Lee, Felix, 1994. "Prospects for reform of hospital fees in sub-Saharan Africa: A case study of Niamey National Hospital in Niger," Social Science & Medicine, Elsevier, vol. 38(4), pages 565-574, February.
  10. Lavy, V & Strauss, J & Thomas, D & de Vreyer, P, 1996. "Quality of Health Care, Survivial and Health Outcomes in Ghana," Papers 96-20, RAND - Reprint Series.
  11. Akin, John S, et al, 1986. "The Demand for Primary Health Care Services in the Bicol Region of the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 34(4), pages 755-82, July.
  12. Huber, Joyce H., 1993. "Ensuring access to health care with the introduction of user fees: A Kenyan example," Social Science & Medicine, Elsevier, vol. 36(4), pages 485-494, February.
  13. Schwartz, J Brad & Akin, John S & Popkin, Barry M, 1988. "Price and Income Elasticities of Demand for Modern Health Care: The Case of Infant Delivery in the Philippines," World Bank Economic Review, World Bank Group, vol. 2(1), pages 49-76, January.
  14. Yoder, Richard A., 1989. "Are people willing and able to pay for health services?," Social Science & Medicine, Elsevier, vol. 29(1), pages 35-42, January.
  15. Lavy, V. & Quigley, J.M., 1993. "Willingness to Pay for the Quality and Intensity of Midical Care; Low- Income Households in Ghana," Papers 94, World Bank - Living Standards Measurement.
  16. McPake, Barbara, 1993. "User charges for health services in developing countries: A review of the economic literature," Social Science & Medicine, Elsevier, vol. 36(11), pages 1397-1405, June.
  17. Stanton, Bonita & Clemens, John, 1989. "User fees for health care in developing countries: A case study of Bangladesh," Social Science & Medicine, Elsevier, vol. 29(10), pages 1199-1205, January.
  18. Light, Donald W., 1992. "Equity and efficiency in health care," Social Science & Medicine, Elsevier, vol. 35(4), pages 465-469, August.
  19. Thomas, D. & Lavy, V. & Strauss, J., 1992. "Public Policy and Anthropometric Outcomes in Cote d'Ivoire," Papers 89, World Bank - Living Standards Measurement.
  20. Mwabu, Germano, 1990. "Financing health services in Africa : an assessment of alternative approaches," Policy Research Working Paper Series 457, The World Bank.
  21. Ellis, Randall P., 1987. "The revenue generating potential of user fees in Kenyan government health facilities," Social Science & Medicine, Elsevier, vol. 25(9), pages 995-1002, January.
  22. Lewis, Maureen A, 1993. "User Fees in Public Hospitals: Comparison of Three Country Case Studies," Economic Development and Cultural Change, University of Chicago Press, vol. 41(3), pages 513-32, April.
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Citations

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Cited by:
  1. Orbeta, Aniceto Jr. C. & Alba, Michael M., 1998. "Macroeconomic Policy Change and Household Health Outomes: A Simulation of the Impact of the 1988-1992 Tariff Reform Program," Discussion Papers DP 1998-03, Philippine Institute for Development Studies.
  2. Mataria, Awad & Donaldson, Cam & Luchini, Stephane & Moatti, Jean-Paul, 2004. "A stated preference approach to assessing health care-quality improvements in Palestine: from theoretical validity to policy implications," Journal of Health Economics, Elsevier, vol. 23(6), pages 1285-1311, November.
  3. Menno Pradhan & Fadia Saadah & Robert Sparrow, 2007. "Did the Health Card Program Ensure Access to Medical Care for the Poor during Indonesia's Economic Crisis?," World Bank Economic Review, World Bank Group, vol. 21(1), pages 125-150.
  4. Jessica Cohen & Pascaline Dupas & Simone G. Schaner, 2012. "Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial," NBER Working Papers 17943, National Bureau of Economic Research, Inc.
  5. Lindelow, Magnus, 2002. "Health care demand in rural Mozambique," FCND discussion papers 126, International Food Policy Research Institute (IFPRI).
  6. Magnus Lindelow, 2004. "The Utilization of Curative Health Care in Mozambique: Does Income Matter?," Development and Comp Systems 0409057, EconWPA.

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