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What should consumers in poor countries pay for publicly-provided health services?

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  • Musgrove, Philip

Abstract

Under the assumption that the price charged for public medical care is not to determine supply (because general revenue is available), the optimum price is determined taking account not of the cost of production but only of the government's welfare function. If this includes both the revenue obtained and the total number of consultations, the optimum price is set where consumers' demand becomes inelastic--how inelastic depends on the relative values of revenue and consultations. Introducing a concern for consumers' own utilities and their incomes leads to a lower price, depending on the inequality of income. Distinguishing necessary and frivolous consultations can either raise or lower the price; the optimum depends on the share of demand that is frivolous. Price discrimination may be justified and, if practised, should lead to lower fees where the other costs (travel, etc.) of obtaining attention are higher.

Suggested Citation

  • Musgrove, Philip, 1986. "What should consumers in poor countries pay for publicly-provided health services?," Social Science & Medicine, Elsevier, vol. 22(3), pages 329-333, January.
    • Handle: RePEc:eee:socmed:v:22:y:1986:i:3:p:329-333
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    Cited by:

    1. Mocan, H. Naci & Tekin, Erdal & Zax, Jeffrey S., 2004. "The Demand for Medical Care in Urban China," World Development, Elsevier, vol. 32(2), pages 289-304, February.
    2. Dow, W.H., 1995. "Welfare Impacts of Health Case User Fees : A Health- Valuation Approach to Analysis with Imperfect Markets," Papers 95-21, RAND - Labor and Population Program.
    3. 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.
    4. 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.

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