Health care cost-recovery simulations from parametric estimates: methodology and results for Ogun State, Nigeria

Cost recovery in the health care sector in developing countries can be a powerful tool for achieving efficiency and equity goals, and for mobilizing financial resources for the improvement of quality. However, there is only fragmentary empirical evidence on the revenue, quality and cost effects of cost-recovery policies in the health care sector. Using parameter estimates from cost and demand functions that were derived from data from a facility and household interview survey in Ogun State. Nigeria, this article simulates various cost-recovery scenarios for the public sector. The empirical results of the simulations show that, under certain realistic scenarios, cost recovery will generate additional revenue and improve quality. Equity would be enhanced by spending some of the additional net cost-recovery revenue on health care for the poor.