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User fees, self-selection and the poor in Bangladesh
S Thomas1, J R Killingsworth, S Acharya
1Health Economics Unit, Ministry of Health and Family Welfare, Bangladesh.
Insights
Implementing user fees in developing countries can harm the poor. This study suggests self-selection mechanisms within healthcare markets can effectively target aid and raise revenue without costly exemptions.
Area of Science:
- Health economics
- Public health policy
- Developing country healthcare systems
Background:
- Uncontrolled user fees in developing nations disproportionately affect impoverished populations.
- Existing targeted exemption schemes for user fees are often inefficient and fail to reach intended beneficiaries.
- Need for effective revenue generation and equitable patient targeting in resource-limited health sectors.
Purpose of the Study:
- To examine the potential of user fees to generate revenue and target poorer patients effectively.
- To explore alternative mechanisms for cost recovery in healthcare, avoiding complex and costly targeting strategies.
- To assess the feasibility of self-selection as a method for identifying and supporting low-income patients.
Main Methods:
- Case studies of cost recovery in the health and population sectors in Bangladesh.
- Analysis of market conditions conducive to self-selection mechanisms.
- Theoretical framework for how self-selection can enable cross-subsidization.
Main Results:
- Under specific market conditions, user fees can be implemented to raise revenue.
- Self-selection allows poorer patients to opt for appropriate healthcare services based on their financial means.
- This mechanism bypasses the need for direct means-testing or external identification of poverty.
Conclusions:
- Self-selection offers a viable strategy for targeting healthcare subsidies to the poor in developing countries.
- This approach facilitates cross-subsidization by enabling the non-poor to subsidize the poor through market choices.
- Policy implications for designing equitable and sustainable healthcare financing in resource-constrained settings.
Abstract:
The widespread uncontrolled introduction of user fees in any developing country is likely to have a disastrous impact on poorer patients. Furthermore, traditional targeting schemes aimed at their exemption are often expensive, difficult to administer and ineffective at reaching those in greatest need. This research study examines how user fees can raise revenue and target poorer patients, under the right market conditions, without resorting to costly targeting schemes. The authors draw their findings from case studies of cost recovery in the health and population sectors in Bangladesh. The mechanism suggested in the paper is to use self-selection. It is argued that under certain market conditions poorer patients will choose the health-care option that is appropriate to their means. They will thus identify themselves as poor without having to be selected or tested by an independent authority. This self-selection allows the relevant authorities to cross-subsidize their market choice by over-charging the non-poor in other segments of the market.