Challenges of Healthcare Financing: Economic and Welfare Effects of User Fees in Urban Ethiopia
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Date
2007-06
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Addis Ababa University
Abstract
This study examines the determinants of health care provider choice of urban households
of Ethiopia. Particularly, it investigates the effects of user fees on the demand for health
care by different segments of socio-economic group using multinomial logit model. The
data source of the study is the Ethiopian Urban Socio-economic Survey conducted in 2004
by the Department of Economics of Addis Ababa University in collaboration with the
Department of Economics, University of Goteborg in Sweden Cost recovery mechanisms
were introduced based on the principle that health care demand in developing countries is
price inelastic; so that more resources can be generated for the health sector without
reducing the demand by the poor. But the results of this study reveal that for a given rise in
health care cost, the poor will reduce the demand for health care significantly in greater
proportion relative to the better off. In other words an increase in user fee is likely to drive
out the largest portion of the poorest households from receiving medical care. The study
also shows the poor are required to pay significantly greater proportion of their income to
health care than the better off in order to get treatment. This will aggravate the existing
inequality in access to basic health care services. Hence, even though the principle of cost
recovery had been advocated as alternative means of health care financing in most
developing countries, increasing user fee may drive the poorest population out of health
care market or deepen their economic situation unless some reliable protective measures are taken
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Keywords
Cost Recovery, Equity, Financing, Health Care Provider