Pricing and User Fees

This article is concerned with the issue of user fees (or user charges) for public health services. The implications of user fees for cost-effectiveness, allocative efficiency, equity, progressivity of public healthcare spending, and quality of service are discussed. Each of these is a desirable end in itself, and so each is an important factor in the optimal pricing decision; however, they are not always compatible with each other. Furthermore, they all have to be financed from a single, and typically constrained, budget. Thus governments have to tradeoff over them. The theory and empirical evidence on the effects of user fees on each factor are reviewed.