Goal 2: efficiency

Using the right level of care

User fees could improve technical efficiency by setting higher prices for higher levels of care. This would mean that people do not use higher level facilities when lower levels can be used instead, and the incentives are in place for a referral system to work. See User financing of basic social services.

In practice there is often no such mechanism in place to penalise patients for using higher levels when lower levels would be adequate, and referral systems fail to encourage patients to seek care at the primary facility first. Sometimes this is because they perceive the quality of care to be too low in the primary care facilities. Cost recovery in Ghana finds that the use of hospitals in the Akim Region in 1991 was much higher than that of primary level facilities, and attributes this to a lack of improvement in the latter.

Other factors include that higher level facilities may seek to maximise their income by encouraging patients to use their services, irrespective of efficiency concerns. Constraints such as geographical access or inappropriate advice by health workers also prevent referral systems from working properly.

Reducing frivolous use

There is very little support for the idea that charges could reduce "frivolous use"

It is also argued that charges can reduce "frivolous" or unnecessary use of the health system. But this argument has very little empirical foundation. Reducing frivolous use requires the patient to be informed enough to distinguish a serious from a non-serious condition. Frivolous use is unlikely to occur on a large scale in developing countries due to barriers such as geographical access to care. Instead, user fees are likely to reduce preventive measures and to reduce the speed with which the patient seeks care. They may therefore lead to delays in treatment and more severe cases, and also recourse to other treatment options, such as self-treatment, which are less effective.

User fees may even worsen efficiency by encouraging providers to provide more care than is needed, if their income is determined by the amount of care they provide. For example, if providers refer patients to their own private pharmacies to buy medication, then there are clearly incentives to over-prescribe. This phenomenon, termed "supplier-induced demand," has received much attention in the context of developed countries, although documented examples from developing countries are rare.