Goal 5: private sector development

When public services are free of charge, the private sector cannot compete, except by providing better quality, more accessible (closer) or more convenient (e.g. longer opening times) services, for which the population are willing to pay. So user fees in the public sector could ease this constraint on private sector development.

There is very limited research to answer specific questions about the impact of user fees on the private sector. "Shopping around" between different facilities is likely to be important mainly in urban settings, where there is more choice of health providers. For example, in Dar es Salaam, Tanzania, there are four private health facilities for every public one. But indigenous or traditional health systems, rather than the private modern sector, are often the main competitors to government facilities, especially in Africa and in rural areas.

Non-governmental organisation (NGO) and mission facilities are also important in sub-Saharan Africa. These tend to be located more in rural areas and tend to be popular due to their non-profit status and the generally positive attitudes of staff. In countries such as Tanzania and Rwanda they have often been given official status as government facilities. These facilities often have cost recovery policies, and as in the for-profit sector, they might find it harder to maintain these policies when public sector facilities are free. Thus the adoption of user fees in public facilities may make it easier for NGO facilities to survive.

However, it is not only price that determines health seeking behaviour. A substantial literature reports that patients will also compare characteristics such as payment schedule, proximity, previous treatment habits and experiences, and perceptions about likelihood of cure.