Pricing Preventive Health Products

Do user fees limit access to health and education services? Does cost-sharing screen out low-income people?

Health care provider distributing free insecticide-treated bednet to mother who just delivered baby at clinic, Kenya.

User fees have been advocated for many years to promote sustainability of health services, to help make sure that goods and services are not given away wastefully, and to provide a source of flexible revenue to those in frontline services to replenish supplies and pay for repairs. More recently, social entrepreneurs have argued that an entrepreneurship model based on small fees can bring socially important products to the poor in a sustainable way. Those arguing against user fees, however, point to the massive increases in the take up of public services that have accompanied the abolition of user fees for schooling and health care around the world.

Among ten randomized evaluations, we find that charging even very small user fees sharply limits access to preventive health care. Though charging small fees is promoted for many reasons- including better targeting of products and reduced wastage in health programs- several experiments in different countries found very little support for these views. But because there are limited resources available for health services, governments should place priority on providing for free those products whose effects spill over beyond individual users and are highly cost-effective.

“[…] it's a fairly universal rule that if governments or businesses want people to take care of themselves, they have to make it as easy as possible.” Tricking People Into Being Healthy: Why people might be more likely to get a flu shot if it's free rather than $1 or $5. The Atlantic, December 7, 2014

Charging even very small user fees sharply limits access.

When a program in Kenya moved from free provision of deworming tablets to charging an average price of 30 cents, take-up fell from 75 percent to 19 percent (1, see graph below). Similar declines were seen when charging for water disinfectant and mosquito nets. This sharp decline in take-up with price was true even when the user fee was a tiny fraction of the true cost of the product.

Charging small user fees to the poor for health products and services is promoted for many reasons—including to help reduce wastage and target products to those who need or will use them. Several experiments on different products and in different countries found very little support for these views. In every study where this was tested, the act of paying for something did not help encourage people to use the product, nor did charging help target a product to those who need it. In one study (3, see graph below), charging a higher price for chlorine to add to drinking water screened out more people who would not have used the product than those who would have used it. This effect was not found in other studies. Giving people more time to raise the money to purchase a product did lead to a less dramatic fall-off in take-up as price rose (6, see graph below).

In most cases, user fees neither improved nor worsened targeting among those who obtained the product, but did reduce the fraction of individuals in need who got the product.

Those who were dewormed when medicine was paid for were no more likely to have a high worm load than those who were dewormed for free, and many children with high worm loads did not get dewormed when user fees were charged, because of the decreased demand (1, see graph below). Pregnant women who chose to purchase bednets in Kenya were no more anemic than those who received nets free of charge, and many anemic pregnant women did not acquire a bednet when user fees were charged, because of the decrease in take-up (2, see graph below). Families with children under 5, who are particularly vulnerable to the negative effects of diarrhea, were no more likely to buy chlorine to add to their water than other households, and many children continued to drink dirty water because of the barrier of user fees (5, see graph below). In a Kenyan study, however, charging did alter the type of family that bought nets and who in the family used the nets. But on average charging worsened targeting, as it reduced the likelihood of children under 5 sleeping under nets (holding net ownership constant)—despite the fact that these children are the ones most likely to die from malaria.

Goods and services with positive spillover effects should be prioritized when governments are selecting which interventions to make available for free.

Many preventive health products offer benefits that reach beyond individual users, but because users do not personally benefit from these spillovers they are often unwilling to pay for them. If a child receives deworming medicine she is less likely to infect others nearby; if enough people sleep under a bednet, this contributes to malaria control in the community. In these cases, there is a strong rationale for subsidizing or even giving products away. Deworming school children, providing bednets, or immunizing children all help break the cycle of disease transmission and benefit more than just the treated child.

There is also strong evidence that people under-invest in preventative health products even when they are highly cost effective which make them good candidates for free delivery.

Demand for Preventive Healthcare Products Based on Price