Global Health Policy

For a change, I have to agree with an economist about informing the debate about fees for service and commodities! When I worked in rural Rajasthan, collecting data for my doctoral work on gynecological morbidity and analyzing the demand-side issues vs. supply side issues of services for this area of reproductive health, I couldn't have learnt more about the low value of, and therefore low demand for, "free" (in this case, government) services. "If it doesn't cost anything, it is not good" and people don't want that service. They would rather pay a small fee at a private provider's clinic (often the Dr. from the PHC who does private clinics all evening from his house) and get "better" private care.

or what about my girlfriend, who insists on buying bottled water despite our perfectly good tap water. I even bought an expensive filter, so she couldn't make spurious claims about contaminants in the tap water. In the end, she just likes to buy bottled water, likes the packaging and sense of getting something special.

In Tanzania user fees have been waived only for children under 5 years. In the majority of cases, parents cannot afford the fee.

Every time children have a malarial event, mostly under fives are brought to a health post. They are saved with ACTs, which costs 10 times more than the classic chloroquine (which have become useless due to resistance), but is provided at subsidized price by donors.

However, when kids go back home the probability they will get a new malarial event and die are the same (immense) as elder brothers, which in their great majority have developed chronic malaria and live with the parasite in their blood, do not receive treatment because parents can not afford the "modesty" of the fee.

As a result, elder bothers transmit the disease to younger siblings at home, via the mosquito, and you have another avenue that explains why every year 1.2 million of under fives in Africa die due to malaria.

Additionally, millions of dollars invested in ACTs may be in vain and resistance developing very fast.

An economic reasoning on fees and health consumers´ empowerment must consider the details and the consquences in other sectors.

In Tanzania, in this precise case, fees actually kill millions.

The issue of pitching user fees at low enough levels that encourage demand seems sensible. However, such low levels would need careful assessment of transaction costs involved in administering these fees in addition to an appraisal of the economic costs to the client of fetching help. The issue is not one of whether or not, or as a similitude, how low, we need to put user fees. Rather, the issue is one of financing instruments available to donors to pay for health in poor countries. Much more promising ways forward are methods to stimulate providers to supply more health services of better quality, or creative ways to compensate clients for the costs involved in obtaining medical services.

In the interests of disclosure, I work for PSI. One of the key reasons that we use a pricing system in our work is not that we wish to recoup costs or charge fees per se, or that we believe that charging a price encourages use every time, but rather that we wish to take advantage of an extant distribution network rather than create an entirely new one. Incentivizing the trade by allowing them to take margins allows us to piggy back at very low cost. In addition, allowing a profit to be made encourages actors of all stripes to ensure that products remain in stock at the point of need.

All of this is not to say that free distribution has no role to play. Usually free, subsidized and full cost product strategies need to all be deployed at the same time to ensure maximal coverage; the recurring, and loud 'free vs. not-free' debate is misleading and not particularly helpful in this regard.

There are some major differences between pricing of socially marketed goods and user fees in the health sector: 1) I bet there are no 'hidden fees' (ie bribes) to purchase Clorin; 2) related to the first point, there is a lot less uncertainty about what the true cost will be for a product (and what the risk of subsequent detention for failing to pay the user fee (see Burundi or Kenya as examples) compared to a consultation with subsequent diagnostic and prescription costs; and 3) the cost of transport and opportunity costs to the consumer are much, much smaller with socially marketed goods, affecting the comparison of a 'nominal' fee for Clorin vs a fee for a health user fee.

In addition to hidden costs in the public sector, there are hidden benefits where fees or prices are accompanied with marketing efforts. Just charging a fee without any effort to justify that fee with marketing techniques does little to create perceived value. When a fee is charged for branded health products or bottled water, the consumer obtains a higher perception of value and has a greater willingness to pay for and use the product or service.

I haven't read the NBER paper but the same authors have also written up their research in Forbes magazine (April 16)

Having read this piece I think that the authors have overlooked a rather glaring factor which explains the different behavior between households. What we are seeing here is an income effect. Could it be perchance, that "Households that agreed to pay more for Chlorine" are richer households? If so, is it surprising that these households (which would also be better educated) are more likely to use Chlorine. Having higher disposable income they would also use it frequently because they would be confident of being able to buy more later. There is no story here. How would it be any different for selling toothpaste: some (richer) households are prepared to spend more money on toothpaste and these families brush their teeth more often. Don't you think that Colgate have worked this out already?

It is in the conclusion that the rather sinister implications of this research come out. Here it is agreed that the more you charge the fewer people will buy. But basic economics tells us that as you raise the price the people who stop buying first will be the poorest. Apparently this doesn't matter though as "health should have a price" to "help to get lifesaving products into the hands of those who use them most" - in other words richer people! As most of our organizations trying to improve the health status of poor people I am not convinced about the merits of this pricing strategy. For these goods with high public health value our primary objective should be to maximize consumption by those who need them most not to maximize efficiency by restricting use (through high prices) to the people who will use them most. Rather than take the line "this stuff will be wasted on the poor" we need to get smarter at finding ways of marketing free commodities to poor.

Thankfully this has now been recognized by WHO. They say that the debate about distributing bednets is now over - you give them away for free:

http://www.who.int/mediacentre/news/releases/2007/pr43/en/index.html

The World Bank also seems to be coming round to this viewpoint, with its new HNP strategy saying in paragraph 105 that: "Upon client-country demand the Bank stands ready to support countries that want to remove user fees in public facilities"

A few people still seem to be clutching at straws that user fees can work, but thankfully most of us are now waking up to the fact that taking money of poor people when they are sick is not a good idea.

Rob Yates

In reference to the comment made above: The authors of the Zambia paper say (on page 40) that, "We find no evidence that buyers at higher offer prices are wealthier or more educated." Comparative wealth, even in the low income target area, was taken into consideration.

The WHO press release itself recommends that nets are "distributed either free or highly subsidized". Both can result in the "easy availability" goals WHO expresses.

Defenders of a "free distribution only" approach miss that many times the largest costs are beyond the price tag. Free distribution centers often lack the convenience that sold nets provide. Going to the local shop at a time the beneficiary chooses is much closer to travel than finding the district distribution center and the beneficiary doesn't have to wait for the essential product for a special "health day". Improving/maintaing health always has a price. Without a serious review of the costs and benefits for health seeking behavior, we oversimplify and make serious mistakes. Having a better understanding for life on the ground, it can be possible to see that in some cases that distributing for an official price competes with "unofficial costs" (bribes) and replaces a highly changeable, under the table rate, with a more reliable printed rate. It could be possible that no longer burdened with the unattractive need to ask for bribes to meet living costs, health workers would be free to instruct consumers on proper usage or provide that extra customer service that should improve usage as well as attract others to come as well.

A blended model, consisting both of social marketing and free distribution, continues to be the best way to ensure high coverage of those in need.

The Zambia study takes a large step to better understand the psychological impact of paying for an item. It takes a needed step to promote the use of a holistic view of what elements promote usage- taking into consideration the comparative psychological impacts of buying versus receiving for free.