Welfare Impacts of Health Care User Fees
A Health-Valuation Approach to Analysis with Imperfect Markets
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Despite large investments in determining the demand effects of raising health care user fees in developing countries, there has been little welfare analysis of user fees. Conventional wisdom assumes that the more that user fees discourage demand, the worse is a user-fee policy. This paper shows that this conventional wisdom is contradicted by neoclassical analysis. It is then argued that empirically resolving these conflicting predictions using standard consumer surplus measurement is inadequate. This is because market imperfections make individual private revealed values potentially different from actual social benefits. An alternative "health-valuation" approach to social welfare measurement is proposed here instead. This involves a reorientation of analyses towards direct measurement of health outcome effects, which is argued to be the preferred research strategy.
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