(Luận văn) user fees and fee exemption mechanism in public health facilities , the case of quang ngai province

UNIVERSXTY OF ECONOMICS HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES THE HAGUE VIETNAM THE NETHERLANDS ng hi ep VIETNAM-THE NETHERLANDS PROJECT FOR M.A ON DEVELOPMENT ECONOMICS w n lo ad ju y th yi USER FEES AND FEE EXEMPTION MECHANISM IN PUBLIC pl n ua al HEALTH FACILITIES: THE CASE OF QUANG NGAI PROVINCE n va fu ll The thesis submitted in partial fulfillment of the requirements for the degree of m oi MASTER OF ARTS IN DEVELOPMENT ECONOMICS at nh z BY z vb PHAM VAN TRONG k jm ht l.c gm om SUPERVISORS: Dr ARDESHIR SEPEHRI n a Lu Mse TRAN THANH SON n va y te re ac th HO CHI MINH CITY- MAY 20th, 2002 CERTIFICATION “I certify that the substance of this dissertation has not already been submitted for any degree and is not being currently submitted for any other degree ng hi ep I certify that to the best of my knowledge any help received in preparing this dissertation and all sources used have been acknowledged in this dissertation” w n Pham Van Trong lo Date: May 20th, 2002 ad ju y th yi pl n ua al n va ll fu oi m at nh z z k jm ht vb om l.c gm n a Lu n va y te re ac th i ACKNOWLEDGEMENT This thesis is done under the Vietnam-Netherlands Project for MA on Development Economics I ng would like to thank The Netherlanđs for Her aid and scholarship hi ep I am grateíul to all project teachers and staíĩ Especially, gratefulness is sent to Mr Tran Vo Hung Son- the Project Leader Many thanks are also released to Ms Nguyet- the Project Secretary and w Ms Chi- the Project Librarian n lo ad High appreciations are given to Dr Haroon Akram-Lodhi and Dr Youdi Schipper for worthy ju y th academic teaching and encouraging me on my thesis draft yi I would like to express my deep appreciations to Dr Gabrielle Berman- member of Project pl Scientific Committee- and Msc Tran Thanh Son- my supervisor- who gave me lots of valuable al n ua academic advise to improve the quality of the paper n va From the bottom of my heart, I would like to give many deep appreciations to Dr Ardeshir Sepehri who guide, support and going witìi me throughout the process of doing this thesis fu ll Especially, his mental encouragement is a great support for me to finish this thesis Again, I m oi would like to give deep appreciations and best wishes to him and his íamily nh at Finally, I would like to express my respectíul gratitude to everyone in my family who has been z z untiringly contributing their mental and íínancial support for me to complete my thesis and Pham Van Trong k jm ht vb looking for my success gm Date: May 20th, 2002 om l.c n a Lu n va y te re ac th ii TABLE OF CONTENT ng List of figures hi ep List of tables Abstract w n CHAPTER 1: INTRODUCTION -Pdge lo Objectives, research questions and hypotheses ofthe study - 2.1 Objectives - ad Problem statement ju y th yi 2.2 Research questions - pl ua al Hypotheses of the study Data source and research method n n va Data source 4 Rationale of the study - ll fu 3.2 Research method - m oi Structure of the thesis nh CHAPTER 2: LITERATURE REVIEW - at z z I Theorical framework vb User fees - ht 2.1 Efficiency enhancing potential of user fees k jm Potential benefit of user fees , gm 2.2 Revenue raising potential ofuser fees om l.c 2.3 Equity enhancing potential ofuser fees -3 Price elasticity of demand for health care 13 a Lu 14 Russell's argument on the inequity of user fees - 14 n 15 y Gilson and Russel's theory on the ineffectiveness of fee 11 Empirical evidence 19 a 15 th mechantsm exemption 111 te re fee exemption mechanism va Willis and Leighton's argument on the ineffectiveness of n Willingness to pay and ability to pay - CHAPTER 3: USER FEES AND FEE EXEMPTION MECHANISM ng 27 Overview of health sector in Vietnam - 27 1.1 Before renovation ( 1989) 27 1.2 After 1989 - 27 User fees and fee exemption mechanism in health services 28 hi IN HEALTH SERVICES IN VIETNAM -Page ep w n lo ad CHAPTER 4: FEE EXEMPTION MECHANISM, EQUITY AND WILLINGNESS 34 y th TO PAY: RESEARCH METHODOLOGY AND DATA ANALYSIS ju 34 Research methodology yi 34 1.2 Analytical framework 34 pl 1.1 Method of data analysis - ua al 36 n Data collection va Overview of main economic activities and health care system n 37 ll fu in Quang Ngai province Data analysis - oi m 40 3.1 Definition of the poor and the non-pu-:r 40 nh 44 Commune health centers - 44 at Data analysis and discussion - z z 2.2 Ba To district hospital ht vb 45 3 Quang Ngai provincial hospital 51 k jm CHAPTER 5: CONCLUSION AND SUGGESTION - om l.c gm 57 n a Lu n va "'' y te re a th iv LIST OF FIGURES ng hi Figure : Equity enhancing potential of user fees -Page 11 Figure : Affect ofuser fees to the poor 16 Figure : Conventional model 35 ep LIST OF TABLES w Table : Econometric estimates of own price elasticities of the demand n 20 Table : Mobilizing resources to pay for care - survey in Sierra Leone - 22 lo for medical care in developing countries - ad y th 23 Table : Mobilizing resources to pay for care (%) - ju 25 yi Table 4: User fee exemption for occupational groups: Cross country experience - pl Table :Health service contacts per person following per capita al 31 n ua expenditure quintiles, 1998 Table 6: Percent ofusers who are exempted from payments for a visit to va 32 n a governmental health facility, 1998 fu 36 ll Table : Variable framework - m 43 Table 9: Payment and exemption for outpatients in district hospital 47 oi Table 8: Income:per capita following income quintiles - at nh Table 10: Payment and exemption for inpatients in district hospital 48 z 49 z Table 11: Inpatient care costs and health financing sources vb 52 Table 13: Payment and exemption for inpatient in provincial hospital 53 k jm ht Table 12: Payment and exemption for outpatients in provincial hospital - 54 om l.c gm Table 14: Inpatient care costs and health financing sources n a Lu n va y te re a th v ABSTRACT ng hi User fees have come to play a significant role in the financing and delivery of public health ep services in many developing countries since 1980s It is considered as a way of rationalizing the use of care, raising revenue and improving the coverage and quality of health services While w n many have been written on the revenue-raising potential of user fees, little is known about the lo ad equity-enhancing potential ofuser fees y th ju In Vietnam, user fees were introduced since renovation in health sector in 1989 Although there is yi formal fee exemption mechanism for the poor in public health services, it doesn't work well in pl practice My paper tries to examine the equity impact of user fees by coming to know the fee al n ua exemption mechanism in public health facilities in Quang Ngai province On that purpose, my va study tries to examine whether the poor patients receive exemptions in health services, there is a n correlation between household income and level of exemption, and the poor has to sell their fu ll productive assets to pay for care or not From that, some conclusions and suggestions are given to m oi the policy-makers to improve the equity of user fees in health services at nh z z k jm ht vb om l.c gm n a Lu n va y te re a th Vl CHAPTER 1: INTRODUCTION ng hi ep 1- Problem statement One of the objectives of governments around the world is the promotion of human w n development in general and the health of the population in particular So, the provision of lo ad health care is the great concerns for many countries in all over the world Since the early y th 1980s, many governments of developing countries have been restructuring the financing ju and the delivery of publicly provided health services Due to the serious imbalances yi between demand and supply of health services and the budget constraints, many low and pl ua al middle-income countries have introduced user fees or user fees in health services as an essential policy to finance publicly provided health services According to de Ferranti n n va (1985), Griffin (1987) and World Bank (1987), user fees have been considered as a way of ll fu rationalizing the use of care, mobilizing sources within the health sectors, encouraging m community participation and making the delivery of health care services more efficient and oi equitable Revenues from user fees are used to expand the coverage and the quality of nh services The improvement in coverage and quality of health care services combined with at z the exemption of user fees for the poor are argued to enhance equity because it creates z vb chances for the poor to access the high quality health services But in reality, the jm ht introduction of user fees in some aspects is not good for some people in society, especially the poor Theoretical models suggested that the price elasticity of demand of health k gm services is to be higher for the low-income groups than the higher income groups (Me l.c Pake, 1993) So, user fees combined with no policy to exempt the poor are unlikely to om promote equity and harmful for the poor Many poor patients, who face difficulties in a Lu finding funds to finance medical care, has to transfer funds from payment for foods and n other necessity goods or selling off productive assets to payment for care (Russell, 1996) va n Before doi moi (economic reforms), the government of Vietnam provided medical care free a (district, provincial and national) of the health care delivery system In 1995, the Ministry th patients for consultations and drugs In 1989, a fee system was introduced in three levels y encouraged private sector's participation in health services Public hospitals began charging te re of charge The user fees were introduced in the late 1980s when the "doi moi" policy of Health issued formal user fee schedules for each kind of consultation and each kind of ng diagnostic test and procedure in clinics and hospital (Vietnam-Public Expenditure Review hi 2000) However, as it is noted by the Vietnam-Public Expenditure Review 2000, although ep there is a formal fee exempting mechanism for the poor, handicapped, war veterans, w orphans and individuals suffering from certain ailment, it doesn't work well in practice n The research of Ensor and San ( 1996) showed that there is no correlation between fee lo ad exemption and household income y th ju Quang Ngai was chosen because it is a poor province located in the middle of the central of yi the country In 1999, GDP per capita in Quang Ngai is equal to USD 174, whereas GDP per pl ua al capita in Vietnam as a whole is USD 363 at that time (Quang Ngai statistical yearbook, 1999) Main cultivations here are rice, sugar-cane, casava The livestocks include buffalo, n n va cow, pig, chicken The health care system here is underdeveloped including one provincial ll fu public hospital, district health centers, and commune health centers In 1990, user fee m system in health services was introduced and applied But it is seemly that it operated oi ineffectively Many poor patients didn't receive any exemption from payment for treatment nh at and some had to sell their assets to finance their costs of treatment z z Crucial to the equity-enhancing potential of user fee argument is the assumption that the vb ht poor need to be exempted from paying user fees While many have been written on the k jm revenue generating potential of user fees, little is known about their equity enhancing gm effects The purpose of my research is to fill this gap by examining (i) the exemption rely on selling their asset to pay for the medical expenses om l.c mechanism as practiced in Quang Ngai province and (ii) the extent to which the households n a Lu 2- Objectives, research questions and hypotheses of the study n va 2.1 Objectives a mechanism operates in health care system in Quang Ngai province; whether the poor th having, it didn't operate well in practice My study tries to examine how the fee exemption y exempt the poor from user fees in health services in some developing countries And if te re Some previous research (Russell and Gilson, 1997) indicated that there is no policy to receive fee exemption in health services; and in the case of receiving no fee exemption in ng health services how they pay for their treatment From that, some suggestions on user fee hi ep mechanism in health services are given to policy-makers to make it better 2.2 Research questions w n lo The main research question in my study is: ad Do poor patients receive an exemption or reduction of user fees in public health y th • ju facilities including: commune health centers, district health centers and provincial yi pl hospitals? al n ua Besides that, the sub-research questions in my study are: va • Is there a correlation between household income and fee exemption level in health n ll fu services? m Do the poor households with illness have to sell their assets in order to pay their oi • at nh cost of treatment? z z 2.3 Research hypotheses vb That not all poor households receive fee exemption from public health services gm • k jm ht The main hypothesis of my study is: l.c There are some poor households who don't receive any fee exemption a Lu • om The sub-hypotheses of my study are: That there is no correlation between household income and fee exemption in health n lowest income quintile It may be that the poor receive exemption equal to or less n va care It means that exemption doesn't increase from highest income quintile to te re than the rich y hospital fees Selling productive assets such as machines, buffaloes, land etc will a That some poor households have to resort to selling their assets in order to pay th • ng Besides that, the richest and the poorest nearly receive the same exemptions from inpatient hi fees implying the inequity of fee exemption mechanism There is no correlation between ep household income and level of fee exemption Moreover, exempting the rich from fees also mean less revenue retained at local health facilities to improve coverage and quality of w n services It suggests the inequity of user fees The rich seem to be more likely to get lo ad benefits from this mechanism rather than the poor y th • Inpatient care costs and health financing sources ju yi pl The results of inpatient care costs and health-financing sources are summarized in table 14 al n ua Table 14: Inpatient care costs and health financing sources n va Inpatient care costs Total Income quintiles r ll fu 12 Q4 Q5 3 3 1 1,000,000- 1,500,000 1 1 Greater than 1,500,000 Owned money 0 Borrowing 2 0 Selling assets 21 Owned money + selling assets 1 Borrowing + selling assets 10 3 at 500,000- 1,000,000 gm Q3 ht Q2 nh oi m Less than or equal to 500,000 Q1 z z vb Health financing sources k jm om l.c a Lu From table 14, we see that the richest households pay for much less inpatient care costs n than the poorest households 60% (3/5) of the richest households with family members va n who had inpatient care costs pay for inpatient costs less than 500,000 dong and none of pay more for the treatment of illness than the rich households 54 a households often suffer more from greater health problems than the rich households and th and up to 56% (5/9) of them paying greater than 1,500,000 dong It suggests that the poor y (3/9) of the poorest households who had inpatient care costs paying less than 500,000 dong te re them pay for inpatient costs greater than 1,500,000 dong By contrast, there are only 33% On health financing sources, we see that 60% (3/5) of the richest patients uses their owned ng hi money to finance their health expenditure There are only 20% (1/5) of them has to sell ep assets to finance their cost of treatment At the other end, none of the poorest uses their own money to finance their treatment and up to 44% (4/9) of them has to sell assets to w n finance their treatment It shows that using owned money to finance the costs of treatment lo ad is the dominant source to the richest The sale of assets, especially productive assets, to y th finance health care costs is the dominant source to the poorest Besides that, table 14 also ju shows that borrowing from relatives or friends and selling assets to finance the costs of yi treatment are main financing sources to the poor It's expressed in quintiles Q1, Q2 and pl ua al Q3 n It would seem that the poor in Quang Ngai suffer more from greater health problems than va n the rich In addition, the fee exemption mechanism doesn't work well in provincial fu ll hospital The poor don't receive exempdons as expected Therefore, they spend more oi m money on health expenditure than the rich Large expenditures on health problems take nh them to borrow money or sell assets Borrowing and selling assets may result in serious at decreases for the welfare of poor households Borrowing means that the households have to z z pay back interest and principal in future Thus, it affects future savings and expenditure and vb leads to lower investment and productivity gains On the other hand, selling assets, ht jm especially productive assets, will set down the income generating capacities of households k In the survey, I found that nearly 85.7% of sold assets are productive assets The result is gm that the poor households' welfare is decreased This is negative impact ofuser fees l.c om In summary, the fee exemption mechanism doesn't work well in the Quang Ngai provincial a Lu hospital The poor have to pay and pay much more for health fees than the rich There is no n correlation between household incomes and levels of fee exemptions In addition, the poor a th households' welfare is decreased It's the inequity of user fees y borrow from their relatives and friends or sell their assets The result is that the poor te re with no exemption lead the poor to large expenditures on health care It takes the poor to n va often suffer more from greater health problems than the rich Health problems combined •!• Brief summary and conclusion for chapter 55 The surveys were implemented in mountainous villages in Ba To District, Quang Ngai ng hi province Although there is a formal fee exemption mechanism in public health facilities, it ep doesn't work well in practice Through the surveys, I have some findings: w There are full fee exemptions for all patients in commune health centers, regardless n lo of their incomes This is the inequity of fee exemption mechanism because, ad according to user fee theories, the poor should be exempted from user fees The rich y th have to pay fees On the oth~r hand, the effectiveness of fee exemption mechanism ju yi is constrained due to some following factors including lack of good medicines and pl equipments, lack of informations on exemptions, long distances and costs of travels, al ua more personal nature of services in nurses' houses in comparison with commune n health centers and beliefs in traditional healers n va ll fu Although there is a formal fee exemption mechanism in the Ba To district hospital m and the Quang Ngai provincial hospital, it doesn't work well in practice The fee oi exemption mechanism doesn't distinguish between the rich and the poor The poor nh at have to pay and pay much more for health fees than the rich There is no correlation z between household incomes and levels of fee exemptions It's the inequity of user z vb fees because, according to user fee theories, the poor should be exempted from user jm ht fees The rich have to pay fees On the other hand, the poor often suffer more from k greater health problems than the rich Health problem combined with no exemption gm lead the poor to spend much on health care So, they have to borrow from their l.c relatives and friends or sell their assets Borrowing means that the households have om to pay back interest and principal in future Thus, it affects future savings and a Lu expenditure and leads to lower investment and productivity gains On the other n hand, selling assets, especially productive assets, will decrease the income be decreased If Quang Ngai is representative of other a th system in Vietnam y regions/provinces in Vietnam then in fact there is substantial inequity in the user fee te re welfare will n va generating capacities of households The result is that their living standards and 56 CHAPTER 5: CONCLUSION AND SUGGESTION ng hi ep User fees had come to play a significant role in the financing of publicly provided health care services in many developing countries since 1980s It is considered as a way of w improving efficiency, equity and raising revenue in health services While many have been n lo written on revenue-raising potential of user fees, little is written on equity enhancing ad potential of user fees y th ju In Vietnam, user fees were officially applied in 1989 when the government issued a fee yi system in three levels (district, provincial and national) of the health care delivery system pl ua al Although there is a formal fee exemption mechanism for the poor in health services, it doesn't work well in practice (Vietnam Public Expenditure Review, 2000) The purpose of n n va my thesis is to examine the equity impacts of user fees by taking into consideration of fee ll fu exemption mechanism in public health facilities in Quang Ngai province m oi My research is based on the household surveys in mountainous villages in Ba To district, at nh Quang Ngai province The results from research supp