Do user fees in the health
sector increase social
inequality in health?
Very first draft - not for citation
Sanne Lund Clement
Centre for Comparative Welfare Studies
Aalborg University
Introduction
The study and discussion of the role and effects of user fees for publicly provided
health services, especially in developing countries, has evolved during the last
decades. During the 1980s and 1990s, health sector reforms to improve the
efficiency of health systems and the quality of care provided were implemented in
low-income countries, mainly in Africa (kilde) However, the introduction of user
fees seems to had had the unintended effect of decreasing access to health care by
the poor and is further accused of greatly contributed to increasing the exposure
of poor households to the financial risks associated with illness (kilde).
In Western wealthy countries, out-of-pocket payments for health care services
have increased as well, as the cost of health care has risen. While the need for
increased quality in health care constituted the main argument for health
reforms and the introduction of user fees in developing countries, these so-called
out-of-pocket-payments are introduced in Western wealthy countries for other
reasons. Traditionally we find two main arguments for introducing user fees;
user fees as a supplementary tax to finance the public sector, and user fees as a
means to manage and regulate the citizens’ behaviour (Hansen & Keiding 1991).
Hansen & Keiding argues that user fees have to be introduced with the purpose
of regulating unwanted behaviour, and that the user fee has to be at exact the
level that makes the citizens consider his or her behaviour (Hansen & Keiding
1991:16). Economic arguments in favour of higher out-op-pocket expenses
suggest that people make better and more cost-effective health care decisions
when they pay for health services at the time their receive these services and
when the amount they pay is related to the cost of these services. In the Danish
welfare state user fees are suggested, mainly to regulate an asserted over-use of
the health system.
The need for increasing the quality of the health system is not an issue in the
user fee debate in the Western countries, but why should the effects, such as an
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increase in social inequality in access to health care be different, just because of a
different purpose? The effects of introducing user fees in wealthy countries will of
course not be as catastrophic and comprehensive as experienced in several
developing countries, but the effects of out-of-pocket expenses on certain groups
such as low-income persons, the elderly, and the chronically ill, must be
considered. The aim of this paper is to contribute to the relatively new discussion
about user fees and other forms of privatisations of public welfare, by discussing
user fees in the health sector and consequences for inequality in access to health
care. The paper will be comprised of three parts; firstly a theoretical discussion of
the consequences of increased privatisation of social welfare; secondly the
financing of the health sector in OECD countries will be mapped and thirdly,
social inequality in the use of health care with and without user fees will be
discussed in the light of Danish data.
Private provision of social welfare – the theoretical discussions
Changes in public provision and financing of welfare responsibilities have become
rather common in recent discussions of challenges to the welfare states (Adema,
Adema & Einerhand, Gilbert). Some believe that public welfare to a large intent
will be crowded out in the future, and it might even be argued that such
developments are necessary or at least desirable in order to cope with future
economic challenges of the welfare state like ageing populations, globalization or with changing values and changing expectations like individualisation (+ igen:
argumentet om, at offentlig, universel velfærdsydelser skaber et overforbrug og
at indførelse af brugerbetaling vil bidrage til at regulere denne uhensigtsmæssige
adfærd). Others would see such a development as an attack on the core values of
the welfare state; in particular, this would install new dynamics of change driven
by discursive change and decline of solidarity on the one hand, and by changing
interest groups and power relations on the other. For instance, private companies
might gain a bridgehead from which they could conquer the welfare state, and
groups with strong social resources would lose interest in collective arrangements
3
of the state. So far, however, this discussion remains largely speculative, and the
research-based knowledge is quite limited.
Policies of privatisation and new welfare mix can be introduced to serve several
purposes, but efficiency and increased productivity, or a financial relief of the
welfare state via reduction of the public responsibilities, have typically appeared
as the main purpose (Sanger). In the Danish case, cost containment is clearly a
dominant motive among politicians, but, as mentioned, in the case of user fees,
regulation of unwanted behaviour is a primary motive.
In the sparing literature about the consequences of privatisations, we observe
quite different overall arguments. According one argument, changes in mix will
not necessary have any consequences. Overbye (1998) is, of the opinion that
different structures or institutions very well can produce functional equivalent
outcomes, and the question will rather be how much change the welfare can state
‘take’, before it will have consequences and effect outcome? But, as pointed out by
Gilbert (2002) among others, the same total level of expenditure to welfare, but
with different mix between public and private, is very likely to cause different
outcome as well. In his example, Gilbert uses OECD-numbers for Denmark and
the US respectively, where the total welfare expenditure as percent of GDP are
practically alike (see also Adema & Einerhand 1998, Adema 1999, 2002, 2005),
but the differences in welfare mix result in widely different outcomes in the
shape of inequality, polarisation and solidarity (Gilbert 2002).
It is exactly observations like the latter that constitute the reason why
mainstream welfare literature take point of departure in social rights and often
consider private provision of welfare – social security and service – as a ‘welfare
replacement’ that just carry on the market inequality and more or less can
remain invisible, when the welfare state are discussed (Korpi 2002). A crowding
in of private welfare is per definition tantamount to crowding out welfare. But
4
private welfare is far from an unambiguous concept, and the existing knowledge
about the consequences of changing welfare mix is utmost inadequate.
Privatisations are often at blame for increasing economic inequality, even though
it may be more economic effective. User fees in specific will increase inequality in
access to the kind of welfare service, which have to be paid for directly, and in
case of the health sector, this might have serious consequences for social
variations in health.
The potential impact of how health systems are financed on the wellbeing of
households, particularly poor households, has affected the design of health
systems and insurance mechanisms in many countries (Bovbjerg 2001). The
protecting of people from very high payments is widely accepted as a desirable
objective of health policy (Musgrove 2000, WHO 2000, WHO 2001). High health
expenditure is not always synonymous with high health-care costs. A large bill
for surgery, for example, might not be catastrophic if a household does not bear
the full cost because the service is provided free or at a subsidised price, or is
covered by third-party insurance. On the other hand, even small costs for
common illnesses can be financially disastrous for poor households.
Little, however, is known about which health system characteristics protect
households from catastrophic payments, and the impact of out-of-pocket
payments on social inequality in access to health care.
Determinants of health inequality
Focussing on the dependent variable, inequality in health, we might ask what
causes health inequality in the first place, and whether the introduction of user
fees is expected to increase the inequality in access to health care. In theory, we
find five main determinants or explanations of inequality in health:
5
1. Material explanations: differences in income affect food habits, living
conditions etc.
2. Cultural explanations: different norms and values affect attitudes toward
smoking, exercise etc.
3. Social-psychological explanations: support from family, friends and
colleagues (mostly regarding mental health)
4. Life-course explanations: health and social factors affect each other
5. Political-economic explanations: political processes and power relations
affect the amount of service, the degree of environmental improvement
policies ect.
[To be elaborated on]
Introduction of user fees in the health sector will in this paper be seen as a
political-economic factor.
User fees in the health sector in OECD countries
User fees in the health sector is not a new concept in most OECD countries.
Countries like Australia, France and Finland have financed relatively large parts
(36%, 30% and 44% in 1960) of the total expenditure on health by user fees from
the beginning of the 1960’s, and even a classified universalistic welfare state like
Denmark financed 15% of the total expenditure on health in 1973 by user fees
(OECD Health Division).
Table 1 below shows health expenditure by source of financing, and the
variations clearly appear. However, the variations are not following the classic
distinction between types of welfare regimes as we might have expected.
6
Table 1. Health expenditure by source of financing, 2003, Percentage of total health
expenditure, ranged by level of out-of-pocket payments
Public
Out-of-pocket
Private health
All other private
expenditure on
payments
insurance
funds
health
Mexico
44.1
52.9
3.0
Korea
51.9
38.4
3.6
6.1
Switzerland
58.5
31.6
9.0
1.0
Poland
69.9
26.4
0.6
2.6
Hungary
71.3
24.1
0.6
4.0
Spain
70.3
23.6
5.4
0.7
Italy
74.7
22.4
0.9
2.0
Belgium
71.6
22.2
4.9
1.4
Portugal
73.4
21.0
4.1
1.5
Turkey
71.6
19.9
Australia
67.5
19.7
7.2
5.6
Finland
76.2
19.4
2.4
2.0
Iceland
82.5
17.5
0.0
Japan
81.5
17.4
0.3
0.8
Austria
75.3
17.1
4.9
2.7
New Zealand
78.3
15.6
5.8
0.3
Norway
83.7
15.5
Canada
70.2
14.5
12.7
2.6
Denmark
84.2
14.2
1.5
0.1
Ireland
76.7
14.2
6.5
2.6
United States
44.5
13.6
36.5
5.4
Germany
78.7
11.8
8.7
0.8
Slovak Republic
88.3
11.7
Czech Republic
89.8
10.0
0.2
0.0
7.8
17.8
6.3
Netherlands
8.6
0.8
France
79.4
7.3
12.5
0.8
Luxembourg
90.6
6.7
1.7
1.0
Note: Out-of-pocket payments in this table = user fees
Source: OECD Health Data 2007
[more about the table in here…]
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Poorer health status where user fees?
According to the dominating theoretical argument presenting above, we will
expect a generally poorer health status in countries with a high level of user fees
than in countries without or with a small level of user fees. To put the argument
simple, a high level of user fees will prevent the poorest citizens from using the
health care system. The higher level of user fees the more citizens are prevented
from the service and the lover aggregated health status.
In the following this hypothesis is examined by use of two indicators for health
status: one general and so-called objective measure, life expectancy at birth in
the countries, and one more subjective measure, the citizens own perceived
health status.
Life expectancy
Life expectancy is the most general and best known measure of the health status
of a population. Changes in life expectancy are traditionally linked to different
interdependent variables such as lifestyles, living standards, and access to
quality health services (OECD: Society at a Glance 2005). Increasing inequality
in access to health service therefore is expected to be followed by increasing
inequality in life expectancy.
8
Table 2: Life expectancy at birth, in years, in 2003
Turkey
71
Hungary
72,6
Slovac Republic
73,9
Poland
74,7
Mexico
74,9
Czech Republic
75,4
Portugal
77,4
Korea
77,4
Denmark
77,5
United States
77,5
Luxembourd
78
Ireland
78,3
Finland
78,5
United Kingdom
78,5
Germany
78,6
Netherlands
78,6
Belgium
78,8
Austria
78,8
Greece
78,9
France
79,4
Norway
79,6
New Zealand
79,6
Italy
79,7
Canada
79,9
Sweden
80,2
Australia
80,3
Spain
80,3
Switzerland
80,6
Iceland
81,2
Japan
81,8
65
70
75
80
85
Source: OECD Health Division
As shown in table 2, life expectancy varies enormously among OECD countries.
In Turkey men can expect to live for 66.2 years, while they are predicted to live
for 78.5 years in Iceland. The same difference goes for women; here life
expectance is lowest in Turkey with 70.9 years and highest in Japan with 85.2
years. Average for all OECD countries is 74.7 for men and 80.6 for women.
If we compare these life expectancy data with the ranking in table 1, our first
expectation is to find correlation between the amount of user fees in the country
and life expectancy rate among the population. However, we find quite a different
picture.
9
Figure 1: % user fees in the health sector and life expectancy in OECD countries,
2003
90
80
70
60
50
% user fees
Life expectancy
40
30
20
10
Luxembourg
France
Netherlands
Czech Republic
Slovak Republic
Germany
United States
Ireland
Denmark
Canada
Norway
New Zealand
Austria
Japan
Iceland
Finland
Australia
Turkey
Portugal
Belgium
Italy
Spain
Hungary
Poland
Switzerland
Korea
Mexico
0
Note: % user fees: percentage of total health expenditure
Life expectancy: life expectancy at birth in years
Source: OECD health division
[Detailed comments to the figure in here]
Perceived health status
Using another indicator for health, the citizens own subjective perceived health
status, the overall picture of no correlation seems intact. However, as the data
does not allow us to test the actual correlation coefficient or the level of
significance, the real correlation might be underestimated. Nevertheless, the
expected strong relationship between the variables is clearly absent.
10
Figure 2: % user fees in the health sector and perceived health status in OECD
countries
100
90
80
70
60
% user fees
50
perceived health status
40
30
20
10
Luxembourg
Netherlands
France
Slovak Republic
Czech Republic
United States
Germany
Denmark
Ireland
Norway
Canada
Austria
New Zealand
Iceland
Japan
Australia
Finland
Portugal
Turkey
Italy
Belgium
Hungary
Spain
Switzerland
Poland
Mexico
Korea
0
Note: Perceived health status: % citizens in country surveys considering their health status as
‘good’ or ‘very good’
For Canada, Finland, Germany, Hungary, Ireland, Italy, Netherlands, New Zealand, Slovak
Republic, Spain, Sweden, Turkey, United Kingdom and United States, data are from 2003
For Australia, Belgium, France, Iceland, Japan, Luxembourg and Poland, data are from 2004
For Czech Republic, Korea, Norway and Portugal, data are from 2005
Data are not available for Switzerland and Austria.
Source: OECD Health Division
[Detailed comments to the figure in here]
User fees and social inequality in health within the Danish welfare state
These results are quite surprising, however, the overall focus in this paper was
not so much the discussion about, whether or not user fees decreases the general
11
health status in a given country, but rather to discuss, whether the social
inequality in health is affected negatively by introducing user fees.
Compared with other OECD countries, quite a large part of the total national
spending on health issues, are paid for purely by the private individuals.
Expenditures for medicine and dental care constitute the largest part, but the
Danish citizens also have to pay for glasses and physiotherapy by themselves.
For the perfect analysis we would need longitudinal data for this. Since such data
are not available, we compare social inequality in health in an area exposed to
user fees with social inequality not exposed to user fees. More precisely we use
data only for Denmark, and compare social inequality in visiting a dentist, which
is an area with a very high level of user fees (about 2/3 of the costs have to be
paid directly by the citizen), with social inequality in visiting a doctor (GP), which
is free of charge, and paid for through the taxes.
Table 3: Average number of visits to GP and Dentist, categorised by socioeconomic status, 2006
GP
Dentist
N
Self-employed
5.7
1.1
187715
Assisting spouse
6.6
1.3
7810
Chief executives
4.9
1.3
69840
Employed with high income
5.1
1.2
329912
Employed with middle income
6.1
1.2
455492
Employed with lower income
6.1
1.1
1025647
Unemployed
7.5
0.8
107734
Pensioners and early retired
12.7
1.0
1094259
Others outside the labour market
5.1
0.4
1372148
Notes: definitioner på kategorierne, jf. DST
Source: Statistics Denmark
12
However the expected variations seems not to be the case – looking at the
citizens’ amount of visiting the doctor, pensioners and early retired are not
surprisingly visiting their doctor quite more often than the other groups. But also
the unemployed seem to have a health status that requires the doctors help more
often than others. Chief executives, employed with high income and ‘others
outside the labour market’ (mainly students) visit the doctor the least, indicating
the best health status among these groups.
Turning to dental care we find quite the opposite picture: pensioners and early
retired people see their dentist the least, while chief executives and employed
with high incomes visit the dentist the most.
[More about this in here]
Why effect locally but not aggregate?
My data does not allow me to go deeper into the discussion about social
inequality in health related to specific areas within other countries but Denmark,
but based on these preliminary analysis and the theoretical discussions, I expect
to find an explanation in the organisation of the ‘user fee policy’. In Denmark the
user fees are limited to quite few areas – mainly dental work, glasses and
physiotherapy.
[Discussion about the effect of other factors than the socio-economic in here]
Conclusions
The main question in this paper; whether user fees in the health sector will
increase social inequality in health is somehow misleading, because the lack of
longitudinal data that would be needed to conclude about consequences of a
change of policy.
13
However, by comparing different areas within the Danish welfare state, dental
care with a high degree of user fees and regular doctors (GP) with no user fees at
all, we get a picture of the social differences anyway.
As long as the country keep a comprehensive public health sector with large
degree of coverage for its citizens, I tend to agree with Overby saying that the
introduction of different kinds of welfare mix might as well produce functional
equivalent outcomes. The social inequality in health is not necessarily increasing
because of an increase in the level of user fees. However, it is not of no
consequence how the user fee policy is organised.
As mentioned in the introduction, user fees should not be introduced purely for
the money – but it is mainly a means for management and should only be used
where the desire is influence the behaviour of the users. In the health care
debates in Denmark about user fees, an argument goes that some people tend to
over-use the GP’s and therefore introduction of a new small user fee is suggested.
According to the theoretical debates and the sparse empirical analysis in this
paper this properly won’t increase the social inequality….
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