UNIVERSXTY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM-THE NETHERLANDS PROJECT FOR M. ON DEVELOPMENT ECONOMICS USER FEES AND FEE EXEMPTION MECHANISM IN PUBLIC HEALTH FACILITIES: THE CASE OF QUANG NGAI PROVINCE The thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS BY PHAM VAN TRONG SUPERVISORS: Dr ARDESHIR SEPEHRI Mse TRAN THANH SON HO CHI MINH CITY- MAY 20th, 2002 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 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. 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”. Pham Van Trong Date: May 20th, 2002 i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT This thesis is done under the Vietnam-Netherlands Project for MA on Development Economics.
I would like to thank The Netherlanđs for Her aid and scholarship. 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 Ms Chi- the Project Librarian.
High appreciations are given to Dr. Haroon Akram-Lodhi and Dr Youdi Schipper for worthy academic teaching and encouraging me on my thesis draft. I would like to express my deep appreciations to Dr. Gabrielle Berman- member of Project Scientific Committee- and Msc.
Tran Thanh Son- my supervisor- who gave me lots of valuable academic advise to improve the quality of the paper. 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. Especially, his mental encouragement is a great support for me to finish this thesis. Again, I would like to give deep appreciations and best wishes to him and his íamily.
Finally, I would like to express my respectíul gratitude to everyone in my family who has been untiringly contributing their mental and íínancial support for me to complete my thesis and looking for my success. Pham Van Trong Date: May 20th, 2002 ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENT List of figures List of tables Abstract CHAPTER 1: INTRODUCTION-----------------------------------------------------------Pdge 1 1. Objectives, research questions and hypotheses ofthe study------------------------- 2 2. 3 Hypotheses of the study------------------------------------------------------------- 3 3.
Data source and research method-------------------------------------------------------- 4 3. Rationale of the study--------------------------------------------------------------------- 4 5. Structure of the thesis---------------------------------------------------------------------- 4 CHAPTER 2: LITERATURE REVIEW--------------------------------------------------- 6 I. Potential benefit of user fees------------, -------------------------------------------- 6 2.1 Efficiency enhancing potential of user fees---------------------------------- 6 2.2 Revenue raising potential ofuser fees---------------------------------------- 8 2.3 Equity enhancing potential ofuser fees-------------------------------------- 9 3.
Price elasticity of demand for health care------------------------------------------ 13 4. Willingness to pay and ability to pay----------------------------------------------- 14 5. Russell's argument on the inequity of user fees----------------------------------- 14 6. Willis and Leighton's argument on the ineffectiveness of fee exemption mechanism---------------------------------------------------------- 15 7.
Gilson and Russel's theory on the ineffectiveness of fee. Empirical evidence------------------------------------------------------------------------ 19 LUAN VAN CHAT LUONG download :111add luanvanchat@agmail.com CHAPTER 3: USER FEES AND FEE EXEMPTION MECHANISM IN HEALTH SERVICES IN VIETNAM-------------------------------------------------Page 27 1. Overview of health sector in Vietnam--------------------------------------------------- 27 1. User fees and fee exemption mechanism in health services-------------------------- 28 CHAPTER 4: FEE EXEMPTION MECHANISM, EQUITY AND WILLINGNESS TO PAY: RESEARCH METHODOLOGY AND DATA ANALYSIS-------------- 34 1.1 Method of data analysis------------------------------------------------------------- 34 1.
Overview of main economic activities and health care system in Quang Ngai province------------------------------------------------------------------ 37 3.1 Definition of the poor and the non-pu-:r------------------------------------------ 40 3 .2 Data analysis and discussion------------------------------------------------------- 44 3. 1 Commune health centers----------------------------------------------------- 44 3 .2 Ba To district hospital-------------------------------------------------------- 45 3. 3 Quang Ngai provincial hospital -------------------------------------------- 51 CHAPTER 5: CONCLUSION AND SUGGESTION----------------------------------- 57 "'' LUAN VAN CHAT LUONG download iv : add luanvanchat@agmail.com LIST OF FIGURES Figure 1 : Equity enhancing potential of user fees---------------------------------------Page 11 Figure 2 : Affect ofuser fees to the poor-------------------------------------------------- 16 Figure 3 : Conventional model-------------------------------------------------------------- 35 LIST OF TABLES Table 1 : Econometric estimates of own price elasticities of the demand for medical care in developing countries--------------------------------------- 20 Table 2 : Mobilizing resources to pay for care - survey in Sierra Leone------------- 22 Table 3 : Mobilizing resources to pay for care (%)--------------------------------------- 23 Table 4: User fee exemption for occupational groups: Cross country experience--- 25 Table 5 :Health service contacts per person following per capita expenditure quintiles, 1998------------------------------------------------------- 31 Table 6: Percent ofusers who are exempted from payments for a visit to a governmental health facility, 1998-------------------------------------------- 32 Table 7 : Variable framework--------------------------------------------------------------- 36 Table 8: Income:per capita following income quintiles--------------------------------- 43 Table 9: Payment and exemption for outpatients in district hospital------------------ 47 Table 10: Payment and exemption for inpatients in district hospital------------------ 48 Table 11: Inpatient care costs and health financing sources---------------------------- 49 Table 12: Payment and exemption for outpatients in provincial hospital------------- 52 Table 13: Payment and exemption for inpatient in provincial hospital---------------- 53 Table 14: Inpatient care costs and health financing sources---------------------------- 54 LUAN VAN CHAT LUONG download v: add luanvanchat@agmail.com ABSTRACT User fees have come to play a significant role in the financing and delivery of public health 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 many have been written on the revenue-raising potential of user fees, little is known about the equity-enhancing potential ofuser fees. In Vietnam, user fees were introduced since renovation in health sector in 1989. Although there is formal fee exemption mechanism for the poor in public health services, it doesn't work well in practice. My paper tries to examine the equity impact of user fees by coming to know the fee exemption mechanism in public health facilities in Quang Ngai province.
On that purpose, my study tries to examine whether the poor patients receive exemptions in health services, there is a correlation between household income and level of exemption, and the poor has to sell their productive assets to pay for care or not. From that, some conclusions and suggestions are given to the policy-makers to improve the equity of user fees in health services. LUAN VAN CHAT LUONG downloadVl : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1- Problem statement One of the objectives of governments around the world is the promotion of human development in general and the health of the population in particular. So, the provision of health care is the great concerns for many countries in all over the world.
Since the early 1980s, many governments of developing countries have been restructuring the financing and the delivery of publicly provided health services. Due to the serious imbalances between demand and supply of health services and the budget constraints, many low and 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 (1985), Griffin (1987) and World Bank (1987), user fees have been considered as a way of rationalizing the use of care, mobilizing sources within the health sectors, encouraging community participation and making the delivery of health care services more efficient and equitable. Revenues from user fees are used to expand the coverage and the quality of services.
The improvement in coverage and quality of health care services combined with the exemption of user fees for the poor are argued to enhance equity because it creates chances for the poor to access the high quality health services. But in reality, the 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 services is to be higher for the low-income groups than the higher income groups (Me Pake, 1993). So, user fees combined with no policy to exempt the poor are unlikely to promote equity and harmful for the poor.
Many poor patients, who face difficulties in finding funds to finance medical care, has to transfer funds from payment for foods and other necessity goods or selling off productive assets to payment for care (Russell, 1996). Before doi moi (economic reforms), the government of Vietnam provided medical care free of charge. The user fees were introduced in the late 1980s when the "doi moi" policy encouraged private sector's participation in health services. Public hospitals began charging patients for consultations and drugs.
In 1989, a fee system was introduced in three levels (district, provincial and national) of the health care delivery system. In 1995, the Ministry 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com of Health issued formal user fee schedules for each kind of consultation and each kind of diagnostic test and procedure in clinics and hospital (Vietnam-Public Expenditure Review 2000). However, as it is noted by the Vietnam-Public Expenditure Review 2000, although there is a formal fee exempting mechanism for the poor, handicapped, war veterans, orphans and individuals suffering from certain ailment, it doesn't work well in practice. The research of Ensor and San ( 1996) showed that there is no correlation between fee exemption and household income.
Quang Ngai was chosen because it is a poor province located in the middle of the central of the country. In 1999, GDP per capita in Quang Ngai is equal to USD 174, whereas GDP per 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, cow, pig, chicken.
The health care system here is underdeveloped including one provincial public hospital, district health centers, and commune health centers. In 1990, user fee system in health services was introduced and applied. But it is seemly that it operated ineffectively. Many poor patients didn't receive any exemption from payment for treatment and some had to sell their assets to finance their costs of treatment.
Crucial to the equity-enhancing potential of user fee argument is the assumption that the poor need to be exempted from paying user fees. While many have been written on the revenue generating potential of user fees, little is known about their equity enhancing effects. The purpose of my research is to fill this gap by examining (i) the exemption mechanism as practiced in Quang Ngai province and (ii) the extent to which the households rely on selling their asset to pay for the medical expenses. 2- Objectives, research questions and hypotheses of the study 2.1 Objectives Some previous research (Russell and Gilson, 1997) indicated that there is no policy to exempt the poor from user fees in health services in some developing countries.
And if having, it didn't operate well in practice. My study tries to examine how the fee exemption mechanism operates in health care system in Quang Ngai province; whether the poor 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com receive fee exemption in health services; and in the case of receiving no fee exemption in health services how they pay for their treatment. From that, some suggestions on user fee mechanism in health services are given to policy-makers to make it better.2 Research questions The main research question in my study is: • Do poor patients receive an exemption or reduction of user fees in public health facilities including: commune health centers, district health centers and provincial hospitals? Besides that, the sub-research questions in my study are: • Is there a correlation between household income and fee exemption level in health services? • Do the poor households with illness have to sell their assets in order to pay their cost of treatment? 2.3 Research hypotheses The main hypothesis of my study is: • That not all poor households receive fee exemption from public health services.