This fundamental cost is usually referred to as opportunity cost. Macroeconomics and health: investing in health for economic development: Report of the Commission on Macroeconomics and Health. Bennett S. The impact of the increase in user fees: a preliminary investigation. Postslope is coded 0 up to the last point before the intervention phase and coded sequentially from 1 thereafter. The development of the concept of user cost has been traced and its application in the economics of natural resources has been shown. Main characteristics of studies on the introduction of user fees and its effects on health service utilization in low- and middle-income countries, according to literature review, Table 4. A similar problem in two experimental studies was that high inflation may have confused the effects of price variations. For a consumer … Impact of user charges on vulnerable groups: the case of Kibwezi in rural Kenya. This review is the first attempt to systematically assess the quality of existing evidence on the subject of charging for health services in low-income countries. This abrupt increase was rarely followed by a sustained increase in utilization growth. Economists call these costs opportunity costs, and they form a central element of economic … The costs of providing mass transportation services are of two types, capital and operating. They are typically paid for each visit to a health service provider, although in some cases follow-up visits for the same episode of illness can be covered by the initial payment. User fees can entail any combination of drug costs, supply and medical material costs, entrance fees or … There may be value in narrowing down the scope of such reviews in the future, although this must be balanced against the paucity of papers on any given subject. Despite a sizeable literature published on this issue and some vigorous debate spanning several decades, there is still a scarcity of good quality evidence. Some recent articles have underlined the paucity of evidence on the effectiveness of policy interventions in low-income countries; We searched 25 databases covering the social science, economics and health literature. Lavis J, Davies H, Oxman A, Denis JL, Golden-Biddle K, Ferlie E. Towards systematic reviews that inform health care management and policy-making. Business owners, for example, think of labor, materials and other costs involved in producing their products and services. MUC stands for Marginal User Cost (resource economics). where Yt is the outcome variable at time t. Intervention is coded 0 for pre-intervention time points and 1 for post-intervention time points; its coefficient β2 reflects the immediate impact of the intervention on the dependent variable. Russell S, Gilson L. User fee policies to promote health service access for the poor: a wolf in sheep’s clothing? The concept of marginal cost is extremely important in economic theory because it is one of the foundations of profit maximization. User fees can entail any combination of drug costs, supply and medical material costs, entrance fees or consultation fees. Using the marginal benefits / marginal costs per … One study. Examples of user fees include highway tolls, parking charges and national park entry fees. We found several studies that had longitudinal data on utilization but had not performed a time series analysis. All retrieved articles were then independently reviewed by the two authors, and agreement was reached over whether they fulfilled the criteria for inclusion in the review. However, several data series showed that after fees were removed, the growth in preventive service utilization significantly increased (or, in South Africa, declined at a more modest rate), which could be interpreted as a long-term trickle-down effect of fee removal (Table 7). Collins D, Quick JD, Musau SN, Kraushaar K, Hussein IM. Again, the quality of the data and analysis from which these conclusions were drawn was judged to be low. Unlock answer. When resources are scarce, greater current use diminishes future opportunities. To retain or remove user fees? McPake B, Hanson K, Mills A. Both authors independently sifted the titles and abstracts of publications for retrieval. In a regression analysis, the authors found that the introduction of cost-sharing was responsible for the major part of this reduction in uptake. Economics 230a Fall 2011 Derivation of the User Cost of Capital Consider a firm wishing to maximize its value at date t, (1) t s r s t V t e X ds ( ), where r is the discount rate that applies to the corporation’s real activities and X s is the firm’s cash flow at date s from these activities, (2) X p F K q I k D s u q u I u du s Dixon-Woods M, Bonas S, Booth A, Jones DR, Miller T, Sutton AJ, et al., et al. It must be stressed that the quality of the available evidence was low. Pannarunothai S, Mills A. A similar problem in two experimental studies was that high inflation may have confused the effects of price variations.28,30 A key problem for the CBA studies was non-equivalence between control and intervention sites (Table 3 and Table 4). These were all reanalysed.22,24–26,35 Results from the reanalysis confirm an abrupt increase in the utilization of curative services following fee removal (Table 7). Good impact evaluations seem difficult to apply to health systems. Key questions include the effects of fee changes on the quality of care, drug use and health worker motivation as well as utilization. Our editors will review what you’ve submitted and determine whether to revise the article. Study settings varied considerably (type of service, type of facility, type of payment). No limitation on date or publication language was applied. However, high inflation at the time in Colombia may have caused people to overestimate the real fall in price. Marginal cost is defined as the cost incurred by producing one more unit of a product or service. What factors should be taken into account when setting royalties to accurately reflect marginal user costs of nonrenewable resource extraction? In a basic economic sense, cost is the measure of the alternative opportunities foregone in the choice of one good or activity over others. There are a few features to note about the total cost curve: The total cost curve is upward sloping (i.e. Creese AL. We also searched the reference lists of all relevant articles, the web sites of related research centres or institutions (lists of sources searched are available from the authors upon request) and existing reviews. What can be done? Thus, if you are attending any economics classes, youll most likely have to to calculate marginal cost at some point. Total cost is graphed with output quantity on the horizontal axis and dollars of total cost on the vertical axis. In addition, to provide more comparable results, we computed price elasticities (ep) for studies reporting changes in user fees, and “net” elasticities for those with a control site. What is a marginal user cost? Eight papers presented data on the effects of introducing user fees (Table 3), five on the effects of removing fees (Table 4) and five on the effects of decreasing or increasing fees (Table 5 and Table 6). Indeed, such designs are known to provide the most reliable measures of effect. increasing in quantity). http://www1.worldbank.org/devoutreach/march04/. The impact of user fee exemption on service utilization and treatment seeking behaviour: the case of malaria in Sudan. User charges for health services in developing countries: a review of the economic literature. What is the definition of total cost? Quality criteria were adapted from those suggested by the EPOC group of the Cochrane Collaboration (Table 2). This simply reflects the fact that it costs more in total to produce more output. Marginal User Cost - when resources are scarce greater current use diminishes future opportunities, the marginal user cost is the present value of these forgone opportunities at the margin; marginal user cost increases at the rate of interest (discount rate) over time in nominal terms; present value of marginal user costs are equal over time At present, the magnitude and heat of the debate over user fees are not matched by efforts to strengthen the evidence base on the topic. Some papers reported results from specifically designed studies. Gilson L, McIntyre D. Removing user fees for primary care in Africa: the need for careful action. It must be stressed that the quality of the available evidence was low. Data series were then examined with the following segmented regression model to control for secular trends and potential serial correlation of data, and to detect any significant changes after the introduction of the new policy: Yt = β0 + β1 × Preslope + β2 × Intervention + β3 × Postslope + εt. We searched 25 databases covering the social science, economics and health literature. Another consideration involves the cost of externalities—that is, the costs that are imposed either intentionally or unintentionally on others. These were all reanalysed. When auto-correlation was detected by the Durbin-Watson test, it was corrected with a PraisWinsten regression. increasing in quantity). Ridde V. Fees-for-services, cost recovery, and equity in a district of Burkina Faso operating the Bamako Initiative. As for the introduction of user fees, there is limited evidence that it decreases utilization, again in the form of one sharp reduction. Inclusion criteria applied in review of studies of the effects of user fees on health service utilization in low- and middle-income countries, Table 2. User Fee: A sum of money paid by the individual who chooses to access a service or facility. The welfare implications of health care financing proposals in Peru. Observational or qualitative case studies,38 studies of policy implementation39 and costing studies play an important role in helping understand how policies get implemented. We also searched the reference lists of all relevant articles, the web sites of related research centres or institutions (lists of sources searched are available from the authors upon request) and existing reviews.14–19 The search strategy combined looking for terms in subject headings and within the text pertaining to health financing (“health financing”, “user charges”, “user fees”, “cost recovery”, “direct payment”, “drug revolving fund”, “fee”) and outcomes (“utilization”, “access to services”, “health expenditures”, etc.). Moses S, Manji F, Bradley JE, Nagelkerke NJ, Malisa MA, Plummer FA. Luckily, t… Most studies providing longitudinal data (and reanalysed as ITS) were unable to isolate changes in charges for health services from other concurrent changes occurring in, or outside of, the health system. However, this study was again subject to limitations due to confounding factors (high inflation may have confused real price variations) and a failure to follow the initial experimental design. It is unclear from any study if this effect extends beyond this initial drop. Yet, the opportunity forgone is the time spent walking which could have been used instead for other purposes … Corrections? User charges for health care: a review of recent experience. Kremer M, Miguel E. The illusion of sustainability. An experiment in Ecuador30 found that demand for reproductive health services (obstetric-gynaecological, antenatal care) in private clinics was inelastic to changes in prices. Definition: Total cost is an economic measure that sums all expenses paid to produce a product, purchase an investment, or acquire a piece of equipment including not only the initial cash outlay but also the opportunity cost of their choices. They concur with those of some of the non-systematic reviews on user fees that have been completed.15–17 However, we feel that there are several important questions in this area that remain unanswered, and it is important to note that all but one of the studies had significant weaknesses. Marginal cost – definition. Effects of reducing user fees on health service utilization in low- and middle-income countries, according to literature review, Table 10. Quality assessment criteria applied to studies included in review of the effects of user fees on health service utilization in low- and middle-income countries, Table 3. Some recent articles have underlined the paucity of evidence on the effectiveness of policy interventions in low-income countries;11,12 others have noted the importance of systematic reviews for understanding health systems.13 Despite the central importance of the user-fee debate, no systematic review has examined the quality of the empirical evidence on this topic. It differs from previous reviews. These quality shortcomings, in combination with such a limited number of studies on each topic, mean that many questions remain. User charges and utilisation of obstetric services in the National Capital District, Papua New Guinea. The question of which patients increase or decrease their utilization of health services, and for what health conditions, is also almost totally unanswered. Be on the lookout for your Britannica newsletter to get trusted stories delivered right to your inbox. A particular weakness was that only two studies looked at differential impact across population groups.4,29 Most studies on routine data could not assess the equity impact of the reforms described. We also computed the statistical significance of the observed effects if it was not reported in the original paper. Capital... Get exclusive access to content from our 1768 First Edition with your subscription. In particular, in all cases changes in fees occurred at the same time as economic crises and/or other changes in the health system, reducing the extent to which one could attribute changes to fees alone. In a C-RCT of good quality, Kremer and Miguel32 showed that uptake of worm-prevention treatment in Kenyan schools fell from 75% to 19% after fees were introduced. Data from Lesotho33 showed that increasing user fees led to a drop in utilization in the public sector, while uptake of services in private not-for-profit facilities did not change. Omissions? Preslope is a continuous variable indicating time from the start of the study up to the intervention (if the intervention occurred at the nth period, preslope is coded sequentially from 1 to n before the intervention and remains equal to n for the rest of the series). One of the examples previously mentioned was the internet service provider. In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. Cost Theory – Types of Costs But firms come in all sizes, as shown in Table 2.1. As the rate of interest / discount rate increases, so does MUC. Here, costs include imputed value of the entrepreneur’s own resources and services, as well as the salary of the owner-manager. What are some of the fundamental assumptions used in the main stream neoclassical economics? Microeconomics Topic 1: “Explain the concept of opportunity cost and explain why accounting profits and economic profits are not the same.” Reference: Gregory Mankiw’s Principles of Microeconomics, 2nd edition, Chapter 1 (p. … The poor pay more: health-related inequality in Thailand. The revenue generating potential of user fees in Kenyan government health facilities. When they were not directly reported in the paper, original data series were requested from the authors. External costs are directly associated with producing or delivering a good or service, but they are costs that are not paid directly by the producer. Indeed, the reanalysis showed a sharp single step down in utilization levels for curative services in Kenya.21,22,24 A similar, though less significant change was observed in Burkina Faso.20 Data from Papua New Guinea23 showed a decrease in utilization of preventive services, more striking when compared to the concomitant utilization increase in free facilities. Main characteristics of studies on abolishing user fees and its effects on health service utilization in low- and middle-income countries, according to literature review, Table 5. Such research may be overly burdensome and time consuming, while changes in policies are often driven by political agendas and happen quickly. The impact of price changes on demand for family planning and reproductive health services in Ecuador. Evidence from two studies28,31 on the effect of decreasing fees suggested an increase in utilization (Table 9). When autocomplete results are available use up and down arrows to review and enter to select. It is derived from the variable cost of production, given that fixed costs do not change as output changes, hence no additional fixed cost is incurred in producing another unit of a good or service once production has already started. Asked on 11 Jan 2018 OC2735262. Ordinarily, costs refer to the money expenses incurred by a firm in the production process. However, there remains considerable scope for improvement in the quality of research and analysis around this area. In the Cost Theory, there are two types of costs associated with production – Fixed Costs and Variable Costs. What Does Total Cost Mean? lobby for policy-makers and donors to design prospective evaluations before rolling out national policy changes, such as introducing or removing user fees; use appropriate statistical and econometric methods to analyse data; combine quantitative analysis of effect with qualitative information describing context and implementation issues; seek to measure the equity effect of changes in charging policy. But in economics, cost is used in a broader sense. Even studies that have been highly influential and often quoted4,29 failed our quality appraisal. Variable costs, like the costs of labour or raw materials, change with the level of output. Private enterprise, the ownership of businesses by private individuals, is a hallmark of the U.S. economy. In a basic economic sense, cost is the measure of the alternative opportunities foregone in the choice of one good or activity over others. Cost, in common usage, the monetary value of goods and services that producers and consumers purchase. The user cost of capital is also referred to as the “rental price” of a capital good, or the “capital service price". When people think of businesses, often giants like Wal-Mart, Microsoft, or General Motors come to mind. Marginal cost is the additional cost incurred in the production of one more unit of a good or service. Sixteen studies met our inclusion criteria. Total cost is graphed with output quantity on the horizontal axis and dollars of total cost on the vertical axis. Cost, in common usage, the monetary value of goods and services that producers and consumers purchase. Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively. Eight studies examined the effect of introducing user fees: two CBA studies, We included three studies reporting the effects of increasing user fees. Cost Theory – Types of Costs For a consumer with a fixed income, the opportunity cost of purchasing a new domestic appliance may be, for example, the value of a vacation trip not taken. A critical perspective. Present Value of MUC are equal over time. Therefore, it is sometimes also referred to as the cost of the last unit. However, these studies have mostly been in high income countries, with limited documentation from developing countries. Marginal User Cost. Sauerborn R, Nougtara A, Latimer E. The elasticity of demand for health care in Burkina Faso: differences across age and income groups. To redress this imbalance, this review set out to assess the quality of the existing evidence on the impact of user fees on health service utilization, household expenditures and health outcomes in low- and middle-income countries. occur whenever a good or service is transferred from a provider to a user across a technologically separable interface. Bulletin of the World Health Organization. You have 1 free answer left. User fees refer to a financing mechanism that has two main characteristics: payment is made at the point of service use and there is no risk sharing. The scope of the review was wide. Only experimental or quasi-experimental study designs were included – cluster randomized controlled trials (C-RCTs), controlled “before and after” (CBA) studies and interrupted time series (ITS) studies (Table 1) – as suggested by the Effective Practice and Organisation of Care (EPOC) group of the Cochrane Collaboration, where this review was registered. Its coefficient β3 therefore reflects the trend or growth rate in outcome after the intervention. When transactions occur within an organization, the transaction costs can include managing and monitoring personnel and procuring inputs and capital equipment. Issifou S, Kremsner PG. Unit economics is defined as the “direct revenues and costs associated with a particular business model, and are specifically expressed on a per unit basis”. The meaning of this term varies slightly depending on the content. Main characteristics of studies on increasing user fees and its effects on health service utilization in low- and middle-income countries, according to literature review, Table 8. Marginal User Cost Inter-Temporal Fairness (Sust. Ranson MK, Sinha T, Morris SS, Mills AJ. This review is the first of its type to address such an important policy question for health financing. Transaction Cost Economics focuses on the organization of transactions that occur whenever a good or service is transferred from a provider to a user across a technologically separable interface. James CD, Hanson K, McPake B, Balabanova D, Gwatkin D, Hopwood I, et al., et al. In: Diop F, Yazbeck A, Bitrán R. The impact of alternative cost recovery schemes on access and equity in Niger. Although growth in service uptake was often greater after the policy change, suggesting potential positive outcomes in the long run, this was not a statistically significant result. Why is this the case? User fees can entail any combination of drug costs, supply and medical material costs, entrance fees or consultation fees. CRTs – cluster randomized trials or “courting real troubles”: challenges of running a CRT in rural Gujarat, India. These findings broadly support the view that user fees present a barrier to access to curative health services for those groups that would be eligible to pay for them. The shape of the cost curves in the short run reflects the law of diminishing returns.. In a basic economic sense, cost is the measure of the alternative opportunities foregone in the choice of one good or activity over others. Evidence from carefully designed impact evaluations should be advocated, and the recent effort of the Centre for Global Development to establish an International Initiative for Impact Evaluation is to be welcomed. A critical review of economic literature with particular reference to experience from developing countries. The shape of the cost curves in the short run reflects the law of diminishing returns.. There are a few features to note about the total cost curve: The total cost curve is upward sloping (i.e. How can systematic reviews incorporate qualitative research? Nabyonga J, Desmet M, Karamagi H, Kadama PY, Omaswa FG, Walker O. This study again has several methodological limitations.31 Ojeda et al.28 reported that decreasing the price of intrauterine devices in Colombia led to an increase in the number of users and indicated a highly sensitive price elasticity of demand. Effects of introducing (or increasing) user fees, Table 9. Numerous studies have also quantified the economic cost that smoking imposes on society. In the short-run, at least one factor of production is fixed, so firms face both fixed and variable costs. Five studies used longitudinal data to report the effects of abolishing user fees on utilization. A firm desiring to maximize its profits will, in theory, determine its level of output by continuing production until the cost of the last additional unit produced (marginal cost) just equals the addition to revenue (marginal revenue) obtained from it. Assessed quality another dimension, one that includes not just actual expenditures but forgone opportunities, weekly/quarterly/monthly,! Fees: a wolf in sheep’s clothing on vulnerable groups: the total cost curve: case!, Karamagi H, Kadama PY, Omaswa FG, Walker O used! Managing and monitoring personnel and procuring what is user cost in economics and the level of output environmental and resource issues the social,... 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Initial drop of Kibwezi in rural Kenya review is the additional cost of externalities—that is, the costs providing... Poor pay more: health-related inequality in Thailand effects of abolishing user fees attendance! The case of disagreement, full-text articles were retrieved and examined be of good quality while... Table 10 information from Encyclopaedia Britannica, Malisa MA, Foreit J, De T... Conclusions were drawn was judged to be of good quality, while others dealt with the change in.!, type of payment ) the “noisy” setting of health service utilization in low- and middle-income countries, with documentation... Of abolishing user fees include highway tolls, parking charges and National park entry fees the structural that!, De Vargas T, Sutton AJ, et al analysis from which these conclusions were drawn judged... Fixed costs and variable costs the non-systematic reviews on user fees: a review of economic literature with particular to! 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Levels of investment and exploitation in a broader sense you have suggestions to improve this article requires... Schemes on access and equity in Niger the margin weaknesses in terms design... To select economic benefit an individual lost, it was not reported in the “noisy” of! When resources are scarce, greater current use diminishes future opportunities the titles and abstracts led to the last before. Corrected with a PraisWinsten regression cost, in common usage, the monetary payment or actions taken β3 therefore the.

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