I’m sorry, you have cancer… and that’ll be a 100 bucks

It should come as no surprise that healthcare costs money.  And lots of it.  In most developed countries the debate about how to pay for an increasingly sick and old population never seems to fade from the spotlight. And while the Americans and the English and the Canadians and the Australians all seem to have quite different ways of paying for healthcare, I’m willing to bet that they would be equally shocked if after hearing their diagnosis they were expected to hand their doctors a wad of cash.

Today a patient’s husband pulled me out of earshot of his wife and asked me, “Doctor if my wife needs a c-section, will they do it even if I need a couple days to get the cash together?”  (The answer was yes).  Last week a patient wondered if her gall bladder could be assessed by the cheaper in-house ultrasound instead of the test we wanted. (The answer was no).  In hospitals in South Africa, India, Haiti, and Angola patients are often directly responsible for the cost of their care – or at a minimum they pay a percentage or a user fee.

User fees at a public hospital in India

The user fee does two things.  First, it helps the hospital stay open. In simple logic: a surgery costs money, the patients wants/needs a surgery, the patient should pay for the surgery. Second, it reduces what economists call “moral hazard” (which is, incidentally, an awesome name for a band).  Moral hazard is the basically the notion that if I assume no risk (cost), why not do it.  So, these economists argue, when patients have full insurance or access to a free public system, a hospital quickly gets overburdened with people who want some insignificant rash repeatedly checked out.

The problem is that user fees can also keep people who really need care (and really can’t afford it) from getting necessary help.  Thus, the poor get sick and the poorer get sicker.  At the hospital I am currently at – a semi-private hospital – patients routinely fail to show up for procedures or get tests done because they cannot afford the fees.  Here in Durban, patients are lucky enough to have a somewhat functional public system to turn to, but in places like Angola or Haiti and even parts of India the public system is often effectively defunct or charges their own form of under-the-table user fees.

Of course, this is an oversimplification. (Any of the number of people who have PhDs studying user fees would be rolling their eyes at me right now).  It is not fair to say that poor people have no money – in fact, at the hospital I am at right now most of the patients are lower income people who dedicate a substantial amount of their savings to paying for semi-private medical care in order to avoid the public system.  It is also unfair to say that there is no moral hazard – every US doctor has a story about a patient that seemingly enjoys medical attention no matter how small the problem.

Lining up to see the doctor at a public hospital in India

Nevertheless, the user fee seems to trouble doctors.  In many settings, it brings the doctor and the patient intimately (and uncomfortably) close to the exchange of money.  But more than that, it seems fundamentally unfair.  When a patient can’t afford an appropriate test, it seems unfair.  When a patient can’t afford the extra three days of hospital stay because of a bad outcome, it seems unfair.  There is no doubt that every day we all roll dice for good health.  For the poor, the dice are already loaded against them and when they fall sick it doesn’t seem right to take from their already stretched resources.

I am sure I am overlooking many of the intricate aspects that underlie user fees.  There is no doubt that hospitals need money to stay open and that user fees moderate the number of patients coming into the hospital. Still I think I’ve revealed my bias on whether user fees (or some variation) are the best way to provide care for people.  But I am curious to read and hear more arguments and hope to revisit this topic again… maybe with some more perspective. Feel free to share if you have one!



  1. Leandro Couto

    Wow, I found your depiction of under the table fees quite surprising, bordering shameful…Brazil is an interesting case to look at: although we are still an under-developing nation, we do provide free health care to anyone who can’t afford private health care and this care is actually comprehensive, a patient can rely on the state for any kind of medical procedure he may need. I don’t think the same happens in the US, which has a bigger amount of cash in its coffers. How come the US does not provide the same kind of free health care Brazil provides? I guess our free health care system is a great model to be followed, although Brazilians who rely on it complain about it non-stop…maybe they should know about the US health system and then they would be proud and impressed with the service they get…I am not saying it is perfect, though…far from it…it needs lots of improvement and investment, but at least we are on the right track towards universal free health care. It is called SUS, which stands for Sistema Unico de Saude. We also need to consider how expensive and demanding treating the poor is, especially when the poor is a great part of the population. Taking all these into account, I dare say Brazil does a great job! Please, you know much more about health care than I do, so do correct me if I said anything stupid or wrong. Good entry to your blog! smart as usual!

  2. prateek

    Moral hazard is indeed the argument offered by economists the world over in favour of a direct user-pay system. The concept is typically introduced within the context of private health insurance, where the obligations and limitations of both the provider and user are far more explicit in order to minimise this market inefficiency. Public health care suffers from the inefficiencies inherent in arranging such explicit contractual terms for each and every citizen, opening the system to abuse/misuse/overuse (for want of a better term).
    Is this so bad though?
    Studies on productivity and contribution to the economy by the poor reveal that those who typically receive complete end-to-end treatment never totally offset the cost of that health care during their lifetimes. So what?
    They are the minority – albeit in places like Brazil a large minority.
    A healthy economy is a productive one, and by providing public health care, the state is investing in long term growth just like investment in other forms of infrastructure. Fear of the few taking advantage of free public health care should not be a reason in itself to not offer it.

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