User charges and utilisation of health services in Kenya

This paper uses data from Kenya to examine the role played by user charges
and the quality of health services in determining the choice of health care providers.
We find that an increase in the price of using public facilities diverts demand from
public to private facilities. The reduction in demand for modern healthcare, captured
by an increase in the use of self-treatment, is minimal. In contrast, a decline in the
quality of services may be expected to lead to a sharp reduction in the use of public
facilities and additional reliance on the self-care alternative. These patterns suggest
that a programme of increasing the quality of services and enhancing drug availability
through cost-sharing may be more effective at meeting the healthcare needs of the
population than a programme of fully subsiding health services at low standards of
care. However, since improved health services entail higher costs of provision and
use, targeted subsidies are required to ensure that the poor are not denied access to
basic care. Difficulties in enforcing statutory fee exemptions at public health facilities
have created interest among Kenyan policy makers in social health insurance as a
dominant mechanism for financing health care. Demand effects of this potential shift
in policy are briefly discussed.