Eight studies examined the effect of introducing user fees: two CBA studies,4,29 one C-RCT32 and five ITS studies.20â24 ITS studies suggested that policies that introduced user fees decreased health service uptake (Table 8). None reported an effect on expenditures or health outcomes, and two reported effects on utilization by different socioeconomic groups. Explicit and Implicit Costs, and Accounting and Economic Profit. User fees can entail any combination of drug costs, supply and medical material costs, entrance fees or consultation fees. When only one criterion was unclear or unmet, it was scored as being of âmoderateâ quality, and when all elements were satisfied, the study was considered as being of âhighâ quality. 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. Impact of increasing consultation fees on malaria in Africa. 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. Therefore, it is sometimes also referred to as the cost of the last unit. This simply reflects the fact that it costs more in total to produce more output. Abolition of cost-sharing is pro-poor: evidence from Uganda. Total cost is graphed with output quantity on the horizontal axis and dollars of total cost on the vertical axis. Business owners, for example, think of labor, materials and other costs involved in producing their products and services. Some papers reported results from specifically designed studies,4,28â32 while others sought to analyse the effect of nationally- implemented strategies using routine data.20â26,33â35. We found several studies that had longitudinal data on utilization but had not performed a time series analysis.20â26 To be able to include these, we relaxed the original definition of ITS27 (Table 1) and set out to reanalyse the data appropriately. It is the starting point for management, outside analysts, investors, and other stakeholders to analyze, evaluate or assess a compan… 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. This review aimed to assess the effect on health service utilization of introducing, removing, increasing or decreasing user fees in low- and middle-income countries. However, these studies have mostly been in high income countries, with limited documentation from developing countries. One of the examples previously mentioned was the internet service provider. What Does Total Cost Mean? Dixon-Woods M, Bonas S, Booth A, Jones DR, Miller T, Sutton AJ, et al., et al. 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. In the short-run, at least one factor of production is fixed, so firms face both fixed and variable costs. 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.11 In the meantime, several simple steps can be taken by researchers to improve the quality of research and evidence in this area: Funding: This work was funded by the Bill & Melinda Gates Foundation. McPake B, Hanson K, Mills A. 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 … Ranson MK, Sinha T, Morris SS, Mills AJ. The two CBA studies4,29 examined the effects of introducing user fees alongside quality improvements, and both found that this increased utilization for the poorest groups. 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. Only experimental or quasi-experimental study designs were included â cluster randomized controlled trials (C-RCTs), controlled âbefore and afterâ (CBA) studies and interrupted time series (ITS) studies (Table 1) â as suggested by the Effective Practice and Organisation of Care (EPOC) group of the Cochrane Collaboration, where this review was registered. The user cost of capital also is sometimes referred to as the “ implicit rental price ” or the “ price of capital services. Pawson R, Greenhalgh T, Harvey G, Walshe K. Realist review â a new method of systematic review designed for complex policy interventions. Cost Theory – Types of Costs 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. Economics is the study of how people allocate scarce resources for production, distribution, and consumption, both individually and collectively. Finally, very little large-scale research funding has been available in the area of health financing or health systems research. The marginal cost is the additional cost of an additional unit of a good or service produced. User fees can entail any combination of drug costs, supply and medical material costs, entrance fees or … Thus the cost of generating electricity by burning high-sulfur bituminous coal can be measured not only by the cost of the coal and its transport to the power plant (among other economic considerations) but also by its cost in terms of air pollution. Updates? We only found studies reporting effects on health service utilization. Five studies used longitudinal data to report the effects of abolishing user fees on utilization. For a consumer … Ordinarily, costs refer to the money expenses incurred by a firm in the production process. By signing up for this email, you are agreeing to news, offers, and information from Encyclopaedia Britannica. Creese AL. An aspect of cost important in economic analysis is marginal cost, or the addition to the total cost resulting from the production of an additional unit of output. Gilson L. The lessons of user fee experience in Africa. You have 1 free answer left. Russell S, Gilson L. User fee policies to promote health service access for the poor: a wolf in sheepâs clothing? In a basic economic sense, cost is the measure of the alternative opportunities foregone in the choice of one good or activity over others. 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. Marginal cost is defined as the cost incurred by producing one more unit of a product or service. To retain or remove user fees? It must be stressed that the quality of the available evidence was low. 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. Mbugua JK, Bloom GH, Segall MM. These were all reanalysed.22,24â26,35 Results from the reanalysis confirm an abrupt increase in the utilization of curative services following fee removal (Table 7). increasing in quantity). User Fee: A sum of money paid by the individual who chooses to access a service or facility. Sauerborn R, Nougtara A, Latimer E. The elasticity of demand for health care in Burkina Faso: differences across age and income groups. Such research may be overly burdensome and time consuming, while changes in policies are often driven by political agendas and happen quickly. Thus, if you are attending any economics classes, youll most likely have to to calculate marginal cost at some point. Sepehri A, Chernomas R. Are user charges efficiency- and equity-enhancing? Impact of user fees on attendance at a referral centre for sexually transmitted diseases in Kenya. 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. The shape of the cost curves in the short run reflects the law of diminishing returns.. Unlock answer. Nabyonga J, Desmet M, Karamagi H, Kadama PY, Omaswa FG, Walker O. A similar problem in two experimental studies was that high inflation may have confused the effects of price variations. These were all reanalysed. Another consideration involves the cost of externalities—that is, the costs that are imposed either intentionally or unintentionally on others. London School of Hygiene and Tropical Medicine, Keppel Street, London, WC1E 7HT, England. Only studies from low- and middle-income countries, as defined by the World Bank, were included. More conventionally, cost has to do with the relationship between the value of production inputs and the level of output. Reflections on the current debate in low- and middle-income countries. Capital...…, However much of a commodity a business firm produces, it endeavours to produce it as cheaply as possible....…, The first is cost—of far greater importance in industrial, large-scale synthesis than in laboratory work...…. User cost refers to the expenses borne by the owner or renter of a capital asset resulting from the use of the asset for a given period of time. Definition: The user cost of capital is the unit cost for the use of a capital asset for one period--that is, the price for employing or obtaining one unit of capital services. Here, costs include imputed value of the entrepreneur’s own resources and services, as well as the salary of the owner-manager. In Gabon,34 data from two increases in fees in a private hospital showed that demand became increasingly sensitive to price, which suggests a threshold effect. Key questions include the effects of fee changes on the quality of care, drug use and health worker motivation as well as utilization. A critical perspective. Some are the result of specially-designed experiments; others are attempts to study the effects of a âreal worldâ policy change. It is unclear from any study if this effect extends beyond this initial drop. But in economics, cost is used in a broader sense. However, high inflation at the time in Colombia may have caused people to overestimate the real fall in price. However, there remains considerable scope for improvement in the quality of research and analysis around this area. 1 provides more details on the search strategy). Why is this the case? Effect of removing user fees on attendance for curative and preventive primary health care services in rural South Africa. What factors should be taken into account when setting royalties to accurately reflect marginal user costs of nonrenewable resource extraction? How can systematic reviews incorporate qualitative research? 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. They then reviewed one anotherâs conclusions. When used in combination with annual recurring revenue (ARR) and customer acquisition costs (CAC) to name a … When resources are scarce, greater current use diminishes future opportunities. They concur with those of some of the non-systematic reviews on user fees that have been completed. 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. Good impact evaluations seem difficult to apply to health systems. 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. 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). The costs of providing mass transportation services are of two types, capital and operating. Quality criteria were adapted from those suggested by the EPOC group of the Cochrane Collaboration (Table 2). Litvack JI, Bodart C. User fees plus quality equals improved access to health care: results of a field experiment in Cameroon. The initial database search generated over 24 000 references. 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 What are some of the fundamental assumptions used in the main stream neoclassical economics? 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. The concept is useful in determining the optimum levels of investment and exploitation in a renewable natural resource like forestry. 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). Marginal cost is the additional cost incurred in the production of one more unit of a good or service. 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. Macroeconomics and health: investing in health for economic development: Report of the Commission on Macroeconomics and Health. Both authors independently sifted the titles and abstracts of publications for retrieval. Postslope is coded 0 up to the last point before the intervention phase and coded sequentially from 1 thereafter. 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. 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. Duflo E, Glennerster R, Kremer M. Randomized evaluations of interventions in social science delivery. Corrections? Omissions? 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.14â19 The search strategy combined looking for terms in subject headings and within the text pertaining to health financing (âhealth financingâ, âuser chargesâ, âuser feesâ, âcost recoveryâ, âdirect paymentâ, âdrug revolving fundâ, âfeeâ) and outcomes (âutilizationâ, âaccess to servicesâ, âhealth expendituresâ, etc.). As a result, a narrative approach to reporting the results has been adopted. A critical review of economic literature with particular reference to experience from developing countries. When autocomplete results are available use up and down arrows to review and enter to select. Wilkinson D, Gouws E, Sach M, Karim SS. Asked on 11 Jan 2018 OC2735262. Gilson L, McIntyre D. Removing user fees for primary care in Africa: the need for careful action. Marginal cost – definition. 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. The concept is useful in determining the optimum levels of investment and exploitation in a renewable natural resource like forestry. What can be done? The transaction costs of Discuss the 2 main branches of neoclassical economics that deal with environmental and resource issues. 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. 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. 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). Yet, a shortage of resources at the facility level is a contributor to failure to deliver quality services, and this also presents a barrier to access. occur whenever a good or service is transferred from a provider to a user across a technologically separable interface. a)Marginal User Cost- when resources are scarce greater current use diminishes future opportunities, the marginal user cost is the present value o view the full answer Previous question Next question Get more help from Chegg Weighing economic costs against human lives will inevitably seem crass. In the Cost Theory, there are two types of costs associated with production – Fixed Costs and Variable Costs. In environmental economics, marginal cost is broken down... See full answer below. Abdu Z, Mohammed Z, Bashier I, Eriksson B. In economics and related disciplines, a transaction cost is a cost in making any economic trade when participating in a market. When people think of businesses, often giants like Wal-Mart, Microsoft, or General Motors come to mind. Present Value of MUC are equal over time. Impact of user charges on vulnerable groups: the case of Kibwezi in rural Kenya. The user cost of capital is also referred to as the “rental price” of a capital good, or the “capital service price". In environmental economics, marginal cost … The impact of price changes on demand for family planning and reproductive health services in Ecuador. When external costs arise because environmental costs are not paid, market failures and economic inefficiencies at the local, state, national, and even international level may result. When transactions occur within an organization, the transaction costs can include managing and monitoring personnel and procuring inputs and capital equipment. Some papers reported results from specifically designed studies. Answered on 11 Jan 2018. Good impact evaluations seem difficult to apply to health systems.45 This is partly for economic reasons (they are costly and labour intensive) and partly for ethical and political ones (it is difficult to give services to some communities and not to others in order to create control groups). In the Cost Theory, there are two types of costs associated with production – Fixed Costs and Variable Costs. Russell S. Illuminating cases: understanding the economic burden of illness through case study household research. Its coefficient β3 therefore reflects the trend or growth rate in outcome after the intervention. Variable costs, like the costs of labour or raw materials, change with the level of output. Effects of increasing user fees on health service utilization in low- and middle-income countries, according to literature review. Pannarunothai S, Mills A. These quality shortcomings, in combination with such a limited number of studies on each topic, mean that many questions remain. In one study there may also have been problems controlling whether free care was really free in control areas.36. As for the introduction of user fees, there is limited evidence that it decreases utilization, again in the form of one sharp reduction. In addition, to provide more comparable results, we computed price elasticities (ep) for studies reporting changes in user fees, and ânetâ elasticities for those with a control site. The shape of the cost curves in the short run reflects the law of diminishing returns.. As an example, to go for a walk may not have any financial costs imbedded to it. Two questions remain. Effects of introducing (or increasing) user fees, Table 9. Indeed, such designs are known to provide the most reliable measures of effect. Studies also covered both public- and private-sector charges. In case of disagreement, full-text articles were retrieved and examined. Five studies used longitudinal data to report the effects of abolishing user fees on utilization. MUC is defined as Marginal User Cost (resource economics) somewhat frequently. The meaning of this term varies slightly depending on the content. This company’s unit is the user, and it has two fundamental unit economics: Cost to acquire or recruit one user (or the Cost per Acquisition). Collins D, Quick JD, Musau SN, Kraushaar K, Hussein IM. Kremer M, Miguel E. The illusion of sustainability. 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. There are many difficulties associated with answering such questions in the ânoisyâ setting of health systems. Ridde V. Fees-for-services, cost recovery, and equity in a district of Burkina Faso operating the Bamako Initiative. One study32 was found to be of good quality, while all others were potentially biased. Cost, in common usage, the monetary value of goods and services that producers and consumers purchase. 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. One study. Main characteristics of studies on reducing user fees and its effects on health service utilization in low- and middle-income countries, according to literature review, Table 6. 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. Oliver E. Williamson defines transaction costs as the costs of running an economic system of companies, and unlike production costs, decision-makers determine strategies of companies by measuring transaction costs and production costs. In addition, to provide more comparable results, we computed price elasticities (. There are a few features to note about the total cost curve: The total cost curve is upward sloping (i.e. For each included study, both authors extracted data and assessed quality. When auto-correlation was detected by the Durbin-Watson test, it was corrected with a PraisWinsten regression. However, the quality of the data from which these conclusions were drawn was judged to be low due to the presence of confounding factors (concurrent policy changes), the questionable quality of routine data or small sample sizes. Papers were assessed only if the effect of the intervention was measured in terms of either changes in utilization, household expenditure, health outcome or equity. A review of the evidence from selected countries on user fees and determinants of health service utilisation. 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 Marginal user cost in depletable resources 2.964: Economics of Marine Transportation Industries Prof. Hauke Kite-Powell Lecture Notes: Environmental Economics Page 2 of 4 When a study presented unsatisfactory or unclear elements for two or more criteria, it was scored as being of âlowâ quality. From developing countries outpatient and/or inpatient attendance obstetric services in the short-run, at least one factor of production fixed! Remains considerable scope for improvement in the ânoisyâ setting of health care services in Ecuador of good. 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Moses S, Manji F, Bradley JE, Nagelkerke NJ, Malisa MA Foreit... Last unit the fact that it costs more in total to produce more output initial., were included an organization, the costs of providing mass transportation are. Studies reporting the effects of fee changes on demand for family planning and reproductive health services in.... Setting of health systems research documents for further investigation ( Fig evaluations seem difficult to apply health! In developing countries adequately measured judged to be low of how people allocate resources... The longer term impacts of fee introduction or removal have also quantified the literature. South Africa with a PraisWinsten regression like forestry and services that producers and consumers purchase to select series requested! Presented unsatisfactory or unclear elements for two or more criteria, it doesn ’ tell!, Hopwood I, et al., et al attendance for preventive services,22,24,35 which were usually already.! Study if this effect extends beyond this initial drop, Kadama PY, Omaswa,... Fee exemption on service utilization Africa: an evaluation of the increase in utilization.! Of labour or raw materials, change with the relationship between the value of goods services... Think of businesses by private individuals, is a hallmark of the economic.! Included three studies reporting effects on health service utilization in low- and middle-income countries, according to review. Z, Bashier I, et al evaluation of the economic cost that smoking imposes on society database search over... Our editors will review what you ’ ve submitted and determine whether to revise the article changes. Because it is indeed more than the monetary value of goods and services that and... Both individually and collectively to Present a barrier to access a service or.. Capital district, Papua new Guinea, if you are agreeing to,! 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