What should consumers in poor countries pay for publicly-provided health services?

Philip Musgrove

Social Science & Medicine, 1986, vol. 22, issue 3, 329-333

Abstract: Under the assumption that the price charged for public medical care is not to determine supply (because general revenue is available), the optimum price is determined taking account not of the cost of production but only of the government's welfare function. If this includes both the revenue obtained and the total number of consultations, the optimum price is set where consumers' demand becomes inelastic--how inelastic depends on the relative values of revenue and consultations. Introducing a concern for consumers' own utilities and their incomes leads to a lower price, depending on the inequality of income. Distinguishing necessary and frivolous consultations can either raise or lower the price; the optimum depends on the share of demand that is frivolous. Price discrimination may be justified and, if practised, should lead to lower fees where the other costs (travel, etc.) of obtaining attention are higher.

Date: 1986
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