User fees: The cost of cost recovery

By Sandhya Srinivasan

Since 1991, user fees have been introduced in government hospitals despite evidence that user fees do not really help cost recovery and only end up placing a further burden on the poor

User fees -- for various services within a healthcare facility -- are an integral part of post-1991 health system restructuring packages, though 'cost recovery mechanisms' in government hospitals existed in some states before 1991. The rationale: money for public healthcare must be raised from somewhere; we already know that people are willing to pay for healthcare, and payments will reduce 'frivolous' use of the healthcare system.

Many health activists and networks like the Jana Swasthya Andolan (JSA) oppose user fees and other cost recovery mechanisms. Their reasoning:

User fees do not raise much money . For example, a review paper by Ramesh Bhat ('Public private partnerships in health sector: issues and prospects' , Indian Institute of Management, Ahmedabad, 1999) notes that "the option of meeting this expenditure through user fees has been tried out by various state governments. However, this could not provide a solution since the receipts were less than the expenditure. In 1992-1993 the average hospital receipts were 1.4% of the total hospital expenditure." Elsewhere, when user charges were recovered as part of health restructuring programmes, Zambia and Kenya recovered about 3% of costs.  Ghana raised between 5% and 12% of expenditure.


Means testing (to give fee waivers for the very poor) doesn't work . A 2002 report by INSAAF International, 'World Bank Funded Health Care: A Death Certificate for the Poor', reported instances of patients in Punjab being thrown out of public hospitals because they didn't have the money. After user fees were imposed in hospitals of the Punjab Health Systems Corporation, from October 1995, the poorest were entitled to exemptions based on government-issued yellow cards. But in Bhatinda, a city of 270,000 people, no exemption cards had been issued since 1996 and only 44 yellow cards were renewed since 1998. Not a single exemption was granted between July and December 2000 at the Bhatinda referral hospital. Only one in 150 city slum women had even heard about yellow cards. The researchers reported a 20% reduction in bed occupancy and a 20-40% reduction in outpatient cases.

User charges can be at significant cost to users. "Ten years ago, ICU charges were free and many medications were available. Today an angiography costs Rs 6,500 -- almost the same as some small private hospitals in Mumbai. People are still charged Rs 65,000 for stents at municipal hospitals though the prices have come down in the market," says a doctor. How do people manage? "Some take loans, some manage grants from the chief minister's fund, some don't get the treatment done." There have been reports of patients slipping out of government hospitals during visiting hours because they could not pay their bills. There has also been the absurd situation of poor patients being kept in the hospital till they pay their bills -- with the bill increasing each passing day.

Many surveys have found that user fees further reduce access to healthcare. Public facilities are used mostly by those who do not have a choice. There are no comprehensive studies in India on whether user fees reduce demand for healthcare. But many small studies in other countries say exactly this:

Health organisations testify to the ill-effects of user fees

The money does not go where it should. Health researcher Ravi Duggal notes that user fees introduced in Kerala were withdrawn as the money remained unspent because of disputes between local authorisation committees and politicians. In Maharashtra , user fees were increased in 2000 but the money is not used, apparently because of bureaucratic problems. The system remains starved of essential drugs and equipment.

Healthcare is a right. Access to primary education and healthcare is a right that should not be conditional on the ability to pay. All people already pay for these services -- through taxes of one kind or the other. User fees shift the burden onto the poor and deflect attention away from the fact that more money should be spent on the public healthcare system.

What doctors think about charging fees in public hospitals

More than 1.5 million people visit the OPDs of the King Edward Memorial Hospital , Mumbai, each year. Starting in the late-1980s, the hospital instituted user charges for OPD papers, various tests and procedures. User charges were increased in the 1990s and applied to a broader range of services.

"Public hospitals were set up for the very, very poor who cannot go anywhere else," says Dr Sunil K Pandya, who retired in 1998 as head of the department of neurosurgery at KEM Hospital . "When I joined in 1967 not only were there no fees but every in-patient would have clean bedsheets and towels. You can't even imagine this today." While expensive tests and some consumables such as heart valves used to be charged in Dr Pandya's time, the social worker would raise the money if needed. "Today every operation is charged -- this is not justified." Dr Pandya remembers routine shortages of drugs and other necessities, starting in December till the end of the financial year, "because the budget would always be 25-30% less than needed".

Eighty per cent of the revenue earned at KEM (amounting to about 10% of its annual budget) is from the radiology department. Dr Ravi Ramakanthan, head of the department of radiology, finds the process an administrative nightmare.

"We are supposed to do 20% of scans free. The decision is made by the medical social worker, but in emergency cases the assistant medical officer, who has no training in this, decides. Are we deciding correctly and uniformly? And we can't stop after the 20% quota is over -- each case has to be decided on merit." Charges include the cost of consumables, but the department sometimes runs out of contrast dye, for example. In such cases Dr Ramakanthan tells the patient to buy the dye from outside and waives all charges.

Rates for basic tests are on the website. The department does other therapeutic procedures for which the charges cannot be fixed. "This can range from Rs 5,000 to Rs 3 lakh." For such large amounts, which cannot be waived, 'non-affording' patients are sent to the social worker who writes letters to charitable trusts and raises about 80% of the money needed. In an emergency the cost can be underwritten by the dean and money taken from the hospital poor box, which collects donations to pay for poor patients' care.

Many departments at KEM have started fund-raising to buy new equipment. But in Dr Ramakanthan's experience, "If you take the trouble to make your case, you'll get the money in the municipality."

Do doctors find that some patients must return without the necessary treatment? Do they worry about how patients raise money at short notice? "We have to be thick-skinned, we just can't take that on," says Dr Ramakanthan.

"Today's patients are willing to pay if you explain the need to them, and it's still much, much cheaper than in the private sector," says Dr Avinash Supe, professor and head of the department of surgical gastroenterology at KEM Hospital . While basic drugs are stocked in the hospital, some expensive less-used medicines will have to be bought from the market as will, for example, the special mesh for hernia operations. An endoscopy costs Rs 150 at KEM, compared to at least Rs 1,500 outside.

Do doctors see patients go without care because they cannot afford it? Rarely, says Dr Supe. The hospital social worker will apply to charitable trusts or get money from the hospital 'poor box'. Or patients will borrow the money from somewhere.

"The biggest problem is when patients get transferred from a private set-up where they have already spent all their money. This happens very often -- I must have five such patients in my ward at any given time."

"I think it's outrageous," says Dr Armida Fernandez, neonatologist and former dean of LTMG Hospital , Sion, Mumbai. Many of the hospital's patients come from the slums of Dharavi next door. "They cannot possibly afford Rs 300 per day in the neonatal ICU -- and they're also paying for many drugs unavailable at the hospital." Dr Fernandez remembers many times when families just could not pay the expenses of treatment. This would either prolong hospital stay and the bill while someone tried to raise the money, or the family would just pack up and leave discreetly during visiting hours. "And then the administrators would be required to file police cases for non-payment." Sneha, an NGO working with women and children in Dharavi, next to LTMG Hospital, found that many women were forced to undergo home deliveries -- increasing the risk both to the mother and the child -- because of the hospital policy of charging for a third delivery.

(Sandhya Srinivasan is a freelance health writer and executive editor of  The Indian Journal of Medical Ethics. Email : This email address is being protected from spambots. You need JavaScript enabled to view it.)


  2. Sonia Andrews, Sailesh Mohan, 'User charges in health care: some issues', Economic and Political Weekly , September 14, 2002
  3. 'No cash no care: MSF's confrontation with cost recovery' c fm?articleid=711DBEE6-1FBA-4D24-BE42ACEBF188E332

InfoChange News & Features, June 2005