The evidence on user fees is clear: it is time to put this policy zombie to rest. Generating revenue by essentially imposing a tax on illness is not good policy. If the goal is to ensure better use of health services, finding and eliminating inefficiencies across the continuum of care holds much more promise.
Myth busted September 2001
Busted again! November 2012
Tough economic times stir up anxiety over the affordability of public services—especially healthcare. As governments struggle to balance budgets, and healthcare spending continues to grow faster than the economy, conditions are ripe for old—and often discredited—policy ideas to make a comeback. User fees are no exception. At first blush, user fees appear to be an obvious solution. After all, any policy that promises to generate revenue and reduce costs by deterring unnecessary use is hard to ignore.[1,2] But as research has shown over the years, the silver bullet of user fees really is the stuff of fantasy.
The evidence indicates that implementing a medical toll booth to reduce healthcare traffic along a particular route can obstruct access to needed care, especially for those that are poor. Viewing patients as responsible for the high costs of healthcare ignores the evidence against user fees and the opportunities for greater efficiency that can be found along the continuum of care. A medical toll booth simply won’t do the trick.
The Tangle of Necessary and Unnecessary Care
The RAND Health Insurance Experiment, the largest and most rigorous study of user fees to date, found that the more patients had to pay for care, the less they used it.[6,7] Less care led to lower costs, but it didn’t mean greater efficiency, because sometimes people received fewer services when they actually needed more. Patients did reduce their use of less-effective care, but there was a decrease in the use of effective care as well. The RAND findings also showed that the proportion of inappropriate hospital stays and admissions was the same with or without user fees.
The RAND findings have stood the test of time. In one study, user fees lowered the appropriate use of effective prevention services and medications to help manage chronic diseases. User fees have also been shown to reduce inappropriate as well as appropriate antibiotic use to a similar extent.
Savings At Any Cost
In Canada, user fees were introduced in Saskatchewan in the sixties and seventies. Subsequent research found that they reduced the annual use of physician services by almost 6%. Notably, low-income families reduced their use of physician services by about 18%. Saskatchewan's overall healthcare costs, however, did not go down. Indeed, over the period user fees were levied, physician fees increased and high income earners on average increased their use of physician services.
User fees may also cause some people to forego necessary treatment. In Quebec, for instance, when the elderly and people on welfare had to pay user fees for prescription drugs, they took less medicine and their conditions worsened. As a result, they ended up with more visits to emergency departments and an increase in serious adverse events.
A study of seniors insured through U.S. Medicare found that raising user fees for physician visits and prescriptions increased Medicare costs. As in Quebec, many patients stopped taking their medications and ended up in the hospital. These findings are supported by a 2007 systematic review of prescription drug cost-sharing. Researchers found that although it is not certain that user fees lead to negative outcomes for all patients, their effect on the chronically ill was clear: increased emergency department use and hospitalizations.
Who Pays the Price
The Canada Health Act effectively bans user fees for two main health services: hospitals and physicians. There are good reasons for this. User fees shift costs to those that use the system the most: sick people. This amounts to a tax on poverty and age, since the poor and the elderly are less healthy than other groups.[15,16,17,18]
The poor are especially sensitive to these fees, which have led to policies that exempt them from user charges. A 2010 report examining the possibility of a health deductible in Quebec suggested that such an exemption would thwart much of the revenue-generating potential of user fees. Because healthcare utilization tends to be concentrated among low-income Canadians, low-income exemptions would significantly reduce the proportion of patients paying user fees.
The poor are negatively affected by user fees in other ways, too. A study looking at the effects of prescription drug user fees found that low-income patients were more likely to stop taking medications to treat chronic disease. These results are not surprising, as in the RAND study adverse health effects due to a decline in care were concentrated among low-income families.[21,7]
User fees are a blunt instrument for targeting waste. They are aimed exclusively at patients, but patients have very little control over which medical services they use.[11,22] Patients choose whether or not to visit a doctor, but ongoing care and big-ticket items are ordered by physicians, the “gatekeepers” of the healthcare system.[23,11,22] What’s more, physician fees account for only 14% of healthcare expenditures. Patients are not solely responsible for the high costs of healthcare, so it doesn’t make sense to put cost containment on their shoulders.
While user fees are effectively banned for hospitals and family physicians in Canada, we continue to have them for many other aspects of healthcare. If our goal is to ensure better use of health services, the evidence shows that user fees have not been capable of achieving it. Finding and eliminating inefficiencies across the continuum of care holds much more promise. The shift toward integrated and coordinated care delivery systems is encouraging, especially where they have been designed to meet the needs of specific populations. That said, efforts to integrate healthcare services continue to be frustrated by user fees (routinely required for visits to physiotherapists, psychologists and for home care support, etc.) that can create access barriers to the most appropriate services.
1. Canadian Medical Association. (2011). Report of the Advisory Panel on Resourcing Options for Sustainable Health Care in Canada to the Canadian Medical Association. Retrieved from http://www.cma.ca/multimedia/CMA/Content_Images/Inside_cma/Annual_Meeting/2011/AdvisoryPanelReport_en.pdf
2. McGinley, M. (2012). Reforming Canada’s health care system. Canadian Student Review Fraser Institute. Retrieved from http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/articles/reforming-canadas-health-care-system_csr-winter-2012.pdf
3. Evans, RG. (1995). User fees for health care: why a bad idea keeps coming back. Canadian Journal on Aging, 14, 360-390.
4. Swartz, K. (2010). Cost-sharing: Effects on spending and outcomes. Robert Wood Johnson Foundation. The Synthesis Project; Issue 20. Retrieved from www.rwjf.org
5. Hollander, M., Verma, J., & Major, J. (2011). Improving Transitions Across the Continuum of Care – Session II. CEO Forum. Ottawa, Canada : CHSRF.
6. Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E.B., Leibowitz, A., & Marquise, M.S. (1987). Health insurance and the demand for medical care: Evidence from a randomized experiment. American Economic Review, 77(3), 251-277.
7. RAND Health. (2006). The Health Insurance Experiment A Classic RAND Study Speaks to the Current Health Care Reform Debate. RAND. California, United States : RAND. Retrieved from http://www.rand.org/content/dam/rand/pubs/research_briefs/2006/RAND_RB9174.pdf
8. Siu A.L., Sonnenberg, F.A., Manning, W.G., Goldberg, G.A., Bloomfield, E.S., Newhouse, J.P., & Brook, R.H. (1986). Inappropriate use of hospitals in a randomized trial of health insurance plans. New England Journal of Medicine, 315(20), 1259-1266.
9. Foxman, B., Valdez, R.B., Lohr, K.N., Goldberg, N.A., Newhouse, J.P. & Brook, R.H. (1987). The effect of cost sharing on the use of antibiotics in ambulatory care: results from a population based randomized controlled trial. Journal of Chronic Disease, 40(5), 429-437.
10. Beck, R.G. & Horne, J.M. (1980). Utilization of publicly insured public health services in Saskatchewan before, during and after copayment. Medical Care, 18(8), 787-806.
11. Stoddart, G.L., Barer, M.L., Evans, R.G., & Bhatia, V. (1993). Why Not User Charges? The real issues. Centre for Health Services and Policy Research, University of British Columbia. HPRU, 93:12D.
12. Tamblyn, R., Laprise, R., Hanley, J.A., Abrahamowicz, M., Scott, S., Mayo, N., Hurley, J., Grad, R., Latimer, E., Perreault, R., McLeod, P., Huang, A., Larochelle, P., & Mallet, L. (2001). Adverse events associated with prescription drug cost-sharing among poor and elderly persons. Journal of the American Medical Association, 285(4), 421-429.
13. Chandra, A., Gruber, J., & McKnight, R. (2010). Patient Cost-Sharing and Hospitalization Offsets in the Elderly. American Economic Review, 100(1),193-213.
14. Goldman, D.P., Joyce, G.F., & Zheng, Y. (2007). Prescription Drug Cost Sharing: Associations with Medication and Medical Utilization and Spending and Health. Journal of the American Medical Association, 298 (1), 61-69.
15. Romanow, R J. (2002). Building on Values : The Future of Health Care in Canada – Final Report. Commission on the Future of Health Care in Canada. Ottawa : Canada.
16. Mikkonen J & Raphael D. (2010). Social Determinants of Health: The Canadian Facts. York University School of Health Policy and Management. Retrieved from http://www.thecanadianfacts.org/The_Canadian_Facts.pdf
17. Gilmour, H & Park, J. (2006). Dependency, chronic conditions and pain in seniors. Health Reports/Statistics Canada, Canadian Centre for Health Information, 16, 21-31.
18. McLeod, C., Lavis, J., Mustard, C., & Stoddart, G. Income Inequality, Household Income and Health Status in Canada: A Prospective Cohort Study. American Journal of Public Health, 93(8), 1287-1293.
19. Stabile, M., & N-Marandi, S. (2010). Fatal Flaws : Assessing Quebec’s Failed Health Deductible Proposal. C.D. Howe Institute Working Paper. Retrieved from http://www.cdhowe.org/pdf/Working_Paper_Stabile.pdf
20. Chernew, M., Gibson, T.B., Yu-Isenberg, K., Sokol, M.C., Rosen, A.B., & Fendrick, A.M. (2008). Effects of Increased Patient Cost Sharing on Socioeconomic Disparities in Health Care. Journal of General Internal Medicine, 23(8),1131-6.
21. Newhouse, J.P. (2004). Consumer-Directed Health Plans And The RAND Health Insurance Experiment. Health Affairs, 23(6), 107-113.
22. Birch, S. (2004). Charging the patient to save the system? Like bailing water with a sieve. Canadian Medical Association Journal, 170(12), 1812-1813.
23. Health Council of Canada. (2010). Decisions, Decisions: Family Doctors as Gatekeepers to Prescription Drugs and Diagnostic Imaging in Canada. Retrieved from http://www.healthcouncilcanada.ca/tree/2.33-DecisionsHSU_Sept2010.pdf
24. Canadian Institute for Health Information. (2011). National Health Expenditure Trends, 1975 to 2011. Ottawa, Canada: CIHI. Retrieved from https://secure.cihi.ca/free_products/nhex_trends_report_2011_en.pdf
25. Hollander, M.J. & Prince, M.J (2002). Analysis of Interfaces Along the Continuum of Care. Final Report: “The Third Way”: A Framework for Organizing Health Related Services for Individuals with Ongoing Care Needs and Their Families. Retrieved from http://www.waterloowellingtonlhin.on.ca/uploadedFiles/Hollander%20Analytical%20Services.pdf
26. Hollander, M.J., Chappell, N.L., Prince, M.J., & Shapiro, E. (2007). Providing Care and Support for an Aging Population: Briefing Notes on Key Policy Issues. Healthcare Quarterly, 10(3), 34-45.
Mythbusters articles are published by the Canadian Foundation for Healthcare Improvement only after review by experts on the topic. CFHI is an independent, not-for-profit corporation funded through an agreement with the Government of Canada. Interests and views expressed by those who distribute this document may not reflect those of CFHI. © 2012