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Community Dispatch - An InfoFax of the Halton Social Planning Council & Volunteer Centre

May 2000


Introduction

Government restructuring, the devolution of human services to regional and municipal governments and budget choices to not reinvest in human services have led to the resurgence of user fees. The Council believes it is important to revisit the salient research findings about user fees and their implications for access and equity, not only within human services but throughout our society. As Boards of Directors and staff consider the implementation of user fees, the Council shares this information in order to assist you in your deliberations.

What are User Fees?

A user fee is an extra charge placed on health, social, educational and recreational services used by the public. User fees are a cost to the individual using the service that varies directly with the amount of the service used. The more you use, the more you pay. User fees can take many forms including:

  • Co-insurance is the simplest form of user charge. The participant is required to pay a fixed percentage of the cost of services received, for example 5%. Often, the higher the cost of the service, the larger the fee. Major users are at a disadvantage, as they contribute a disproportionate amount compared to other participants. An example would be dental services.
  • Co-payment is an alternative to co-insurance. Instead of paying a percentage of service costs, the participant pays a flat fee per service, for example $25, which does not necessarily bear any relation to the cost of the service. The same amount is charged, no matter what the cost of the service provided, each time the service is required. An example of recreation user fees are the fees participants pay to enter some city parks and programs such as public skating, swimming and instructional programs.
  • Deductibles require the individual to pay the cost of services received up to a certain ceiling (the deductible amount). Above this ceiling, costs are covered by the public health insurance plan. All users of this system must pay a standard minimum deductible amount, which is independent of the quantity of services received. An example in health care is the share of the costs a participant pays for medical and hospital services covered by public health insurance plans.
  • Extra-Billing may also be considered a type of user charge. In this instance, the individual-s private contribution pays costs not covered by the public plan. An example would be a doctor billing the participant for an extra fee over and above established government rates. All participants requiring this medical service would be affected, no matter what their income.

Arguments For User Fees

One of the reasons users fees are implemented in the health and human service sector is to increase revenue. This is an understandable argument when funding to this sector has been reduced. Organizations are increasingly debating whether to increase or implement user fees as a way of funding or, at least, partially funding their services. The proponents of user fees also argue that if participants become involved in the payment of the services which they use, then they will act with a greater sense of responsibility and accountability in their use of the services. The general advantages of user fees are:

  • Limitations of Overall Costs - user fees are a means of limiting or reducing service costs by shifting part of the cost from the agency or insurance to the recipient of the service.
  • Curtailment of Abuses - user fees may serve to limit the use of services by participants for "frivolous" or "unnecessary" reasons. A reduction in unnecessary services would allow staff or facilities to re-assign their efforts to participants who are genuinely in need of services.
  • Deterrent to Over Servicing - user fees have been seen as a means of setting limits on the provision of "unnecessary" services by personnel to participants.
  • Increased Sense of Responsibility - by making a direct partial payment for services received, beneficiaries will gain a greater appreciation of the total costs that are involved and will adopt a more responsible attitude towards their use.
  • Augmenting the Quality of Service - the selective use of user charges has been seen as a means of improving the quality of service provided to participants, a step achieved by a combination of a more responsible participant attitude and the more conscientious provision of services by personnel.
  • Raising the Incomes of Service Providers - During times of financial constraints, the introduction of user fees is a means of maintaining the income of service providers.

Arguments Against User Fees

Some opponents of user charges find the very idea incompatible with basic principles of access to universal health, education and human services. "In such instances the introduction of user charges is seen as a breach of the principles which ensures equal access to the health care system without regard to the ability to pay" (Badgley, 1979, p31). Disadvantages attributed to user fees are:

  • Participant Culpability - User fees, particularly in health care, have been opposed on the basis that patients are only partly responsible for initiating certain aspects of medical or hospital care, having little choice in cases of acute illness, return visits, specialists referrals, or admission to hospital. In this situation, patients are seen to be penalized by user fees for decisions made by physicians or professionals over which they have little or no control.
  • Non-Selectivity of User Fees - the use of services varies by the age and gender of individuals with the young, the elderly and women in general constituting a high proportion of the demand for health, human and recreational services. Where user fees are imposed on visits for use of service these sectors of the population are penalized.
  • Control of Prices - If user fees are initiated as a measure to offset cost increases or decreases in funding, the public may be penalized for the price component of the services over which it has no direct control.
  • Rebound Effect - Implicit in the concept of user fees is the principle that redistribution occurs in the apportioning of costs among the groups involved - the public, the participant, the professionals or organization. This -rebound- argument acknowledges that while such a redistribution may occur to a limited degree, the actual reductions in one service area may rebound through an increased utilization in other potentially more costly services.
  • Difficulty of Collection - Where there is considerable opposition to user fees, difficulties may be incurred such as:
    1. non-payment,
    2. a loss of participants,
    3. the non-adherence to this practice by staff.

Such opposition, it has been argued, results in price increases in other services that are not covered by user fees, restoring costs to their former levels.

  • Regressive Impacts - User fees are seen to be socially inequitable, serving to deter those most vulnerable, such as the poor and the elderly, from receiving services they need.

The Regressive Impacts of User Fees

In a major study of user charges conducted in the United States by the Rand Corporation, researchers found that user charges deterred individuals from using both unnecessary and necessary services. This leads to obvious negative health and social outcomes for many individuals. The Canadian experience with user charges confirms this finding.

The Effects on the Poor

Between 1968 and 1971 the province of Saskatchewan had a flat fee user charge for a physician office visit. The charge reduced the annual use of physician services by 6 to 7 percent, but the reduction was much larger, around 18 percent, for low-income people. User charges were also found to have a greater impact on low-income people by researchers who studied the effect of extra-billing in Ontario. The 1980 survey, "The Effect of Physician Extra-Billing on Participants" found that low-income people who had been extra-billed were significantly more likely than higher income people to delay seeking care because of the cost. Thirty percent of the poor in the study reported a delay or lack of utilization of physicians because of the cost as compared with 16% of non-poor. Differences were also found between poor and non-poor families in that they felt the costs of doctor-s services created a financial problem for them and their families. A significantly higher proportion of the poor (28%) reported the cost of doctor's services created a financial problem for them compared with 15% of the non-poor. User fees may make people think twice before, for example, going to a doctor, which means people will diagnose themselves and decide the seriousness of their condition. They might make the right decision or they may not, and what then will be the consequences and possible additional costs to human services.

The evidence is clear, instead of reducing unnecessary use of services, (an argument in support of user fees) user fees are more likely to deter individuals, particularly those affected by low incomes, from seeking services, services that may be vital for their health and well-being.

The Effect on Seniors

Although the Canada Health Act prohibits user fees for hospital and physician services, user fees may be, and are, applied to home care services. While provincial governments publicly fund 85% of home care services, 10% of these services are funded by user fees and 5% by private insurance. Participants are usually charged a fee-for-service or user fees for non-clinical services such as homemaking, personal assistance and house cleaning, meals on wheels, transportation, supplies and equipment. Although, user fees are usually based on a sliding scale according to income, seniors are one of the largest low-income groups in the community and as such are adversely affected by users fees. The National Advisory Council on Aging states "The private/public balance in health care is particularly of concern to seniors because they are more likely to need health care than other Canadians, and because they have lower incomes." (p.10)

The Effect on Women and Children

As previously mentioned, women and children constitute a high proportion of the demand for health and human services. In a study involving Halton residents, "When the Bough Breaks," services, including child care and appropriate recreation for children, were randomly assigned, at no charge, to 765 mothers on social assistance and their 1,330 children. The results showed that children provided with recreational services increased their academic competence, social, vocational and physical levels of well-being. Furthermore, this was achieved at no greater cost to society because it was a preventative approach that reduced in the long term, the need for services, such as therapists. Access to these services at no charge also reduced the mothers- stress, depression and the need for medications, again reducing the need for other human services.

This example illustrates the important need for universal access to services - rather than user fees. Arguments in support of user fees for important services, such as recreation, are short sighted and do not consider the social costs associated with marginalized youth and, ultimately, the future well-being of children in our society.

Conclusion

At first glance user fees seem to be a reasonable and effective way to reduce costs and increase funding for services. User fees, it is argued, discourage unnecessary use of services and increase the share of payments by people that use them. In fact, however, user fees have the effect of increasing total health care costs (by adding private costs without significantly reducing public costs) and reducing access to services among, the poor the elderly, women and children.

As Canadians, we collectively take pride in our health, education, social and recreation services. Universal access to health care and other human services is a strong Canadian value, and choices about the social importance of this value will determine the path we take toward making our society an equal and sustainable place for all.


Sources

Badgley, Robin F. and Smith, David R. (1979) "User Charges for Health Services", The Ontario Council of Health.

Beck, R.G. & Horne, J. (1980) "Utilization of Publicly Insured Health Services in Saskatchewan Before, During and After Co-payment", Medical Care, 18: 787-806.

Browne, G et al. (1998)"When the Bough Breaks: Provider-Initiated Comprehensive Care is more Effective and Less Expensive for Sole Support Parents on Social Assistance", System-Linked Research Unit, McMaster University.

Evans, R. G. et al (1994) "Who Are The Zombie Masters, and What Do They Want?", The Premier's Council on Health, Well-being and Social Justice.

Evans, R. G. et al (1994) "Charging Peter To Pay Paul: Accounting for the Financial Effects of User Charges", The Premier's Council on Health, Well-being and Social Justice.

Lohr, K.N. et al. (1986) "Use of Medical Care in the Rand Health Insurance Experiment: Diagnosis- and Service-specific Analyses of a Randomized Controlled Trial", Medical Care, 24 (Supplement): S31-S38.

Madore, O. "Health Care Financing: User Participation." Background Paper, July 1993. Data provided by Health Information Division, Policy, Planning and Information Branch, Health and Welfare Canada, April 1993.

Morris, L. B. (1994) "The Remarkable Tenacity of User Charges", The Premier's Council on Health, Well-being and Social Justice.

National Advisory Council on Aging. (1997) "The NACA Position on the Privatization of Health Care." Government of Canada.

Stoddard, G.L. et al. (1994) User Charges, Snares and Delusions: Another Look at the Literature." The Premier's Council on Health, Well-being and Social Justice.

Stoddard, G.L. et al. (1994) "User Charges, Snares and Delusions: Another Look at the Literature", The Premier's Council on Health, Well-being and Social Justice.

Stoddard, G.L. et al. (1993) "Why Not User Charges? The Real Issues", The Premier's Council on Health, Well-being and Social Justice.

Stoddard G.L & Woodward, C.A. (1980) "The Effect of Physician Extra-Billing on Participants- Access to Care and Attitudes Toward the Ontario Health System", Research Study for Health Services Review '79 (Hall Commission), Hamilton: Dept. Of Clinical Epidemiology and Biostatistics, McMaster University.


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