A research article expanding on the efficiency gap caused by growing pharmaceutical costs for the elderly population.
Overview
Willingness to pay and loss of welfare
Economic justifications for user fees are founded on the notion of allocative efficiency, which holds that resources are efficiently allocated when individuals are prepared to pay for a commodity at a price that represents the marginal cost of production [17]. This has two consequences. To begin, only those willing to pay should have access to a certain product.
Keeping health-care expenses in check
Any reduction in usage ascribed to user prices would be considered a gain in allocative efficiency, regardless of the value or efficacy of the health services forsaken. However, many non-economists believe that when faced with user fees, sensible customers will forsake the health treatments that are of the least benefit to them (surely those that are free).
Increasing income to improve efficiency
If user fees are set low enough to discourage considerable levels of use, they can help the health system collect cash. This policy argument is particularly common in low-income nations, because public health-care resources may be extremely inadequate or non-existent. In such cases, relying on private resources to assure an adequate supply of pharmaceuticals, for example, might benefit health, especially if poorer individuals are excluded from user fees.
Concern for efficiency or concern for the budgets of third-party payers?
Which of these arguments in favor of user fees appears to be the most persuasive in the instance of prescription medication charges? Applying the allocative efficiency argument to a style of health care that necessitates a doctor’s prescription only emphasizes the need of health policy.