the time of use.<sup>7</sup> As already argued, the principal reason for restricting user fees to hospitals is achievement of equity in health service delivery.

16. The suggtstion that patients should pay directly (through user fees) for primary health care services, while paying indirectly (through taxes) for hospital care is based on two facts. First, the total costs of running primary h.alth tacilities are quite small in comparison to recurrent costs of hospitals. It is therefore possible for local communities to support a significant portion of these costs." In this case, user fees act not just as means for cost recovery, but more importantly, as devices for ensuring a sustained delivery of primary health care. The second fact is that the cost of hospital care, particularly in Sub-Saharan Africa, cannot be afforded by the majority of the population. **Thus,** to avoid distributional problems, hospital services should be provided free of charge at the time of use.

17. The administrative feasibility of the financing option just described depends critically on sensitivity of patients to money and time costs of medical care. If patients are very sensitive to costs of medical care, implementation of user fees would cause a large reduction in utilization of health services. Statistical demand studies in COte d'lvoire (Dor, Gertler and van der Gaag (1987)) and in Kenya (Mwabu (1989)) indicate that user fees that are high enough to recover a substantial portion of costs of providing health services would strongly discourage low income patients from seeking treatment. The Cote d'lvoire study showed that a one percent increase in travel time reduced visits to clinics (primary health care facilities) by about 0.29 to 1.49 percent for low income groups. This sensitivity increased with travel time. That is, patients with longer travel time, reduced visits to clinics proportionately more than patients with shorter travel time following a uniform proportionate rise in travel time. It is highly likely that patients' sensitivity to money prices in Cote d'lvoire would be at least as large as that for time prices. The Kenyan study showed that both time and money prices are significant deterrents to utilization of primary health services, with money prices being more important than time prices.

18. The only major health care demand study so far (but outside the African region), that can be used to support the policy of charging user fees This approach to cost recovery, has recently been advocated by UNICEF, and is commonly referred to as the Bamako Initiative.

8 However, unit costs for outpatient treatments at primary health facilities are higher than unit costs for outpatient services in hospitals due to economies of scale and scope (see e.g. Heller (1975) and Anderson (1980)). Thus, ruling out transportation costs, user fees for outpatient services in government hospitals would be lower than user fees for the same services at government clinics. Economies of scale and scope provide a strong justification for charging uospital services. However, recent empirical evidence from Africa has generated controversy as to whether scope and scale economies exist in the hospital sector (see Bitran and Dunlop (1989) and Wouters (1988)).