Does Free Public Health Care Increase Utilization and Reduce Spending? Heterogeneity and Long Term Effects.

Zambia removed user fees in publicly supported-government and faith based- health facilities in 54 out of 72 districts in 2006. This was extended to rural areas of previously unaffected districts in 2007. The natural experiment provided by the step-wise implementation of the removal policy and five waves of nationally representative household survey data enables us to study the impact of the removal policy on utilization and household health expenditure. We find that the policy increased overall use of health services in the short term and the effects were sustained in the long term. The increases were higher for individuals whose household heads were unemployed or had no or less education. The policy also led to a small shift in care seeking from private to publicly supported facilities, an effect driven primarily by individuals whose household heads were either formally employed or engaged in farming. The likelihood of incurring any spending reduced, although this weakened slightly in the long term. At the same time, there was an upward pressure on conditional health expenditure, i.e., expenditure was higher after removal of fees for those who incurred any spending. Hence, total (unconditional) household health expenditure was not significantly affected.