Effect of regulated user fee on quality of healthcare for the poor and the non-poor

User fee for healthcare continues to be used in many countries despite the extensive documentation on the impoverishing effect on households. The literature has also analyzed the effect of user fee on the quality of care for both rich and poor. The purpose of this study is to find the factors affecting the physician’s behavior, under a user fee payment mechanism with an exemption program for the poor, when choosing treatment for poor and non-poor patients. The factors examined were treatment effort input, the fine, cost of investigation, costliness of government, severity of illness for the non-poor and for the poor, and the proportion of non-poor patients. The results showed that regulated user fee cannot be effectively implemented without government investigation or monitoring of the health provider’s treatment choice. The possibility of investigation provides incentive for the provider to choose the proper treatment quality when the poor are likely to be high risk than the non-poor. An important result is that regulated user fee can deteriorate the quality of care received by the rich, through excessive treatment, especially in developing economies where there is a small proportion of the rich. Improvement in innovative technologies that reduce the cost of investigation, government revenue collection, and treatment effort input is likely to improve the quality of care provided to patients regardless of income status.