This study examines the determinants of health care provider choice of urban householdsrnof Ethiopia. Particularly, it investigates the effects of user fees on the demand for healthrncare by different segments of socio-economic group using multinomial logit model. Therndata source of the study is the Ethiopian Urban Socio-economic Survey conducted in 2004rnby the Department of Economics of Addis Ababa University in collaboration with thernDepartment of Economics, University of Goteborg in Sweden Cost recovery mechanismsrnwere introduced based on the principle that health care demand in developing countries isrnprice inelastic; so that more resources can be generated for the health sector withoutrnreducing the demand by the poor. But the results of this study reveal that for a given rise inrnhealth care cost, the poor will reduce the demand for health care significantly in greaterrnproportion relative to the better off. In other words an increase in user fee is likely to drivernout the largest portion of the poorest households from receiving medical care. The studyrnalso shows the poor are required to pay significantly greater proportion of their income tornhealth care than the better off in order to get treatment. This will aggravate the existingrninequality in access to basic health care services. Hence, even though the principle of costrnrecovery had been advocated as alternative means of health care financing in mostrndeveloping countries, increasing user fee may drive the poorest population out of healthrncare market or deepen their economic situation unless some reliable protective measures are taken