Academic journal article Applied Health Economics and Health Policy

Demand for Outpatient Healthcare: Empirical Findings from Rural India

Academic journal article Applied Health Economics and Health Policy

Demand for Outpatient Healthcare: Empirical Findings from Rural India

Article excerpt


Understanding the underlying process of the demand for healthcare is quintessential for a better assessment of the role of public intervention in the health sector. This issue has gained momentum recently, especially in developing countries. From a development perspective, the design of an efficient and effective healthcare system is of utmost importance because the health status of the population in developing countries is generally far below that of developed countries. In fact, the Commission on Macroeconomics and Health of the WHO[1] argues that the provision of better healthcare is the key to improving health and economic growth in developing countries. Any barriers to accessing and utilizing medically necessary services are therefore a cause for concern. Thus, a thorough understanding of the healthcare decision-making processes of individuals would assist in designing national health policy in developing countries that is responsive to need while respecting budgetary constraints.

In many developing countries there is extensive public support for hospitals, medical education, physician services and prescription drugs. In the public sector, most of the health services are typically provided at below cost or no monetary price at the point of access. But substantial non-monetary barriers, such as distance, transportation and long waiting times, may exist in rural and remote areas. Thus, while in recent years the private sector has grown substantially to respond to the healthcare needs of people in many developing countries, the extent to which this has assisted the poor who face these non-monetary obstacles is not clear.

The notion of demand for healthcare is closely related to the health-seeking behaviour of individuals in any society. Before a person consumes any medical care, either from private or public sources or self-care, she/he must perceive the need for it and then demand it. When the need arises, individuals must decide whether or not to visit a medical practitioner and where to visit subject to availability and affordability. The process of making such decisions may be complicated because of limited information about the potential costs, risks and benefits, and the opportunity cost of foregoing the consumption of non-medical goods and services. Although price, income and health status are likely to affect the demand for healthcare, by how much is not clear a priori. The main objective of this article was thus to examine the role of monetary and non-monetary price, income and individual- and household-specific characteristics on the demand for healthcare in rural India.

The empirical literature on healthcare demand in developing countries provides conflicting evidence. Some studies report that prices are not important determinants of demand for medical care,[2-6] in contrast to the theoretical prediction that the price effect may be higher in developing countries than developed countries because of low income and a large uninsured population.[7] Interestingly, a number of studies find that prices are important determinants of the demand for healthcare, although the magnitudes are very small.[7-18] Most of these empirical studies employ discrete-choice models to analyse the choice of healthcare provider. However, it is difficult to compare price and income effects when the settings are different across studies, hampering the ability to make general policy conclusions.[7,19,20]

The apparent conflicting findings in the empirical literature on the demand for healthcare may be attributed to three major elements. First, the treatment of the price of medical care may not be adequate in the context of developing countries. Some studies use standard fee schedules (e.g. Akin et al.,[3] Gertler et al.[13]), while others use either medical expenditures per visit as the relevant price or the results from a hedonic price equation (e.g. Gertler and Van der Gaag,[7] Gertler et al. …

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