Demand for curative health care in rural India : choosing between private, public and no care

Abstract

Discussions around health sector reforms in developing countries have included the issue of user fees as a possible mechanism for cost recovery as well as a technique for improving allocative efficiency. The main argument against user fees is based on the possible regressive impact on utilisation of health services. This debate can be meaningfully analysed in terms of the welfare implications of user fees, using a framework of utility maximisation and estimating demand functions for health care. The study uses the 1994–95 NCAERHDI data on rural India to explore the possible effects of an increase in user fees on demand for health care. A system of equations using both nested and non-nested multinomial logit framework was estimated, and arc price elasticities were calculated. The estimates revealed very low values of these elasticities in the government sector as well as for private qualified providers. Also, the elasticities were income-sensitive, indicating that the poor are more price-sensitive; and that there may be some scope to levy user fees in the government as well as private sector facilities. However, since these results could be due to the limited choice available to consumers, the increase in user fees will have to be accompanied by a real improvement in quality of services provided or expansion of quality services.

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