Background
Price, income and health status are likely to affect the demand for healthcare in developing countries, and their quantitative effects are unclear in the literature. Some studies report that prices are not important determinants, while others conclude that prices are important determinants of the demand for healthcare. Knowledge of the extent to which price, income and health status affect the demand for healthcare is crucial for the design of effective health policy in developing countries.
Objective
To examine the role of monetary and non-monetary price, income, and a variety of individual- and household-specific characteristics on the demand for healthcare in rural India.
Methods
Utilizing micro data from the 52nd round of India’s National Sample Survey, a variable choice set based on geographical location, price, income and the severity of illness was constructed to reflect the underlying true choice-generating process in rural India. Nested multinomial logit models were estimated and simulations with respect to prices and income were conducted to estimate price and income elasticities.
Results
Contrary to many earlier studies on the demand for healthcare in developing countries, it was found that prices and income were statistically significant determinants of the choice of healthcare provider by individuals in rural India. Demand for healthcare was found to be price and income inelastic, corroborating the findings from other developing countries. Distance to formal healthcare facilities negatively affected the demand for outpatient healthcare, an effect that was mitigated as access to transportation improved. Age, sex, healthy days, educational status of the household members and the number of children and adults living in the household also affected the choice of healthcare provider in rural India.
Conclusions
After controlling for a number of sociodemographic factors, it was found that prices, income and distance are statistically significant determinants of the provider chosen by individuals; nevertheless, the demand for healthcare is price and income inelastic in rural India.