The role of quality in the demand for health care in Cebu, Philippines

Economic analysis of the demand for medical care has largely been concerned with the impact of price or cost-sharing on utilization. The role of qualitative differences in health care environments has long been recognized as important in policy discussions, but has only recently been a subject of investigation by economists. This paper estimates a mixed multinomial logit model to investigate the effects of quality, price, distance, and individual characteristics on the choice of obstetric care provider in a developing country. The analysis uses data collected from both households and health care facilities in Cebu, Philippines. The developing country setting provides substantial variation in the type of facility chosen, ranging from home delivery aided only by friends and relatives at one extreme, to modern private hospitals at the other end of the spectrum. The reduced-form model specifications that are estimated contain price, travel time, and different combinations of quality measures, including the availability of medical supplies, practitioner training, service availability, facility size, and crowdedness, and their interaction with individual characteristics. In addition, the sensitivity of the results to different choice-set definitions is analyzed.;The estimation results, which correct for the two-stage design of the household survey, indicate that facility crowding and practitioner training are significant determinants of consumer choice. The results also indicate that individual characteristics such as education of the woman interact in important ways with quality in influencing choice. For example, the availability of drugs is a significant determinant of facility choice for well-educated women, but not for others. In addition, the results support the hypothesis that price is a significant determinant for poor households, but not for other households. The model is used to conduct policy simulations designed to be informative to public officials interested in the effect of cost recovery schemes on utilization patterns. The simulations indicate that when public facilities simultaneously increase user fees and the aspects of quality over which policy makers can exercise control in the short-run, the mean probability of using public facilities increases for both poor and non-poor households.