Demand for healthcare in India

In a developing country like India, allocation of scarce fiscal resources has to be based on a clear understanding of how investments in the heath sector are going to affect demand. Three aspects like overall healthcare demand, consumer decisions to use public and/or private care and role of price/quality influencing poor/rich consumer’s decisions are critical to assessing the equity implications of alternative policies. Our paper addresses these aspects through examining the pattern of healthcare demand in India. Data from the National Family Health Survey are used to model the healthcare choices that individuals make. We consider what these behavioral characteristics imply for public policy. This analysis aims to study disparities between rural and urban areas from all throughout India to five Indian states representing three levels of per capita incomes (all-India average, rich and poor). Results evidence that healthcare demand both in rural and urban areas is a commodity emerging as an essential need. Choices between public or private provider are guided by income and quality variables mainly with regard to public healthcare denoting thus a situation of very limited alternatives in terms of availing private providers. These results emphasize that existing public healthcare facilities do not serve the objective of providing care to the poor in a satisfactory manner in rural areas. Thus, any financing strategy to improve health system and reduce disparities across rich-poor states and rural-urban areas should also take into account not only overcoming inadequacy but also inefficiency in allocation and utilization of healthcare inputs.