Demand assessment and price-elasticity estimation of quality-improved primary health care in Palestine: some responses from the contingent valuation method

Abstract

The paper proposes a new methodology to assess demand and estimate price-elasticity for health care, based on patients’ stated willingness to pay (WTP) values for certain aspects of quality improvements. A conceptual analysis of how respondents consider contingent valuation (CV) questions permits us to specify a probability density function for sated WTP values; and consequently, to model a demand function for quality-improved health care. The model was empirically estimated using a CV study intended to assess patients’ values for improving the quality of primary health care in Palestine. Quality was apprehended using a multi-attribute approach; and respondents valued specified quality improvements using a decomposed valuation scenario and a payment card elicitation technique. A Random sample of 499 individuals were interviewed; most (91.8%) declared willing to pay extra user fees to benefit from better quality. Demand analysis suggests an inelastic demand at low user fees; and when price-increase is accompanied by important quality-improvements. Nevertheless, demand becomes more and more elastic if user fees continue to rise. On the other hand, patients’ reaction to price-increase turns out to be dependent on one’s income. Our results can be used to elaborate successful health care financial strategies while respecting individuals’ own preferences and financial capacities.