Working Paper: NBER ID: w26460
Authors: Zachary Wagner; Somalee Banerjee; Manoj Mohanan; Neeraj Sood
Abstract: There are two salient facts about health care in low and middle-income countries; 1) the private sector plays an important role and 2) the care provided is often of poor quality. Despite these facts we know little about what drives quality of care in the private sector and why patients continue to seek care from poor quality providers. We use two field studies in India that provide unique insight into this issue. First, we use a discrete choice experiment to show that patients are willing to pay higher prices for better technical quality (defined by correct treatment and correct diagnosis). Second, we use standardized patients to show that private providers who provide better technical quality are not able to charge higher prices. Instead providers are able to charge higher prices for elements of quality that the patient can observe (good patient interactions and more effort), which are less important for health outcomes. Taken together, this research highlights a market inefficiency and suggests that engaging patients with accessible information on technical quality of the providers in their community could shift demand to providers that provide better care and thus improve health outcomes.
Keywords: health care quality; discrete choice experiment; standardized patients; India; market inefficiency
JEL Codes: D12; D22; D52; I1; I11; I12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher prices are charged not for technical quality but for observable quality attributes (L15) | Providers with better observable quality metrics were able to charge higher fees (I11) |
| Higher prices are charged not for technical quality but for observable quality attributes (L15) | Misalignment between patient preferences and market behavior (D16) |
| Lack of price premium for technical quality despite patient demand (L15) | Need for interventions to improve transparency of technical quality (L15) |
| Patients are willing to pay higher prices for better technical quality (I11) | Increased probability of choice (C25) |