THE TRADEOFF BETWEEN PRICE AND QUALITY OF SERVICES IN THE PHILIPPINES

This paper examines the tradeoff that consumers make between price and quality in the demand for health care. The analysis is based on data collected from both households and health care facilities in Cebu, Phi lippines. The availability of both types of data makes this one of onl y a handful of demand for health care studies that includes detailed i nformation on both individual characteristics and facility attributes of all relevant alternatives. The developing country setting provides substantial variation in the type of facility chosen, ranging from hom e delivery aided only by friends and relatives at one extreme to moder n private hospitals at the other end of the spectrum. The alternatives vary greatly in quality and price, making this an ideal context for e xamining the role of these variables in facility choice. The nested le git model specifications that are estimated contain price, travel time , and different combinations of quality measures, including the availa bility of medical supplies, practitioner training, service availabilit y, facility size and crowdedness, and their interaction with individua l characteristics. In addition, the sensitivity of the results to diff erent choice-set definitions is analyzed. In particular, models that u se conventional choice-set definitions that are based only on nominal status are compared with models that attempt to classify facilities in to relatively homogeneous groups based on price and quality. The estim ation 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 indicat e that individual characteristics such as education of the woman inter act in important ways with quality in influencing choice. For example, the availability of drugs is a significant determinant of facility ch oice for women with high levels of education, but not for others. In a ddition, the results support the hypothesis that price is a significan t determinant for poor households, but not for other households. The m odel 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 fa cilities simultaneously increase user fees and the aspects of quality over which policy makers can exercise control in the short-run, the me an probability of using public facilities increases for both poor and non-poor households. (C) 1998 Elsevier Science Ltd. All rights reserve d.