1 OJHAS 2019;18(4):9 Purohit BC. Changing Demand for Healthcare in India. -- Original Article: Changing Demand for Healthcare in India Author: Brijesh C Purohit, Madras School of Economics, Kottur, Chennai 600025, INDIA. Address for Correspondence Brijesh C Purohit, Madras School of Economics, Kottur, Chennai 600025, INDIA. E-mail: brijeshpurohit@gmail.com. Citation Purohit BC. Changing Demand for Healthcare in India. Online J Health Allied Scs. 2019;18(4):9. Available at URL: https://www.ojhas.org/issue72/2019-4-9.html Submitted: Dec 19, 2019; Accepted: Jan 21, 2020; Published: Feb 28, 2020 Abstract: Healthcare consumers may be behaving to some extent based on the nature of healthcare being a necessity or otherwise. The choice of either of public and private providers may depend upon factors like availability, accessibility, cost and quality. To some extent, this is revealed through their elasticities based on income, cost, quality and socio-economic factors. Objective of this paper is to explore the demand for healthcare services in India and estimate consumers’ elasticities to these factors. Using logit results we find that an individual may choose his preference for private or public based on distance of facility from residence. It may also depend whether it is rural or urban area and whether the income levels of state are below or above all India average. Comparing our results for two all India surveys, it is observed that people’s perception and thus preferences are mostly based on choices of nearby location, suitable timings, presence of medical personnel and less waiting time. The presence of insurance either by a national or state sponsored scheme seems to have changed the nature of healthcare demand in India from a stark necessity to a matter of better choice. Key Words: Healthcare, availability, accessibility, quality, socio-economic factors. Introduction: In the healthcare sector in India, allocation of scarce fiscal resources has to be based on a criterion which meets the demand for healthcare services either from public or private providers.(1) The choice may depend upon factors like availability, accessibility, cost and quality. It is further presumed that some basic healthcare services may be among necessities. Healthcare consumers may be behaving to some extent based on the nature of healthcare being a necessity or otherwise. In this regard, their responsiveness based on income, cost, quality and socio-economic factors could be revealing. Objective of this paper is to study the demand for healthcare services in India and estimate responsiveness of healthcare consumers to these factors. Beginning with Grossman human capital model (2,3) and its modifications, in the relevant literature, the household production function model of consumer behavior is considered. It distinguishes health as an output and medical care as one of many inputs into its production. Later elaboration of the basic Grossman approach draws a sharp distinction between fundamental objects of choice or commodities that enter the utility function and market goods and services. For example, individuals use sporting equipment and their own time to produce recreation, likewise they use medical care, nutrition, etc. to produce health. Like a firm production function, the concept of a household production function also relates specific outputs to a set of inputs. Since goods and services are inputs into the production of commodities, the demand for medical care and other health inputs is derived from the basic demand for health. Thus consumers both demand and produce health. Health is a choice variable because it is a source of utility (satisfaction) and determines income or wealth levels. Health is demanded by consumers for two reasons: i) as a consumption commodity, it directly enters their preference functions; ii) as an investment commodity, it determines the total amount of time available for market and non-market activities. An increase in the stock of health reduces the amount of time lost from these activities, and the monetary value of this reduction is an index of the return to an investment in health. Since health capital is a component of human capital, a person inherits an initial stock of health that depreciates with age, can be increased by investment, and falls below a certain level with death. The shadow price of health is said to depend on many variables other than medical care price. Shifts in these variables alter the optimal amount of health and the derived demand for gross investment and health inputs. This price of health rises with age if the rate of depreciation on the stock of health rises over the life cycle and falls with education if more educated people are more efficient producers of health. The model stresses that, under certain conditions, an increase in the shadow price may simultaneously reduce the quantity of health demanded and increase the quantities of health inputs demanded. To develop empirically testable hypotheses, a model of the demand for health defined in terms of different indicators of mortality and diseases is specified. The model concentrates on the role of money and time prices, earned and non-earned income and health insurance. A number of socio-economic variables including religion, caste, education, assets are also used in empirical estimation. [See Annexure 1 of this paper.] To simplify, the formal model is developed in terms of one provider of health only, but the implications for several providers can easily be drawn. This work is licensed under a Creative Commons Attribution- No Derivative Works 2.5 India License Online Journal of Health and Allied Sciences Peer Reviewed, Open Access, Free Online Journal Published Quarterly : Mangalore, South India : ISSN 0972-5997 Volume 18, Issue 4; Oct-Dec 2019