Stellenbosch Working Paper Series No. WP06/2002
Supply-side solutions to health-care provision dominate the South African debate about health care. These solutions are often premised on views that health resources are too concentrated in the private health sector – which supposedly serves only a small minority of the population – and thus public sector provision needs to be expanded. We argue that this rests on a lack of understanding of the nature of the demand for health services. This paper estimates the determinants of the demand for health care using a multinomial logit estimation. It is found that three categories of factors influence the demand for health care. Firstly, demographic and locational variables are significant (e.g. income group, race and where the respondent lives). Secondly, the characteristics of the care provided are important (e.g. cost and distance from the respondent). Finally, the characteristics of the illness (such as its severity) are important. Overall, private health care plays a surprisingly large role in the health care decisions of all South Africans – even poor respondents reveal a clear preference for private health care, despite constraints of money and access. This dominance of the demand for private health care is likely to increase with rising incomes, or if all health services were to receive a similar subsidy (e.g. from mooted medical insurance-type schemes). On a policy level, this would indicate that greater attention should perhaps be given to health demand in considering policy alternatives.
Keywords: health care, South Africa
JEL Classification: I11, D12