A Model of the Demand for Medical and Health Services in West Malaysia

Abstract

This paper provides an empirical analysis of the determinants of the demand for medical services in Peninsular Malaysia. After eleborating a theoretical model of household demand for medical care in Section II an econometric model is specified and estimated in Sections III, IV, and V. The results indicate that total medical demand, as measured by the absolute volume of outpatient and inpatient consumption, is highly inelastic to the cash price and to the cost in time of utilization. Total medical demand is also inelastic with respect to income. Yet consumers are clearly responsive to the relative prices of alternative sources of medical care. Consumers are also sensitive to the way in which the time of utilization is spent, with high travel and treatment time causing reduced demand for services.