Why does a large proportion of India s urban poor choose to pay for private health services
when public services are essentially free of charge? Drawing from previous research this study
takes the underprovision of the medication component in public health packages as a starting
point. Field evidence shows that patients in public health facilities often have to get
external medication whereas private hospitals offer a menu of pre-specified care packages.
Thilo Klein contributes an answer as to why the poor choose to go private by investigating
their risk-aversion and demand for insurance in the choice of health facilities. In discrete
choice experiments on maternity care in the slums of Hyderabad the author finds that the
lowest income group attaches significantly higher importance to full medication maternity care
packages. In line with Expected Utility theory the study further finds empirical evidence that
this insurance demand of the poor is partially explained by their risk-aversion. The findings
suggest that an effective pro-poor policy should provide insurance cover for medication-related
expenses. They have significant implications for the provision of public health care to the
poor and are important for policy-makers and health management alike.
