Targeting health subsidies through a nonprice mechanism: A randomized controlled trial in Kenya

Abstract

Free provision of preventive health products can dramatically increase access in low income countries. A cost concern about free provision is that some recipients may not use the product, wasting resources (over-inclusion). Yet charging a price to screen out non-users may screen out poor people who need and would use the product (over-exclusion). We report on a randomized controlled trial of a screening mechanism that combines the free provision of chlorine solution for water treatment with a small non-monetary cost (household vouchers that need to be redeemed monthly in order). Relative to a non-voucher free distribution program, this mechanism reduces the quantity of chlorine procured by 60 percentage points, but reduces the share of households whose stored water tests positive for chlorine residual by only one percentage point, dramatically improving the tradeoff between over-inclusion and over-exclusion.

The impact of price on take-up and use of preventive health products

“…In Kenya, requiring households to redeem vouchers for free chlorine screened out 88 percent of households who would have accepted the product under free provision, but would not have used the chlorine to treat their water. Importantly, this voucher system did not decrease the number of households that actually used the chlorine [15].…”

Can Rationing through Inconvenience Be Ethical?

“…However, inconvenience of service use is also a commonplace rationing mechanism for encouraging socially preferred choices. Consider the following examples: • Pascaline Dupas and colleagues found that, in western Kenya, combining free provision of a chlorine water treatment (a diarrhea prophylactic) with a voucher system that imposes the inconvenience of having to redeem a coupon at a local store screened out 88 percent of those who would otherwise accept the product without using it . Similarly, Xiaochen Ma and coauthors found that giving Chinese children a voucher redeemable for eyeglasses in a store “modestly improved targeting efficiency” compared to handing out eyeglasses …”

“…In contrast, without choice, health policy must proceed on “general presumptions,” which, as John Stuart Mill wrote, “may be altogether wrong, and even if right, are as likely as not to be misapplied to individual cases.” Society lacks pertinent information about individual variability in many areas where the “ordinary man or woman has means of knowledge immeasurably surpassing those that can be possessed by anyone else.” By separating individuals who are willing to accept inconvenience to procure a good or service from ones who are not, rationing through inconvenience gathers that information and applies it to personalize rationing policy. For example, in Dupas and colleagues’ experiment, families who know that they are unlikely to use the chlorine tablets are less likely to submit to the inconvenience of procuring them . In this way an inconvenience—an “ordeal”—may lead to more efficient allocation.…”

“…Indeed, the deadweight cost may be trivial when a “micro‐ordeal” or a very small “effort tax” can dramatically change behavior. For instance, a reimbursable coupon rather than the product itself can target those likeliest to use the product . Similarly, making a generic drug the easy default often suffices to prompt patients to use it, saving large amounts over the branded product.…”

“…• Pascaline Dupas and colleagues found that, in western Kenya, combining free provision of a chlorine water treatment (a diarrhea prophylactic) with a voucher system that imposes the inconvenience of having to redeem a coupon at a local store screened out 88 percent of those who would otherwise accept the product without using it. 5 Similarly, Xiaochen Ma and coauthors found that giving Chinese children a voucher redeemable for eyeglasses in a store "modestly improved targeting efficiency" compared to handing out eyeglasses. 6 Using burdensome arrangements-application processes, forms, waiting periods, and the like-as a strategy for limiting the use of health care resources has been roundly but uncritically condemned.…”