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Willingness to Pay for Drug Rehabilitation: Implications for Cost Recovery

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  • David Bishai
  • Jody Sindelar

Abstract

Objectives: This study estimates the value that clients place on drug rehabilitation services at the time of intake and how this value varies with the probability of success and availability of social services. Methods: We interviewed 241 heroin users who had been referred to, but had not yet entered, methadone maintenance treatment in Baltimore, Maryland. We asked each subject to state a preference among three hypothetical treatment programs that varied across 3 domains: weekly fee paid by the client out of pocket ($5 to $100), presence/absence of case management, and time spent heroin-free (3 to 24 months). Each subject was asked to complete 18 orthogonal comparisons. Subsequently each subject was asked if they likely would enroll in their preferred choice among the set of three. We computed the expected willingness to pay (WTP) as the probability of enrollment times the fee considered in each choice considered from a multivariate logistic model that controlled for product attributes. We also estimated the price elasticity of demand. Results: We found that 21% of clients preferred programs that were logically dominated by other options. The median expected fee subjects were willing to pay for a program that offered 3 months of heroin-free time was $7.30 per week, rising to $17.11 per week for programs that offered 24 months of heroin-free time. The availability of case management increased median WTP by $5.64 per week. The fee was the most important predictor of the self-reported probability of enrollment with a price elasticity of -0.39 (SE 0.042). Conclusions: Clients' median willingness to pay for drug rehabilitation fell short of the average program costs of $82 per week, which reinforces the need for continued subsidization as drug treatment has high positive externalities. Clients will pay more for higher rates of treatment success and for the presence of case management.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12506.

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Date of creation: Sep 2006
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Publication status: published as Bishai, D. & Sindelar, J. & Ricketts, E.P. & Huettner, S. & Cornelius, L. & Lloyd, J.J. & Havens, J.R. & Latkin, C.A. & Strathdee, S.A., 2008. "Willingness to pay for drug rehabilitation: Implications for cost recovery," Journal of Health Economics, Elsevier, vol. 27(4), pages 959-972, July.
Handle: RePEc:nbr:nberwo:12506

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  1. Cartwright, William S. & Solano, Paul L., 2003. "The economics of public health: financing drug abuse treatment services," Health Policy, Elsevier, vol. 66(3), pages 247-260, December.
  2. Richard J. Zeckhauser & Donald S. Shepard, 1980. "The Choice of Health Policies with Heterogeneous Populations," NBER Working Papers 0612, National Bureau of Economic Research, Inc.
  3. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2002. "Reliable estimation of generalized linear mixed models using adaptive quadrature," Stata Journal, StataCorp LP, StataCorp LP, vol. 2(1), pages 1-21, February.
  4. Haas-Wilson, Deborah & Scheffler, Richard & Cheadle, A, 1989. "Demand for Mental Health Services: An Episode of Treatment Approach," MPRA Paper 19862, University Library of Munich, Germany.
  5. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-83, June.
  6. Dockner, Engelbert J & Feichtinger, Gustav, 1993. "Cyclical Consumption Patterns and Rational Addiction," American Economic Review, American Economic Association, vol. 83(1), pages 256-63, March.
  7. Keeler, Emmett B. & Manning, Willard G. & Wells, Kenneth B., 1988. "The demand for episodes of mental health services," Journal of Health Economics, Elsevier, vol. 7(4), pages 369-392, December.
  8. Manning, Willard G, et al, 1987. "Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment," American Economic Review, American Economic Association, vol. 77(3), pages 251-77, June.
  9. Natalia N. Borisova & Allen C. Goodman, 2003. "Measuring the value of time for methadone maintenance clients: willingness to pay, willingness to accept, and the wage rate," Health Economics, John Wiley & Sons, Ltd., vol. 12(4), pages 323-334.
  10. Cass R. Sunstein & Richard H. Thaler, 2003. "Libertarian paternalism is not an oxymoron," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 48(Jun).
  11. Mireia Jofre-Bonet & Jody L. Sindelar, 2002. "Drug Treatment as a Crime Fighting Tool," NBER Working Papers 9038, National Bureau of Economic Research, Inc.
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  13. Richard H. Thaler & Cass R. Sunstein, 2003. "Libertarian Paternalism," American Economic Review, American Economic Association, vol. 93(2), pages 175-179, May.
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Cited by:
  1. Nicolas R. Ziebarth, 2009. ""Do I Really Need to Go to Rehab? I'd say No, No, No.": Estimating Price Elasticities of Convalescent Care Programs," SOEPpapers on Multidisciplinary Panel Data Research 212, DIW Berlin, The German Socio-Economic Panel (SOEP).
  2. Nathalie Havet & Magali Morelle & Alexis Penot & Raphaël Remonnay, 2012. "The information content of the WTP-WTA gap: An empirical analysis among severely ill patients," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 1213, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  3. NicolasR. Ziebarth, 2010. "Estimating Price Elasticities of Convalescent Care Programmes," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 120(545), pages 816-844, 06.

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