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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.

Suggested Citation

  • David Bishai & Jody Sindelar, 2006. "Willingness to Pay for Drug Rehabilitation: Implications for Cost Recovery," NBER Working Papers 12506, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12506
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    Cited by:

    1. NicolasR. Ziebarth, 2010. "Estimating Price Elasticities of Convalescent Care Programmes," Economic Journal, Royal Economic Society, vol. 120(545), pages 816-844, June.
    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 1213, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Ziebarth N, 2009. "“Do I really need to go to rehab? I’d say no, no, no.” Estimating Price Elasticities of Convalescent Care Programs," Health, Econometrics and Data Group (HEDG) Working Papers 09/27, HEDG, c/o Department of Economics, University of York.

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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • I10 - Health, Education, and Welfare - - Health - - - General

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