Demand for private healthcare in a universal public healthcare system: Empirical evidence from Sri Lanka

This paper examines healthcare utilization behaviour in Sri Lanka with special emphasis on the choice between costly private and free public healthcare services. We use a data set that combines nationwide household survey data and district level healthcare supply data. Our findings suggest that even with universal public healthcare policy, richer people tend to use private sector healthcare services rather than public services. We also find significant regional and ethnic discrepancies in healthcare access bearing the risk of social tensions if these are further amplified. Latent class analysis shows in addition that the choice between private and public sector healthcare significantly differs between people with and without chronic diseases. We find in particular that chronically ill people rely for their day-To-day care on the public sector, but for their inpatient care they turn more often than non-chronically ill people to the private sector, implying an additional financial burden for the chronically ill. If the observed trend continues it may not only increase further the health-income gradient in Sri Lanka but also undermine the willingness of the middle class to pay taxes to finance public healthcare.

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