Valuation and Cost Effectiveness of Rural Incentive Packages for New Physicians in Lao PDR

Introduction: Policy-makers, ministries of health (MOHs), donors, multilateral institutions and healthcare non-governmental organizations (NGOs) have increasingly recognized the importance of health workers as a critical input for improvement of population health outcomes over the last decade.  One particular issue, as in the developed world, is the predilection of health workers to locate and work in urban settings - resulting in even more severe shortages in rural areas.  We analyze a discrete choice experiment (DCE) from Lao PDR conducted in May 2011 among medical students to determine which components and incentive packages most efficiently would increase voluntary rural entry among new physicians.

Methods: First we use the mixed logit estimates from the DCE (n=329) to determine the implied value (or willingness to pay) for each component of rural incentive packages intended to increase the attractiveness of practicing in rural locations.  Second, we compare the implied valuations from the DCE with the actual expected cost to the payer (in this case the Lao PDR Government) for each of the components as reported in a separate costing survey.  Lastly, we use the relative risk measures derived from the DCE to project the degree to which various proposed incentive packages would likely motivate additional rural entry by recent medical school graduates over a 5 (and 30) year period and combine these estimates with emerging literature which calculates the effects of health worker density on health outcomes to generate both average and incremental cost effectiveness ratios of 15 different voluntary rural incentive packages proposed for Lao PDR

Results:  In the valuation (WTP) analysis, we find that implicit individual valuation of incentive components is frequently less than the cost to the payer.  Nevertheless, many of the 15 rural incentive packages examined were cost effective (relative to the WHO standard of 3x income per capita) when we account for the expected indirect health benefits generated by improving the distribution of new physicians.  Lastly, rural incentive packages with components with low (or no) up-front capital or fixed costs are likely to be both more cost effective and less risky policy options to pursue in order to address the skewed rural distribution of health workers.  

Discussion: In this analysis we conduct a DCE analysis to estimate WTP for components of incentive programs designed to encourage new physicians to practice in rural locations in Laos PDR.  We augment the analysis with a costing assessment to more carefully assess how individual valuation compares to direct program costs, but recognize that spillover benefits and indirect health benefits are potentially important.  Other developing countries can combine DCEs and costing surveys to generate WTP and cost effectiveness ratios for rural health worker incentive packages.  Components with variable cost structures and low fixed costs are generally more cost effective than capital-intensive components with respect to motivating rural entry.