MODELING OF DEMAND FOR HEALTH CARE
Continuous Choice Model
Continuous choice model can analyze the intensity of consumption and can predict
the quantities of health care services consumed. Health care expenditure is a measure
of intensity of consumption of the services. The analysis of determinants of health
expenditure can be used to derive the optimal amount of health expenditure for a
society (Matteo, 2003) and can identify the factors affecting the health care expenditure.
The health care expenditure model can be applied to both micro and macro-level data;
however, this review focuses on the studies based on micro-level data. The studies on
determinants of health expenditure are limited in developing countries due to the fact
that required data are not available and modeling of the health care demand is not
straight forward (Rous and Hotchkiss, 2003). Two major problems arise when attempts
to analyze demand by using health care expenditure data: health expenditure data
are highly skewed violating the assumption of normal distribution of the dependent
variable and have presence of a large number of zero expenditures making it impossible
to apply the ordinary least squared (OLS) methods (Chaze, 2005).