Conditional Cash Incentive and Use of Health Care Services: New Evidence from a Household Experiment

Studies have recently provided insights into the effects of incentive modalities in the health care sector. However, there is insufficient evidence on the underlying causes of the partial effectiveness of these strategies in the health systems of developing countries. This study presents results from a large-scale randomized experiment across 6,848 households in Afghanistan that evaluates the impact of a conditional incentive pay scheme on health facilities. Supported by the target-income hypothesis framework and relaxing the compliance assumption in the empirical modeling, the estimated coefficients yield causal effects of the supply-side conditional incentive on the utilization for health care services. After two years, the conditional incentive increased the use of pre-targeted maternal and children health care services among the households at lower levels and at contracted-out health facilities. Additionally, the incentive scheme is associated with sizable efficiency gains at the facility level. These gains are realized at the expense of deterring service users’ satisfaction with physicians’ communication qualities. This study establishes that margins of improvement do exist in the supply-side performance conditioning on an organizational structure and the service contractual arrangements of health facilities. This work provides a framework for the plausible implementation of incentive policies in the health care sector.