IMPROVING EQUITABLE ACCESS TO CATARACT SURGERY IN RURAL SOUTHERN CHINA USING WILLINGNESS TO PAY

IMPROVING EQUITABLE ACCESS TO CATARACT SURGERY IN RURAL
SOUTHERN CHINA: USING WILLINGNESS TO PAY DATA TO ASSESS THE
FEASIBILITY OF A TIERED PRICING MODEL TO SUBSIDIZE SURGERIES TO
THE POOREST

by
Elaine M Baruwa

A dissertation submitted to Johns Hopkins University in conformity with the
requirements for the degree of Doctor of Philosophy
Baltimore, Maryland
June 2007

© Elaine M Baruwa 2007
All Rights Reserved


UMI Number: 3288601
Copyright 2007 by
Baruwa, Elaine M.

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Abstract
Title: Improving Equitable Access to Cataract Surgery in Rural Southern China: Using
Willingness to Pay Data to Assess the Feasibility of a Tiered Pricing Model to Subsidize
Surgeries to the Poorest.
Aim: To assess the equity of financial access to cataract surgery given willingness to pay
(WTP) for cataract surgery at the current price of surgery and for added amenities such as
surgery by a senior surgeon, an improved intraocular lens, transport and food. To determine
the feasibility of a tiered pricing and cross-subsidization model using these estimates.

Methods: A WTP survey was administered at community screenings and hopsital cataract
surgery clinics in rural Guangzhou. WTP was estimated using interval regression and then
compared to the price of surgery to determine access. A further equity analysis was
conducted using concentration indices and curves. The WTP for amenities was similarly
analyzed to determine potential demand.

Results: WTP surveys were conducted with 656 patients and 342 of their caregivers. The
mean WTP for the community screening patients was 371RMB (S.D. 114RMB) and
570RMB (S.D. 69RMB) for the hospital patients (8RMB =US$1). For caregivers the mean
was 619 RMB (S.D. 77 RMB). At the two prices charged by HKI, 500RMB and 630RMB,
the estimated concentration indices were 0.18 and 0.36 for patients, which implies that
financial access is inequitably concentrated amongst the wealthier patients. However, the
respective index measures were 0.01 and 0.10, for caregivers indicating lower inequity at
630RMB and no inequity at 500RMB. The WTP for amenities was low, only 78RMB for a

n


senior surgeon and 42RMB for an improved IOL.
Conclusion: Access to cataract surgery is inequitably distributed between the poor and
the poorest in this population even at cost, 500RMB. We determined that not enough
patients would be able to purchase surgery at higher, tiered prices for additional amenities in
order to subsidize any significant number of surgeries at a lower price. While WTP for
cataract surgery was significantly higher when assessed by patient's caregivers, adjusting for
this did not change the finding that access is inequitable for this population and creative
ways must be found to lower prices.

Thesis Committee:

Kevin Frick, PhD, Department of Health Policy and Management, JHSPH
David Bishai, MD PhD, Department of Population and Family Health, JHSPH

Emily West Gower, PhD, Department of Ophthalmology, JHMI

Damian Walker, PhD, Department of International Health, JHSPH
Laura Morlock, PhD, Department of Health Policy and Management, JHSPH

in


ACKNOWLEDGEMENTS
I would like to thank:

The Department of International Health, JHSPH for the excellent teaching and support
that they gave me during my doctoral studies. In particular, Carol Buckley for her all her
help, making sure that I never got lost administratively.
My colleagues at the PneumoADIP for their encouragement and my director Angeline
Nanni, for understanding my priorities and accomodating them with such empathy.

My fellow doctoral students were an invaluable source of encouragement and friendship,
particularly during both of my pregnancies. Arantxa Colchera, Nhan Tran, Marjorie Opuni,
Rebekah Heinzen and Tram Lam studied with me, baby-sat for me, pondered the pros/cons
of doctoral studies (mostly the cons), and attended my defense.

My family: Chiadi, Ketandu and Omenka for being so patient with a wife and mother
who seemed to always have too much to do at the same time. I love them so much. Their
smiles and laughter kept me going on the rare occasions when I did feel as though 24 hours
in a day and a single brain were not quite enough to get throught this journey.
Finally my advisor, Kevin Frick, who is extremely bright, seems to have 36 hours in
work day and possesses a bizarre affection for econometrics but his patience, his work ethic
and his generosity have been inspirational to me. I aspire to be the type of mentor, teacher
and friend that he has been to me and consider myself truly blessed to shared this experience

with him.

TABLE OF CONTENTS
1

2

3

4

5

STUDY AIM AND OBJECTIVES

1

1.1

OBJECTIVE 1

3

1.2

OBJECTIVE 2

3

1.3

OBJECTIVE 3

4

BACKGROUND

5

2.1

EPIDEMIOLOGY OF CATARACT AND CATARACT SURGERY

5

2.2

RURAL HEALTH CARE IN CHINA

6

2.3

HKI, CHINA AND TIERED PRICING

10

2.4

THE ARAVIND EYE HOSPITAL, INDIA

11

2.5

HKI, CHINA AND CATARACT SURGERY

13

CONCEPTUAL FRAMEWORK

14

3.1

DEFINING EQUITY IN TERMS OF WILLINGNESS TO PAY

14

3.2

SOCIAL WELFARE AND THE EQUITY-EFFICIENCY TRADE-OFF

16

3.3

THE ECONOMICS OF TIERED PRICING

18

CONTINGENT VALUATION AND WILLINGNESS TO PAY 20

4.1

CONTINGENT VALUATION

20

4.2

WTP AND 'DEMAND'

23

4.3

WTP AND SOCIAL WELFARE

25

4.4

WTP AND EXTERNALITIES

27

4.5

WTP AND ALTRUISM

29

THE USE OF WTP IN DEVELOPING COUNTRY RESEARCH

31

5.1

WTP FOR INSECTICIDE TREATED BEDNETS IN EASTERN NIGERIA

31

5.2

WTP FOR COMMUNITY-BASED INSURANCE IN BURKINA FASO

32

v


6

7

8

9

5.3

WTP FOR CATARACT SURGERY IN NEPAL

33

5.4

WTP FOR CATARACT SURGERY IN TANZANIA

33

5.5

FINDINGS AND IMPLICATIONS

34

5.6

BEST PRACTICE FOR WTP SURVEY ADMINISTRATION

37

DATA COLLECTION

42

6.1

SAMPLING FRAMEWORK

42

6.2

SAMPLE SIZE

43

6.3

SURVEY DESIGN

44

6.4

SURVEY ADMINISTRATION

50

STATISTICAL METHODS 53
7.1

CATEGORICAL OUTCOMES - INTERVAL REGRESSION

53

7.2

CONCENTRATION CURVE AND INDEX ESTIMATION

58

RESULTS

63

8.1

SAMPLE SIZE AND RESPONSE RATE

63

8.2

SAMPLE CHARACTERISTICS

65

8.3

BIVARIATE ASSOCIATIONS WITH WTP ANYTHING FOR CATARACT SURGERY

75

8.4

MAXIMUM WILLINGNESS TO PAY FOR CATARACT SURGERY

79

8.5

OBJECTIVE 1 PATIENTS WILLINGNESS TO PAY

86

8.6

OBJECTIVE 2 CAREGIVERS WILLINGNESS TO PAY

99

8.7

EQUITY OF ACCESS USING CAREGIVER'S WTP

104

8.8

OBJECTIVE 3 WILLINGNESS TO PAY FOR AMENITIES

105

DISCUSSION

109

9.1

FACTORS AFFECTING PATIENT'S WTP

109

9.2

PATIENT'S WILLINGNESS TO PAY

113

9.3

FACTORS AFFECTING CAREGIVER'S WTP

115

vi


9.4

HOUSEHOLD CHARACTERISTICS' IMPACT ON WTP ON PAIRED RESPONDENTS

116

9.5

CAREGIVERS' PREDICTED WILLINGNESS TO PAY

118

9.6

EQUITY OF ACCESS

122

9.7

POLICY IMPLICATIONS FOR HKI

124

9.8

POLICY IMPLICATIONS FOR CHINA'S

9.9

WAS THE METHODOLOGY APPROPRIATE FOR OUR OBJECTIVES?

128

9.10

WAS THE METHODOLOGY APPROPRIATE FOR THIS POPULATION?

128

9.11

BEST PRACTICE FN PRACTICE

133

9.12

STUDY LIMITATIONS

137

9.13

CONCLUSION

140

10 APPENDICES

RCMS

127

151

10.1

WTP SURVEY FOR PATIENTS

151

10.2

WTP SURVEY FOR CAREGIVERS

171

11 CURRICULUM VITAE- ELAINE MONISOLA BARUWA

190

VII


TABLE OF TABLES
TABLE 1 NEW COMMUNITY MEDICAL SCHEME - PREMIUMS, CO-PAYMENTS AND DEDUCTIBLES

9

TABLE 2 SURVEY STRUCTURE

45

TABLE 3 SAMPLE SIZE BY SITE AND TYPE

63

TABLE 4 SAMPLE SOCIODEMOGRAPHICS

66

TABLE 5 WORK STATUS AND CARE REQUIREMENTS

67

TABLE 6 VISUAL ACUITY CLASSIFICATION

69

TABLE 7 SAMPLE VISUAL ACUITY

69

TABLE 8 SAMPLE HOUSEHOLD INCOME

71

TABLE 9 REASONS FOR NOT WANTING TO PAY FOR SURGERY

72

TABLE 10 FIRST PAYMENT CARD AS A DETERMINANT OF MAXIMUM WTP

74

TABLE 11 BIVARIATE ASSOCIATIONS WITH WILLINGNESS TO PAY ANYTHING FOR CATARACT
SURGERY (PATIENTS ONLY,
TABLE

12

MAXIMUM

N=656)

WTP ANYTHING

FOR CATARACT SURGERY,

76
(N=656)

79

TABLE 13 NUMBER OF RESPONDENTS AND THEIR MAXIMUM EXPRESSED WTP BY PAYMENT CARD
AND BY SITE

84

TABLE 14 CHECKING THE CONSISTENCY OF IMPUTED INCOME VARIABLES

86

TABLE 15 MAXIMUM WTP - FINAL PATIENT MULTIVARIATE MODEL (N=656)

89

TABLE 16 PREDICTED WTP AND ACCESS FOR PATIENTS

92

TABLE 17 CONCENTRATION INDICES FOR PATIENTS

96

TABLE 18 CAREGIVER MAXIMUM WTP MODEL

101

TABLE 19 PREDICTED MAXIMUM WTP FOR PAIRS

103

TABLE 20 CONCENTRATION INDEX FOR CAREGIVERS

105

TABLE 21 WILLINGNESS TO PAY FOR AMENITIES

106

TABLE 22 MAXIMUM WTP FOR A SENIOR SURGEON FROM PATIENTS

107

TABLE 23 PREDICTED WILLINGNESS TO PAY FOR AMENITIES

107

viii

TABLE 24 HOUSEHOLD SIZE AND NUMBER OF CHILDREN
TABLE

27

CONCENTRATION CURVE FOR 250RMB SURGERY FOR COM. SCREENING PATIENTS

117

125

IX


TABLE OF FIGURES
FIGURE 1 CONCENTRATION CURVE - EQUITABLE ACCESS

59

FIGURE 2 FIRST PAYMENT CARD ASKED BY INTERVIEWER

74

FIGURE 3 UNADJUSTED MAXIMUM WTP BY SITE

85

FIGURE 4 PREDICTED WTP BY SITE

94

FIGURE

5 ACCESS TO CATARACT SURGERY

AT

500RMB SHOWING THE % IN NUMBERS OF

RESPONDENTS BY SITE
FIGURE

95

6 ACCESS TO CATARACT SURGERY

BY INCOME AT 630RMB SHOWING THE

%

IN NUMBERS

OF RESPONDENTS BY SITE
CURVES FOR PATIENTS AT 500RMB BY SITE

98

FIGURE 8 CONCENTRATION CURVES FOR PATIENTS A T 6 3 0 R M B BY SITE

99

FIGURE

7 CONCENTRATION

96

FIGURE 9 COMPARISON OF UNADJUSTED MAXIMUM WTP RESPONSES BY PAIRS

100

FIGURE 10 ACCESS TO CATARACT SURGERY BY CAREGIVERS

104

FIGURE

11 CONCENTRATION CURVE

FOR PATIENTS AND CAREGIVERS AT

500RMB

105

FIGURE 12 SAMPLE GENDER (A) AND ACCESS BY GENDER (B)

111

FIGURE 13 SAMPLE EDUCATION AND ACCESS BY EDUCATION

112

FIGURE 14 WTP FOR CATARACT SURGERY FOR MATCHED PAIRS (CHILD IS PAYMENT SOURCE) .... 120
FIGURE 16 WTP RESPONSES BY SITE

131

FIGURE 17 PREDICTED MAXIMUM WTP AS A % OF ANNUAL HH INCOME

132

x


1

Study Aim and Objectives

This study was designed to evaluate whether access to cataract surgery is equitable in the
Guangdong Province of the People's Republic of China (PRC) and to explore the feasibility
of using a tiered pricing model to increase uptake by the poorest, using data from a
willingness to pay survey administered to a rural population in this region.

China and Cataract
Cataract is the leading cause of blindness in the PRC in people aged 50 and over.
Prevalence rates of cataract blindness have been estimated to be up to 4.37%, with rates of
low vision being even higher in this age group (Hsu, Cheng, Liu, Tsai, & Chou, 2004; Li, Xu,

He, Wu, Munoz, & Ellwein, 1999a). Combined with a low cataract surgery rate of 230 per
million per year the result is that China has a severe burden of curable blindness and low
vision (Apple, Ram, Foster, & Peng, 2000).

Helen Keller International, China
Helen Keller International (HK.I), in conjunction with the privately owned Guangming Eye
Hospital (GEH) and the Yang Jiang local government health department set up a cataract
screening and surgery program in 2001. The program now provides about 1800 surgeries a
year which translates roughly to a rate of at least 720 per million if we do not include the
surgeries performed by other providers. A cross sectional willingness to pay study conducted
three months after the program began, suggested that income would be a limiting factor for
access to cataract surgery even with the service priced at cost (He M et al., 2007). Now the

program would like to determine whether or not it is feasible to use a tiered pricing structure
to increase its revenues in order for it to provide cataract surgery at a lower price to those

1


unable to pay the current fee of 500 - 630 Renminbi (RMB) where 1 US$=8RMB.

Access: Inequality and Inequity
In the 2001 study it was found that there were significant differences in the amount that
respondents were willing to pay across income groups, specifically, those in higher income
groups were willing to pay higher amounts. This finding highlights an inequality in
willingness to pay that is not necessarily inequitable - there is nothing 'unfair' about
individuals with a higher income being willing to spend more than individuals with lower
income. However it was also found that only 37% of the respondents would be willing to pay
500RMB or more to obtain cataract surgery. This result suggests that even though the service
is now available to this population, there may remain access limitations for some individuals

due to the pricing and this outcome is inequitable. The combination of these findings suggests
that, with enough income variation, it might be possible to induce those with higher incomes
who may be willing to pay more for surgery, to actually do so and then to use the increased
revenue to subsidize a lower price that improves access for those with lower incomes and
willingness to pay. In other words we could take advantage of an existing income inequality
and provide somewhat unequal services to reduce an access inequity for the most basic level
of service.

This study will utilize data from a willingness to pay survey to obtain a valuation of
cataract surgery by respondents and their caregivers which, when combined with the known
prices, will determine whether or not access is equitable. It will then determine whether or
not a large enough number of respondents value additional amenities highly enough to enable

higher pricing. Such amenities could include having a senior surgeon perform their surgery,
having an improved intra-ocular lens implanted or having food and transport provided for

2


them. With estimates of revenue, a range of possible subsidized prices can be determined and
used to predict the impact of the model on the equity of access to cataract surgery.

1.1 Objective 1
To determine whether access to cataract surgery is equitable in this population
using willingness to pay survey data from respondents with cataract
Empirical Analysis: The results from a survey administered to respondents who are
cataract blind in at least one eye will be used to explore how willingness to pay for cataract
surgery may differ by demographic and socioeconomic characteristics, vision status and
potential sources of payment. Following this exploration, an appropriate model to estimate
willingness to pay will be proposed and tested. From these results an 'incidence rate' for

cataract surgery at current pricing levels will be determined and combined with the income
data to construct a concentration index that describes the equity of access.

1.2 Objective 2
To determine whether willingness to pay differs between respondents with
cataract and their households/caregivers and what impact this has upon the
willingness to pay estimates
Empirical Analysis: The results from a survey administered to the caregivers who
accompany respondents will be used to explore how willingness to pay for cataract surgery
may differ between patients and another member of their household and to determine how
much care the patient needs because of their impaired vision. Specifically this comparison
will be used:

l) To determine why there may be differences in WTP from respondents who come from

3


the same household and are subject to the same income constraint. It could be important if
sources other than own savings and insurance are used to pay for surgery
2) To determine if there are intergenerational differences in the perceived need for surgery

3) To determine whether there are differences in perceived control of household resources

4) To determine whether a societal valuation of cataract surgery might be significantly
higher or lower than the patients' valuation of cataract surgery

1.3 Objective 3
To estimate the revenue that can be expected from a tiered pricing model and
to determine the potential of the model to improve equity of access to surgery

Empirical Analysis: The willingness to pay data will be used to assess the potential
demand for the additional amenities that GEH/HKI could provide at minimal cost. These
amenities are having a senior surgeon perform the surgery, an improved intraocular lens,
transport to/from the clinic and the provision of meals. Subsequently, the projected revenue
from the provision of such services will be estimated and used to determine the feasibility of a
tiered pricing and cross subsidization model. To avoid having to determine patients' choices
between amenities, revenues will be determined from the provision of a single amenity at a
time. Finally a concentration index will be estimated at each feasible subsidized price to see
what impact this model may have on the equity of access.

4


2

Background

2.1 Epidemiology of Cataract and Cataract Surgery
Cataract is the opacification of the lens and its major risk factor is aging. Other risk factors
postulated include diabetes, smoking, alcohol and UVB exposure (Cataract: Epidemiology
and service delivery.2000). Cataract can occur unilaterally but is more often bilateral, with
the cataract in each eye likely to develop and worsen vision at differing rates. Surgical
removal of the lens is the only treatment. There are different methods for cataract extraction
and costs are very dependent upon which method is used and whether the lens is replaced or
the patient is given aphakic spectacles to improve their post surgery vision. Global estimates
of visual impairment by the WHO are that I6l million people were blind or had low vision in
2002 and 90% of these people live in developing countries. Despite being treatable, cataract
is the leading cause of visual impairment by far and causes 48% of global blindness compared
to the next largest cause glaucoma which causes 12%( World Health Organization, November
2004). Blindness is defined as having visual acuity of less than 0.05 in the better eye with

best possible correction. That is, being able to see at 3 meters what a person with normal
vision can see at 60 meters or 3/60 in Snellen Visual Acuity in meters. Low vision is defined
as visual acuity of less than 0.33 (20/60), but equal to or better than 3/60'. In terms of

' By the 10th Revision of the WHO International Statistical Classification of Disease,
Injuries and Causes of Death.

5


functional vision , consider that in the state of Maryland a driver can obtain an unrestricted
license with a minimum visual acuity of 10/20 or 0.5 in either eye and the legal definition of
blindness in the United States is 20/200.
Cataract is the leading cause of blindness in people over the age of 50 in China where there
are approximately 90 million people over the age of 60 (Li, Xu, He, Wu, Munoz, & Ellwein,
1999a; Zhang et al., 1992; Zhang, Zou, Gao, Di, & Wang, 1992). The estimated prevalence
of blindness in China is estimated to be between 2.94% and 4.37% and estimates of low
vision are even higher (Hsu et al., 2004; Li, Xu, He, Wu, Munoz, & Ellwein, 1999a). The
cataract surgery rate (CSR) varies across China and was estimated to be 138 per million per
year in Guangdong circa 1992. It was as low as 28 in Hebei and as high as 1500 in Xizang.
The current average of 230-320 across China is very low when compared to India where the
CSR is 3650 despite having a cataract surgeon to total population ratio that is comparable to
China's (Foster, 2001; Li, Xu, He, Wu, Munoz, & Ellwein, 1999a; Zhao, Sui, Jia, Fletcher, &
Ellwein, 1998).

2.2 Rural Health Care in China
Yang Jiang is a county of the Guangdong Province comprised of 1 urban city and 3 rural
sub-counties, located on the South East coast of China. The Guangdong Province is one of
the wealthiest in China by virtue of its economically beneficial coastline, which has given rise

Functional vision will be described in more detail in the Results section in order to
illustrate the level of visual impairment in the population sample.

6


to massive swathes of industrialization. However, there is severe inequality between the
urban and rural economies. Income estimates for all the Central Provinces, including
Guangdong are 7,900 RMB annual per capita in urban areas and 2,652 RMB annual per capita
in rural areas (Sicular T., Yue X., Gustafsson B., & Li S., 2006). Rural Guangdong is as poor
as rural regions across China.

The Old Rural Cooperative Medical System
Until the late 1970s about 90% of China's rural villages were well served by the Rural
Cooperative Medical System (RCMS) that was a pre-payment plan financed by household
premiums, village level collective welfare funds and a small amount of higher level
government funding. This system, famous for its 'barefoot doctors,' is widely acknowledged
as being a tremendous success. It is credited with making a major contribution to China's first
'health care revolution' in which life expectancy increased from 38 in 1949 to 68 in 1978.
With the move from central planning toward a market economy, the commune system moved
to a 'household responsibility' system. With the removal of the risk-sharing benefit of the
collective welfare fund, the majority of RCMS funds collapsed and by 1998 only 9.5% of the
rural population was insured. The government maintained its level of very limited investment
in rural health care services, which combined with a high level of financial decentralization,
left the rural population with severely limited access to care. Local county, township and
village health posts are available, but they have little impact on access to healthcare for the
poor because they receive such limited government subsidization. Yang Jiang General
Hospital for example, has a turnover of 170 million RMB but receives only 300,000 RMB in

7

subsidy from the government3. In order to ensure access to basic care and equity, government
'mandates' prices with little regard to the feasibility of maintaining services. Consequently
there is little incentive to provide basic services. The need to remain financially stable
encourages the practice of lucrative drug over-prescription and unnecessary/avoidable
expensive procedures. At the village level there is no government subsidy at all and so the
providers of basic services are essentially private providers of care, working on a fee for
service basis.

The New RCMS
The scheme that replaced the RCMS proved to be largely unsustainable due to the lack of
central government financial participation. It was modified into the New Community Medical
System (NCMS) that now incorporates a matched financing model to encourage enrollment
and increase sustainability. Specifically, enrollees pay 10 RMB per capita per year, which is
matched by 20 RMB by the central government and at least 20 RMB by the local government
(40 RMB in the wealthier provinces). The matching is entirely reliant on the enrollee's
contribution. Uptake has been estimated at 70% in the pilot schemes that cover about 65
million of China's 450 million rural dwellers (Wagstaff A, Lindelow M, Jun G, Ling X, &
Juncheng Q, 2007). The program is set to begin expansion to cover 80% of the country's
rural population in 2007. When paid, the premium entitles the rural enrollee to discounts at
health service institutions, both private and public, in the form of co-pays for services, with a
maximum of 3000 RMB per year beyond which fees are out of pocket.

Personal communication, Dr He, Director, Guangming Eye Hospital

8


Table 1 shows how the NCMS operates in rural Yang Jiang and how the urban health

insurance works for those seeking cataract surgery (there are no 'rural' reimbursable providers
of cataract surgery).

Table 1 New Community Medical Scheme - Premiums, Co-payments and
Deductibles

Annual
Premium per member per household
(maximum Annual Coverage 3000 RMB)
Co pay at a local clinic (n/a)
Co-pay at a local hospital
Co-pay at a private hospital
Deductible at a public facility followed by 30% co-pay
(e.g. Peoples (General) Hospital)
Deductible at a private facility followed b\ a 30% copax
(e.g. Guangminu IAC Hospital)

Rural

Urban

10 RMB

40-60 RMB

50%
60%
70%

700 RMB

300 RMB

A review of the program conducted and reported by the World Bank found that enrollment
is lower in poorer households and that the scheme has had no impact on out-of-pocket
spending or on utilization among the poor (Wagstaff A et al., 2007) although it has improved
access for the poor in urban areas (Liu GG, Zhao Z, Cai R, Yamada T, & Yamada T, 2002).
Wagstaff et al's review also found that coverage is mainly limited to in-patient, curative care
with very high deductible requirements. The deductible requirement, as illustrated in Table 1,
is not trivial. For cataract surgery in Yangjiang City, patients with insurance still have to pay
700RMB for surgery at the People's Hospital. This level of deductible, which must be paid
for out-of-pocket is regressive and unfavorable for equity, resulting in either household
resource depletion or continued visual impairment.

9


2.3 HKI, China and Tiered Pricing
This environment, combined with the high burden of disease, prompted the initiation of the
cataract screening and surgery program by HKI and GEH. This has increased the CSR in this
county to 780 per million annual (compared with the 280 million per year quoted in (Apple et
al., 2000)). However, there is still a huge backlog of cataract caused visual impairment and
there remain concerns about increasing the uptake of surgery equitably, while maintaining
sustainability. The program tries to improve equity by offering free surgeries to the small
number of patients that have government provided 'proof of need' documents. One of these is
an official card that confirms that the patient has no children and is not a dependant. The
other type of card is the 'Di bao' or Minimum Living Standards Program card, which provides
transfers in cash or in kind to those living below the 'di bao' line for their municipality,
which lies at or below RMB 637 per year, the national poverty line. These cards do not
actually entitle the holder to free health services however, HKI/GEH have chosen to provide
free services to those who have them even though there is no reimbursement for the services

provided from government. In practice this amounts to a very small number of surgeries.

In order to ensure the support of the local government, a critical success factor for any
NGO wishing to operate in China (Hsia R. & White L., 2002), the community screening and
surgery program was designed in consultation with local health department officials. This
body agreed to mandate its community health workers to organize the screenings and in return
HKI/GEH agreed to provide cataract surgery at a health department mandated price of
500RMB. HKI/GEH worked towards ensuring that the program could be sustainable at that
price as there is no actual financial contribution from local government. However, the 2001
study suggested that even at this price, uptake from the poorest might be limited. Unable to

10


raise the price of basic surgery or to reduce the cost of providing each surgery presently, they
have decided to look at a different model to address this situation. The other HKI site at the
Yang Chun Hospital charges 630RMB, but both these prices are extremely low compared to
the standard prices at the GEH, which start at 1,500RMB.

2.4 The Aravind Eye Hospital, India
Since its creation in 1976, the Aravind Eye Hospital has grown from 20 to 3,590 beds in
2005 (Aravind Eye Hospital) and has provided free eye care to two-thirds of its patients from
the revenue generated by the paying patients who make up the other third (V. Kasturi Rangan,
1993). Using a tiered pricing model, Aravind was able to provide three quarters of the
247,235 eye surgeries it performed in 2005 for free (Aravind Eye Hospital). Aravind utilizes
revenues from customers who are willing to pay for certain amenities along with the cataract
surgery service to subsidize the provision of a 'no frills' service to those unable to pay
anything at all. In other words, it practices a form of price discrimination by using tiered
pricing to maximize its output conditional upon offering as many as possible of the surgeries
for free and subject to breaking even.

The 'tiers' of service are the availability of three different classes of rooms. 'A' class
rooms include a bed and a private toilet for which the patient is charged $3 a night. 'B' class
rooms include a bed and a shared toilet for which a patient is charged $1.50 a night. ' C class
rooms are basically rooms with a mat for which the patient pays $1 a night. All fee paying
patients pay a $1 per outpatient visit. Other chargeable services include the choice of surgical
techniques (more expensive surgical techniques have shorter recovery times) and different
brands of IOLs. The 'free' patients occupy a separate building with 'wards' that are large airy
rooms with rows of mats for patients and their caregivers. The quality of clinical service

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however is the same in terms of surgical outcomes whether the patient is fee paying or not
because the same surgeons perform them with the same equipment.

Essential to its ongoing viability as a self-sustaining firm and its plans for growth, Aravind
places emphasis on minimizing costs by purchasing high quality capital such as appropriate
modern equipment, research into improved techniques and using both to their maximum
capacity. In addition, since 1992 when it set up Aurolab, it has been manufacturing and
selling its own brand of intraocular lenses (IOL) for lens replacement after extra capsular
cataract extraction (ECCE). This has brought the cost of IOLs down from $30 (Rs. 800) to $7
(Rs. 200). This vertical integration is part of an ongoing mission to minimize the cost of
increasing the quality of its services by offering all its free patients IOLs, an improvement
over the 'coke-bottle' aphakic glasses that were previously provided for post surgery vision
correction by intracapsular cataract extraction (ICCE) and increase revenues by selling the
lenses to other facilities. By constantly seeking ways to minimize costs while producing a
high quality service that is demanded by both fee paying customers and the 'poorest' of the
poor, Aravind is able to maintain a ratio of paying to non-paying customers of 1:2 with the
firm maintaining an expenditure to income ratio of between 48-51% (Kumar Nirmalya &

Brian Rogers, 2000).

The core principle of the Aravind System is that the hospital must provide services to the
poorest and to the non-poor alike, yet be financially self-supporting. This principle is
achieved through high quality, large volume care and a well-organized system. Beyond the
economic model however, Aravind's success is as much due to the social role that it sees itself

fulfilling - both its founder and its staff are completely dedicated to providing services for
free.

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HKI/GEH would like to determine if there might be a similar demand for amenities from
some of the users of their program and would like to determine whether there is enough
income and preference variation in the population they serve to utilize this model and improve
access to cataract surgery while remaining sustainable.

2.5 HKI, China and Cataract Surgery
Support for the idea that tiered pricing might be a feasible way to apply cross-subsidization
to HKI, China's operation came from a study conducted at HKI's community screenings in
2001 (He M et al., 2007). It was found that the amount that respondents were willing to pay
differed substantially across income groups, suggesting that those in higher income groups
may be willing to pay more for cataract surgery. In addition, it was found that those with less
visual impairment were willing to pay more for surgery than those with greater levels of
visual impairment. He et al suggest that this may be because younger patients place a higher
value on the benefits of cataract surgery as well as the fact that they may still be working and
so better able to afford the service. These two findings suggest that is a section of the
population who could benefit from cataract surgery that may consider paying more than the
current HKI price for surgery and that the offer of additonal amenities may provide the

incentive for them to actually do so.

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3

Conceptual Framework

3.1 Defining Equity in terms of Willingness to Pay
Equity researchers choose to focus on different and not always mutually supporting issues
in health care, but generally an 'equitable' situation is one in which people who are in need of
a health service, usually one considered a basic necessity, are able to obtain that service
regardless of their ability to pay - i.e. equal access for equal need. This definition, used for
this analysis, is also referred to as 'horizontal equity' (Culyer & Wagstaff, 1993; Kawachi,
Subramanian, & Almeida-Filho, 2002).

The determination of equitable access using willingness to pay for cataract sugary data
requires two assumptions. First we assume cataract surgery is a basic health necessity. Given
the wide range of other health services that are under utilized across the developing world it is
worth supporting this assumption. Cataract is not preventable so there are no measures that
can be implemented to avoid the eventual need for surgery. However, cataract is treatable and
so cataract blindness is preventable. Cataract surgery has also been found to be cost-effective
to treat in low income countries (Baltussen, Sylla, & Mariotti, 2004). Finally, cataract surgery
has a high success rate for restoring vision, even in resource constrained environments
(Venkatesh, Muralikrishnan, Balent L., Prakash, & Prajna, 2005). Despite all of these
findings, cataract causes an increasing level of disability, particularly in China's aging
population. For these reasons we find it reasonable to consider cataract surgery a basic and
essential service. In this population it is available but not always accessible, and we have

reason to believe that this is due to the price relative to local per capita income. This leads us
to hypothesize that access is inequitable.

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