Net costs of health worker rural incentive packages: an example from the Lao People's Democratic Republic

Many developing countries are examining whether to institute incentive packages that increase the share of health workers who opt to locate in rural settings; however, uncertainty exists with respect to the expected net cost (or benefit) from these packages.

We utilize the findings from the discrete choice experiment surveys applied to students training to be health professionals and costing analyses in Lao People's Democratic Republic to model the anticipated effect of incentive packages on new worker location decisions and direct costs. Incorporating evidence on health worker density and health outcomes, we then estimate the expected 5-year net cost (or benefit) of each incentive packages for 3 health worker cadres--physicians, nurses/midwives, and medical assistants.

Under base case assumptions, the optimal incentive package for each cadre produced a 5-year net benefit (maximum net benefit for physicians: US$ 44,000; nurses/midwives: US$ 5.6 million; medical assistants: US$ 485,000).

After accounting for health effects, the expected net cost of select incentive packages would be substantially less than the original estimate of direct costs. In the case of Lao People's Democratic Republic, incentive packages that do not invest in capital-intensive components generally should produce larger net benefits. Combining discrete choice experiment surveys, costing surveys and cost-benefit analysis methods may be replicated by other developing countries to calculate whether health worker incentive packages are viable policy options.