Gerald Bloom, et al • How Health Workers Earn a Living in 25

Original Article

How Health Workers Earn a Living in China

Gerald Bloom 1, Leiya Han 2 , Xiang Li 2 1. Institute of Development Studies, University of Sussex, Brighton, BN1 9RE, UK 2. Department of Health Policy, Tongji Medical University, People’s Republic of China

Abstract Health workers earned the same salary throughout China during the period of the command economy. Differ- ences in earnings have grown substantially since then. Some health facilities supplement basic government salaries with substantial bonuses financed out of earned revenues, whilst others cannot pay basic salaries in full. Some health workers supplement their income through informal channels. The government’s response depends on the kind of informal payment. It uses moral pressure and the threat of the loss of professional privileges to discourage acceptance of cash payments from patients. It treats those who accept kickbacks from drug suppliers or health facilities as criminals. The government faces very difficult challenges in facilitating the adaptation of the health system to a market economy. Its strategy has been to create a broad policy framework within which individuals and enterprises can develop individual adaptation strategies. It has enacted rules to regularise new relationships that emerge. The strategy of gradual institutional reform has enabled the health sector to adjust to major change. However, it has allowed people to profit from opportunistic behaviour and resulted in inefficiencies and problems with access. It could eventually change social attitudes about what constitutes ethical behaviour by health workers. The challenge is to create a regulatory framework that permits health workers to earn a reasonable income, whilst encouraging them to provide effective and affordable health services that meet the needs of the population.

Key words: Human resources, informal payments, China, provider behaviour, health system reform, transition

1. Introduction nurses in other countries resist work in rural settings, if it will impede their professional Most analysts agree that health workers progress. Systems for allocating training oppor- respond to economic incentives. Salaried em- tunities and selecting people for promotion in ployees tend to work less intensively, those earn- the public sector influence health worker ing a fee related to service provision tend to see behaviour. more patients and recommend more tests and interventions and those paid a fixed amount per Users of health services have little capac- patient per year tend to minimise the time they ity to judge the quality of advice and services spend on each consultation. However, immedi- they receive. Societies have developed mecha- ate financial gain is only one of a number of nisms for reducing the risk and transactions cost influences (Figure 1). of selecting expert health services(1). One com- mon strategy is for the state to limit the right to The pursuit of a profession requires a sub- provide and/or charge for certain services to li- stantial investment. Health professionals may censed practitioners. The aim is to protect users trade immediate opportunities for gain against from dangerous practices and enable them to long-term career prospects. For example, British identify competent practitioners. doctors work for many years for modest pay, hoping to achieve consultant status. Doctors and

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Figure 1 Influences on the behaviour of health workers.

The state gives practitioners a consider- istrative chaos. able amount of power by awarding them a This paper describes the response of Chi- monopoly right to sell certain services. Many nese health workers to radical changes during countries have created mechanisms to limit the the transition to a market economy. It argues ability of health workers to use this power for that transactions between health service users personal gain. One mechanism for reducing their and providers now have many characteristics of room for manoeuvre is for government to em- a market. China is transforming almost every ploy them. This places them under a contractual aspect of its social, economic and legal struc- obligation to provide certain kinds of services in tures. It may eventually create a regulatory frame- exchange for a salary. It is dangerous to work with rules of behaviour for providers of generalise, nonetheless, the relative pay of health social services, but this will take time. The pa- workers tends to be lower where government is per begins by describing the factors that influ- their principal employer. enced health worker behaviour during the pe- Many societies have established profes- riod of the command economy. It then discusses sional regulatory bodies. Some argue that these how these factors changed during the transition bodies give more weight to their members’ in- to a market economy. It describes the legal and terests than to the public. However, the long- illegal livelihood strategies of health workers term of professions depends during the latter period and it discusses the on the public’s perception of their integrity and blurred boundaries between the two in a society they have a stake in limiting inappropriate undergoing radical reforms. behaviour. There is little knowledge about the performance of these bodies in low and middle- 2. Health Workers and the Command income countries. Economy Health worker behaviour is constrained by 2.1 Organisation and finance of health services (2,3) hard-to-define cultural factors. In some coun- in the 1970s tries health workers internalise a set of medical ethics, in others they respond to political or re- Prior to the economic reforms of the 1970s, ligious factors. In exchange they have high so- the state bureaucracy, rural communes and the cial status as trusted advisors. The values of Communist Party dominated the Chinese professional service have contributed to the pres- economy. The state bureaucracy was organised ervation of the effectiveness of services in some according to the principles of the command countries, which experienced periods of admin- economy. The national government fixed prices

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and pay, deployed workers and controlled in- Both the government and communes con- vestment. Lower levels of government and en- tributed to rural health finance. The former paid terprises were expected to meet targets. salaries of its employees and covered some op- erating costs of county facilities and preventive The rural areas were organised into com- programmes. The latter paid non-government munes, units of collective production. Communes health workers. Preventive services and consul- allocated a portion of output to investment and tations with barefoot doctors were supplied free local services and distributed the rest to their or at very low cost, but patients paid for drugs members, in proportion to the time they had spent and other consumable inputs. Local prepayment on collective activities. The Communist Party schemes, which derived revenue from individu- played an important role in economic and social als and communes, reimbursed a portion of these activities. Its cadres influenced decision-making charges. in all institutions. The politicisation of economic life reached a high point during the late 1960s and early 1970s, when the 2.2 Influences on health worker behaviour in put ‘politics in command’. the command economy By the early 1970s China had established Figure 2 summarises the influences on a highly organised health service throughout the health worker behaviour during the 1970s. The country. Its character reflected the society which health service was a tightly organised system, (4) created it . Hospitals and work-based which combined what Moore calls ‘hierarchical served the urban population. The Ministry of control’ and ‘solidarity’.(6) The government and Health (MoH) and state-owned enterprises, such the Communist Party provided parallel mecha- as the railways, owned these facilities. The MoH nisms of hierarchical control. The government paid the salaries of government health workers employed a large proportion of health workers. and financed some running costs of its facilities. It transferred many to rural facilities during the Health facilities charged for drugs and services. late 1960s. Health workers were answerable to Government employees and workers in state- the facility that employed them. The communes owned enterprises were covered by health insur- paid the barefoot doctors and health workers in ance, which paid most of these charges. commune health facilities. The county health The so-called ‘three-tier’ health services bureau was responsible for the quality of health covered most of the rural areas. Approximately work in the county and it supported supervisory 85% of villages had a health station staffed by visits and training sessions for grassroots per- one or more barefoot doctors, peasants who had sonnel. The health centres supervised the bare- been given a short training course. They pro- foot doctors. vided curative and preventive services. The com- The Communist Party provided a second mune health centres provided referral services mechanism of hierarchical control through its and supervised the barefoot doctors. All coun- network that extended to most villages. Political ties had a government hospital and specialised cadres directly influenced management deci- preventive institutes. The health bureau was re- sions.(7) The Communist Party was the primary sponsible for planning and overseeing the man- route for implementing many government poli- agement of the county’s health services. A num- cies. For example, it led many public health ber of public health campaigns were organised campaigns, with technical support from the health under the technical leadership of the MoH and sector. The slogan calling on people to ‘put the political leadership of the Communist Party, politics in command’ highlighted the importance which played an important role in mobilising of non-bureaucratic and non-economic factors. (5) the population . Health workers were expected to serve the people

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Figure 2 Influences on the behaviour of health workers in 1970s China

by leading these mass campaigns. They were to local health prepayment schemes after de- answerable to local Communist Party structures collectivisation, was that local elites had ben- and faced serious sanctions if they acted in a efited disproportionately from them.(12) It is im- manner considered to be self-interested or possible to assess the magnitude of these prob- counter-revolutionary. lems. Professional regulatory bodies were pro- foundly weakened during the Cultural Revolu- 3. Health Workers and the Transition tion of 1966-1976.(8) The Communist Party led to a Market Economy a reaction against a bureaucratic and intellectual 3.1 Organisation and finance of health services elite whose interests were perceived to be di- vorced from those of the population.(7,9) Between China is transforming into a ‘socialist 1966-1969 medical universities and colleges were market economy’. This involves changing from closed and through the mid-1970s training insti- collective to household agricultural production, tutes only provided courses of practical orienta- phasing out price controls, reforming state-owned tion of no more than three years duration.(10) Sta- enterprises, creating a labour market, and devel- tus and role differences among personnel with oping new forms of enterprise ownership. China different levels of expertise were reduced in an has experienced rapid economic growth and its attempt to diminish the power of physicians. gross national product increased by 9.5% a year (13) Ranking by titles was opposed and promotion of between 1978 and 1994. any kind stopped for ten years. Revolutionary Government revenues have not kept pace committees governed hospitals. Their members with economic growth and they account for a often had relatively little specialised training. diminishing share of gross national product. The health system of the 1970s provided Government’s contribution to total health expen- almost universal access to basic preventive and diture (excluding for govern- curative health care, contributing to a dramatic ment employees) fell from 28% to 14% between (11) improvement of health status.(11) However, there 1981 and 1993. The government has raised were problems. The high employment, low wage public sector pay several times and it also per- economy may have led to low effort and ineffi- mits cost centre managers to pay bonuses out of (14) cient services. According to Feng et al, one rea- revenues they earn from user charges. Earn- son why peasants were unwilling to contribute ings of personnel in profitable and unprofitable

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enterprises, and rich and poor localities, have sional regulatory bodies are still weak. Alterna- diverged increasingly. Local governments in the tive mechanisms of local public accountability, poorer parts of the country spend up to 80% of such as village representative bodies, are only their budget on personnel.(15) In spite of this, they now being established.(19). This limits the degree can no longer afford even basic salaries. Many to which local service providers are accountable facilities in these areas can only generate small to users. amounts of revenue to finance bonuses.

The so-called iron rice bowl, whereby 3.2 Extra-legal payments for health services trained personnel were assigned jobs and guar- anteed employment for life, is ending. The Health workers employ a variety of strat- changes have been slowest in the public sector. egies to augment government salaries. Health Local governments still assign new graduates to facilities are permitted to pay bonuses out of government facilities and facility managers have surplus earnings that can be as large as the basic little power to dismiss personnel. On the other salary. Patients may also give them gifts, called hand, workers can leave their post if they find a “red packages”, and suppliers of drugs, equip- better job. Many rural health facilities have ment and services may pay them “kickbacks”. employed more staff but lost their most quali- These payments span a spectrum from fully fied personnel. Utilisation of these facilities has acceptable to criminal. The boundary between diminished.(8) Hospitals in areas experiencing categories is shifting as China creates a regula- (20,21) rapid economic growth have been able to in- tory framework. crease their number of highly trained staff to This section describes payments outside the meet the increasing demand for specialist ser- ethical and/or legal norm. It is based on a re- vices. Their employees have greater opportuni- view of academic literature, newspaper articles ties to earn bonuses. and government statements. These sources pro- Many local governments finance less than vide an impression of current thinking; they do 15% of the budget of hospitals and health cen- not provide systematic data on the importance tres.(16) Government grants often do not pay even of formal and informal economic incentives. basic salaries of health workers. Health facilities 3.2.1 Red Packages generate revenue from service charges, selling drugs and undertaking profit-making activities, During the period of the command such as manufacture of pharmaceuticals and so economy people often had to wait a long time to forth. They use some of this revenue to finance gain hospital admission or access to specialised salary supplements. Government grants to pub- services and sophisticated drugs. Some gave gifts lic health programmes have not kept up with to a doctor or manager who allowed them to inflation. Preventive institutes have developed jump the queue or obtain special services. These revenue-generating activities and charge for some gifts are called “red packages”, which were tra- preventive services.(17) ditionally exchanged as an expression of mutual obligation. These practices were considered anti- Cost centres now have a great deal of social and red packages were infrequent and autonomy. Government bureaucrats and local secret.(22) politicians can no longer interfere with manage- ment decisions.(7) The government is slowly re- Red packages have become more common placing the command and control model of su- during the transition to a market economy. Xing pervision with a functioning regulatory sys- reports that health workers in 190 hospitals re- tem.(18). But the creation of alternative gover- cently turned 3.5 million yuan in such payments (23) nance structures is proceeding slowly. Profes- over to local government. Feng and Feng found that over 50% of inpatients in Shengyang

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had paid a red package averaging 260 yuan.1(24) air-conditioners, mobile telephones, banquets, Li and Huang found that 74% of inpatients had entertainment and travel.(40-43) They are paid to made informal payments.(25) Most studies focus health facilities and/or individuals. Wang reports on urban health facilities, however, Jing et al that they typically amount to 8%-10% of the report that health workers in rural Jiangxi also cost of common drugs and 30% of the cost of receive red packages.(26) advanced ones.(44) Zhou estimates that a mid- scale hospital can earn as much from kickbacks Red packages mostly take the form of cash as from the typical government grant.(45) payments. Their size varies with the income of the local population, the degree of sophistica- Some health organisations or departments tion of the health facility, the seniority of the pay doctors “prescription fees” for ordering a doctor and the field of specialisation.(27) Surgeons, particular investigation or drug, “introduction obstetricians and anaesthesiologists do particu- fees” for sending new patients, or “referral fees” larly well. Surveys of hospitals in several prov- for sending them patients for specialist care. inces report average payments between 140-320 These forms of informal payment emerged in yuan.(28-31) Studies of large referral hospitals have the mid-1990s, reflecting the competitive nature found averages of 400 yuan or more.(32,33) of the health service market in urban areas. People pay red packages for a number of There is little information on the extent of reasons. Some hope to encourage to kickbacks. The government recently asked phar- give their case special attention. Uninsured pa- maceutical companies and health facilities to tients may pay the doctor to refrain from recom- carry out a self-audit. The 117,714 participating mending unnecessarily expensive items.(34) The institutions reported 1.74 billion yuan in drug payer may view the red package as a gift, which kickbacks over four years. The government also cements a reciprocal relationship. A newspaper received 6103 complaints involving illegal pay- article about a man who attacked his father’s ments of 664 million yuan.(46) Provincial audits refused a red package illustrates the have revealed substantial problems in Zhejiang, emotional significance of the transaction.(35) Hunan and Shanxi.(31,45,47-49) Health workers have ambivalent attitudes Policy analysts have identified several towards red packages. Zhou and Zhang report negative consequences of drug kickbacks includ- that 21% of doctors said they accepted them to ing: loss of taxes, bypass of quality controls, compensate for unrealistically low pay, 59% and over-prescription of drugs.(43,44,50) Some com- refused them on ethical grounds and 15% turned panies use kickbacks to promote expensive im- them down for fear of punishment.(271) Another ported drugs or locally produced brand name survey found that 31% of recent medical school products.(51-54) This has contributed to rapid rises graduates thought that red packages were nor- in the cost of medical care. mal.(36) It is impossible to assess whether these attitudes reflect actual practices of doctors. 3.3 Influences on health worker behaviour in 3.2.2 Kickbacks the socialist market economy Health facilities are allowed to accept dis- Health workers are more influenced than counts of up to 5% from suppliers of drugs or previously by material incentives and, what equipment, as long as they record them in the Moore calls, ‘dispersed competition’.(6) However, (37-39) accounts. All other payments are illegal. many providers do not act as if their only mo- These commonly are in the form of cash, cars, tives are financial. Figure 3 identifies factors,

1 One US dollar was equivalent to approximately 8 yuan during the mid to late 1990s,

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Figure 3 Influences on the behaviour of health workers in 1990s China

which explain this. Some are diminished ver- enhancements or invest in improvements. sions of the influences on health workers during Weitzman and Xu call this kind of entity a the 1970s and others are new. The discussion is ‘vaguely defined cooperative’.(58) By this they complicated by the rapidly changing structure mean that the manager is answerable to the of the health sector. The government is reform- employees and to local government. They argue ing many aspects of health sector management, that enterprises have been successful, in spite of finance and regulation. the vaguely defined property rights, because the Health workers are mostly salaried employ- Chinese are used to limiting self-seeking ees of health facilities, which derive revenue from behaviour in the interest of the community. Hsiao government grants and user charges. Village argues similarly that China may be able to cre- health workers are the major exception. Most of ate sustainable rural health prepayment schemes them receive very little money from the govern- because its villagers are used to working coop- ment. They earn most of their income from eratively.(59) In this view, the performance of consultation fees, selling drugs and non-medical health facilities reflects a continuing negotiation work.(55,56) There is also a growing number of between government, employees and users, mod- licensed private practitioners.(57) This section fo- erated by poorly defined pressures for a socially cuses on the employees. acceptable outcome. 3.3.1 Provider behaviour in a regulated The regulatory bodies inherited from the market. command economy are modifying their roles. Chinese health facilities are neither public Until recently local managers had little control nor private, as understood in established market over hiring and firing. Health workers can now economies. They are mostly owned by local change jobs more easily than before. This has government, although some localities are experi- given skilled personnel greater negotiating power menting with alternative forms of ownership. The and the best trained have left facilities in poor government signs a contract with the facility localities. manager and negotiates an annual grant. The Government price bureaus have kept facility raises the rest of its revenue (85% or charges for preventive services and routine con- more) by charging patients directly or billing sultations low, in order to keep services acces- the employer of insured workers. The facility sible. Many health facilities experienced serious manager can use surplus revenue to pay salary financial problems during the 1980s and the

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government responded by allowing them to earn Health Department in Yunnan influences the a 15-20% mark-up on drugs and other performance of local health facilities by paying consumables and to set high fees for services performance-related bonuses to township health for relatively sophisticated equipment. This en- centres.(62) The authors report that the facilities abled health facilities to cope with a relative fall improved their performance in response to a in government funding, but it created incentives combination of peer pressure and small finan- to increase costs. cial incentives. Health facilities reward revenue generation Urban and rural insurance schemes also with salary bonuses. Tang describes rural health influence service providers. The schemes for centres that pay larger bonuses to members of urban workers generally reimburse health facili- the more profitable clinical cost centres.(14) One ties on a fee-for-service basis. Since the early response of health workers has been to shift their 1980s, claims on them have consistently risen activities from preventive programmes to cura- faster than inflation.(11) The newly created Min- tive services. Another response has been to sell istry of Labour and Social Security is more drugs.(60) This has contributed to a rapid reorganising the system of urban health finance. rise in drug expenditure. The use of relatively It plans to establish unified insurance bodies in new technologies such as ultrasound and CAT each . These bodies will exert a substantial scanners has increased rapidly for similar rea- influence on provider behaviour in future by sons. monitoring their performance and altering the payment mechanism. Local health departments play a diminished regulatory role. Officials control allocations to Most rural residents pay for their own health facilities, but pay little attention to the health care. However, around 10% of villages quality or cost of services. This reflects the low have health prepayment schemes.(63) Recent priority local governments have given to policy statements strongly urge other localities health.(61) The government issued a major health to create such schemes. Most reimburse indi- policy document in late 1997, which assigned to viduals for a proportion of treatment costs. How- all levels of government responsibility for en- ever some have tried to influence health worker suring access to appropriate health services at performance by monitoring drug prescription an affordable price. This may stimulate greater behaviour, auditing hospital costs, negotiating political interest in health services. alternative forms of contract with health facili- ties, and so forth.(64) The new government policy Other reasons for the decline in regulation, recognises the potential influence of these particularly in poor localities, include low tech- schemes on the pattern of health services provi- nical capacity of many local governments and sion. lack of funding for supervisory visits or courses for health workers. The health facilities respon- 3.3.2 Redrawing the boundary between sible for supervising grassroots providers depend legal and illegal practices. on revenue generation and have little incentive The government has become increasingly to allocate resources to regulatory activities. concerned with the use of extra-legal strategies Health departments of higher levels of by health workers to augment their income. Its government provide almost no funding for fa- response has depended on whether it perceived cilities belonging to lower levels of government the strategy as criminal or merely undesirable. and they have almost no influence on their per- The government treats red packages as unethi- formance. They also spend very little on super- cal and unprofessional.(65-67) Health Departments visory visits. In spite of this, Zhang et al de- take them into account in evaluating hospital scribe how the Provincial Maternal and Child performance.(68-72) For example, Hunan down-

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grades hospitals where more than 1% of em- guilty can be imprisoned for between 5 and 9 ployees accept red packages. Health facilities years.(44,79) Zu documents 3363 cases of kick- award prizes for “honest medical service” and backs, that went to court between October 1995 rewards of up to 20% to health workers who and October 1997.(46) refuse a red package or give it to the authorities. 3.3.3 The importance of non-economic They punish offenders with fines, loss of bo- influences. The attempt to explain the behaviour nuses, termination of employment, postponement of health workers in terms of economic incen- of promotion, demotion and/or loss of the right tives ignores the influence of internalised moral, to prescribe drugs. A recent strategy has been to political and professional values. This may ex- ask patients and doctors to sign an agreement plain why many village health workers partici- not to pay or receive a red package(73,74). pate in preventive programmes and see poor One could attribute the growth in red pack- patients in spite of the lack of financial incen- ages to distortions in the health care market. tives. It also explains why health facilities in Health facilities cannot charge economic fees for Yunnan respond positively to small performance- inputs of time by health workers. They have related bonuses. It is hard to predict how long compensated by selling drugs and charging for attitudes developed in command economy will the use of sophisticated equipment. However, persist as marketisation continues. they have not been able to match levels of pay The influence of political cadres over health of profitable enterprises. Health workers have providers has weakened. This is partly because sought additional income from informal sources the former are more interested in economic de- to meet their aspirations. The different systems velopment than health. It has been many years of health finance have created different markets since the population has been mobilised for for health services. People with health insurance, public health campaigns. This has reduced the mostly in urban areas, can easily afford a rela- pressure on health workers to take the interests tively modest red package. The majority of the of users into account. The government acknowl- population, who are uninsured, have difficulty edges the need to shift the balance in favour of meeting formal hospital charges and have little the community. It hopes to achieve this through capacity to make additional payments. Red pack- a combination of better regulation by govern- ages are partly a response to rigidities in the ment health departments and strengthening the health care pricing system and the widening capacity of civil society to influence provider differences in levels of pay. They have, in turn, performance. increased inequalities in access to services be- tween residents in rich and poor localities and The government is formulating a new law the insured and uninsured and magnified the to establish criteria for registration as a profes- attraction of health workers away from poor sional.(8) It is not clear how the regulatory bod- areas. Their existence highlights difficult policy ies will monitor health worker performance and issues regarding health worker pay. it is too early to assess the degree to which they will promote some form of professional ethic. Government views kickbacks as a form of The government is also beginning to establish bribery.(38,75,76) Several ministries are coordinat- elected village councils. It advocates “democratic ing efforts to stop them.(47,77) The MoH and Pro- supervision” of local health services. Most lo- vincial Health Departments have carried out cam- calities have not yet established mechanisms to paigns against kickbacks.(78) The punishments improve accountability of health service provid- include fines and prosecution under the “Law ers. Against Unfair Competition”. People found

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4. The Changing Social Contract with As long as there are substantial regional Health Workers economic differences, the government will be unable to establish a unitary pay scale for health China, in contrast to many other ex-com- workers unless it makes large fiscal transfers to mand economies, has preserved an effective poor localities to maintain salaries at levels ap- health sector during a time of great change. This propriate to richer areas. There are strong argu- is due, to a great extent, to its management of ments for increasing subsidies to health services transition. China has not attempted a blueprint in poor areas, but there are also dangers in pay- approach to reform. Most changes have taken ing artificially high salaries to health workers. place as a result of local initiatives, which other Governments have to address a number of dif- localities have emulated. The government has ficult questions in formulating strategies for shifted policy to take into account the altered managing the emerging market for health work- reality. This approach has enabled government ers: to maintain relative stability during a period of rapid change. However, it has given a great deal • Can the objectives of providing access of influence to local negotiations. Government to health services for all social groups has tolerated major distortions in the regulatory be reconciled with the need to pay framework while waiting for new strategies to competitive salaries to health workers? emerge. • How should health worker pay be The gradual approach to change is illus- established? To whom should different trated by the shift from administered prices to a categories of health workers be market economy and from a managed labour compared? Should health worker income system to a labour market. The government has vary between rich and poor localities? had to balance the need to prevent excessively To what extent should the government large geographic differences in health worker pay intervene to reduce inter-regional against the need to keep levels of pay in health inequalities in pay by controlling comparable to other sectors. It has encouraged earnings in rich areas or subsidising local governments, health facilities and health health workers in poor localities? workers to find their own strategies for securing • How can the willingness of richer social health worker incomes. Informal payments are groups to pay more for health services one end of a continuum of adaptive activities. be reconciled with the objective of The government has responded to these adapta- ensuring access to skilled health workers tions, in turn, by modifying the regulatory frame- for all? Can health workers earn work (changing fee structures and so forth). It additional income from fees without has also begun to define the boundary between creating unacceptable inequalities? legal and illegal activities. Should “private” patients be asked to The national government established a pay the full cost of fees, rather than regulatory framework aimed at keeping the cost modest red packages? of basic services low. This arrangement was • What are the relative roles of govern- stable for over 15 years, but it created strains ment, professional bodies and commu- which have been expressed in movements of nities in supervising health worker personnel to urban facilities, the shift in the performance? balance of activities in favour of those which generate revenue and the increase in extra-legal • How can health workers be encouraged payments. By the late 1990s, it was apparent to maintain ethical standards during the that major institutional reforms would be neces- transition to a market economy? sary.

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Government may be able to reduce the relationship between health workers, govern- prevalence of informal payments by price re- ments, and civil society organisations are likely forms and more active enforcement of the law. to change considerably in China and other low However, as long as it tries to ensure equitable and middle income countries during the next few access to health services, it needs to find a way years. to balance the desire of health workers to earn incomes comparable to those in other sectors Acknowledgements against the needs of poor patients. The authors would like to acknowledge The existence of informal payments is a very useful comments by Henry Lucas and Hi- sign of the increasing gap between the view of lary Standing. This paper is an output of ESCOR the health sector as a fully funded government project 6969. The opinions are those of the au- service and reality. It also reflects a strain in the thors and do not necessarily reflect the policy of present contract between government and health the Department for International Development. workers. It is one aspect of a more general crisis in the performance of government services in References many countries.(80) Nunberg and Lindauer put forward a number of reasons for this phenom- 1. Arrow K. Uncertainty and the welfare econom- enon including low levels of public sector pay, ics of medical care. American Economic Re- inadequate promotion structures, poor working view 1963;53:941-973. conditions and the loss of the self-perception of 2. Segall M. From cooperation to competition in civil servants as a socially responsible elite.(81) national health systems-and back?: impact on The extent of informal payments provides a professional ethics and quality of care. Inter- measure of the gap between the formal rules of national Journal of Health Planning and Man- the public sector and the emergence, in many agement 2000;15:61-79. countries, of an informal market for public ser- 3. Mechanic D. Changing medical organisation vices.(82) and the erosion of trust. Millbank Quarterly 1996;74:171-181. Governments have been unwilling or un- 4. Tang S, Bloom G, Feng X, et al. Financing able to either finance a health service, which rural health services in China: Adapting to meets the expectations of the richer members of economic reform. IDS Research Report 26, society, or pay salaries, which meet the expec- Brighton: Institute of Development Studies, tations of health workers with the most market- 1994. able skills. This has created a niche for legal 5. Sidel V, Sidel R. Serve the people: Observa- and/or illegal markets for health services. In some tions on in the People’s Republic cases health workers supplement basic govern- of China. New York: Josiah Macy Jr Founda- ment salaries with income earned (legally or tion, 1973 illegally) from other sources. In other cases they 6. Moore M. Competition and pluralism in public leave public employment. The balance varies bureaucracies. IDS Bulletin 1992;23:65-77. between countries. 7. Lee HY. From revolutionary cadres to party Governments have to revisit basic ques- technocrats in Socialist China. Oxford: Uni- tions about how they should make the best use versity California Press, 1991. of their limited financial and regulatory powers 8. Gong Y, Wilkes A, Bloom G. Health human to influence health service providers. This may resource development in rural China. Health lead to a redrawing of the boundaries between Policy and Planning 1997;12:320-328. public and private sectors and a re-negotiation 9. Tsou T. The cultural revolution and post-Mao of the social contract with health workers. The reforms: a historical perspective. Chicago: University of Chicago Press, 1986.

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