Here is the science and psychology behind hospital corruption. As can be seen, the very low government hospital user fee, the huge differential between it and private consultation fee, and the substantial un-captured higher willingness to pay (WTP), provides for considerable rent-seeking opportunities (shaded area in graph below). The WTP is amplified by the vulnerability of a patient fighting for his/her life.
Elimination of bribery by raising user fees to match that of the private hospitals is politically unfeasible. The logistics of managing reimbursement of the higher fees to the poor (to UID-linked bank accounts) is simply too complex. Standard prescription like more rigorous regulations - anti-corruption agencies, exemplary punishments, transparent recruitment process, etc - while essential, are not likely to make much head-way given the huge numbers (of officials and offices) involved, the vast spread, effective monopoly of service provision (atleast to the poorest), and entrenched and commonplace nature of such rent-seeking. In fact, the challenge is to resolve corruption given the aforementioned existing factors.
Simple and cliched as it sounds, the reasons for keeping consultation fees low in government hospitals is worth repeating. Basic health care services are a public good - not supplied by private sector and the preserve of governments. Pricing up the access to the service so as to capture the full WTP, will naturally end-up denying the service to the poorest. However, they are precisely those who cannot access private health care and who are among the most certain beneficiaries of such government welfare programs. Any attempt to increase consultation fees in government hospitals and reimburse the subsidy will be too complex to administer, even with enabling systems like the UID.
In any case, market efficiency is not the issue here, as one of the comments (KP) nicely put it, "If the government steps in to provision and deliver a service, it is invariably a question of satisfying un-met demand because of market failure, its logic is not to capture the consumer surplus in entirety". Further, comparison with the US is irrelevant for the two reasons - cultural and law-abiding nature of citizens - which are not applicable, atleast for now, to India. And, as POM graphically and brilliantly highlights, capturing consumer surplus by higher pricing is no insurance against rent-seeking or other forms of exploitation. It simply morphs and emerges in an even more difficult-to-address form! Outsourcing, especially to SHGs and NGOs, while theoretically appealing, have been found to deliver much the same, even worse, outcomes.
Even raising the wages of the street-level bureaucrat is likely to do little to limit rent-seeking. In view of many of the aforementioned factors, the rents are likely to be inelastic in relation to the salaries. In other words, the increased salaries, without addressing the WTP and other contextual factors, will do little to depress the bribes.
I cannot but completely agree with KP that it is "perverse" to apply the WTP principle and maximize consumer surplus while designing public policies (that too on supply of public goods) in an environment of huge unmet demand. Fortunately, our sense of right and wrong have not degenerated so much that we are forced to deny a person an opportunity to save his life because he cannot afford the required treatment.
The challenge, and the problem I posed in the earlier post, is to design implementation strategies for delivering health care services in government hospitals, given all the adversities of the environment.
Here my understanding of the problem. The last-mile issue here is the multiple interfaces between officials and the patient. We cannot avoid them, but we can minimize them and even create conditions to limit the chances of bribe-transactions. The challenge then is to structure an implementation environment that will nudge/coax/deter/condition officials so as to mitigate or even eliminate the rent-seeking opportunity. And these environmental framing can be done in different ways, taking into account the specific cultural and functional factors.
At a more generic level, is it possible to have a single-window type interface? Can all the tests be done at one location so as to eliminate multiple interfaces? Can tests be carried out at the bedside? Is it possible to issue tokens with clear timings to each patient to access these services? What are the different means of corrupt practices at each interface, and can we do something to deter them? Can we rotate officials at the cutting edge with some periodicity? Answers to all these and more would be determined by the micro-environments of the rent-seeking action and how we can re-frame them to dis-incentivize corrupt practices.
Or, on a more unconventional manner, can we have a system wherein, no in-patient can keep possession of any money? And even if they want, the notes should be dipped in a powder that dis-colors water? Or we can even borrow this from Kathmandu airport - pocket-less employee uniforms!