Written by Neil Munro.

In China, inappropriate incentive structures have encouraged health care providers to systematically offer treatment which is not medically indicated and to take extra money for treatment which has already been paid for. Given all the efforts at reform over the past ten years, we would hope to find that some of the problems with incentive structures in the Chinese health care system had now been ameliorated.

However, even a cursory glance at the literature suggests that this is not the case. The problems of 2009 are still present in 2019. The government still provides too little money to Chinese hospitals, which provide around 90 per cent of patient care, and doctors still plug the gap by requiring unnecessary diagnostic tests, over-prescribing expensive drugs and, where surgical procedures are involved, taking informal payments (红包). Hospitals’ financial problems directly impact on doctors, who are not paid enough to survive on their official salaries.

Preliminary analyses suggest that residence status (hukou), level of development, beliefs about private treatment, trust in doctors, and expectations of unethical behaviour all influence how Chinese citizens respond to the phenomenon of over-prescribing expensive medicines.

The government has tried various measures to control costs to patients, including capping the prices of the most needed drugs. Nevertheless, the phenomenon of ‘using drugs to feed medicine’ (以药养医) continues, as various ways are found to game the system, such as prescribing slightly different drugs which are not on the approved list, or, in cahoots with the manufacturers, changing their names.  In the Chinese saying, ‘above they have policies, below we have countermeasures’ (上有政策，下有对策).

Agency risks arise whenever the interests of principals (patients) potentially diverge from those of agents (doctors) and the costs of ensuring that agents protect the principals’ interests are prohibitively high. Scholars have long understood that the way agency risk is handled creates different implications for the nature of the doctor-patient relationship. In their role as patients and consumers of health care services, the public is implicated in agency risk management and in the types of doctor-patient relationships which emerge.

The ethical codes established by the state are designed to encourage patients to trust doctors not because they know them or have paid them, but simply because they are doctors. In other words, the ethical codes seek to encourage a fiduciary relationship between health care providers and patients. Perceiving the relationship as contractual encourages rational calculations by the patient or potential patient concerning how best to reduce agency risk. For example, an informal payment represents a direct attempt to manipulate the doctors’ incentives. Market options are meant to reduce risk by offering the chance to change agents.

Strategies aimed at managing agency risk echo Albert Hirschman’s famous (1970) distinction between ‘voice’ to improve the terms of a relationship and ‘exit’ which replaces it with another relationship. When we refer to ‘exit’ we don’t necessarily refer to the use of private health care providers in place of public ones, since publicly owned providers can be induced to compete in markets as well. Even changing doctors within one hospital can count as ‘exit’ in this sense.

Is it possible, then, to identify which factors encourage voice and exit, which may exert pressure on doctors to desist from unethical practices, as opposed to Hirschman’s third category of ‘loyalty’, which corresponds to the behaviour of patients who do as they are told?

A nationwide survey carried out in mainland China from 1 November 2012 to 17 January 2013 included items prompting respondents to recommend a course of action to deal with examples of unethical behaviour by doctors.  For each situation, respondents were asked to choose between several strategies which differed in the extent to which they were proactive or passive, universalistic or particularistic, and whether they involved voice or exit.

To take the example of over-prescribing, the survey asked: What would you advise your friend to do if the doctor at a public hospital prescribes a lot of expensive medication which is not covered by insurance even when cheaper alternatives are available? Results showed that 23 per cent of respondents would buy the medicine prescribed and the same number would ask the doctor to change it. Thirteen per cent would recommend changing to another public hospital and 7 per cent would try a private hospital, but only 8 per cent would complain to the hospital administration. Five per cent would resort to the use of connections while just 2 per cent would pay a bribe, and other strategies were also marginal. Finally, 16 per cent said they didn’t know and 1 per cent gave no answer.

Preliminary analyses suggest that residence status (hukou), level of development, beliefs about private treatment, trust in doctors, and expectations of unethical behaviour all influence how Chinese citizens respond to the phenomenon of over-prescribing expensive medicines.

It appears that agricultural hukou discourages exit strategies (including using connections, changing hospitals and going private). People in richer locations are more active in terms of voice (both complaining and asking the doctor to change the prescription) and in the use of connections to get a referral. Favourable views of private treatment encourage proactive responses including both voice and exit, but these do not include going to a private hospital or pharmacy for a prescription, most likely because public provision is so dominant. Trust in hospitals generally discourages voice (i.e. asking the doctor to change the prescription). Awareness of unethical medical practices encourages proactive responses including both voice and exit.

Changing the way hospitals are financed is the ultimate solution to the problem of unethical medical practice in China. However, changing the financial systems will probably not produce the desired results without accompanying reforms designed to empower patients, who are at the bottom of the medical ‘food chain’. This means giving patients more choice by untying health insurance from providers, setting up effective publicly managed systems to redress complaints, encouraging the development of the private sector, and educating the public about the nature of unethical medical practices.

Dr Neil Munro is a Senior Lecturer in Chinese Politics at the School of Social and Political Sciences, University of Glasgow. Image Credit: CC by Michael Coghlan/Flickr.

The author bears full responsibility for the facts cited and opinions expressed in this article.