Corruption in the health sector - general introduction

Causes and consequences

Improving public health is a fundamental precondition to ensure human development.

The importance of health for economic growth and reduction of poverty is reflected in the Millennium Development Goals (MDG). Three out of the eight goals refer directly to health. One additional goal refers to access to affordable drugs in developing countries. To ensure universal and equitable access to quality health services, governments must earmark a sufficient share of public revenues for health. While most rich countries spend at least 5% of GDP on health, many developing countries spend less than half of this figure [1] .

Insufficient health budgets due to deteriorating economic conditions, combined with burgeoning health problems such as the global HIV-AIDS pandemic, have led to a shortage of drug and medical supplies, inadequate or non-payment of health workers salaries, poor quality of care, and inequitable health care services in many low income and transition countries. The result has been deterioration of general health and an increasing degree of corruption at all levels of the health system [2] .

CONTENT ON THIS PAGE:

• Corruption in the health sector
• High corruption vulnerability in the health sector
• Health finance systems and corruption
  

Corruption in the health sector

"Corruption in the health sector is a concern in all countries, but it is an especially critical problem in developing and transitional economies where public resources are already scarce." [3]. Corruption reduces the resources effectively available for health, lowers the quality, equity and effectiveness of health care services, decreases the volume and increases the cost of provided services. It discourages people to use and pay for health services and ultimately has a corrosive impact on the population's level of health. A study carried out by the International Monetary Fund (IMF) using data from 71 countries shows that countries with high indices of corruption systematically have higher rates of infant mortality [4] . Preventing abuse and reducing corruption therefore is important to increase resources available for health, to make more efficient use of existing resources and, ultimately, to improve the general health status of the population.

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High corruption vulnerability in the health sector

Despite limited research, the health sector appears to be particularly vulnerable to corruption. This is the result of many processes with high risks of bribery.

• The health sector is marked by a high degree of imbalances of information and an inelastic demand for services [5].
• The high degree of discretion given to providers in choosing services for patients puts patients in a vulnerable position. In most countries health professionals have assumed a cultural role as trusted healers who are above suspicion [6]. We don't like to believe that providers could have conflicts of interest that affect their judgement, but in fact this can be the case. The gap in information regarding various types of services provided is mentioned as a major problem in the study "Voices of Stakeholders in the Health Sector in Bangladesh [7] .
• Systems with direct public provision are prone to low productivity when insulated from competition or external accountability [8].
• Services are also highly decentralised and individualised making it difficult to standardize and monitor service provision and procurement [9]. Limited regulatory capacity in many developing countries adds to the problem [10].

The following processes stand out as having a high inherent risk of corruption: provision of services by medical personnel, human resources management, drug selection and use, procurement of drugs and medical equipment, distribution and storage of drugs, regulatory systems, budgeting and pricing.    

Measuring and documenting abuse and corruption is essential to diagnose, locate and address problems in the provision of basic health services. A series of empirical tools have been developed in the past few years to measure corruption, leakages and efficacy of public spending. Table 1 lists some of the tools that can be used to assess vulnerabilities to corruption. For example, USAID has produced a handbook "Tools for Assessing Corruption & Integrity in Institutions" [11a].The handbook looks specifically at several sectors, including health. Other empirical tools include Focus Group Surveys, Price Information Comparisons, Public Expenditure Tracking Surveys (PETS), Quantitative Service Delivery Surveys and Firm Level Surveys. The findings of these various studies have produced very valuable data, enabling stakeholders to identify, analyse and develop effective strategies to tackle the problems.

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Health finance systems and corruption

How and where corruption appears in the health sector depends partly on the health financing system (much of corruption found in the health sector is a reflection of general problems of governance and public sector accountability) [12]. A health finance system that directly finances the supply of services will be more vulnerable to corruption in procurement and abuses that undermine the quality of services. A system that relies on billing an insurance institution is generally more vulnerable to diverting funds. The first system is known as an integrated system, while the other, with a separation between finance and provider, is called a “finance/provider system”.  Integrated health systems are the most common form of public health systems in developing countries.  Countries with social insurance systems can however be found in middle income countries of Latin America and Asia [13] . In an essay contributed to Transparency International’s Global Corruption Report 2006, William Savedoff and Karen Hussmann explore how the type of national health financing system can affect the level of corruption (Part I: the causes of corruption in the health sector: a focus on health systems. Why are health systems prone to corruption?).”

Health financing and risks of corruption [14]

In low-income countries, tax usually funds 40 to 50% of total health expenditure, while social insurance finances 10 to 20% and direct out-of-pocket payments from patients' finances 20 to 40 %. Private insurance funds less than 10%. In transition economies, though, out-of-pocket spending can account for up to 75-80% of total health expenditure [16]. A necessary step for many low-income countries is to decide on a national health financing strategy taking into consideration availability of funds, equity and efficiency. Measures to reduce the waste of resources due to corruption should be an important part of any financing strategy.

Consequences of Corruption

On a macroeconomic level, corruption limits economic growth, since private firms see corruption as a sort of "tax" that can be avoided by investing in less corrupt countries. In turn, the lower economic growth results in less government revenue available for investment, including investment in the health sector. Corruption also affects government choices in how to invest revenue, with corrupt governments more likely to invest in infrastructure-intensive sectors such as transport and military, where procurement contracts offer potential to extract larger bribes, rather than social sectors like health and education. Within the health sector, investments may also tend to favor construction of hospitals and purchase of expensive, high tech equipment over primary health care programs such as immunization and family planning, for the same reason.

Corruption in the health sector also has a direct negative effect on access and quality of patient care. As resources are drained from health budgets through embezzlement and procurement fraud, less funding is available to pay salaries and fund operations and maintenance, leading to demotivated staff, lower quality of care, and reduced service availability and use [17]. Studies have shown that corruption has a significant, negative effect on health indicators such as infant and child mortality, even after adjusting for income, female education, health spending, and level of urbanization [18]. There is evidence that reducing corruption can improve health outcomes by increasing the effectiveness of public expenditures [19].

A review of research in Eastern Europe and Central Asia found evidence that corruption in the form of informal payments for care reduces access to services, especially for the poor, and causes delays in care-seeking behavior [20]. In Azerbaijan, studies have shown that about 35% of births in rural areas take place at home, in part because of high charges for care in facilities where care was supposed to be free [21]. In many countries, families are forced to sell livestock or assets, or borrow money from extended family and community members, in order to make the necessary informal payments to receive care.

Besides informal payments, other types of corruption which clearly affect health outcomes are bribes to avoid government regulation of drugs and medicines, which resulted in the dilution of vaccines in Uganda [22] and has contributed to the rising problem of counterfeit drugs in the world. Dora Akunyili, Director General of the National Agency for Food and Drug Administration and Control in Nigeria, writes eloquently about her struggle to lead Nigeria’s battle against counterfeit drugs [22b].Unregulated medicines which are of sub-therapeutic value can contribute to the development of drug resistant organisms and increase the threat of pandemic disease spread. In addition to fake and sub-therapeutic drugs on the market, corruption can lead to shortages of drugs available in government facilities, due to theft and diversion to private pharmacies. This in turn leads to reduced utilization of public facilities. Procurement corruption can lead to inferior public infrastructure as well as increased prices paid for inputs, resulting in less money available for service provision.

Unethical drug promotion and physician conflict of interest can have negative effects on health outcomes, as well. As documented by Jerome Kassirer, promotional activities and other interactions between pharmaceutical companies and physicians, if not tightly regulated, can influence physicians to engage in unethical practices [23]. Studies have shown that these interactions can lead to non-rational prescribing[24], and increased costs with little or no additional health benefit. Patients’ health can be endangered as some doctors enroll unqualified patients in trials or prescribe unnecessary or potentially harmful treatments, in order to maximize profit [25].

Further reading

Why are health systems prone to corruption?
William D. Savedoff and Karen Hussmann (page 4 of the Global Corruption Report 2006)

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