Hungary's Medical Profession's Game with the Government
by Pavel Ovseiko

This articles uses game theory to conceptualize the challenges Hungary’s health sector currently faces in relation to effective governance. The prisoner’s dilemma game can illustrate the structure of the interaction between the medical profession and the government. To optimize the health sector’s performance these two actors must cooperate. The article considers two problems causing ineffectiveness, inefficiency, and inequality—"gratitude money" and adverse incentives—and suggests how cooperation between the medical profession and the government could address these problems.

In Hungary, doctors and pharmaceutical and medical equipment manufacturers took advantage of the state’s loss of control over the health sector and the introduction of market mechanisms in the public health system. Patients pay doctors gratitude money in the hope of receiving better prescriptions, securing attention, jumping a line, obtaining a referral to a hospital so as not to have to pay for prescribed drugs, taking sick leave, and being treated in a high-profile hospital or by a leading specialist. Similarly, to sell more drugs pharmaceutical companies pay doctors "in gratitude" for prescribing their products with up to 10 percent of the cost of the prescribed drugs, gifts, or invitations to "conferences" in exotic places. (Note that it was only in 2000 that the government introduced a law banning doctors from accepting gifts from pharmaceutical companies.) In addition, to boost sales the manufacturers of medical equipment and commercial health care providers offer premium deals to doctors with negotiating power.

Adverse Incentives and Gratitude Money

In terms of adverse incentives, nonpurposeful mismanagement and incompetence on the part of reformers account for considerable efficiency losses. For example, instead of providing a definitive course of treatment, general practitioners, who receive salaries according to the number of patients they serve, are enticed to quickly prescribe drugs and refer problematic patients to specialized inpatient clinics. The cost of inpatient care is much higher than that of outpatient care. Moreover, in inpatient clinics doctors’ salaries are performance based. Thus doctors have incentives to keep patients as long as possible and to prescribe expensive treatments.

Rooting out the problems of gratitude money and adverse incentives is extremely difficult, as both result from maximizing behavior on the part of patients, doctors, and the medical industry. Minimizing the effects of these problems requires either changing the incentive system or finding ways to eliminate these problems within the context of existing health sector arrangements. Because changing these arrangements is difficult and expensive, finding new options that will improve efficiency is desirable.

In my opinion, for the time being the authorities must refrain from pursuing costly, radical changes and from following blind hopes that liberalization, democratization, and decentralization policies by themselves can put things right. Such policies can bring about effectiveness and efficiency in the long run, and society will eventually regulate the free market through civic groups, political parties, trade unions, patient rights groups, and professional organizations of doctors. In the meantime, however, policymakers should focus on finding practical solutions for problems that reduce the effectiveness, efficiency, and equity of existing health sector arrangements.

Short-Term Solution

The phenomena of gratitude money and adverse incentives persist because of medical professionals’ low salaries. Under pressure to reduce public expenditure, the government cannot devote sufficient resources to finance the health sector. This was also true under the socialist system. The communist government took gratitude money into consideration and set salaries and wages in the health sector lower than it might have done in the absence of such payments, allowing patients to top up doctors’ salaries and the wages of auxiliary staff. Another consideration concerns the interests of the medical profession. Clearly if gratitude money constitutes up to 90 percent of doctors’ incomes, even a tripling or quadrupling of their official salaries will not create a sufficient incentive for them to abstain from accepting gratitude money. Similarly, if doctors continue to have incentives to prescribe expensive drugs, they will do so. Thus an effective system of penalties and policing is needed.

The problems result from interaction between the government and the medical profession. The government’s strategy of accusing the medical profession of corruption serves to manipulate public opinion. The public knows firsthand about corruption in the health sector, but corruption in the government is less apparent. Meanwhile the medical profession’s attempts to preserve the publicly funded health system are not solely altruistic, and are often motivated by the self-serving interests of the current medical elite.

Thus as concerns the "game" the medical profession and the government play, the current situation of gratitude money and adverse incentives represents equilibrium. As such, no player can gain by unilaterally switching to another strategy. The government’s dominant strategy is to accuse the medical profession of corruption and to make doctors responsible for the problems of the health service, thereby absolving itself from its own responsibility for public health. As for the medical profession, the current situation allows senior doctors (who represent the medical profession in political circles) to earn high incomes and preserve their top positions in the medical hierarchy. Obviously such an equilibrium is suboptimal.

The government can no longer control the medical profession, and therefore requires its cooperation to establish and enforce a set of cost-contained and effective treatment procedures that doctors should follow, penalties for deviation from these procedures, and an enforcement system. The medical profession has no reason to regulate and restrict its activities as long as such measures neither ensure high incomes for doctors nor contribute toward the profession’s development. Thus to promote cooperation, the government must increase official salaries in the health sector. If doctors receive high official incomes, they would be interested in excluding colleagues who are incompetent and/or violate professional norms and procedures from their profession (though the possibility of negative solidarity among doctors should not be excluded). Therefore the medical profession should delegate a certain amount of control and policing functions to the state. In return the state should delegate some powers to the medical profession to participate in health policymaking in relation to doctors’ salaries, costs and content of medical procedures, organizational reforms, and so on.

Is Cooperation Possible?

In the prisoner’s dilemma game, cooperation is beneficial for players, even though it can be viewed as irrational. The expectations of players who consider taking a cooperative strategy that their counterparts will inevitably cheat them determines that both players stick to a competitive strategy. A great deal of trust between the players is needed to allow them to abandon rational strategies of competition and to "irrationally" choose a cooperative strategy. This trust can be generated between the government and the medical profession only through personal relationship building. If leaders of the medical profession and the government achieve this, then they can agree on an unbiased framework that would facilitate the medical profession’s participation in health policymaking with a view to enhancing overall efficacy. To have an effective, efficient, and equitable health system, the government needs to introduce reform in cooperation with the medical profession, but whether it can achieve this in practice remains an open question.

The author is an International Policy Fellow at the Center for Policy Studies, Open Society Institute. This article is based on IPF Public Health Working Paper no. 2002-02. The full text of the paper is available at http://www.policy.hu/ovseiko.