# **6. Informal Payments**

Corruption is a clear case of good governance gone wrong. Informal payments by definition lack performance fundamentals –incentives are wrong, information absent and accountability missing (see Box 1). Institutional performance as outlined in Figure 1 becomes dysfunctional where informal payments drive the financing and delivery of health care. Indeed their perpetuation suggests breakdown of public sector operations and both inequity and inefficiency in service provision. While fees are appropriate for the private sector illegal charging for free public services is simply a form of corruption and undermines good governance, provider performance, and fair access to publicly funded and delivered services.

Increasing evidence from across the world points to the phenomenon of under-the-table payments that patients are required to make to obtain the services of specific providers; for upgraded services; to reduce waiting times; as “insurance” for potential future visits; or simply for basic diagnostics and treatment at “free” public hospitals or clinics. Informal payments can be defined as “payments to individual and institutional providers, in kind or cash, made outside official payment channels, or purchases meant to be covered by the health care system” and they are a form of corruption meeting the corruption criterion of “use of public office for private gains” (Lewis 2007: 985; Bardhan, 1997).<sup>20</sup> Where such informal payments are required, often health workers at all levels charge informally with orderlies expecting compensation for moving patients within the hospital, nurses charging for their care, and physicians setting their own charges for diagnosis and treatment. The amount charged tends to vary with location, type of service, the provider, and in some cases, patient income.

Informal payments in public clinics and hospitals are a form of corruption, which raises serious issues that are very difficult to address. Informal payments are sometimes argued to be a coping strategy used by health workers to deal with low pay, instead, it may be more useful to view the practice as a response to opportunity. Charging underthe-table represents a trade-off between bribes earned and income lost if caught and dismissed. When the probability of being detected, and if detected penalized, is very low, as is the case in many developing and transition countries, informal payments tend to be more widespread.

The frequency of informal payments in the health sector offers an important indicator of underlying governance failures because it means fraudulent behavior is being tolerated, and it also offers insights into the extent of the problem within and across countries. The evidence, however, is surprisingly fragmented with a lack of country-level data and indicators that thwart meaningful cross-country comparisons.

Relevant data aimed at informing policy can be obtained by collecting information on the prevalence of such practices and how they operate through household surveys, facility exit surveys, and governance and anti-corruption studies, providing a basis for

> 20 Shortages of supplies and drugs at points of service often force patients to purchase these items (Tatar et al. 2007; Zaidi et al. 2009). This is an example of patient payments that do not constitute corruption as fees are not paid directly to providers for specific services but signal governance failure.

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