Does health insurance coverage reduce informal payments? Evidence from the "red envelopes" in China

Representing a major threat to both equity and efficiency of health systems, the corrupt practice of informal payments is widely found in developing and transition countries. As informal payments are more likely to occur in health systems characterized by a high out-of-pocket payment rate, it is argued that formalized prepaid health insurance programs may help to curb such practice.

Using panel data from the China Health and Retirement Longitudinal Survey, this study examined the association between changes in health insurance coverage on patient's behavior proxied with informal payments.

The statistical results reveal that health insurance status in fact increases the probability of patients making informal payments to physicians. However, this association varies among population groups and insurance programs, particularly between social health insurance and private health insurance status.

In a health system characterized by unequal allocation of medical resources, the dual pursuit of cost saving and quality of care may drive patients to make informal payments for personal gains. This study argues that health policy interventions aimed at curbing informal payments must be based on a thorough understanding of their complex socioeconomic causes and attack the perverse incentives in a coherent and bona fide manner.