In Defense of Tipping Physicians

In recent years the practice in Hungary of routinely tipping physicians has come under much deserved criticism. The so-called “hálapénz rendszer,” or “gratitude money system” (though it is hardly sufficiently codified to merit the word “system”), originated under communism as a means of compensating for the modest wages physicians were paid by the state. While it has been more than twenty years since the change of regime, the practice has been slow to change, in part because physicians in Hungary are still poorly paid, at least in comparison with the salaries of doctors in other European Union countries, and no doubt in part because many physicians are loathe to abandon a practice from which they have profited for years or decades. Change is clearly inevitable and necessary, but it might be prudent, as consumers and policy makers weigh the advantages and disadvantages of different approaches to financing health care, to consider (wistfully and with some measure of irony) the merits of the practice of tipping.

I should be explicit: the point is not so much to defend tipping as to consider potential inadequacies and risks of other approaches to the funding of health care, in particular the introduction of private insurance, a solution proposed several times between 2000 and 2008, but also the suggestion (made for instance by István Mikola in an interview with Nick Thorpe in the January 2011 edition of Hungarian Review) that physicians negotiate independent contracts with health care providers (in simple terms, hospitals). Each of these proposals carries the risk of making the diagnostic decisions of doctors subject to financial imperatives of either a profit-based, often publicly traded insurance company or an institution that is obliged to maintain a competitive budget and therefore has an incentive to pressure doctors to tend towards diagnoses that involve less costly treatments. Essentially, either of the two above solutions would give financial considerations a more prominent role in the diagnostic process. From the perspective of economics, this makes perfect sense. From the perspective of the patient who has entrusted the physician with his or her health, it may demand at least a moment’s reflection.

In order to offer a stark illustration of the merits of tipping, it may make sense to consider the case of the United States, where until recently health insurance has been almost entirely in the hands of the private sphere. Again, the intention is not so much to defend tipping as to observe that questions of inequality, justness, and effectiveness are relative. It is not difficult to see the inadequacies and injustices of tipping, but in contrast with the inadequacies of a system on the other end of the private/public spectrum the shortcomings of tipping may seem less dramatic. To summarize the differences: while private insurance inevitably poses the problem of whether or not to offer treatment to the uninsured, the practice of tipping in general does not result in the denial of health care because payment is made after treatment has been given; whereas private insurance spreads costs evenly across a population of radically differing incomes, the practice of tipping allows for the possibility of payment in proportion to personal means; the practice of tipping enables the patient to pay physicians directly, rather than obliging patients to pay insurance companies, which have extensive administrative branches and ultimately are legally obliged to work in the financial interests of their investors. If the system of tipping is to be replaced in favour of the introduction of private insurance, Hungarian citizens would do well to develop a legal framework that safeguards these advantages before entrusting their health care to the private sector.

Of the advantages of the practice of tipping, perhaps the most obvious is that in principle payment is made after treatment has been given. No doubt there are many exceptions to this practice (though I personally have never once come across one, on the contrary my offers of tips have almost always been declined by physicians and nurses), but the case of the United States is nonetheless illustrative. In general, patients in the United States are expected to provide proof of insurance coverage before receiving treatment. As has been documented in innumerable news stories, patients in the United States who arrive in the emergency room of one hospital are routinely sent to another if their insurance policies are not accepted by the first, often resulting in grave complications and even death. The case of Mychelle Barris, featured in Michael Moore’s 2007 film Sicko, comes to mind, an eighteen-month-old who was taken by paramedics to hospital with a high fever. Rather than treat her, the physicians, under duress from her insurance company, transferred her to Kaiser Permanente, a hospital where her policy was accepted. This decision was made solely to enable the insurance company to pay so-called in-network (less expensive) costs of coverage. Mychelle died minutes after arrival at Kaiser Permanente of cardiac arrest.

It would be dishonest to refer to a single case as evidence of a systemic flaw if the case were exceptional, but Mychelle’s case was not exceptional. On the contrary, there is a webpage ( devoted to the memory of patients (a long list) who died because they were denied prompt, contractually guaranteed medical care by Kaiser Permanente, the largest so-called managed care provider in the United States. Crucially, the decisions to deny immediate care are not simply the consequence of honest mistakes by physicians. Rather they are products of a system under which physicians are under pressure from their employers (so-called health maintenance organizations, a sort of extreme form of the health care provide institutions to which Mikola refers) to allow considerations of cost to influence their recommendations for treatment. In principle, the practice of tipping avoids this problem because payment is made after treatment. Again, this is not to defend the practice of tipping as a viable solution. No doubt the policy is abused (lends itself to abuse), and no doubt there are physicians who demand tips up front. But one can at least see the merits, in principle, of settling financial questions after diagnoses have been made and care has been provided.

A second advantage to the practice of tipping is that because payments are not regulated there is at least the possibility that the actual amount will be determined in part by a patient’s means. Put more simply, a patient with a modest income may tip less than a wealthier patient. Proponents of the privatization of health care in Hungary may overlook the importance of this advantage. The supposition is that insurance itself is equally affordable for everyone, but given the cost of health care this is actually unlikely. If private health insurance companies are entrusted with the task of funding health care the actual costs of maintaining the system will be spread equally among all policy holders. In other words the wealthy will pay the same amount for health care as the poor. This is entirely appropriate if one views health care as in no way different from other goods and services, such as smart phones or interior design, but fortunately in Europe the view according to which access to basic health care is a right and not a privilege continues to prevail. Private health insurance is utterly incompatible with this view.

Finally, if I can be forgiven for adopting a mildly ironic elegiac tone, one of the great pleasures of tipping for someone who grew up in a system of privately funded health care is the satisfaction of giving money directly to a doctor instead of writing a check to an insurance company or health care provider institution. The practice of tipping a doctor who is poorly paid by the state spares patients the grief of dealing with the immensely complex administrative practices of private insurance companies. It may be difficult to appreciate fully the simplicity of handing an envelope with an unspecified amount of money to a doctor following an exam if one has never had to write numerous letters of appeal in order to be reimbursed by an insurance company months after having paid thousands of dollars for care. And one must keep in mind that the administrative practices of insurance companies are designed to maximize profit by minimizing interaction with policyholders. The more tedious the appeals process, the less likely patients are to pursue so it, so it is in the financial interests of an insurance company to hinder and hamper the attempts of their policyholders to receive coverage for treatment as vigorously as the law permits. Anyone who feels put off by the social awkwardness of having to tip a doctor should be spared the trials of having to spend hours on hold before finally speaking to a representative of an insurance company on the phone who reads from a company-approved set of dialogues written with the intention of bringing the conversation to an end as quickly as possible.

These words of praise for the practice of tipping physicians should not be misunderstood as a denial of its shortcomings, and certainly not as an argument in favour of its preservation. The practice lends itself to abuse and, more importantly, fails to divide compensation appropriately among health care professionals. Yet attempts to address these failings should not fail to recognize the risks of other approaches to funding health care. Crucially, the profit margins of an insurance company or the solvency of a health care provider institution should not take precedence over a patient’s health.

Over the past several years, doctors in Hungary have been accused time and time again in the media of corruption for accepting tips. Waiters, taxi drivers, hair dressers, hotel stewards are not, with the explanation that the tips are factored into their salaries, but the same is true of doctors. Everyone knows that in general they do not live off what they make on paper. For my part, the primary shortcoming of tipping is that while it may provide a good living for physicians who frequently come into contact with patients (the obvious example is a gynaecologist present for a birth), it does not provide adequate compensation for numerous other people whose contributions to health care are indispensable and who may well choose to leave the country and seek their fortunes elsewhere. But as far as those physicians who make a good living off tips, I do not begrudge them this. On the contrary I hope they come to work well-rested and with little or no financial cares or distractions.

Is it taking the theme to the absurd? I just want to point on how satisfying and necessary personal and direct communication between doctor and patient is – even in this less than ideal form of financial transaction. Compare this with the American doctor who never comes to one’s house, and is never even available by phone.

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