A Gold Ring Cannot Fix a Hospital: Two Stories of Incentivizing the Wrong Problem

Guest blog by Prarthna Dayal

A gold ring to encourage women to deliver in public hospitals.

Yes. The Government of Tamil Nadu, a state in India has announced exactly that. The states’ new Thaimaman Thanga Mothiram Thittam scheme will provide a one-gram gold ring to babies born in government hospitals, aiming to encourage families to choose public facilities – in a state where 99.7% of births already happen in health facilities. The scheme has an annual allocation of ₹755.83 crore (USD 78.8 million).

The problem that the Tamil Nadu government is solving for is a steady drift away from government hospitals which are free, towards private ones, where care can cost 6-8 times more.

There is nothing inherently wrong with using incentives in public policy. The problem comes when an incentive is used to solve a problem whose causes lie elsewhere.

If families are willing to pay many times more for a private delivery, what are they paying for? Perceived differences in quality, cleanliness, responsiveness, waiting times, privacy, dignity, availability of staff and medicines, or simply trust in the care they receive. A gold ring resolves none of these deficiencies in public hospitals.

The instinct to hand someone a benefit or a subsidy rather than fix what’s broken underneath, is pervasive in how we often approach development. It has appeal to both politicians and the public. There are many examples of this from across countries in Asia and Africa where cash transfers to women to deliver in facilities led to increased utilisation but did not address the fundamental quality issues plaguing these facilities. There is a powerful attraction to policies that are immediate, visible and tangible.  The gold ring is only the latest version of the same reflex. The alternative—reforming a public health system—is much harder.

That’s why it was heartening to see the Government of India’s Parliamentary Standing Committee on Health and Family Welfare recently released Report on Affordability and Accessibility of Healthcare Facilities in the Public and Private Sector making a strong case for exactly this harder path: systematic investment in public-sector infrastructure to strengthen the capacity of Community Health Centres, District Hospitals and state-run medical colleges to deliver dependable emergency obstetric and paediatric care. If we want people to choose public hospitals, we have to make public hospitals work.

But money alone doesn’t translate into better functioning services.  Public hospitals are notoriously resistant to reform – across high-income, low-and middle-income contexts alike – even when reforms offer economic incentives, like hospital autonomy or pay-for-performance.

I looked at this conundrum recently – of why economic incentives built into reforms don’t always translate into action? Specifically, why public hospitals in a resource-constraint setting were not interested in engaging with a strategic purchasing reform which would provide an additional source of revenue to improve their functioning?

What surprised me was public hospital leaders either claiming they had sufficient funds or blaming junior contractual staff for non-performance and engagement with the scheme. This response was striking given how chronically underfunded public hospitals are known to be. Either longstanding resource constraints had become normalised, or that hospital leaders were consciously distancing themselves from the additional revenue.

The real explanation for their disinterest in the extra money lay not in the incentive itself, but in how existing institutional relationships, structures and patterns of behaviour in the public sector determined whether that incentive was seen as worth pursuing at all.

First, existing resource shortages – understaffing, poor infrastructure, unreliable electricity – combined with what were considered tedious processes, made lodging claims genuinely challenging. Doing it required initiative and experimentation – to align hospital systems to obtain required information and complete the paperwork – that were not in tune with how hospital leaders were used to working. They were used to following routine administrative procedures to execute budgets, not being entrepreneurial or investing additional effort to generate revenue.

Second, there was a risk attached to getting the money and no incentive to take the risk of using it, and in fact every incentive not to. They operated in an institutional environment marked by low trust and punitive means of oversight. This intersected with an absence of a performance management system that recognised their utilisation of funds to improve services, making risk avoidance a rational choice. As one government official put it, “Everyone is scared of scrutiny….and zero penalty for not doing anything but potential penalty for doing something.” There was an absence of incentives for public hospital leaders linked to hospital improvement.

Third, externally contracted staff and parallel implementation structures – set up presumably to work around an under-resourced bureaucracy – instead enabled everyone with real authority to disown responsibility by being able to lay blame elsewhere, often on the contractual staff with no power to change anything.

Inaction, in other words wasn’t a failure of individual motivation. It was a socially embedded disposition produced and reinforced by fragmented governance arrangements and weak accountability, misaligned incentives, challenging processes, resource and capacity constraints, and institutionalised patterns of behaviour.

This points to a deeper pattern in policymaking: reforms are too often designed on simplistic economic assumptions — that economic incentives carry a fixed, self-evident value and people respond predictably to them, regardless of context.

Health systems are social systems. Reforms have to work through existing institutions, organizational cultures, relationships, and power structures. They have to be understood and acted upon by the people expected to implement them.

These learnings could help inform countries like India as they embark on investing in their public hospitals. Below are a few suggestions:

• Integrate new initiatives with existing programmes and structures rather than simply adding another layer – so that responsibility is aligned with authority.
• Involve the people actually delivering services in defining problems and designing solutions – to build real ownership.
• Create monitoring systems that generate feedback and learning—and genuine incentives for improvement – simply identify failure and assign blame.
• Be willing to adapt when policies do not work as intended.

This is slower, harder work – it demands long-term commitment and a willingness to address the root of a problem, not a glittery gift wrap around it.  

A gold ring might attract attention. A functioning public health system is harder to gift.