RUTHFULLY YOURS

ATHENS—A few years ago, George Gianakouras, a retired salesman of hotel supplies from the Greek port town of Volos, was feeling sluggish. His doctors diagnosed heart disease. He was given cardiac drugs and scheduled for angioplasty and stenting at a hospital in Thessaloniki, Greece’s second city.

Like nearly all Greeks, Mr. Gianakouras was covered by a state social-security fund, which paid €10,000 ($13,600) for the hospital bill. There was one more thing: Mr. Gianakouras said he gave his surgeon “black money”—€5,000 in cash—to perform the operation.

“If you don’t pay,” he said, “you don’t get anything done.”

Greece’s constitution obliges the state to provide health care to citizens. By and large, it does. But the system is a mess. It is stuffed with debt, plagued with corruption such as the bribes Mr. Gianakouras said he paid, and hobbled by inefficiency and inequity.

In many ways, the health-care system is a microcosm of Greece itself. Big debts in the public hospital system helped usher in Greece’s financial crisis in 2009, and health care is now a key battleground as the country struggles to escape it.

Greece on Friday swore in Prime Minister Lucas Papademos’s caretaker government, which is expected to continue the path toward austerity that includes health-spending cuts that have been demanded by the international monitors of its bailout deal.

Amid Greece’s crisis, doctors have staged sporadic strikes to protest a plan that would consolidate social-security funds and tamp their wages. The government is wrestling over prices with pharmaceutical companies, some of which have cut off public hospitals after seeing their bills go unpaid.

Roche Holding AG this year said it stopped selling cancer drugs to some public institutions because of nonpayment, delivering them instead to pharmacies, which are more reliable customers.

Inside the public system, cash shortages are routine. Evasion of employment taxes shortchanges the social-security funds, which in turn make skimpy reimbursements to hospitals. Cash-poor public hospitals often don’t pay their suppliers and turn to the government to foot the bills.

At the end of June, public hospitals owed drug companies €693 million for last year’s sales, according to the local drug-industry trade group. Last year, Greece settled some bills with special government IOUs. That added to a government debt burden of €360 billion that has sparked Europe’s worst economic crisis since World War II.

Public health care’s strained finances have created a large private system, widely used by wealthier Greeks, as well as a shadow system built heavily on bribes—the envelopes of cash known in Greece as fakelaki. Generally, €20 to €50 buys a fast, basic office visit; surgeries can be thousands of euros, according to figures from Transparency International, the anticorruption group, which rates Greece the European Union’s most corrupt country.

“The state has exchanged public funding for private, under-the-table payments,” said Lycourgos Liaropoulos, a professor at the University of Athens and a prominent health-care economist. A study by Mr. Liaropoulos and his colleagues found that Greeks spend nearly as much on bribes and other “informal” payments as they do on “formal” costs such as insurance co-pays.

Bribery is so endemic that visitors to Evaggelismos Hospital in the heart of Athens will spot peculiar stickers in a corridor leading to the surgical suite. They look from a distance like no-smoking signs. But in place of the lit cigarette crossed through with a red line, there’s a hand offering an envelope.

The system is plainly under strain. Petros Avgerinos, an internist at the Polyclinic Omonia, a public facility in central Athens, said the hospital recently went several months without needles for bone-marrow biopsies. Like many doctors and some policy makers, he suggests legalizing the forbidden payments to help finance hospitals. “Greeks don’t feel well if they don’t pay their surgeon. It’s like a dowry,” Dr. Avgerinos said.

Dr. Avgerinos said he never asks for extra payments. Some patients insist on a gift. “Sometimes they bring presents, like a bottle of wine,” he said. “Sometimes they bring cash.” He said he has accepted small amounts—”not more than €400 a year”—and “this does not direct my judgment or seeing of patients.”

Government officials say the problem isn’t underpayment to doctors and providers—it’s overpayment. Athina Dretta, the top civil servant overseeing the state health-insurance funds, said the system was plagued by overbilling. Doctors, she said, “prescribe medicine that is unnecessary.”

Athens and the pharmaceutical industry continually square off. Ms. Dretta said Greece has cut the funds’ drug spending from €5.2 billion in 2009 to €4.4 billion last year, thanks in part to a pilot effort to monitor doctors’ prescribing habits.

Dioynsios Filiotis, who runs Eli Lilly‘s Greek arm and is head of the country’s drug-company trade group, acknowledged that “there is overprescribing in the system.” But he said the Greek government is a problematic customer: For years, he said, Greece didn’t budget for pharmaceuticals in the state hospitals. Bills would stack up, and every few years, the government would pay. “Up to this crisis, we used to get our money,” Mr. Filiotis said. “This time it was very different.”

Instead of money, the drug companies were given government bonds to settle €5.4 billion in unpaid bills from 2007 to 2009. The bonds amounted to nearly 20% less than the full sum, and the firms fear they may see further discounts in the coming debt restructuring.

Doctors will often find sympathy from patients. Even Mr. Gianakouras, the man who paid an extra €5,000 for his surgery, said: “We have good doctors, but they are not paid well.”

But government officials say doctors are among the biggest tax evaders in a country with plenty of them. Since Greece’s financial collapse, Nikos Lekkas and his team of tax-crime specialists have started more than 700 in-depth audits of doctors, an effort the government says is aimed at containing costs and boosting revenues. One physician declared no income for four years, Mr. Lekkas said; the auditors found €2.2 million of income in that period. Another had €53,000 in declared income and €812,000 off the books.

Giorgios Patoulis, the head of the doctors’ union in greater Athens, decries the tax audits. “The objective was mainly to smear” doctors, he said. A doctor needs a “respectable fee, so he and his family can live.”Dr. Patoulis says reimbursement rates—particularly for primary care—are exceedingly low. After expenses, he said, a doctor might see only a few euros from each visit. “We’re not satisfied with that.”

Dr. Patoulis, an orthopedic surgeon, is also the mayor of the Athens suburb of Maroussi. The town-hall office in which he receives visitors is adorned with elegant carpets, a clutch of leather club chairs and a dark wood conference table. On one wall hangs a replica of Jacques-Louis David’s painting of the coronation by Napoleon of Empress Josephine.

He said the fakelaki are a consequence of low salaries and the state’s attempts to run a system on the cheap. “Above all, the state needs to make clear what kind of health care it wants to provide its citizens,” Dr. Patoulis said. “When it says the system should be free, it should be free. That means payment for the doctors who carry this out.”