There has been a rapid increase in the use of behavioural economics (BE) as a tool for policy makers to deploy, including in health-related applications. While this development has occurred over the past decade, health care systems have continued to struggle with escalating costs. We consider the potential role of BE for making improvements to health care system performance and the sustainability of publicly funded health care systems, in particular. We argue that the vast majority of applications in this field have been largely focussed on BE and public health, or the prevailing level of risks to health in populations, and with policy proposals to ‘nudge’ individual behaviour (e.g. in respect of dietary choices). Yet, improvements in population health may have little, if any, impact on the size, cost or efficiency of health care systems. Few applications of BE have focussed on the management, production, delivery or utilisation of health care services per se. The latter is our focus in this paper. We review the contributions on BE and health care and consider the potential for complementing the considerable work on BE and public health with a clear agenda for behavioural health care economics. This agenda should complement the work of conventional microeconomics in the health care sector.
This is a preview of subscription content, log in to check access.
Buy single article
Instant access to the full article PDF.
Price includes VAT for USA
Libertarian paternalism is not the only normative proposition that has arisen from BE. For a recent critique and contractarian proposal, see Sugden .
Nor do they resolve how the paternalist is to know the preferences of the decision takers. Such broader philosophical matters are beyond the scope of the current paper. Applied BE essentially proceeds on the assumption that such questions can or have been resolved or are unimportant or that positive net social benefits may be assumed when some balance is struck between liberalism and paternalism.
In Sunstein’s  terms, this definition of BE excludes “hard” paternalism and targeting “ends” rather than means. But not all discussions of BE explicitly exclude these types of policies from consideration.
van Winssen et al.  made several related points about the implications of BE for the choice architecture and menus offered in private health insurance markets.
Akerlof and Kranton  proposed that individuals experience positive utility from working for an organisation whose values they identify with and vice versa. The former are referred to as “insiders” and the latter as “outsiders.”.
They reported data on proportions of respondents from different employer types that suggest their sample was representative of the Centre for Global Development’s subscriber base.
Madrian BC. Applying insights from behavioural economics to policy design. Annu Rev Econ. 2014;6:663–88.
Ball S, Hiscox H, Oliver T. Starting a behavioural insights team: three lessons from the Behavioural Economics Team of the Australian Government. J Behav Econ Policy. 2017;1:21–6.
Meng L, Chapman GB. Nudge to health: harnessing decision research to promote health behaviour. Soc Pers Psychol Compass. 2013;7(3):187–98.
Simon HA. Behavioural economics. In: Macmillan Publishers Ltd (eds) The New Palgrave Dictionary of Economics. London: Palgrave Macmillan; 2018.
Rice T. The behavioural economics of health and health care. Annu Rev Public Health. 2013;34:431–47.
Thaler RH, Sunstein CS. Libertarian paternalism. Am Econ Rev. 2003;93(2):175–9.
Sunstein C and Thaler RH. Libertarian paternalism is not an oxymoron. University of Chicago Law Review. U Chi L Rev. 2003;70(4):1159–1202.
Sugden R. On nudging: a review of nudge: improving decisions about health, wealth and happiness by Richard H. Thaler and Cass R. Sunstein, Int J Econ Bus. 2009;16:3, 365–73.
Sugden R. The community of advantage: a behavioural economist’s defence of the market. Oxford: Oxford University Press; 2018.
Thaler RH, Sunstein CR. Nudge: Improving decisions about health, wealth, and happiness. New Haven: Yale University Press; 2008.
Reimer D, Houmanfar RA. Internalities and their applicability for organizational practices. J Organ Behav Manage. 2017;37(1):5–31.
Kahneman D. Thinking, Fast and Slow. New York: Farrar, Straus Giroux; 2011.
Sunstein CR. Why nudge? The politics of libertarian paternalism. New Haven: Yale University Press; 2014.
Stiglitz JE. Countering the power of vested Interests: advancing rationality in public decision-making. J Eco Issues. 2017;51(2):359–65.
Vlaev I, King D, Dolan P, Darz A. The theory and practice of “nudging”: changing health behaviors. Public Adm Rev. 2016;76(4):550–61.
Fine B, Johnston D, Santos AC, van Waeyenberge E. Nudging or fudging: the World Development Report 2015. Dev Change. 2016;47(4):640–63.
Li M, Chapman GB. “100% of anything looks good”: the appeal of one hundred percent. Psychon Bull Rev. 2009;16:156–62.
Tversky A, Kahneman D. Judgment under uncertainty: heuristics and biases. Science. 1974;185(4157):1124–31.
Van Winssen KPM, van Kleef RC, van de Ven WPMM. The demand for health insurance and behavioural economics. Eur J Health Econ. 2016;17:653–7.
Van Winssen KPM, van Kleef RC, van de Ven WPMM. How profitable is a voluntary deductible in health insurance for the consumer?’. Health Policy. 2015;119(5):688–95.
Van Winssen KPM, van Kleef RC, van de Ven WPMM. Potential determinants of deductible uptake in health insurance: how to increase uptake in The Netherlands? Eur J Health Econ. 2016;17:1059–72.
Oliver A. Incentivising improvements in health care delivery. Health Econ Policy Law. 2015;10:327–43.
Akerlof GA, Kranton RE. Identity economics: how identities shape our work, wages, and well-being. Princeton: Princeton University Press; 2010.
Doran T. Incentivising improvements in health care delivery: a response to Adam Oliver. Health Econ Policy Law. 2015;10:351–6.
Vrangbaek K. Commentary to Adam Oliver’s ‘Incentivising improvements in health care delivery’. Health Econ Policy Law. 2015;10:367–71.
Holmås TH, Kjerstad E, Luråsd H, Straume OR. Does monetary punishment crowd out pro-social motivation? A natural experiment on hospital length of stay. J Econ Behav Organ. 2010;75:261–7.
Judson TJ, Volpp KG, Detsky JS. Harnessing the right combination of extrinsic and intrinsic motivation to change physician behaviour. J Am Med Assoc. 2015;314(21):2233–4.
Möllenkamp M, Zeppernick M, Schreyögg J. The effectiveness of nudges in improving the self-management of patients with chronic diseases: a systematic literature review. Health Pol. 2019;123:1199–209.
Trujillio AJ, Glassman G, FleisherLK, Nair D, Dinzhan D. Applying behavioural economics to health systems of low- and middle-Income countries: what are policymakers’ and practitioners’ views? Health Pol Plan. 2015;30(6):747–58.
Chapman GB, Li M, Colby H, Yoon H. Opting in vs opting out of influenza vaccination. JAMA. 2010;304(1):43–4.
Milkman KL, Beshears J, Choic JJ, Laibsond D, Madrian BC. Using implementation intentions prompts to enhance influenza vaccination rates. Proc Natl Acad Sci. 2011;108(26):10415–20.
Patel MS, Volpp KG, Small DS, Wynne C, Zhu J, Yang L, Honeywell S Jr, Day SC. Using active choice within the electronic health record to increase influenza vaccination rates. Gen Intern Med. 2017;32(7):790–5.
Schmidt H. The ethics of incentivizing mammography screening. JAMA. 2015;314(10):995–6.
Gøtzsche PC, Jørgensen KJ. The Breast Screening Programme and misinforming the public. J R Soc Med. 2011;104:361–9.
Viscusi WK. Do smokers underestimate risks? J Polit Econ. 1990;98(6):1253–69.
Lowenstein G and Ubel P. Economics behaving badly. NY Times. New York: The New York Times: A31; 2010.
This work was not supported by external funding.
Conflicts of interest
Luke B. Connelly and Stephen Birch have no conflicts of interest that are directly relevant to the content of this article.
Availability of data and material
All sources are in the public domain.
Ethics approval was not required for this work as it involved no human or animal subjects.
Connelly and Birch jointly developed the outline of the paper, devised and supervised the literature search, undertook the literature review and drafted sections of the paper. Both authors reviewed and amended early drafts of the manuscript and reviewed and approved the paper for submission. Both authors contributed to revisions to the manuscript following the helpful comments of two anonymous referees.
About this article
Cite this article
Connelly, L.B., Birch, S. Sustainability of Publicly Funded Health Care Systems: What Does Behavioural Economics Offer?. PharmacoEconomics (2020). https://doi.org/10.1007/s40273-020-00955-x