Sustainability of Publicly Funded Health Care Systems: What Does Behavioural Economics Offer?


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.

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  1. 1.

    Libertarian paternalism is not the only normative proposition that has arisen from BE. For a recent critique and contractarian proposal, see Sugden [9].

  2. 2.

    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.

  3. 3.

    In Sunstein’s [13] 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.

  4. 4.

    van Winssen et al. [19] made several related points about the implications of BE for the choice architecture and menus offered in private health insurance markets.

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    Akerlof and Kranton [23] 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.”.

  6. 6.

    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.


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Correspondence to Stephen Birch.

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Luke B. Connelly and Stephen Birch have no conflicts of interest that are directly relevant to the content of this article.

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Author Contributions

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.

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Connelly, L.B., Birch, S. Sustainability of Publicly Funded Health Care Systems: What Does Behavioural Economics Offer?. PharmacoEconomics (2020).

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