The Five Bad Habits of Healthcare

Health spending is on an unsustainable course in many advanced economies. Not only will it force painful trade-offs with other priorities such as education, infrastructure or welfare, for some countries the explosion in health expenditure will also threaten their future fiscal health. Yet, traditional methods of expenditure control (for example rationing, price capping and the introduction of competition) appear to have had limited success. This may be in part because these traditional policies are based on how people should behave when they are rational and not on how they actually behave. These irrational behaviours contribute to the problem of increasing health expenditure. Drawing on the work of the 2010-2011 World Economic Forum Healthcare Industry Global Agenda Council, we identify five important and pervasive “bad habits”, which contribute to this spending problem. This discussion paper illustrates how these bad habits drive increased heath expenditure. It also explores the well-known biases and other influences which help explain them. More importantly, we can develop a fuller and more effective set of tools for containing both demand for healthcare and its costs.