Managing Policymakers’ Biases in Dealing with Uncertain Hospital Capacity Needs

We rely on a simple choice model of hospital-capacity decisions to highlight the relevance of policymakers’ behavioural biases in the management of health care demand uncertainty. We show that matching ex-ante the design of the fiscal approach to financing hospitals with the policymakers’ behavioural biases could reduce care-rationing risks. However, the effectiveness of the financing choice also depends on the levels of operational and social costs the policymakers decide to work with in their assessments of needs. The model can also be used ex-post to reveal undeclared behavioural biases and use this information to improve future financing policy designs.