Does health care spending improve health outcomes? Evidence from English programme budgeting data

Abstract

Empirical evidence has hitherto been inconclusive about the strength of the link between health care spending and health outcomes. This paper uses programme budgeting data prepared by 295 English Primary Care Trusts to model the link for two specific programmes of care: cancer and circulatory diseases. A theoretical model is developed in which decision makers must allocate a fixed budget across programmes of care so as to maximize social welfare, in the light of a health production function for each programme. This yields an expenditure equation and a health outcomes equation for each programme. These are estimated for the two programmes of care using instrumental variables methods. All the equations prove to be well specified.They suggest that the cost of a life year saved in cancer is about £13,100, and in circulation about £8,000. These results challenge the widely held view that health care has little marginal impact on health. From a policy perspective, they can help set priorities by informing resource allocation across programmes of care. They can also help health technology agencies decide whether their cost-effectiveness thresholds for accepting new technologies are set at the right level.

Inference in the presence of redundant moment conditions and the impact of government health expenditure on health outcomes in England

“…In practice, the funding rule is not exact but Z 1 , Z 2 and Z 3 are the main determinants of E; as a result, we refer to these variables as "stronger instruments" to reflect their relative importance in the determination of E. We also consider the inclusion of other other instruments, such as variables that are related to N (but not H), which tend to be of lesser importance in the determination of E; these variables we have already labelled "near redundant", and are similar to those used by Martin, Rice, and Smith (2008).…”

Public Finance, Economic Growth and Inequality

“…Turning to the link between spending and health outcomes (e.g. life expectancy, mortality), the empirical evidence is so far inconclusive about the strength of the link between health care spending and health outcomes (Martin et al, 2008;Joumard et al, 2010). This is partly because other factors such as life-style, diet and environment are perceived as key factors determining health outcomes.…”

The Politics of Access to Expensive Drugs: INESSS and the Innovative Pharmaceutical Industry

“…The Methodology Research Programme funded by the National Institute for Health Research and Medical Research Council has funded research to establish appropriate methods to estimate the NHS threshold based on routinely available sources of data. This research extends earlier econometric analysis [17][18] which utilised NHS programme budget data and mortality data for different programmes of care to estimate the relationships between programme expenditures and health outcomes. The results of this initial work are summarised in Table 1. This analysis is being extended in a number of ways by the current research.…”