Further evidence on the link between healthcare spending and health outcomes in England

Executive summary 

Since 2003 each primary care trust (PCT) in the English NHS has prepared data on spending on healthcare across 23 programmes of care based on the International Classification of Diseases Version 10 (ICD-10). These data offer great opportunities for examining the link between healthcare spending and health outcomes across PCTs.

There is extensive international literature on this topic, but very little solid empirical evidence on the magnitude of the link. Indeed many authors claim that – at the margin – extra healthcare spending has little impact on health.

In this study we update results of an earlier study [1] on mortality rates and cancer and circulation problems using expenditure data for 2005/06. Using this data set, we also apply our outcome and expenditure models to several other programmes of care. We present satisfactory regression results for five further programmes: neurological, respiratory, gastro-intestinal, diabetes, and trauma, burns and injuries.

Years of life lost 

Using a measure of ‘years of life lost’ instead of a mortality rate as the measure of health outcome, it is also possible to estimate the spending required to ‘save’ one extra year of life in each disease category. We estimate that, on the basis of expenditure data for 2005/06, the marginal cost of a life year saved is:

• £13,931 for cancer (£13,137 using 2004/05 expenditure data)
• £8,426 for circulation problems (£7,979 using 2004/05 expenditure data)
• £7,397 for respiratory problems
• £18,999 for gastro-intestinal problems
• £26,453 for diabetes.

Note these results have quite large confidence intervals and should be treated with caution.

The results are useful from a number of perspectives. Scientifically, they confirm our previous findings that healthcare has an important impact on health across a range of conditions, suggesting that those results were robust across programmes of care and across years.

Policy implications for resource allocation

From a policy perspective, these results can help set priorities by informing resource allocation across a larger number of programmes of care. They also add further evidence to help NICE decide whether its current QALY threshold is at the right level.

[1] The link between healthcare spending and health outcomes: evidence from English programme budgeting data
> Programme budgeting report (270 kb)

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