This project estimates the mortality and quality of life effects, or simply the health effects, of variations in expenditure on health care, public health and social care across English local authorities. Estimates of this kind are useful for informing a range of public policies. They provide information about the likely effect on health of increasing or decreasing the amount of money spent on these services. In addition, when a decision is made to fund an investment this requires money that is no longer available for other activities. These estimates help to assess whether the investment represents good value for money or not, by comparing the health effect of the investment with the health effect of what otherwise would have been done with the same money (the health opportunity cost).
The data we use are publicly available and relate to 152 geographic areas within England called local authorities. Health care and public health budgets are allocated by central government to local authorities using resource allocation formulae, while social care budgets reflect a mix of revenues from local taxation and central funds. We use area-level data from various resource allocation formulae and measures of health and social care need to estimate the impact of variations in expenditure on health and social care outcomes.
Even after controlling for the area-level measures of need for health or social care, estimation of the health effects of variations in expenditure is challenging for two key reasons. First, there may be difficulty in isolating the effect of expenditure on health when there may be an effect in the opposite direction. For example, higher levels of expenditure may reduce local mortality, but high levels of mortality may attract additional funding from central government to deal with the problem. Second, there may be other factors which are unobserved and whose effect on outcomes may be wrongly attributed to the effect of expenditure. As a result, we use an method called instrumental variable regression that helps to address these issues.