NCPA - National Center for Policy Analysis

HIGHER HEALTH SPENDING SAVES LIVES

November 8, 2007

Comparing outcomes of patients who are exposed to different health care systems that were not designed for them (i.e. patients who are far from home) shows that medical emergencies occurring in areas that have high health care spending, patients are more likely to survive, according to a new National Bureau of Economic Research Working Paper.

This result comes from analyzing groups of counties with similar lodging prices that are also popular tourist destinations -- areas that are likely to be close substitutes in terms of vacations, and that provide credible variation in health care systems.  According to study author Joseph Doyle:

  • If the medical emergency occurred in a high-spending area, the patient was significantly more likely to survive.
  • A typical comparison of a high-spending area and a low-spending one means a 50 percent difference in health care spending intensity.
  • This disparity is associated with a 1.6 percentage-point lower mortality rate among heart emergency patients.
  • Based on that estimate, the additional cost of a statistical life-year-saved is on the order of $50,000 -- similar to the estimate from health improvements over time, and well below the typical value of a life-year-saved of $100,000.

Doyle also points out that visitors choose their destinations, and if relatively healthy individuals were to choose high-spending areas, his main results would reflect these differences.  However, his estimates are robust across different types of patients, including those with various income levels, and within groups of destinations that can be characterized as close substitutes.  The returns to spending are lower in places where the visitors were more likely to select the destination with the health care system in mind -- this suggests, says Doyle, that his main results may understate the benefits of health care spending.

Source: Les Picker, "Higher Health Spending Saves Lives," NBER Digest, November 2007; based upon: Joseph Doyle, "Returns to Local-Area Health Care Spending: Using Health Shocks to Patients Far From Home," National Bureau of Economic Research Working Paper No. 13301, August 2007.

For text:

http://www.nber.org/digest/nov07/w13301.html

For study:

http://www.nber.org/papers/w13301

 

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