The link between health care spending and health outcomes for the new English Primary Care Trusts

English programme budgeting data have yielded major new insights into the link between health care spending and health outcomes. This paper updates two recent studies that have used programme budgeting data for 295 Primary Care Trusts (PCTs) in England to examine the link between spending and outcomes for several programmes of care. We use the same economic model employed in the two previous studies. It focuses on a decision maker who must allocate a fixed budget across programmes of care so as to maximize social welfare given a health production function for each programme. Two equations – a health outcome equation and an expenditure equation – are estimated for each programme (data permitting). The two previous studies employed expenditure data for 2004/05 and 2005/06 for 295 health authorities and found that in several care programmes – cancer, circulation problems, respiratory problems, gastro-intestinal problems, trauma burns and injury, and diabetes – expenditure had the anticipated negative effect on the mortality rate. Each health outcome equation was used to estimate the marginal cost of a life year saved. In 2006/07 the number of PCTs in England was reduced to 152, largely through a series of mergers. In addition, several changes were made to the methods employed to construct the programme budgeting data. This paper employs updated budgeting and mortality data for the new 152 PCTs to re-estimate health production and expenditure functions, and also presents updated estimates of the marginal cost of a life year saved in each programme. Although there are some differences, the results obtained are broadly similar to those presented in our two previous studies.