English data from 2003 to 2012 suggests that it costs the NHS £10,000 to generate an additional quality-adjusted life year (QALY). This estimate relates to all NHS expenditure and no attempt was made to explore possible heterogeneity within this total. Different types of expenditure - such as secondary care, primary care and specialized commissioning - may have different productivities and estimates of these may help policymakers decide where additional investment is most beneficial. We use the two-stage least squares estimator and data for 2016 to explore the mortality response to three types of healthcare expenditure. Three specifications are estimated for each type of expenditure: backward selection and regularized regression are used to identify parsimonious specifications, and a full specification with all covariates is also estimated. The regression results are combined with information about survival and morbidity disease burden to calculate the marginal cost per QALY for each type of expenditure: the most conservative results suggest that this is about £8,000 for locally (CCG) commissioned services, while estimates for specialized commissioning and primary care are more uncertain. When this heterogeneity is taken into account, the estimated marginal cost per QALY for all NHS expenditure increases slightly, from about £6,000 to £7,000. Our results suggest that additional investment is likely to be most productive in primary care and in locally commissioned services.
Keywords: Cost per quality-adjusted life year; Healthcare expenditure; Healthcare productivity; Mortality; Two-stage least squares estimation.
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