Estimating the marginal productivity of the English National Health Service from 2003 to 2012

OBJECTIVE: Estimates of the marginal productivity of the health sector are required for a wide range of resource allocation decisions. Founding these estimates on robust empirical analysis can inform these decisions and improve allocative efficiency. This article estimates the annual marginal productivity of the English NHS over a 10-year period (between 2003 and 2012). METHODS: Data on expenditure and mortality by program budget category are used in conjunction with socioeconomic and demographic variables from the censuses for 2001 and 2011. This article applies an econometric strategy that employs an established instrumental variable approach, which is then subjected to a number of sensitivity analyses. The results of the econometric analysis, along with additional data on the burden of disease, are used to generate an estimate of the marginal productivity for each of the study years. RESULTS: We find that an additional unit of health benefit has cost between £5000 and £15 000 per quality-adjusted life-year from 2003 to 2012. Over this period these estimates (all in current prices) have increased at a faster rate than NHS price inflation, suggesting an increase in real terms. CONCLUSIONS: These results are discussed in the context of the existing literature, and the potential policy implications for decisions about resource allocation are explored.