Presentation (CTI)

OBJECTIVES: Estimating the effects of public healthcare funding on health outcomes is important. However, short-run causal identification of these effects remains empirically challenging. Public healthcare systems continuously allocate resources toward areas with greater needs, generating a two-dimensional endogeneity problem: funding is endogenous to persistent health differences across areas and time-varying health conditions within areas. This paper addresses both dimensions using a simulated-instruments approach, exploiting changes in national funding allocation rules for causal identification.
METHODS: Using panel data on National Health Service (NHS) funding allocation across English local areas, I construct a simulated instrument: counterfactual funding each area would receive holding local health needs fixed, thereby isolating exogenous variation in funding. I estimate healthcare funding effects on avoidable mortality (preventable and treatable) and subjective wellbeing (ONS4 measures). I also conduct a cost-benefit analysis in wellbeing terms, estimating the cost per WELLBY (one-unit increase in life satisfaction per person-year).
RESULTS: A £1,000 increase in funding per head (mean=£1,270) reduces preventable mortality by 101.2 per 100,000 population, with no significant effect on treatable mortality. Beyond survival, funding improves subjective wellbeing: it reduces anxiety immediately, while raising happiness and life satisfaction with a lag. Wellbeing cost-benefit analysis yields a marginal cost of £1,282 per WELLBY.
CONCLUSIONS: The £1,282 per WELLBY marginal cost falls well below the UK government benchmark of £13,000, suggesting marginal NHS funding expansions generate large welfare gains. The preventable-treatable asymmetry is consistent with higher marginal productivity of preventive care and reflects commissioner funding and payment structures favouring prevention at the margin. Together, these results support greater NHS investment within budget cycles, with implications for how allocation rules and payment mechanisms shape mortality responsiveness to public healthcare funding.