Comparing costs and outcomes across programmes of health care

Stephen Martin, Nigel Rice*, Peter C. Smith

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This paper examines the expenditure choices of local health authorities operating under fixed budget constraints. It applies a theoretical model of budgeting to a data set from 303 English Primary Care Trusts (PCTs) across ten broad programmes of health care to derive estimates of the elasticity of expenditure in each programme with respect to the total income of the PCT. The results suggest quite similar income elasticities across most programmes, in the range 0.644–1.128. The only outlier is the musculoskeletal programme with an elasticity of about 0.46. The modelling also derives estimates of spending elasticities with respect to medical needs and thereby permits calculation of the implicit cost of saving a life year in five programmes of care. The results are important as they indicate to policy makers how specific programme areas might be affected by general budgetary reductions.

Original languageEnglish
Pages (from-to)316-337
Number of pages22
JournalHealth Economics
Issue number3
Early online date14 Feb 2011
Publication statusPublished - Mar 2012


  • Allocative efficiency
  • Budget elasticities
  • Health outcomes
  • Local health authorities
  • Programme budgets

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