Returns to Local-Area Health Care Spending: Using Health Shocks to Patients Far from Home

Abstract

Health care spending varies widely across markets, yet there is little evidence that higher spending translates into better health outcomes, possibly due to endogeneity bias. The main innovation in this paper compares outcomes of patients who are exposed to different health care systems that were not designed for them: patients who are far from home when a health emergency strikes. The universe of emergencies in Florida from 1996-2003 is considered, and visitors who become ill in high-spending areas have significantly lower mortality rates compared to similar visitors in lower-spending areas. The results are robust across different types of patients and within groups of destinations that appear to be close demand substitutes.