The answer to this question is not so clear cut. Comparing outcome for patients living in Beverly Hills and those in South Los Angeles may be different not only due to health care spending but also due to the patient socioeconomic factors that affect health outcomes. To get around this econometric challenge, an interesting paper by Doyle, Graves and Gruber (2015) use the randomness of ambulances to examine how increased spending affects outcomes.
This paper uses the effective random assignment of patients to ambulance companies to generate comparisons across similar patients treated at different hospitals. We find that assignment to hospitals whose patients receive large amounts of care over the three months following a health emergency do not have meaningfully better survival outcomes compared to hospitals whose patients receive less. Outcomes are related to different types of treatment intensity, however: patients assigned to hospitals with high levels of inpatient spending are more likely to survive to one year, while those assigned to hospitals with high levels of outpatient spending are less likely to do so. This adverse effect of outpatient spending is predominately driven by spending at skilled nursing facilities (SNF) following hospitalization.
Thus, people should not look at an additional dollar of healthcare as always inherently good or bad. In many cases, these funds are improve health outcomes–such as increased hospital spending. However, there are some cases–SNFs in this paper–where higher spending does not improve outcomes. Thus, whenever you hear a policymaker say that additional health care spending is either good or bad, a key follow-up is: what type of spending and for which patients? The answer to that more specific question is the key to identifying where U.S. society should invest the health care dollars it spends.