Abstract

Study objective: This paper explores the relation between healthcare expenditures (HCEs) and environmental variables in Ontario, Canada.

Design: The authors used a sequential two stage regression model to control for variables that may influence HCEs and for the possibility of endogenous relations. The analysis relies on cross sectional ecological data from the 49 counties of Ontario.

Main results: The results show that, after control for other variables that may influence health expenditures, both total toxic pollution output and per capita municipal environmental expenditures have significant associations with health expenditures. Counties with higher pollution output tend to have higher per capita HCEs, while those that spend more on defending environmental quality have lower expenditures on health care.

Conclusions: The implications of our findings are twofold. Firstly, sound investments in public health and environmental protection have external benefits in the form of reduced HCEs. Combined with the other benefits such as recreational values, investments in environmental protection probably yield net social benefits. Secondly, health policy that excludes consideration of environmental quality may eventually result in increased expenditures. These results suggest a need to broaden the cost containment debate to ensure environmental determinants of health receive attention as potential complements to conventional cost control policies.