We applied instrumental variable analysis to a sample of 388,690 Medicare beneficiaries predicted to be high-cost cases to estimate the effects of medical care use on the relative odds of death or experiencing an avoidable hospitalization in 2006. Contrary to conclusions from the observational geographic variations literature, the results suggest that greater medical care use is associated with statistically significant and quantitatively meaningful health improvements: a 10% increase in medical care use is associated with a 8.4% decrease in the mortality rate and a 3.8% decrease in the rate of avoidable hospitalizations.
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