Health Sector Needs More User Pays, Less Nanny State

Geoff SimmonsHealthLeave a Comment

Some people label ideas like a junk food tax as ‘nanny state’, but ultimately such soundbites are overly simplistic, because we already have a situation where the state interferes in our lives. Are unhealthy people such as smokers or people with a poor diet really a burden on the rest of us? If so, what could and should we do about it? Let’s tease out some of these issues.

Smokers & obese people cost the health system more while they are alive

Soundbites like ‘nanny state’ are vacuous, revealing the utterer’s intellectual simplicity. We already have a nanny state that takes a third of our income and spends it looking after us in a variety of ways – for example on our obesity-related illnesses, irrespective of whether we took care of ourselves. Now that’s nanny state so who knows what the ideological Right are on about when they utter this response?

Smokers and obese people on average create more health bills while they are alive, lifting treatment costs by 21 and 36% respectively (obese people are not exactly the same as unhealthy eaters, but sadly they are easier to collect data for). On average, a person with a healthy lifestyle costs half as much as an unhealthy person in healthcare bills. So actually taxing junk food is more ‘user pays’ than it is ‘nanny state’. The same argument runs for cigarettes.

But they also save us money

However, unhealthy people also die earlier. On average, smokers and obese people will die roughly 7 years earlier than healthy people. That seven years is fairly expensive from a healthcare perspective, which means that over their total lifetime, smokers and the obese may cost the health system slightly less! When you add in the superannuation budget, unhealthy people probably save us money.

So if we take an accountant’s view of the situation, we should just let people eat, drink and be merry and forget the whole thing. After all if it saves us money, why not? In fact, the true ‘hard right’ policy would go further – if people really were responsible for their actions, we would let smokers and the obese die without receiving expensive (and ultimately pointless) medical care, and save even more money!

But they also contribute less while they are alive

Food-related diseases have a large detrimental impact on productivity, estimated to be many times the direct healthcare costs. Obesity increases the risk of chronic diseases like diabetes, which result in people working less, and being less productive when they are at work. A recent report by Morgan Stanley suggests that, given our high rates of obesity, this could reduce our economic growth in coming years by a quarter.

This means that people with diet related illnesses are also contributing less to the public purse. So when we tot up both sides of the ledger, we are back at square one – that poor diet affects us all via the economy and public purse.

And the timing of the diabetes epidemic couldn’t be worse

In case you haven’t noticed, now is not a good time for our productivity to be dropping as a nation. We already face some serious future costs thanks to our ageing population – which is predicted to drive health and superannuation costs to a level where they soak up 20-25c of every dollar our country earns.

It wouldn’t be so bad if we just had the purple rinse brigade to deal with, but we have a tsunami of diabetes as well. Being obese is the health equivalent of twenty years of premature ageing. So to the list of baby boomers we will have to look after in coming years, you can add any obese Gen X-ers. The real problem for our health system isn’t the cost, it is that we won’t have enough doctors and nurses to cope with demand.

Given these trends, the current ‘nanny state’ approach – where we keep people alive irrespective of their lifestyle – will not be tenable. Our nanny state will have become a nursey state. This leaves us two alternatives to deal with the diabetes epidemic: we could remove taxpayer-funded healthcare and let them die earlier (as mentioned above, this is a proper ‘hard right’ policy), or we could use corrective taxes to force people to change their ways or bear the cost of their excess (the rational, middle-of-the-road approach). Many call for better education, but this won’t sufficiently change behaviour in the timeframes we are talking about.

And there is a lot of stuff we can’t measure

OK, OK, there’s more. Beyond the hard economics of it all, people also do unpaid work, and it’s pretty hard to put a value on the time grandparents spend with their grandkids. Most people contribute to society if they can, including in retirement, so early death makes us all poorer. Few people on their death-bed express a regret that they hadn’t eaten more donuts.

But we have to recognise that junk food has a value too

If we are valuing all the good stuff that people could have done if they lived longer, we have to also include the benefits that the junk food brought them in the first place. Freedom and choice certainly have value in our lives, and that needs to be respected. Comparing these benefits with living longer is difficult however, because people are not consistent in their views over time. When young we may want to ‘life fast, die young and leave a beautiful corpse’, but that is rarely the case when death is looking us squarely in the face.

Do people really want to live fast die young & have a beautiful corpse?

If we really want to eat junk food and forget about the consequences, then why on earth should other’s pay your health bills? It just doesn’t make sense to expect the health system to pick up the pieces at the end and keep us alive against all odds. We should embrace the old adage ‘Live fast, die young and leave a good-looking corpse!’ Sadly, when it comes to dying, few people want to go quietly, or cheaply.

And we saw in Health Cheque, if our aim really is to live longer but healthier lives, then prevention is a far better investment than treating people at death’s door. And the obvious place to start is with what we eat. This may not save money for our health system, but it will certainly benefit our economy, particularly in the face of an ageing population. Those that call this a nanny state need to try and think a little clearer, what we have now is a nanny state and it’s rapidly evolving into a nursey state. The lack of consequences for our lifestyle pushes health bills up and stunts productivity, whereas more user pays in the form of preventative corrective taxes would avoid both.

Health Sector Needs More User Pays, Less Nanny State was last modified: December 15th, 2015 by Geoff Simmons
About the Author
Geoff Simmons

Geoff Simmons

Facebook Twitter

Geoff Simmons is an economist working for the Morgan Foundation. Geoff has an Honours degree from Auckland University and over ten years experience working for NZ Treasury and as a manager in the UK civil service. Geoff has co-authored three books alongside Gareth.