Healthy lives cost money
The belief that the NHS’s financial problems would be alleviated if people led healthier lifestyles continues to be widely held. When policies to clamp down on bad habits are proposed, campaigners cite the cost of smoking, drinking and obesity as their justification. When government preventative health budgets are cut, those who work in the sector claim that it is a ‘false economy’ that will cost the government more in the long run by creating more illness.
None of this makes sense to economists who understand that healthier lifestyles not only increase healthcare costs but also put a strain on other government departments by raising demand for pensions and social care. As Jane Hall explains in the Oxford Handbook of Health Economics, most preventive medicine, if successful, adds to government spending in the long run. ‘Although it is frequently argued (but not by economists) that prevention will save expenditure on future treatment,’ she writes, ‘the current body of evidence demonstrates that it is more likely to generate additional health care costs.’
Economic studies have found that 80 per cent of preventive health initiatives increase overall healthcare expenditure. In financial terms, a stitch in time does not save nine.
The reason is simple. A large proportion of a person’s healthcare costs are spent in the last year of life. These end-of-life costs cannot be prevented, only delayed, and are much the same regardless of the age at death. The years of life gained by lifestyle changes and medical technology tend to come when the person is retired and is a net recipient from the welfare system. The person who would have lived to the age of 68 when the NHS was founded now lives an extra thirteen years. This means an extra thirteen years of healthcare provision, pension payments and other benefits – all at a time when the person is paying no income tax.
When campaigners talk about the costs of smoking, drinking and obesity, they ignore the costs of old age that taxpayers would have to meet if nobody smoked, drank or gained weight. Most studies have shown smoking to be cost-saving overall and the same may also be true of obesity.
All told, only a fraction of the £24 billion paid in alcohol and tobacco duty each year is needed to pay for public services related to drinking, smoking and obesity. The rest of it is essentially a subsidy paid by those who drink and smoke to those who do not.
Whilst it would be repugnant for the government to actively encourage unhealthy living to save itself money, those who believe that taxes would be lower if unhealthy habits were stamped out are mistaken. There is a case for spending government money on preventative health care and there is a case for taxing alcohol and tobacco consumption. However, the case for both these policies cannot be made from the perspective of saving government money in the long run. As far as externalities arising from eating, drinking and smoking are concerned, they may exist, but they do not relate to costs imposed on taxpayers.