An Argument of Fairness: Should those who are purposefully ‘unhealthy’ be allowed to receive free services from the NHS?
In our newest segment, titled 'An Argument of Fairness', we will be examining a range of social policies implemented by governments across that have been targeted for being an inefficient use of funds. Within the segment we will examine whether these policies are justifiable, in both an economic and a social sense. The first entry will be analyzing the National Health Service in the UK and whether it should provide its services free of charge for those who are purposefully unhealthy.
Through healthcare provision to all citizens of the United Kingdom, the NHS practices what is preached in its constitution, which states that ‘nobody is excluded or left behind’, vowing to provide medical assistance to all those in need, and more importantly, at absolutely no cost, (NHS, 2012).
An argument amongst those in disagreement with this ‘everyone – included’ ideology is that of deserve. Certain brits simply believe that recipients of the taxpayer-sponsored service who take advantage of it via an unhealthy lifestyle simply do not deserve this ‘commodity’. The NHS expends more than £11 billion a year treating preventable illnesses caused by smoking, alcohol and general inactivity (Public Health England, 2016). With a total commissioning budget of £105.8 billion (NHS England, 2016), it can be calculated that the expenditure on preventable illness comprises more than 10% of the total budget. Although seen by many as abuse of the UK’s healthcare system, there exists countless reasons as to why the inevitable discrimination against those who lead what one may regard as an ‘unhealthy lifestyle’ must be prevented.
In reference to a study conducted at Columbia University, it is asserted that “About 18% of a citizen’s income tax goes towards healthcare” (Chang, Peysakhovich, Wang, & Zhu). Assuming the income of smokers does not differ from non-smokers, and that the annual income tax revenue is £168,451 million (HM Revenue & Customs, 2017), one can estimate that the NHS receives a total of roughly £5.8 billion pounds worth of income tax from smokers, as approximately 19% of UK citizens smoke regularly (Office for National Statistics, 2014). The healthcare cost per capita per annum in the UK totals at about USD 3235 (OECD, 2015), approximately £2580, meaning that if the UK population is taken to be at 65.1 million (Office for National Statistics, 2017), the approximately 12.4 million smokers cost the NHS £3 billion. This cost is significantly lower than the revenue generated for the NHS through taxing their incomes, illustrating that imposing payment for healthcare would not lead to a gain but on the contrary, a loss, as it would follow that removing their healthcare benefits would also mean that they are no longer taxed that 18%.
In response to the aforementioned statistics, it is frequently contended that the reasoning behind the high per capita cost of healthcare in the UK is primarily due to the extra costs incurred from unhealthy individuals; in other words, smokers and drinkers cost the taxpayers money. Many claim that if it were not for those who make these poor lifestyle choices, the per capita cost of healthcare, as well as income tax rates would be lower as the NHS would require less money to treat their illnesses. This could, in return, stimulate an increase in productivity within the UK due to the lowering of tax rates, resulting in a subsequent increase in consumer discretionary income. Moreover, it may also stir a quasi-laffer effect, ultimately leaving the government greater funds which could be directed towards education subsidization and infrastructure investment. Now, whilst this may seem like a reasonable claim to put forward, the following evaluation of the duties imposed on these demerit goods indicates otherwise:
In addition to the 20% Value Added Tax paid by consumers in the UK, cigarettes also receive an additional tax at 16.5% of the retail price, as well as £4.16 per packet of 20 cigarettes (GOV.UK). In the 2014-15 fiscal year, tobacco duties generated £9.3 billion, and duties on beer/cider, wine and spirits generated a total of £10.5 billion (Levell, O'Connell, & Smith) ,therefore a total of £19.8 billion altogether to the government, a value much greater than the approximate £11 billion spent by the NHS to treat preventable illnesses. Thus, one may conclude that those who lead these lifestyles have in a sense paid the government back their due, accounting for NHS costs, as well as other negative consumption externalities generated, and are not using up more than their ‘fair share’ of the Healthcare Service, when in fact helping to pay for the healthcare of others. One mustn’t forget that these statistics only take into account those who drink and smoke, yet these 2 categories alone have more than paid back the amount that the NHS requires to treat all preventable illness, including those caused by obesity, illegal drug-use and countless others.
Now, if smokers and alcoholics are made to pay for their own healthcare, it would follow that taxation of demerit goods is reduced only to a level which includes VAT and perhaps Sin tax, as they are no longer reliant on the NHS for medical aid. This may prove detrimental to UK citizens who smoke, as the current Price Elasticity of Demand for cigarettes in the United Kingdom stands at -1.19 (HM Revenue & Customs, 2015). Thus, a price reduction of just 10% will increase demand by 11.9%. This price drop may have adverse effects on the health of smokers, as the demerit good would now be more affordable to consume. Additionally, if smokers are now completely responsible for their healthcare, an income tax reduction of 18% for smokers would also follow suit (as this is the approximate share of income tax that goes to the NHS, as mentioned previously), leaving consumers with a larger disposable income, in turn rendering their habit even more inexpensive. It may be reasoned that this will not be the case as smokers will put this extra income towards paying for their healthcare, yet that seems a tough assertion to buy into, due to the addictive nature of cigarettes.
Other negative outcomes may arise with privatizing health care for smokers and alcoholics: as the median full-time gross annual income in the United Kingdom stands at about £27,600 (Office for National Statistics, 2016), or £22080 after the 20% tax on incomes in the £11,501 - £ 45000 bracket (GOV.UK), the cost of healthcare would constitute almost 12% of the average person’s pay (as its per capita cost was earlier cited to stand at £2580). For smokers residing in higher income brackets, paying for medical treatment will not pose many issues; however, those who make up the majority of the population do not possess extreme wealth, and as such would suffer if an aggressive policy taking away their healthcare rights was to be placed. This would be akin to regressive taxation, in which a larger burden is placed on the poorer, as it can be assumed that wealth does not directly determine how much one must spend on healthcare, yet smokers of all incomes would be made to pay the same fixed amount, as opposed to a percentage proportional to their income. This could be defended by claims that smokers would not be made to pay as much as £2580, as the NHS’s Internal Market would ensure that prices are lowered so that individual hospitals remain competitive, however healthcare is a basic human right, and should not be toyed with on the claims that the invisible hand will save those who do not have free access to it, especially when the state possesses the means to provide it.
Certain viewpoints may deem this idea of smokers paying for healthcare to be ‘fair treatment’ as it is their fault that they continue their habit, however, from an economic standpoint, this could cost the nation more than it would save it, as imposing such a policy could prove detrimental to the nation’s workforce: smokers lacking healthcare would turn sick, causing a reduction in the amount of active labour within the UK, therefore hindering potential growth and prosperity (as demonstrated by the graph above, which clearly depicts the negative correlation between unemployment and Real GDP). Increased unemployment may also project further health complications due to depression and poorer diets, potentially commencing a vicious cycle in which they become sicker. Moreover, in order to assess whether or not this really would be ‘fair treatment’, other factors must be considered. For example, smoking cuts 10 years off of one’s lifespan, (Davies, 2014). As the state pension is currently £8094 a year (Hunter, 2016), smokers who live 10 years less will require £80,940 less than others in their old age, and as a result are less dependent on retirement and benefits, reducing the financial burden the government would have to otherwise bear. Considering this amount translates to more than 31 years of healthcare costs, yet smokers only live 10 years shorter, would it really be fair treatment to strip them from their healthcare rights? The statistics would say otherwise. Alcoholics are an even better example, as research dictates that they shave off 23 years off of their lifespans, (Hunter, 2016), and therefore do not make even make it to the retirement age as the average life expectancy in the UK is 79.2 years for males, and 82.9 for females (Siddique, 2016).
Traditional economic theory dictates that we humans are rational and make decisions in order to maximize gain, perhaps through cost-benefit analyses. Yet in practice, as demonstrated by the theory of hyperbolic discounting, smokers do not make decisions about smoking rationally. As opposed to thinking of the health drawbacks caused by the unhealthy habit, cognitive biases such as anchoring may lead smokers to consider an outlier instead, for example, a relative who had lived to an old age despite being a smoker.
Due to limited self-control, smokers struggle to give up their addiction despite all available information provided to them teaching the practices harm. Therefore, this brute-force and authoritarian approach of making smokers pay for their healthcare will not help them manage or quit their habits, as they will not respond rationally. Numerous experts stand against this method, such as Simon Clark, director of a smokers’ rights group, who has stated that “in a mature society people should have the freedom to make an informed choice without being patronised or forced to give up (their habits).”, (BBC NEWS, 2004).
Instead, alternative approaches should be taken: the UK government has now deviated away from its previous tactics of ‘nannying and legislation’, and has instead steered towards designing choice architectures that will encourage people to make better decisions, (Smith, 2010).This has proven itself to be a much better way to reduce and eliminate bad habits that have been taken up by many of the citizens of the United Kingdom, and in the long term would lead to a much better outcome, and will be of much more benefit to the nation than forcing the ‘unhealthy-by-choice’ to pay for their own healthcare.
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