Harnessing the power of health taxes
Summary of key points
The group of health services a government chooses to provide is known as a health benefits package. Current discussions on such packages are centred on curative health services but can and should do more for prevention. Given budgetary constraints, a compromise must be reached between investing in curative and preventive health interventions.
Cost effectiveness is central to decisions that seek to negotiate this. Its increasing importance to governments, keen to make smart investments in health, is reflected in the global proliferation of health technology assessment (HTA)—an evidence based approach to evaluating the costs, benefits, and wider effects of health technologies.
Many public health interventions are evaluated through HTA and some are included in health benefits packages. But health taxes, though potentially cost effective, are not routinely included in either HTA or health benefits packages.
Health taxes are an extremely cost effective yet neglected area compared with areas traditionally focused on by HTA agencies such as the National Institute for Health and Care Excellence (NICE) in the United Kingdom.
Health taxes don’t just generate revenue but can also be a powerful tool for improving health. There is a ubiquity of interest in this globally. Taxation is one of the few remaining cost effective interventions available that is exclusively under government remit.
In most countries, the treasury looks at the overall public sector to make regular decisions on fiscal policy (including taxes), using budgetary forecasting. Traditionally, tax has been viewed primarily as a way for a government to balance their spending and revenue, and the way decisions are made reflects this. The primary motivation behind general tax change is not related to population health. Taxes on goods harmful for health must compete for political capital with non-health related tax to achieve the primary goal of revenue generation.
Health taxes can generate large sums of money initially. The Task Force on Fiscal Policy for Health—an international group of leaders in finance, development, and health, brought together to tackle the growing burden of non-communicable diseases—released a report in April 2019, which said that increasing the price of tobacco, alcohol, and sugary beverages by 50% could generate $20tn additional global revenue over 50 years.
Revenues from health taxes, however, might fail to grow over time if consumption of goods decreases. In countries where revenue generation forms the basis of decisions, with strong industry opposition to taxes, arguments for the health benefits of taxes might be overshadowed.
Health technology assessment for tax
HTA has the potential to limit the influence of political factors on decisions related to health taxes. The advantage of using HTA over a best buy or return on investment approach is that it allows explicit consideration of trade-offs and accounts for social, ethical, and organisational considerations, using a standardised process. It therefore allows a comprehensive comparison between multiple interventions. This is important as governments have a suite of potential policy options for public health, with many being cost effective.
Given their political nature, examples of health policy being assessed with HTA are scarce. One example comes from Thailand, where the Health Intervention and Technology Assessment Programme evaluated interventions to reduce alcohol harm, including taxes. The policy impact of this project is not yet clear, but earlier work by the same programme on the economic costs of alcohol consumption was integral to policy reform, informing the development of a comprehensive law for alcohol control in 2008. The Thailand experience shows that HTA can move beyond clinical services and medical technologies to help shape health policy.
The ability of HTA to improve public health is limited by the fact that agencies tend to have legislative power in some politically attractive areas, including complex high tech interventions, but not others. Over time, the focus of HTA in certain domains further fuels investment into these very areas and skews wider healthcare priorities away from preventive interventions, which are known to be the most cost effective.
If HTA considered tax, the resulting investment in health related fiscal policy research could also enable long overdue innovation in this area. But bringing health taxes under the jurisdiction of HTA without the appropriate supportive legal structures will leave recommendations ignored or criticised.
A global opportunity
Many middle income countries have developed HTA structures and institutions. Today, more than 160 countries tax alcohol, and 39 tax sugar sweetened beverages. Widening the remit of existing HTA activity to comprehensively consider health taxes is possible in many middle income countries. But devolving political decision making to public health authorities will be a challenge, as it is in high income countries. Furthermore, implementing recommendations in countries where lobbying and private sector interests are dominant, with large informal sectors and a weak tax base, will be difficult. Nonetheless, if HTA institutions are supported with adequate legal powers, appropriate autonomy, and wider political and societal support, then they might be able to successfully venture into health taxes.
Health taxes could be a cost effective state investment to improve health. How to choose between tax interventions (falling outside the remit of healthcare) and incorporate them into health benefits packages remains a challenge. HTA provides an opportunity to rethink how decisions that affect health are made. Harnessing HTA for health taxes will require a shift in power and authority, away from central government. This must be supported by legislation and institutional collaboration to ensure the effective and judicious use of evidence based policies to catalyse progress in public health.