A Powerful Pair: Tobacco Taxes for Universal Health Coverage

A Powerful Pair: Tobacco Taxes for Universal Health Coverage

 {Photo by: World Health Organization}Part of the poster for World No Tobacco Day. Raising taxes on tobacco is the most effective way to reduce its consumption.Photo by: World Health Organization

This post originally appeared on Devex.com.

When people get sick in Senegal, like in many other low- and middle-income countries, they often find that quality health care services are unaffordable. The majority of health spending is out-of-pocket, meaning people aren’t enrolled in health insurance plans, or their plans’ benefits are limited.

While the government has announced a strategy to provide universal health coverage by 2017, observers have questioned whether the government has budgeted nearly enough to achieve that goal. Meanwhile, especially for the 80 percent of Senegalese who work in the informal sector, modern health care is often out of reach.

Tobacco, on the other hand, is cheap and widely available. In Senegal, a pack of economy brand cigarettes costs just US$0.80. Premium brands are $1.20. Low prices only aggravate the health system’s woes: Price is the key determinant of tobacco use, and more people smoking means more getting sick. Despite an apparent willingness to battle Big Tobacco over smoking restrictions and new tobacco control legislation, Senegal hasn’t moved to increase tobacco taxes.

Ratcheting up taxes would save lives: Smoking is a leading risk factor for noncommunicable diseases like cancer and heart disease, which already account for 30 percent of the disease burden in Senegal. While non-communicable diseases have finally garnered worldwide attention, action has been slow. Emerging economies like Senegal’s need to take the offensive. It was exciting, therefore, to hear Minister of Health Awa Marie Coll-Seck tell NGO representatives earlier this year that her government might increase tobacco taxes. Even better, they’d use the money to help fund the universal health coverage plans.

Raising prices to save lives

The World Health Organization is calling on countries to raise taxes on tobacco for World No Tobacco Day 2014. Though often grouped with “innovative” health financing mechanisms like UNITAID’s airline levy, tobacco taxes aren’t new. Taxes on unhealthy products like tobacco and alcohol have appeared in the United States since the 18th century. Today, in high-income countries, taxes account for 63 percent of the retail price for tobacco products. Only a handful of countries exceed WHO’s recommendation of a 70 percent tax share.

Developing countries, however, lag behind. In low-income countries, the tax share on tobacco is only 39 percent of retail. There are outliers: In Rwanda, a 66 percent tax rate contributes to one of the lowest smoking rates in the region. Other countries must follow suit. Tobacco taxation is a WHO “best buy” for controlling non-communicable diseases because it’s conclusively proven to reduce tobacco usage, particularly among the poor. The recent Lancet Commission on health investments noted that a 50 percent price increase in China would prevent 20 million deaths over 50 years. In India, it’d prevent another 4 million.

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And taxation shouldn’t stop at tobacco. Alcohol consumption is the top risk factor for ill health among people age 15-45 worldwide, and among men of all ages in sub-Saharan Africa and Latin America; taxes are proven to reduce consumption and excessive drinking, especially among young people. The argument looks equally compelling for highly processed foods and beverages, including soda, which is headed down the same road as tobacco. Developing countries should jump ahead of rich countries by using taxes to discourage consumption. It’ll be a fight — developing countries are the prime growth market for junk food companies — but success in one country like Mexico will begin changing norms as they help save lives.

More revenue for health

These taxes on unhealthy products are a win-win because, unlike most public health interventions, they don’t cost governments money — they bring it in. Instead of combining these new funds with general revenue, in countries where government spending on health is too low, there’s a strong argument for earmarking them for health. In particular, they could support efforts towards UHC, which WHO Director-General Margaret Chan calls “the single most powerful concept that public health has to offer.”

UHC, defined by WHO as the goal of everyone having access to quality health services without financial hardship, is an ambitious but achievable agenda that starts with ensuring health care access for poor and vulnerable groups and builds from there. As more developing countries announce plans to pursue UHC and UHC gains momentum in the post-2015 agenda, the obvious question is: How can you afford it? The people who need coverage the most are usually the ones who can contribute the least. Governments typically must increase domestic public spending to close this gap.

While taxes on tobacco can’t cover the full cost of a UHC program (and shouldn’t be expected to), they can act like a shot of adrenaline for health systems. In the Philippines, new tobacco and alcohol taxes collected more than $750 million in its first year, much of it set aside to cover free health care for vulnerable populations. That’s a model Senegal can build upon: Earmarking for UHC is a political winner that can help mobilize public support to counter tobacco industry opposition.

A powerful duo

In Senegal and elsewhere, a symbiotic relationship between UHC and taxes on tobacco and other harmful products makes eminent sense. When countries commit to UHC, they commit to ample public financing, or else they fall short. And as countries expand publicly financed health care, the externalities of tobacco, alcohol and processed food consumption — that is, chronic poor health — become more visible, demanding public solutions. Countries like Senegal, in pursuit of UHC, quite literally can’t afford not to tax these products.

What do you think about “sin taxes” on tobacco, alcohol and other products? Let us know by leaving a comment below.