posted on 05 April 2016
by Elliott Morss, Morss Global Finance
The pendulum swings. And for drug addiction, it has just swung from incarceration to treatment. But there is an elephant in the room: who should pay for treatment? To answer this question, I look at the major dangerous addictions and how they are handled.
The Dangerous Addictions
Of course, not all addictions are dangerous - there are many healthy addictions such as work, sex, exercise (and for me) gardening. However, I have written several articles on dangerous addictions and there are some killer and family destroying types. Personally, I am very much for free choice: the government should not interfere - let every man/woman "choose their own poison." In part, I say this because in the US, government restrictions never work - if there is a market for something, a government ban will just mean it is provided by criminal elements.
So what are the most dangerous addictions? The World Health Organization has developed a relevant statistic - the Disability-Adjusted Life Year (DALY). DALYs for a disease or health condition are calculated as the sum of the years of life lost due to premature mortality in the population and the years lost due to disability for people living with the health condition or its consequences.
Table 1 provides data on the global share of total DALYs for the most dangerous addictions. Nicotine is a nasty, addictive drug and more than 5 million die of smoking every year. And while only half as many people die from alcoholism than smoking, one can argue that alcoholism is more destructive. Why? Because drunks lose jobs, kill people while driving, and destroy family/friend relationships.
The one other point worth noting about Table 1: the inclusion of overeating as a dangerous addiction. Overeating leads to being overweight/obese. The United Nations reports that even in developing countries, the number of obese children now exceeds the number malnourished. And the DALY statistic for overeating could be much higher if the derivative problems caused by being overweight were included. The WHO attributes the following problems to being overweight/obese: breast cancers, cerebrovascular diseases, colon and rectum cancers, corpus uteri cancers, diabetes mellitus, hypertensive heart disease, ischemic heart disease, and osteoarthritis. If the DALYs for these problems were included in the Overweight/Obese total, it would be the leading DALY addiction.
Table 1. - DALY Shares of Dangerous Addictions
Who Should Pay for Dangerous Addictions?
I have no problem with the public picking up the tab for health costs associated with old age and other maladies the individual cannot control. But health problems resulting from choices made by individuals to smoke, drink, overeat, or use drugs are another matter. Nearly all of us have "tendencies" towards one or another dangerous addiction. But most of us exercise discipline to resist getting too addicted. It would seem equitable that whenever a health problem results from the choice of an individual, that individual should bear a significant share of the resulting costs.
Government Addiction Policies
Table 2 provides data on the magnitude of the US dangerous addictions. Overeating tops the list with 58.7% of the population either obese or overweight. And the problem is growing. In 2008, 25.5% of the population was obese. That number today is 30.6%.
Table 2. - US Addicts
It is interesting to reflect on government policies towards these dangerous addictions. Cigarettes, by far the most dangerous of the addictions as a killer, are legal and readily available for purchase. However, they are heavily taxed, there are severe limitations on where you can smoke, danger to health notices must be printed on every package, and major anti-smoking campaigns are ongoing. And while smoking is slowly declining in the OECD nations, it continues to grow in Asia, the Middle East, and Africa.
What should government addiction policies be? As I have documented elsewhere, outright bans on products (alcohol in the past and drugs today) have not worked: the markets remain and are supplied by criminals. US policies to curb cigarette smoking are probably the best model for addictions. You can smoke if you are a certain age but not around other people and you pay a very large sales tax. And part of the tax monies received is used for education and treatment.
Alcohol is a more complex issue. At one point in US history, alcohol was banned (1919-1933), but "The Noble Experiment" did not work. It did not work because the demand was still there and it was satisfied by "criminal" producers and distributors. Currently for alcohol, there are age limits and penalties escalate rapidly for repeat drunk drivers. But taxes on alcohol are not high. Perhaps this is because numerous studies indicate that alcohol consumed in moderation has positive health consequences.
Illegal drugs are interesting. They fit perfectly the profile of what happens when a product for which there is a significant demand is illegal. The product is supplied but by a criminal element making tremendous profits. More information on drugs and overeating is provided below.
According to the medical journal Lancet, about 200 million people worldwide use illegal drugs and their use causes about a quarter of a million deaths per year. In the US, these drugs are either banned or only available via prescriptions. Despite these regulations, they are readily available and doctors are part of the criminal element providing them. The United Nations Office on Drugs and Crime reports there are vibrant markets throughout the world for cannabis, opium, heroin, cocaine, and amphetamines. Statistics from the US Office of National Drug Control Policy show that drug production has increased and prices in the US have fallen since the US has begun spraying herbicides on the coca crops in Latin America.
Table 3 provides data on what the US government is spending on drugs. This year, the US will spend $15.8 billion on Domestic law enforcement, interdiction, and treatment. It is not working and never will. Most are available at lower prices than 10 years back. The solution? Save this money by legalizing these drugs and put some of it towards more treatment and prevention.
Table 3. - US Federal Government Drug Expenditures
Source: US Budget, 2017
But these figures raise another troubling question. The US is cutting way back on the number of citizens put in jail for using drugs. Good. Treatment is cheaper than incarceration. But who should pay for the treatment the addicts need? Should they get off without having to pay anything after getting addicted? One hears a lot of sad stories about people having legitimately been on pain killers and then getting addicted. But wait a minute! These "victims" were warned about the addictive properties of these pain killers. And most people who have been prescribed these drugs have not gotten addicted.
In light of this, I believe addicts should have to pay for some of their drug treatments.
Overeating as an addiction is just beginning to be noticed. It was just a couple of years back the UN reported there were more obese than undernourished children in developing countries. Government policies to control this addiction? Almost non-existent. And while the medical costs of overweight people will soon dwarf all others, punitive actions are not being considered.
With overeating, there is clearly a large discretionary element involved. And the resulting health costs are significant. Table 4 provides the results of a study done by the Congressional Budget Office. It collected data (2nd column from left) on the per capita medical costs of people at different weights. The next three columns compare how much more being under and overweight add to the annual costs of the country. It shows how much being overweight ($24 bil.), obese ($110 bil.), and morbidly obese ($36 bil.) add to the annual health costs of the country. The additional costs of overweight/obese people add a total of $170 billion annually or $1,465 per household.
Table 4. - US Health Costs for Citizens of Different Weights
Source: Congressional Budget Office
My proposal: I would like to see the share of the treatment costs picked up by people's insurance decline as the number of treatment sessions for overeating related health problems increases. Let's say they get two free sessions but after that the share declines to nothing after maybe 10 sessions.
It is definitely short-sighted to put addicts in jail. By the same token, they should not be encouraged to stick with their addiction by getting off scot-free. When individuals can choose to become addicted to something with social costs, they should be required to bear some of those costs. We do this with cigarettes - a very heavy tax that smokers must pay. Alcoholics bear a lesser share of the costs of their actions: drunk driving penalties are significant and job losses also directly affect the drunkards. But they rarely pay for the damage they do to their families.
For drugs, a lot of work remains to be done. We spend more money trying on trying to prevent their use than on treatment. And while sending addicts to jail has thankfully been ended, regulations should be formulated that require addicts to pick up some of the tab for their treatment.
And nothing has been done about addictive eating, despite its huge health costs. My suggestion: food addicts cause health costs to rise because of their excess weight. Their insurance should pay a smaller share of these costs as they grow.
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