Weighing up the cost of the health of a nation

Weighing up the cost of the health of a nation

Imagine for a moment the government is serious about reining in health costs. What should it do?

Should it invest heavily in preventive health, trying to change lifestyles so more people don’t get ill in the first place, or should it amass billions for medical research?

Illustration: David Rowe.

Illustration: David Rowe.

A government concerned about pay offs will do the first. Or it may decide to do both, investing in preventive health while also putting aside funds for medical research. What it won’t do is shut down existing attempts to prevent illness in order to fund research. That’s if it is serious.

On the other hand, if it doesn’t believe in preventing illness and wants to pander to big food and alcohol corporations ...

Believe it or not this story begins with Christopher Pyne. Now famous as Prime Minister Tony Abbott’s attack dog, in an earlier, gentler time he was John Howard’s parliamentary secretary for health and later the assistant minister for health.


Assistant ministers throw themselves into the detailed work their senior ministers don’t have time for. Pyne’s senior minister was Abbott. Pyne was asked to tackle alcohol. One of his ideas was to make alcohol harder to buy, especially in indigenous communities. He commissioned research on the worth of a nationwide floor price for alcohol, “a minimum fixed price per standard drink applied to all alcohol products sold in Australia”.

As the research got going, the new Labor government heard about the project and shut it down. But the seed took hold. In 2011, Labor established the National Preventive Health Agency and asked it to “develop further the concept of the public interest case for a minimum (floor) price of alcohol”.

It released its report this month just as the Abbott government is preparing to shut it down. It’s about to release another, on alcohol advertising. This year’s Budget Paper No. 2 includes two short paragraphs headed: “Smaller Government – Australian National Preventive Health Agency – abolish.” Some of its functions will be transferred to the Department of Health. The net saving, $2.6 million a year, will be transferred to the Medical Research Future Fund.

As it happens, the agency finds against a minimum floor price for alcohol. It thinks the takings may be captured by the alcohol manufacturers and it will be better to tax alcohol uniformly and use the proceeds to discourage drinking. The finding is important, the answer to the question Pyne had asked two governments earlier.

Along the way it has made the alcohol industry very uncomfortable. It had been claiming the costs of alcohol overuse were minimal, only $3.6 billion a year instead of the more widely quoted figure of $46 billion. It sourced the claim from a paper prepared by three respected New Zealand economists for Australia’s National Alcohol Beverage Industries Council.

The paper says most of what we think of as the cost to society of excessive alcohol consumption isn’t the cost to society at all. It is the cost to drinkers and their families. But because families who drink choose to drink, they must believe the benefits (for them) outweigh the costs (for them). Therefore the only costs that matter are those inflicted on other people outside the drinker’s family.

The study commissioned by the National Preventive Health Agency demolishes the argument in the most forceful terms. It is an argument that says what goes on in families is of no concern to the wider society. (The authors draw the line at violence, saying illegal activities do matter.)

The study says the logic excludes costs such as foetal alcohol syndrome on the basis that they are “private costs”, within families.This one flawed assumption – that what goes on in families is of no broader consequence – cuts the estimated cost of alcohol-related death from $4.5 billion to $0.2 billion per year.

Without the National Preventive Health Agency, a health department given the same task may have the wool pulled over its eyes, or have its website pulled down. That’s what happened to the Health Department’s food star rating website at the behest of a the Assistant Minister for Health Fiona Nash whose chief of staff owned shares in a firm that lobbied for junk-food manufacturers.

The National Preventive Health Agency lists three priorities on its soon-to-be decommissioned website: tobacco control, overweight and obesity prevention, and harmful alcohol use.

All of them are important to a government that really does want to keep health spending down. None of them sounds as grand as medical research.

Peter Martin is economics editor of The Age

Twitter: @1petermartin

Most Viewed in National


Morning & Afternoon Newsletter

Delivered Mon–Fri.

By signing up you accept our privacy policy and conditions of use