Are restaurants supersizing us all?

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Yes, yes, we've all heard about how those awful, nasty, fast food restuarants are making us all so fat we'll keel over from the cholesterol before we hit 35. Even that this generation will be the first in modern times to live shorter lives than their parents. That the NHS is about to buckle under the weight of lard butts demanding treatment so we must immediately impose the Big Mac Tax.

The problems with this narrative are numerous: not least that people dying young from being porkers saves the tax system money, not costs it. But the first question we really need to ask ourselves is, is it true that fast food restaurants, or indeed restaurants of any kind, actually lead to the observed increased whaleness of the nation's shape?

While many researchers and policymakers infer from correlations between eating out and body weight that restaurants are a leading cause of obesity, a basic identification problem challenges these conclusions. We design a natural experiment using highways in rural areas to exploit exogenous variation in the effective price of restaurants and examine the impact on body mass. We find no causal link between restaurant consumption and obesity. Analysis of food-intake micro-data suggests that consumers offset calories from restaurant meals by eating less at other times. We conclude that regulation targeting restaurants is unlikely to reduce obesity but could decrease consumer welfare.

Well, no, it appears that the restaurants aren't in fact the problem. After gorging at a restaurant we all seem to eat less next time, when not at a restaurant. Meaning that our targetting of those restaurants won't in fact cure whatever ills we diagnose as coming from the undoubted rise in weights that is going on.

Meaning also that the problem lies elsewhere: but good luck to the government that tries to deal with that. There aren't all that many votes in saying "You're fat because you're greedy" now, are there?

Tories' alcohol taxes won't cure binge drinking

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Shadow Home Secretary Chris Grayling wants to tax alcopops and curb pub hours. Neither will stop binge drinking.

When problems like binge drinking crop up, lots of people from 24-hour news channels thrust microphones under the noses of politicians and ask what they are going to do about it. Naturally, they say they're going to take 'tough' action, right away. But often their 'tough' action is only tough on the symptoms, not the disease. And quite often, the politicians' actions have exactly the opposite effect of the one intended.

Here's an example. As Fraser Nelson reported a year ago, when the Rudd government in Australia jacked up the price of pre-mixed drinks by 70%, consumption fell by 30% but spirit sales jumped by 46% as the kids mixed their own. And of course the kids poured themselves bigger measures than you got in the average alcopop. The result was a 10% rise in alcohol consumption.

Australia also used to have the ‘five o’clock swill’ as pub customers drank as much as they could before the official 5pm closing time. I remember the same happening in Scotland, where pubs were open a few hours at lunchtime, then from just 5pm-10pm in the evening. They didn't even open at all on Sundays. After Scotland deregulated in 1978, allowing 24-hour opening, everything improved – there was less drunkenness, less violence, an easier job for the police, and a fall in alcohol-related illnesses. Pubs were no longer just male drinking holes, but started selling food and becoming much more welcoming to families.

Politicians who want to seem ‘tough’ on binge drinking would be better focusing on the real, cultural cause. Alcohol is far cheaper in France and they drink at all hours, but they don’t have anything like our problems. Instead of an instant reaction for the microphones, our politicians would be better to understand why it is that young people go out binge drinking. Maybe it's because we have regulated our pubs so much that young people can't afford to drink in them. So they are no longer drinking under adult supervision, but go and get smashed on supermarket lager instead. Maybe the decline in the nuclear family, thanks to perverse welfare rules, also means that kids never learn to handle the joys and the dangers of alcohol as they do in France. Maybe it's bad state education or a nanny state that just picks up the mess with no come-back for kids or parents. Whatever the cause, slapping on new taxes and bringing in regulation isn't going to stop the effect.

Dr Butler's book The Rotten State of Britain is now in paperback.

Tories' care home costs plan

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Cameron's 'thoughtful revolution' in elderly care needs more thought about principle.

The latest fusillade in the Conservatives' 'thoughtful revolution', which Philip Salter reported on here, looks – well, completely devoid of any thought at all.

In fact, this latest vote-winning wheeze shows how devoid of principle or imagination the Conservatives have become. (Not that this is much of a criticism, since all parts of the political class are naturally more interested in votes than in either of those.) Indeed, it looks like a quick-fix plan to match Gordon Brown's costly promises on the same subject

The plan is that if people pay the £8,000 at retirement, then the government will give them free long-term care when they need it. It is absolutely extraordinary. It means that the Conservatives – the Conservatives – are proposing a new form of national insurance. An extension of the Welfare State. It means that a Conservative – a Conservative – government would crowd out private insurers who might just be able to do that sort of a job better and cheaper than Whitehall bureaucrats. (Admit it, that has been known.)

If anyone in the Eton-Islington Axis was actually moved by principle rather than PR, they'd have consulted two decades' worth of think-tank reports pointing out that things like long-term care – and healthcare in general – are best provided through a partnership between individuals, insurance, and the state. The deal should be that if you fund or insure yourself for a reasonable period (say two years) of long-term care, then yes, the state will pick up the tab for the rest – since it's those unpredictably long stays that give insurers the collywobbles. It certainly shouldn't be that the state insures everything.

As an insurance company, the state sucks. It should focus on its proper role – welfare needs and the provision of things people can't save or insure for – not advancing into new areas that never occurred to Aneurin Bevan. Now that would be a thoughtful revolution.

Dr Butler's book The Rotten State of Britain is now in paperback.

Bismarck beats Beveridge

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The Euro Health Consumer Index (ECHI) 2009 was released this week, and got lots of media coverage in the UK because it ranked the NHS 14th out of 33 countries and said the British health service was let down by waiting lists and "uneven quality performance". Only 4 counties in the EU15 (Western Europe, roughly speaking) got lower scores – Italy, Spain, Greece and Portugal.

The report is full of interesting information, but one point (on p9) particularly interested me. In their words, "Bismarck Beats Beveridge – yet again!" To explain:

Bismarck healthcare systems are "based on social insurance, where there is a multitude of insurance organizations... who are organisationally independent of healthcare providers." They are named after Otto von Bismarck, who founded the German welfare state.

Beveridge systems are "systems where financing and provision are handled within one organisational system, i.e. financing bodies and providers are wholly or partially within one organization." They are named after Wiliam Beveridge, who founded the British welfare state.

Anyway, the point the reports makes is that, "Looking at the results of the EHCI 2006 – 2009, it is very hard to avoid noticing that the top consists of dedicated Bismarck countries, with the small-population and therefore more easily managed Beveridge systems of the Nordic countries squeezing in. Large Beveridge systems seem to have difficulties at attaining really excellent levels of customer value."

The following list shows the rankings of Western European healthcare systems according to their 2009 score. The Bismarck countries are in bold:

(1) Holland, (2) Denmark, (3) Iceland, (4) Austria, (5) Switzerland, (6) Germany, (7) France, (8) Sweden, (9) Luxembourg, (10) Norway, (11) Belgium, (12) Finland, (13) Ireland, (14) UK, (15) Italy, (16) Spain, (17) Greece, (18) Portugal.

Clearly there is something in what the authors of the ECHI say. They suggest two points which could explain the comparative underperformance of Beveridge systems:

(1) Managing organizations of this size (the NHS employees 1.5m staff) requires management skills which just don't exist in the public sector. (I'd say they are extremely rare in the private sector too.)

(2) The primary loyalty in Beveridge organizations tends to be to politicians and other top decision-makers, rather than patients.

Adopting a competitive social insurance system like Holland's would be a huge step forward for the UK, even if – in an ideal world – I would prefer something based on medical savings accounts. You can read more about it here, in our excellent 2002 report NHS Reform: towards consensus?

Liberals and the nanny state

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On Tuesday night I spoke at a fringe event at the Liberal Democrat conference, which was co-hosted by FOREST and the excellent Liberal Vision. The subject was "Politics & Prohibition – how can liberals fight back against the nanny state?"

One point I stressed – and which I felt sure would endear me to a Lib Dem audience – was that we can't rely on a Conservative government doing much to fight the nanny state. On the contrary, what we're promised is an army of local directors of public health, dedicated public health budgets, a bigger, stronger chief medical officer's department, a "holistic strategy to focus public health across departments", "a clear marketing plan to promote healthy living", and a brand spanking new QUANGO – the Public Health Commission – to oversee it all.

There was even talk a while back about an 'NHS Health Miles Card', where people would get 'reward points' for losing weight, which they could then redeem against fresh vegetables, subsidized gym membership or even priority within other public services. That last idea – government systematically discriminating between citizens based on their lifestyle choices – strikes me as particularly disturbing, but it does seem to be the direction in which we are travelling.

All of this despite the fact that there's scant evidence that public health campaigns – especially those targeted at broad lifestyle issues like diet and exercise – work. Even the government's Wanless Review admitted as much, saying that public health campaigns have a ‘very poor information base’, that they exhibit a ‘lack of conclusive evidence for action’.

The trouble for the Lib Dems – and I made this point too – is that they are offering pretty much exactly the same thing as the Tories. And that's a real shame, because surely their role should be to stand outside the mainstream consensus, to offer something different and genuinely liberal.

Of course, the really irritating thing is that these so-called 'public health issues' are not actually public health issues at all. Public health is about securing health benefits that are by their nature public, like clean water and sanitation. It is not about what people freely choose to put into their own bodies. But since calling something 'public' legitimates having a public bureaucracy to deal with it, that's what politicians do. For me, this unopposed redefinition and erosion of privacy is the most worrying aspect of the debate.

Scans for all

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To put it bluntly the Society of Radiographers are a bunch of scare mongerers! Tesco, via their Clubcard, and in conjunction with a company called Lifescan, are offering vouchers that can be put towards the cost of having a CT scan. The Society of Radiographers believe this to be a danger to Tesco's customers. Stating that the low-levels of radiation are detrimental to people's health and that this promotion will create hordes of 'worried-well' people cluttering up doctors' waiting rooms. Tesco's customers should be grateful that their shop of choice thinks highly of them and offers them this deal.

The reasoning that the SoR uses for wanting this offer ended is weak and unfounded. The radiation levels are entirely safe, otherwise the company wouldn't be allowed to use the equipment it does. If people find that they've something wrong from this, and it's caught early enough then the treatment costs are lowered. Of course, having a scan would mean that many within the SoR wouldn't have an ill patient to scan in the future. Perhaps this competition concerns them. They should be encouraging this service, twith some warning about the low levels of radiation, rather than seeking its prohibition.

It's certain that Tesco would want to keep its customers alive for as long as possible and offering them the chance of an 'MOT', as they term it, is a visionary way of ensuring customer loyalty and longevity. It also saves the taxpayer money by discovering illnesses that can be treated a lot cheaper if found early. Scans for all, should be Tescos next venture, rather than books for schools.

It's not the amount of money you spend, it's the way that you spend it

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I've not normally got a lot of time for Professor Julian Le Grand but this point about NHS reforms leapt out at me:

During the same period that we examined waiting times in England in our study, Scotland and Wales, which both explicitly rejected market-driven reforms, have spent more per patient but have seen much smaller decreases in waiting times.

People like me don't run around screaming that we've got to use market mechanisms because that's what Nanny beat into us nor because we are paid agents for international capital: no, we do so because most of the time (and I certainly am willing to acknowledge that this isn't always true) the use of market mechanisms is more efficient. We get more of whatever it is that we want from the resources available by using markets than through any other method we've yet managed to come up with.

That the English system of more markets reduces waiting times (and also, as the Professor notes, increases equitable access at the same time) produces better results than the not market but more expensive Scots or Welsh systems should come as no surprise to those who remember water privatisation. England got for profit private companies, Wales a not for profit mutual, Scotland a government run company and Northern Ireland direct government supply. In terms of cheapness of supply, higher purity of that supply and lower environmental damage from that supply a decade later the best to worst in order was England, Wales, Scotland, Northern Ireland.

This will of course be the most delicious part of both devolution and of the even more fashionable localism that is being promoted. Precisely because different places will try different structures we'll see which of those structures works best in each and every different field. Forgive me if I crow and point out that yes, even in such basics as water and health care, markets seem to work better than not-markets.

Taxing fast food will lose us money, not make it

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As Spencer pointed out, there are reasons why taxing fast food to prevent obesity might not work. There's a larger point to make as well though. If taxing fast food did reduce obesity it would not save us money on health care costs: quite the contrary, it would increase the amount that we have to pay out of tax revenues.

I've looked at the American numbers in more detail elsewhere but the basic outline is quite simple. Assume that we are living in something very much like any of the European welfare states. Health care and pensions are paid out of tax revenue (that is the case pretty much anywhere in Europe). Then let us agree with those who say that obese people (that is, with a BMI of over 30, not just those like yuo and I merely well padded) cost more each year of their life in medical costs.

It isn't exactly a wild leap of faith to assume that those who consume more in health care are likely to die younger: one of (not the only of course) functions of health care is to prevent early death so not to see a connection there would be odd. And it is indeed true: the obese on average die younger than the non-obese. Those years of life not enjoyed stuffing fast food into oneself as a result of stuffing fast food into oneself tend, as is the nature of these things, to come at the end of one's lifespan. When one is retired and in recepit of, even in the US, both government paid health care and a government paid pension. People who die after pensionable age but before the average age of death save us money on that health care and pension.

A brutal thought, yes, but one that is still worth thinking. What we want to know now is whether the extra health care costs paid over the years are lower than, higher or the same as, the savings in health care costs made by not having thin pensioners. As a rough guide it seems that the savings from those years of not providing health care are a little less than the extra costs during life: add in the pensions and obesity is a net gain for the public purse. Just like smoking in fact which also provides a net gain to The Treasury.

There are of course other reasons to think about obesity as a bad thing: those lost years of life for a start. But in a purely monetary calculation, obesity does not cost us money, it saves us money. Thus while there may be other arguments to be used in favour of corralling us all into "eating healthily" the saving of money simply isn't one of them.

Defensive medicine

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Support for ObamaCare is crumbling rapidly as people are getting more aware of its weaknesses. Yet one area in which the president Obama could curb costs is tort reform, which for many years has been a major driver of increasing health care expenditures. The fact is that American doctors have in recent decades increasingly resorted to defensive medicine (a recent study put the number at 87% of doctors) . These doctors are reckless in employing all available diagnostic procedures simply to escape claims of malpractice by their patients.

The price tag for this type of defensive medicine in the US amounts to somewhere between $100 and $200 billion per year. This considerable sum forms the livelihood of a group of well-heeled and specialized lawyers, who happen to be among the biggest sources of funding for the Democratic party. So for purely political reasons this is a no-go-zone for the Obama administration. In addition the rapidly increasing rates for malpractice insurance are invisible to patients:

- Nearly $2,000 a year in extra health expenses for an average family, according to the rate of defensive medicine found in a study by Daniel Kessler and Mark McClellan.

- Stuart Weinstein…has calculated that if a doctor delivers 100 babies a year and pays $200,000 for insurance (the rate in Florida), "$2,000 of the delivery cost for each baby goes to pay the cost of the medical liability premium."

If this money could be transferred into a patients health savings account about half of the yearly health budget for a middle income family of four would be provided for.

Controlling healthcare costs

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As I've blogged before, would-be reformers need to realize that we should not isolate people from the cost of healthcare, otherwise prices tend to spiral out of control. That is true whether you are relying on tax or insurance to fund your healthcare. Both systems rely on third-party payment, and both therefore cause the same problem.

Imagine a typical third-party payment scenario. You go to the doctors, feeling unwell. You've already paid your taxes or your insurance premium, so you'll want to feel like you're getting your money's worth. In other words, you'll want to maximise the amount of care you receive, regardless of the cost. Now look at it from the doctor's perspective: it is also in his interest to provide as many and as expensive services as possible. The more he does, the more money he earns from the insurance company or the government.

Put simply, in a third-party payment context, both parties to the healthcare transaction have an incentive to maximise costs, while neither has an incentive to contain them. And that feeds back into higher taxes, or higher insurance premiums – neither of which are remotely desirable.

Clearly, third-party payment is good for big-ticket health expenditure. Very few people could cover the cost of a serious illness out-of-pocket, so pooling risk and resources makes perfect sense. On the other hand, it's not sensible at all for dealing with lesser ailments, where its bureaucratic cost can often outweigh the cost of the services provided.

How do you translate this into policy? In the US, the best way would be to stop subsidizing employer-provided insurance, and encourage individual/family insurance instead (perhaps through a tax-credit). You would also want to encourage people to combine high-deductible insurance plans with health savings accounts, so that third-party payment is kept to a minimum. Studies have shown that health plans like this produce 3-year savings of $1m per 1000 participants.

In government-dominated systems like the UK's, it is a little more difficult. Assuming outright privatization is not on the cards (and it should be, at the very least in primary care) then the introduction of user charges and co-payments are the way to go. And really, that is not nearly such a radical suggestion as British politicians seem to think: pretty much every other European country has them.