Saturday, December 7, 2013

Economy: Health Care - What We Could Learn From Mexico

(Drivebycuriosity) - Obesity, caused by a wrong diet, is a global problem. This causes a lot of diseases and high medical costs.

Mexico deals with this problem. The Latin American country introduced a tax on junk food and sugary drinks (theguardian). The taxes will increase the price of junk foods – those high in saturated fat, sugar and salt – by 8%, writes the "Guardian". It will also put one peso on a litre of sugary drinks such as Coca Cola, which Mexicans consume in vast quantities at a rate of 43 gallons per person per year – the highest in the world.

I think this is a good idea.  Heavy consumption of junk food & soft drinks could cause diseases like heart attacks, strokes and cancer. To much sugar & overweight is often the cause for diabetes. Those diseases are a burden for the whole community, even for those who live healthy and aren`t directly affected. The medical treatments of these diseases are often paid by insurances, meaning by all their members (customers), or the government, meaning all the tax payers.

Moral Hazard

Economists know this behavior as "moral hazard": People care less about risks if their consequences are borne by others (wikipedia). The heavy consume of junk food is just another case of "moral hazard".

Mexico follows the economic text books which recommend a tax on activities whose cost are paid by the community.  Wrong behavior will be  more expensive and therefore reduced. This will result in less diseases which will also reduce the health cost that are born by everyone.

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