Health care reform could mean bad news for beef

by David Martosko, Director of Research – Center for Consumer Freedom

Summary

Congress’ proposal to overhaul the nation’s health care system will likely have serious negative consequences for the beef industry – going well beyond the immediate cost concerns raised by tax increases and benefit mandates.

Questions abound. Scott Brown has defeated Martha Coakley in Massachusetts. No one knows the status of the Democrats’ favored fast-track solution and no one is certain that Majority Leader Harry Reid, D-Nev., won’t try to sneak a bill through the Senate using the budget reconciliation process. Nor is anyone really sure the President will be able to get his agenda through the U.S. Senate at all.

But the $1 trillion question since “Day One” has been how will Congress pay for the action the White House wants to take. And even if no health care bill makes it to the Oval Office this year, costs are skyrocketing beyond the ability of most U.S. employers to cope.

Insurers are looking for novel ways to cut the cost of providing health care, especially end-of-life care, which represents a disproportionate share of expenses. And legislators are looking for untapped dollars to fill budget holes. So the new trend is to push “preventive” care – those minor expenditures and lifestyle adjustments (eating a healthier diet, for instance, or taking blood pressure medicine) which can forestall or even eliminate the need for more costly medical interventions down the road, with new taxes.

Increasingly, however, the preventivehealth toolbox has grown to include government intervention in Americans’ diets. Already, 40 states tax sodas or “junk food.” There is serious talk of adding so-called “fat taxes” to the revenue mix in many places. The rationale is simple: penalize people who don’t eat the government-approved diet to make up for the cost of treating the resulting medical conditions.

And as government takes over more of the health care system, lawmakers will acquire the moral authority to interfere with what we eat. This will inevitably grow beyond taxes on foods that supposedly “cause” obesity.

Governments will soon begin targeting foods and beverages believed to be responsible for an increased incidence of any medical condition, such as cancer, diabetes, hypertension, and stroke, which come readily to mind. This could take the form of taxes, restrictions on availability, and even the zoning of restaurants and food retailers.

This is the current situation, and it would be irresponsible to suppose that beef won’t be one of these targets. Last July, the Urban Institute released a study proposing new taxes on cheeseburgers and other “fattening” foods. It estimated that a 10 percent excise tax would raise $500 billion over 10 years. That’s a tantalizing revenue prospect for fiscallyhandicapped lawmakers.

At present, both the House and Senate versions of President Obama’s health care plan include a prohibition against insurers declining coverage to anyone because of preexisting conditions. If this were to become law, it’s easy to see how new taxes on meat (or restrictions on where it can be sold) could enter the realm of possibility. And if insurance companies believe, however wrongly, that penalizing meat-eating consumers will reduce healthcare costs they’re forced to underwrite, they could find themselves lobbying in favor of all sorts of insanity.

Discussion

Soft drinks and snack foods have long been easy targets for sales taxes. Already, 33 states charge a specific sales tax on sodas, the average being 5.2 percent. And 15 states tax candy. All told, 40 states have soda or “junk food” taxes, and that list is growing.

In November 2009, Colorado Gov. Bill Ritter proposed new “junk food” taxes. In Massachusetts, Gov. Deval Patrick plans to generate $121 million by eliminating a sales tax exemption on candy, soda, sweetened beverages, liquor and fruit cocktails with less than 50 percent fruit juice.

There will be huge pressure on the state and federal governments to raise existing food taxes and find new ones. The health care bill passed by the House in November is projected to cost $1.1 trillion over 10 years. The Senate bill is estimated to cost $870 billion. Whatever the final version looks like, it will be exorbitantly expensive.

Not surprisingly, President Obama has signaled his support for a national tax on sodas. During an interview in the October issue of Men’s Health magazine, Obama said a soda tax is “an idea that we should be exploring.”

In the face of a budget-busting health care reality, taxes on coffee, bacon and burgers are going to start sounding like good ideas. Back in 2005, a New York Times editorial endorsed taxes on fatty foods: “If you pay a little extra to the government for a Budweiser, why not for a Big Mac?”

The Senate health care bill already includes a 10 percent tax on tanning salons, based on the conventional wisdom that tanning beds cause skin cancer. Taxes on anything that’s not chock full of antioxidants can’t be far behind.

The new tobacco?
In September, the Institute of Medicine (IOM) recommended “a tax strategy to discourage consumption of foods and beverages that have minimal nutritional value.” IOM also recommended zoning restrictions to keep fast-food restaurants away from schools, and limits on the density of fastfood restaurants.

There is already significant public support for so-called “Twinkie taxes.” A July 2009 Kaiser Family Foundation poll found that 55 percent of Americans supported a snackfood tax. Of those who opposed the tax, 63 percent said they would change their minds if the revenue was used to fund health care and address obesity.

The IOM report blames the rising obesity rate among adolescents on easy access to high-calorie foods during the past 30 years. “What has changed is access to food that is abundant in calories and less participation in physical activity,” said report chairman Eduardo Sanchez.

What should concern the entire beef supply chain is how quickly a generic discussion about “fatty foods” can translate to the specific targeting of meat:

• Dr. Fred McKinney, a former economist on President Carter’s Council of Economic Advisors, now says the solution to America’s health care problems is to adopt vegetarianism and tax meat to deter consumption: “Combine a vegetarian diet with taxes on meat, eggs, milk, sugar and refined grain products, and we would have the mechanism to pay for real health insurance for all Americans.”
• The People for the Ethical Treatment of Animals (PETA)-aligned Physicians Committee for Responsible Medicine (PCRM) is demanding new taxes on “highfat, high-cholesterol” foods – PCRM’s code for meat and dairy: “Taxing sodas and cheeseburgers would raise prices at the drive-through window, but Americans would get that cash back in the form of lower medical bills.”
• Harvard pediatrics professor Dr. David Ludwig says there is no “better way to accomplish both lowering health care costs through obesity prevention and funding expansion of health insurance coverage than to add a tax to unhealthy foods.”
• In an October 2008 New York Times op-ed, journalism professor Michael Pollan called on President Obama to pursue policies that deliberately increase the price of fast-food meals and other meat sales: “You will need to make the case that paying the real cost of meat, and therefore eating less of it, is a good thing for our health.”
• The American Institute for Cancer Research released a study in 2007 blaming commodity subsidies for contributing to obesity by making meat too affordable: “We have actually had a policy [for] decades which was based on postwar, old-fashioned ideas that we needed as much meat, milk, butter, fat and sugar as possible.”
  

Urban Institute: Fat Tax will yield $500 billion in revenue
Last July, an Urban Institute study detailed specific proposals to curb obesity, modeled on government anti-smoking campaigns. The piece was titled “Reducing Obesity: Policy Strategies from the Tobacco Wars.”

In attacking the obesity epidemic, says the Urban Institute, “aggressive policy remedies like those used with tobacco deserve serious consideration” since obesity poses a health threat similar to smoking: “The obese and overweight experience chronic illness, poor health, and more than 100,000 preventable deaths each year.”

In determining which foods to target, the study’s authors cite the “Raynor model” developed by a panel of the United Kingdom’s Food Standards Agency. This model analyzes food items by balancing the food’s nutritionally “risky” elements against its nutritional benefits.

All foods are categorized in three categories – “Healthier,” “Intermediate,” and “Less Healthy.” Cheeseburgers and bacon are placed in the last column.

The British use the Raynor model to identify foods that may not be advertized to children. The Urban Institute proposes using the Raynor model to identify which foods should be taxed and more strictly regulated. “Policymakers interested in raising taxes to reduce the consumption of fattening food,” the Institute says, “may need to tax the full range of such food items.”

Like many similar public-health proposals, the Urban Institute’s anti-obesity campaign tries “to make healthier choices easier and less costly… while making fattening choices better informed, harder and more expensive.” Its goal is two-fold: reduce consumption of “Less Healthy” foods and raise huge amounts of revenue.

Under the Urban Institute’s model, taxes “should be high” to achieve the desired effect. The study suggests that taxes should “equal at least 10 to 30 percent of the price of the food.”

Its estimate is that a 10 percent excise tax on all foods identified as “Less Healthy” under the Raynor model would generate $240 billion over five years and $522 billion over 10 years.

That’s exactly the kind of revenue legislators will need to pay for health care reform – even of the watered-down variety. The analogy to the tobacco issue is disturbingly apt. In 1998, tobacco companies agreed to pay $386.5 billion supposedly to compensate states and individuals for tobacco-related health costs and finance anti-smoking programs.

In reality, the tobacco money is used by state governments as an additional revenue source for their routine budget outlays. And as with tobacco, a $500 billion “fat tax” to curb and treat obesity would surely morph into another lucrative revenue source for government programs. Once a tax like that is in place, it would be extremely difficult to roll it back.

Insurance companies could fall in line
The Senate health care bill would prohibit insurance companies starting in 2014 from denying coverage based on pre-existing conditions. The House bill would impose its similar mandate in 2013. The Senate would also restrict the amount private insurers could spend on administrative and marketing costs. And excise taxes on high-end “Cadillac” insurance plans are expected to cost the industry another $70 billion over 10 years.

These mandates will cut deeply into insurance profit margins, and cost-cutting will quickly become the mantra du jour. It’s reasonable to expect that the industry could look favorably upon policies that promise to reduce the number of people suffering from obesity, diabetes, cancer and heart disease.

Some estimates hint that obesity costs the health care system $147 billion annually. Diabetes has a $116 billion tag. Cardiovascular disease and cancer costs are an order of magnitude larger still. A single patient with Type-2 diabetes alone incurs additional health care costs of more than $6,600 per year. That can amount to more than $400,000 over a lifetime.

Insurers may soon lose the strategic option of keeping patients like these out of their risk pools. So government interventions before disease can occur may seem not just palatable, but desirable.

Michael Pollan has observed with glee in the New York Times that health insurance companies may become powerful allies of public health activists: “The moment these new rules take effect, health insurance companies will promptly discover they have a powerful interest in reducing rates of obesity and chronic diseases linked to diet… Suddenly, every can of soda or Happy Meal or chicken nugget on a school lunch menu will look like a threat to future profits.” 

Conclusions

The current national health care debate began – and will end – with the fundamental question of whether we want government more intimately involved with the critical decisions about what medicine we can receive, which surgeries we qualify for, and ultimately whether we live or die. But countless smaller decisions may suddenly also become matters of public concern.

Should I have the burger or the salad? Will my snack be the banana or the beef jerky? Should school lunches include meatloaf, or will the lunch lady serve veggie-only entrees?

In the private sphere of our everyday lives, most of us agree that choices about food are best left to individuals, families and communities. But don’t count on that presumption remaining the default position much longer.

Like it or not, the social acceptability of serving and eating beef is likely to be affected greatly by the conventional wisdom of how it impacts our general health. You can either be on Big Brother’s “naughty” list or its “nice” list. (Hint: The more people hear the word “beef ” and think of a cheeseburger instead of a lean steak, the more trouble you’ll be in.)

Public relations firms frequently counsel companies and entire industries to get ahead of these types of problems, engage the public early, and trust that public opinion will ultimately be more powerful than any other force in America. So it’s helpful that polls show most Americans don’t want to see anything like the current Congressional health care plan signed into law.

But even if it withers on the vine, some of the damage has already been done. Public health activists, who would love to see soda taxes expanded to encompass entire extravalue cheeseburger meals, will paint beef with the broadest brush possible. Unless you have a good battle plan, public perception will cast red meat as Public Health Enemy No. 1 (or at least No. 2 or No. 3).

The absolute worst-case scenario would see beef inextricably tied to cancer at a time when politicians seem willing to do just about anything to rein in health care costs.

Media outreach and public education debunking some popular misconceptions in this regard should be treated as a major priority. And diminishing the credibility of opposition is a requirement for public opinion success.

However you slice it, the beef industry absolutely must make sure the public knows that they’re buying and eating the same wholesome product they always have. It’s the rhetorical environment that’s changed, not the cuts of beef.