Tobacco use results in increased health care expenditure and lost human capital. In 2018, nearly eight million people worldwide died from smoking-related diseases and 9.1% of disability-adjusted life years lost can be attributed to smoking (IHME, 2022). In Latin America, it has been estimated that 8.3% of all health care expenditure can be attributed to smoking (Pichón-Riviere et al., 2016).
In Mexico, the population without social security receive healthcare mainly from the states’ health systems. This research explores whether budgeted state revenue from IEPS (impuesto especial sobre producción y servicios, “Excise Tax on Production and Services”) levied on tobacco is sufficient to cover health care costs for three diseases caused by smoking in each state under the assumption that these cover them.
In every single state, a significant fiscal gap is observed in the amount needed just to treat only three tobacco-related diseases. Nationally, this deficit totals over 80 billion pesos and exists even if considering only tobacco-attributable costs. This gap would be much greater for the entirety of tobacco-related diseases.
The cost of treating just three tobacco-related diseases in 2020 totals 93.379 billion pesos for Mexicans without social security. This is 7.4 times the amount states receive in IEPS tax levied on tobacco.
Beyond the economic implications for the tax system, the population lacks effective access to health care. This is not just for lack of financial means, but also because conditions like COPD and lung cancer are not included in the catalog of services available for those not covered by any social security institution and therefore will face out-of-pocket expenditures, with often catastrophic consequences.
Funding and including diseases that require highly specialized care, like lung cancer, have been rendered more difficult with the launch of IMSS-Bienestar, a decentralized public entity responsible for making health care universal, and by the fact that this body is funded by resources from FONSABI.
Highly specialized, tertiary level care is not included in the express care plan for those without social security in the Strategic Health Program for Well-Being published on September 7th in the Official Gazette of the Federation (H. Congreso de la Unión, Acuerdo por el que se emite el Programa Estratégico de Salud para el Bienestar, 2022).
An urgent discussion is needed to align the priorities of the health sector with the Mexican fiscal system. Fundamental to this discussion should be the generation and integration of sources of sustainable funding to support those with reduced access to health services. Increasing the low excise taxes on tobacco can fill the fiscal gap by increasing the revenue transfer to the states.
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