Should Indonesian smokers pay more for health costs?

Doubling the price of cigarettes could increase tax revenues to a level that could cover the current deficit in the national health insurance scheme (JKN). Photo by Flickr user Eko Susanto.
Doubling the price of cigarettes could increase tax revenues to a level that could cover the current deficit in the national health insurance scheme (JKN). Photo by Flickr user Eko Susanto.

 

Another shot was fired in the small but growing battle against the tobacco industry in Indonesia last month, with the publication of a journal article on public support for increasing cigarette prices. As often happens with anything tobacco-related in Indonesia, Professor Hasbullah Thabrany’s fairly straightforward study, in the first edition of the new Indonesian Journal of Health Economics, triggered an avalanche of media attention. This ranged from an article in Kompas predicting the price of a pack of cigarettes rising to Rp 50,000 (AU$5), and the imminent collapse of the tobacco industry, to supportive comments from the head of the national legislature (DPR), and the head of DPR Commission IX, which deals with health.

 

Hasbullah’s argument was strong. In brief, he proposed that smokers – who pay up to Rp 600,000 per month for cigarettes and burden the national health insurance scheme (JKN) with extra costs for their tobacco induced illnesses – contribute to the costs of their health care by paying increased taxes on the cigarettes they purchase. He estimated that doubling the price of cigarettes would increase government tax revenues to a level that could cover the current deficit in the JKN.

 

With overall prevalence of smoking in Indonesia at 36.5 per cent, smoking is responsible for over 200,000 deaths annually, and an increasing burden of non-communicable disease that threatens to overwhelm the capacity of the fledgling national health insurance scheme to pay. Even more alarming, the prevalence of smoking among Indonesians aged 15-19 years reached 20.5 per cent in 2013, ensuring further growth in adult smoking.

 

Hasbullah’s random telephone survey asked 1,000 respondents about their smoking habits, their likely response to a rise in cigarette prices, and their opinion on whether cigarette taxes should be increased if the revenue was used to fund health services. More than 40 per cent of the respondents were smokers, spending between Rp 450,000 to 600,000 per month on cigarettes, much higher than the monthly health insurance contribution. Nearly all admitted knowing that smoking was harmful, and more than 70 per cent stated they would stop smoking if the price of cigarettes rose above Rp 50,000 (about three times current prices). The majority of non-smokers (80 per cent) and 76 per cent of smokers supported an increase in taxes on cigarettes, with the proceeds being used to fund health services.

 

Hasbullah’s paper also modelled a doubling of the price of cigarettes, and found that even with the predicted reduction in consumption, government tax revenue would increase sufficiently to cover the current deficit in the health insurance fund. The response in the media was, to some extent, predictable, with most outlets fixated on the potential for the price of cigarettes to reach Rp 50,000, even though this was not Hasbullah’s proposal.

 

The Indonesian Tobacco Association conceded that the price could increase but only as much as inflation (6 per cent).  A spokesman for the Indonesian Consumers Association supported an increase in taxes, as long as this was accompanied by health services to assist those who wished to stop smoking, and other regulations, such as prohibition of the sale of single cigarettes.

 

More concerning was the weak response from President Joko “Jokowi” Widodo’s administration. The Ministry for Industry stated that there were no plans for such a large increase in tobacco taxes, and that the industry should continue to increase production as per agreed growth plans. This was perhaps not unexpected.

 

But even the Minister for Health gave only a lukewarm response, welcoming the concept of an increase in price, principally in order to reduce youth smoking, but declining to comment on the appropriateness of a price rise, as it was not within her ministry’s authority.  It was Minister for Marine Affairs and Fisheries Susi Pudjiastuti who provided a more positive response, saying that she supported a price rise because it might help her stop smoking!

 

A recent publication by the World Health Organisation examined the experience of nine countries in the use of “earmarked tobacco taxes” – tax revenues dedicated to health care and health promotion. The countries examined were Iceland, Poland and Romania in Europe, Botswana and Egypt in Africa, Panama in South America and Thailand, Vietnam and the Philippines in Asia, with excise rates varying from 36 per cent to 73 per cent. In all countries, the secure and earmarked funding source brought significant benefits to health financing, enabling additional health services and expansion of health insurance schemes in these countries.

 

Indonesia is facing an epidemic of tobacco related disease, which will affect not only smokers but also non-smokers exposed to tobacco smoke, particularly household members of smokers. International experience has demonstrated that this is not an issue on which you will get agreement from the tobacco industry. The Indonesian government needs to move beyond the search for consensus. Instead, it should build on existing support within the community and the health sector, and confront an industry that is undermining Indonesia’s future.