Healthy Nutrition Saves Public Funds: Strategies to Reduce Healthcare Costs in Russia
In Russia, the annual cost of treating type 2 diabetes alone exceeds 500 billion roubles. Promoting healthy nutrition programmes can ease the burden on the healthcare system and increase life expectancy. This was the conclusion reached by economists at HSE University after analysing global experiences with government involvement in promoting a healthy lifestyle.
An unbalanced diet and nutritional disorders, whether due to malnutrition or overeating, cause harm to health and increase the burden on the healthcare system and social costs. According to the World Bank, low- and middle-income countries collectively lose up to $100 billion annually in medical costs and reduced productivity due to diseases linked to the consumption of substandard and unhealthy food. Similar issues are observed in Russia: a 2016 study found that the cost of treating type 2 diabetes alone, which develops in 70% of cases due to overeating and an imbalanced diet, amounts to nearly 1% of the annual GDP.
Assistant Professor at the HSE Faculty of Economic Sciences Natalia Khorkina, in collaboration with Research Fellow at the Laboratory of Public Sector Economic Research, HSE Centre for Basic Research, Kristina Chetaeva and bachelor's student at the HSE Faculty of Economic Sciences Alexandra Shpeko, analysed best practices of other countries in promoting healthy nutrition programmes and used the findings to develop recommendations for Russia.
There are three primary methods for increasing the popularity of healthy food consumption: educational initiatives, economic measures, and administrative regulation. Each of the methods can be applied both at the central and regional levels. According to the authors, the most effective approach is a combination of higher taxes on harmful products along with subsidies for both producers and consumers of healthy food. In Western European countries, the introduction of an excise tax of 10% to 20% on sugary carbonated drinks has led to a 12% to 15% reduction in their consumption, resulting in a $17 billion decrease in healthcare costs. In Mexico, implementing such a tax has resulted in savings of $4 for every dollar spent on administering the programme. In 2023, Russia introduced an excise tax on sugary drinks, leading to a twofold reduction in sugar content in many of these beverages.
Subsidising producers of healthy foods and encouraging the availability of nutritious options in the market can also be effective strategies. For example, Singapore has implemented a competitive support system for manufacturers. The country invested $35 million in the programme, distributing this amount among 100 companies. Subsequently, their products were featured in over 10,000 food and retail establishments. In 2022 alone, this initiative led to the preparation of over 200 million servings of food containing healthy ingredients. Additionally, providing support to specific population groups can be beneficial, such as subsidising hot lunches in schools and offering free meals to students from large families, orphans, and other vulnerable groups. Administrative measures can also produce positive outcomes. For example, in Gateshead, England, local authorities have prohibited the establishment of fast-food outlets near schools and in areas with high rates of childhood obesity. As a result, the proportion of public catering establishments offering junk food in the town decreased by 14% over four years. In Los Angeles, measures to ban new fast-food outlets resulted in a 3% reduction in obesity rates and a 2% decrease in diabetes rates within seven years of the ban. Many Latin American countries have implemented food labelling that highlights high calorie content and the associated health risks of consuming these products. In Chile, up to 50% of the population altered their eating habits following the introduction of such labelling, while in Uruguay, the consumption of sugary carbonated drinks dropped by 24%.
Kristina Chetaeva
Such nudging measures have proven highly effective and could be implemented in Russia as well. According to the authors, one effective method could be the ‘traffic light’ labelling system. It uses color-coded labels to inform customers about the nutritional content and health impact of products: red for harmful, green for beneficial, and yellow for products with mixed properties. 'This is an effective and intuitive method for helping people make informed decisions about the food they buy, which is especially crucial for young people whose eating habits are still developing. For example, studies conducted in Ecuador have shown that this labelling system can encourage children and adolescents to choose healthier foods. Scientists in Japan observed a significantly healthier selection of dishes by students after implementing traffic light-style labels on the dinner menu. In Russia, the traffic light labelling is still optional and not very common,' comments Kristina Chetaeva, Research Fellow at the Laboratory of Public Sector Economic Research, HSE Centre for Basic Research.
Natalia Khorkina
Many of these measures are already in place in Russia. For example, a reduced VAT rate of 10% is applied to healthy foods such as meat, dairy products, vegetables, and berries, while the VAT rate for fast food has been increased to 20%. In 2024, up to 8 billion roubles will be allocated for subsidies to farms. Nevertheless, the researchers recommend maintaining and expanding policies that promote healthy eating. 'Subsidies for sellers of healthy foods, additional funding for school hot lunches, and benefits for employers who offer balanced diets to their employees could serve as key tools for promoting healthy eating in Russia. Additionally, it is important to continue differentiating indirect taxes on specific food groups, following the model of the excise tax on sugary carbonated drinks introduced in 2023, and to make the product labelling system more accessible and understandable. Such a policy could lead to a significant reduction in the burden on the healthcare system,' according to Natalia Khorkina, Assistant Professor at the HSE Faculty of Economic Sciences.
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