Opting out of compulsion
The externality argument for compulsion has a specific logical structure. It says that your smoking, drinking, or eating imposes costs on others through the NHS, so the state may restrict your choices to protect the collective purse.
The argument's entire force rests on one fact: you are a member of a shared-cost pool. You did not opt into that pool, but were forced into it. Remove that fact, and the externality disappears. Someone who opts out of the NHS, insures privately, and pays for their own treatment no longer imposes costs on anyone else. Their obesity or smoking becomes, in the economist's term, entirely internalized. They bear the consequences themselves.
If that is so, then consistency demands the compulsion lapses with the membership. You cannot invoke shared-cost pooling to justify restricting someone's liberty, and then keep restricting it after they have left the pool. That would mean using the argument's conclusion while discarding its premise. It is the same logic that applies to any club. If you leave the club, its rules on you lapse because the rules existed to manage shared costs, not to police behaviour for its own sake.
This distinction matters because it separates two kinds of justification that are run together in public debate. One is cost to the taxpayer. The other is harm to third parties, such as second-hand smoke, or paternalism pure and simple, the state deciding it knows better than you what risks you should run with your own body.
The opt-out argument only touches the first. If someone defends a smoking ban or a sugar tax by falling back on ‘but it's for their own good’ once the NHS-cost justification is removed, that tells you the NHS-cost justification was doing rhetorical work it could not actually support. It was being used because it sounds objective and fiscal rather than moralistic, while the real motive was paternalism all along. Honesty requires separating the two and being explicit about which is in play.
There is also a revealed-preference case for taking the opt-out seriously. Someone who pays twice, once through general taxation for an NHS they do not use, and again for private cover, has already demonstrated they take responsibility for their own costs. That is a far stronger signal of internalized risk than anything the state extracts from smokers and the obese who remain inside the NHS system, where the threat of compulsion is meant to substitute for the missing price signal.
Discussions about pensions strengthens the case further, because it shows the fiscal accounting behind the compulsion argument is already incomplete even for those who stay inside the NHS. Early death from smoking or obesity-related illness saves the state years of pension payments and long-term social care, often exceeding the treatment costs incurred.
Studies commissioned in the Netherlands and elsewhere have found lifetime healthcare costs for smokers and the obese are not clearly higher than for the long-lived healthy, once you include the expensive final years of life that the long-lived eventually rack up anyway, and net out the pension and care savings. If the state wants to run the argument on pure fiscal grounds, it owes the public a full accounting, not a selective one that counts costs but not savings. Once the accounting is honest, much of the justification for compulsion weakens even for those who stay in the pool.
The practical objections are worth taking on rather than avoiding. Point one is adverse selection. Would only the healthy and wealthy opt out, leaving a sicker NHS pool behind? Possibly, but that is an argument about NHS funding design, not a reason to keep compelling people who have already left it.
Another point is about verification. How do you know someone has genuinely exited the risk pool for good rather than for a year? This is answerable with binding minimum terms and a requirement for continuous private cover, the same way private health insurers already require. Moral hazard at the point of an emergency is solved by requiring catastrophic and emergency cover as a condition of the opt-out, so no one is left untreated at the roadside while the argument is settled in principle.
The underlying point is one of intellectual honesty. If compulsion is justified by shared cost, then removing the shared cost should remove the compulsion. Anything else reveals that cost was never really the reason.
Madsen Pirie