The Economics of Overweight and Obesity - The High Cost Of Overweight And Obesity

In 1999 the AOA commissioned the Lewin Group, a health economics consulting firm, to conduct a cost analysis of fifteen conditions causally related to obesity. These obesity-related conditions were arthritis, breast cancer, heart disease, colorectal cancer, Type 2 diabetes, endometrial cancer, end-stage renal disease, gallbladder disease, hypertension, liver disease, low back pain, renal cell cancer, obstructive sleep apnea, stroke, and urinary incontinence. Using data from the National Health Interview Survey and the third National Health and Nutrition Examination Survey (NHANES III, conducted between 1988 and 1994), the researchers established prevalence rates of each condition and computed the percentage of the cost of each disease attributable to obesity. This analysis fixed the direct health-care costs of obesity at $102.2 billion in 1999.

According to the Weight-control Information Network (WIN) of the National Institute of Diabetes and Digestive and Kidney Diseases, the U.S. government's lead agency responsible for biomedical research on nutrition and obesity and part of the National Institutes of Health (NIH), the estimated annual medical spending TABLE 7.1 Direct, indirect, and total costs for physical inactivity, obesity, and overweight in California adults, 2000 "Table 1. Direct, Indirect and Total Costs for Physical Inactivity, Obesity, and Overweight in California Adults (in Year 2000 Dollars)," in The Economic Costs of Physical Inactivity, Obesity, and Overweight in California Adults: Health Care, Workers' Compensation, and Lost Productivity, California Department of Health Services, Cancer Prevention and Nutrition Section, April 2005, http://www.dhs.ca.gov/cdic/CPNS/press/downloads/CostofObesityFullTechnicalReport.pdf (accessed January 12, 2006)attributable to overweight and obesity was about $93 billion in 2002. The WIN estimated the total cost as $117 billion, with an additional $33 billion spent on weight-loss products and services. Estimates of the medical care costs, direct and indirect as well as total cost of overweight and obesity in the United States, vary depending on how the conditions are defined, whether overweight and obesity are considered together or separately, and which costs and obesity-related conditions are included in the estimates and projections. For example, the WIN total cost is based on epidemiological studies that defined obesity and overweight as body mass index (BMI) equal to or greater than twenty-nine.

TABLE 7.1
Direct, indirect, and total costs for physical inactivity, obesity, and overweight in California adults, 2000
[In year 2000 dollars]
Cost category	Direct physical inactivity	Indirect physical inactivity	Direct obesity	Indirect obesity	Direct overweight	Indirect overweight	Subtotals
aThe ratio of indirect costs to direct costs for various medical conditions is approximately 6:1 based on a range of 1.2:1 (low) to 15:1 (high). A conservative ratio of 3:1 was applied.
bA multiplier of 4 was used; the ratio of indirect to direct costs associated with workers' compensation costs is generally higher than medical care expenses due to the odds that extraneous circumstances will delay and/or impair an individual's return-to-work timeframe and on-the-job performance, e.g., adjudication, poor worker attitude, return to work policy, etc.
cIndirect costs are not applicable since lost productivity measures are inherently classified as direct costs.
Medical carea
1. Treatment	$241,985,581	$725,956,744	$135,520,641	$406,561,922	$93,509,242	$280,527,726	$1,884,061,856
2. Rx drugs	$1,065,943,038	$3,197,829,114	$595,514,095	$1,786,542,286	$410,605,609	$1,231,816,827	$8,288,250,969
	$1,307,928,619	$3,923,785,858	$731,034,736	$2,193,104,208	$504,114,851	$1,512,344,553	$10,172,312,826
Workers compensationb
	$50,005,040	$200,020,159	$17,658,344	$70,633,376	0	0	$338,316,919
Lost productivityc
1. Absenteeism, presenteeism, short-term disability	$7,528,629,764	0	$3,364,013,159	0	0	0	$10,892,642,923
2. On-the-job injury	$274,983,844	0	0	0	0	0	$274,983,844
							$11,167,626,767
Sub-totals	$9,161,547,267	$4,123,806,017	$4,112,706,239	$2,263,737,584	$504,114,851	$1,512,344,553
						Adults total	$21,678,256,511

Economists Eric A. Finkelstein and Ian C. Fiebelkorn of RTI International, an independent, nonprofit research corporation, and Guijing Wang of the Centers for Disease Control and Prevention (CDC) examined costs attributable to people who were overweight, which they defined as BMI between 25 and 29.9, and obese, which they defined as BMI of 30 or higher ("National Medical Spending Attributable to Overweight and Obesity: How Much, and Who's Paying?" Health Affairs, http://content.healthaffairs.org/cgi/content/full/hlthaff.w3.219v1/DC1, May 14, 2003). Using data from a nationally representative sample of 9,867 adults aged nineteen and older, derived from the 1998 Medical Expenditure Panel Survey and linked to the 1996 and 1997 National Health Interview Surveys, they computed the fraction of medical spending associated with being overweight and obese. Because of including both overweight and obesity-related costs, they estimated annual medical spending due to overweight and obesity to be as much as $93 billion in 2002—9.1% of U.S. health expenditures.

The researchers also reported that among people under age sixty-five, medical expenditures for people who are overweight or obese are approximately 37% higher than for those of normal weight and observed that about half of these costs are financed by the federal and state government public assistance programs Medicare and Medicaid. (The majority of Medicare enrollees are people aged sixty-five and older. Medicaid is the entitlement program that uses federal and state funds for the provision of health-care insurance to people less than sixty-five years of age who cannot afford to pay for private health insurance.) This study was the first to assess the effect of being overweight or obese on select payers, including individuals, private insurers, Medicare, and Medicaid.

The combined prevalence of overweight and obesity averaged 53.6% across all insurance categories, and was largest, 56.1%, among people enrolled in Medicare. Because obesity is associated with chronic diseases such as cancer, heart disease, and diabetes, obesity-related expenditures for older adults (people aged sixty-five and older) were significantly higher than among younger populations.

The researchers found that overall annual medical costs for an obese person were about 37.7% more, or $732 higher, than the costs for people of normal weight. An obese Medicare recipient incurred medical expenses of $1,486 more a year than one of healthy weight, and an obese Medicaid recipient cost $864 more than a normal-weight Medicaid recipient. For people with private health insurance the per capita increase among obese people was $423.

In an updated study, "State-Level Estimates of Annual Medical Expenditures Attributable to Obesity" (Obesity Research, vol. 12, no. 1, January 2004), Finkelstein and his colleagues estimated that in 2003 Medicare and Medicaid spent $75 billion treating obesity-related diseases. In this study the researchers calculated state-level estimates of total, Medicare, and Medicaid obesity-attributable medical expenditures. According to the CDC 1999–2000 National Health and Nutrition Examination Survey, which is based on measured heights and weights, among Medicare recipients, obesity prevalence ranges from 12% in Hawaii to 30% in Washington, D.C.

The percentage of annual medical expenditures in each state attributable to obesity ranged from 4% in Arizona to 6.7% in Alaska. Medicare expenditures connected to obesity ranged from 3.9% in Arizona to 9.8% in Delaware. For Medicaid recipients, the percentages were considerably higher because of the higher prevalence of obesity among Medicaid recipients—from 7.7% in Rhode Island (where 21% of Medicaid recipients were obese) to 15.7 % in Indiana (where 44% of Medicaid recipients were obese).

State-level estimates ranged from totals of $87 million in Wyoming to $7.7 billion in California. Obesity-attributable Medicare estimates range from $15 million in Wyoming to $1.7 billion in California, and Medicaid estimates ranged from $23 million in Wyoming to $3.5 billion in New York. (It is important to remember that state-level spending is largely a function of population, so it is reasonable that the less populous Wyoming would spend fewer state and federal dollars than population-dense California and New York.)

Health economist Eric Finkelstein observed that the amount of Medicare and Medicaid dollars spent on obesity-related illnesses was just slightly less than that spent to treat smoking-related illnesses. In a January 21, 2004, news release from RTI International, former U.S. Department of Health and Human Services Secretary Tommy G. Thompson responded to the results of the study, with the assertion that "This report further drives home the point that we must stem the tide of the obesity epidemic in this country. These findings are a dramatic illustration of the devastating economic impact obesity has on health-care delivery systems across the nation."

Obesity Costs in California Exceed $21 Billion

The California Department of Health Services reported even higher costs than those estimated in the RTI/CDC report—nearly $25 billion in private and pub-FIGURE 7.1 Costs* related to physical inactivity, obesity, and overweight in California adults, 2000 and projected, 2001–05 "Figure 3. Appraised (2000) and Projected (2001–2005) Costs Related to Physical Inactivity, Obesity, and Overweight in California Adults," in The Economic Costs of Physical Inactivity, Obesity, and Overweight in California Adults During the Year 2000: A Technical Analysis, California Department of Health Services, Cancer Prevention and Nutrition Section, April 2005, http://www.dhs.ca.gov/cdic/CPNS/press/downloads/CostofObesityFullTechnicalReport.pdf (accessed January 23, 2006)lic medical services, lost productivity, and workers' compensation. The state health department attributed these costs to the 59% of adults in California who are obese or overweight. In the January 23, 2004, issue of the Los Angeles Times Susan Foerster, chief of cancer prevention and nutrition for the California Department of Health Services, explained that her department is examining the factors that may explain the relatively recent jump in obesity in the state. Foerster cited "car-dominated or unsafe neighborhoods and limited access to fresh fruits and vegetables" as possible sources of the state's surge in obesity, and stated that "It's not a matter of simply pushing away from the table or getting up off the couch—the increase in rates over time has been a function of changed lifestyles and changed environment" (Lisa Richardson, "Fat of the Land: Obesity Costs State, U.S. Billions, Studies Say," Los Angeles Times, January 23, 2004).

Research that analyzed medical claims data for the year 2000 estimated that direct and indirect costs related to overweight, obesity, and inactivity cost the State of California $11.2 billion annually in lost productivity, $10.2 billion in medical care, and $388 million in workers' compensation. (See Table 7.1.) The research report projected conservative cost estimates totaling more than $28 billion for 2005 (The Economic Costs of Physical Inactivity, Obesity, and Overweight in California Adults during 2000: A Technical Analysis, Cancer Prevention and Nutrition Section, California Department of Health Services, April 2005). Figure 7.1 shows how the costs FIGURE 7.2 Projected costs* in California related to physical inactivity, obesity, and overweight with no impact vs. projected costs at 5% and 10% impact levels, 2001–05 "Figure 4. Projected Costs Related to Physical Inactivity, Obesity, and Overweight with No Impact vs. Projected Costs at 5% and 10% Impact Levels," in The Economic Costs of Physical Inactivity, Obesity, and Overweight in California Adults During the Year 2000: A Technical Analysis, California Department of Health Services, Cancer Prevention and Nutrition Section, April 2005, http://www.dhs.ca.gov/cdic/CPNS/press/downloads/CostofObesityFullTechnicalReport.pdf (accessed January 23, 2006)attributable to physical inactivity, overweight, and obesity steadily increased between 2000 and 2005. The researchers calculated that even modest improvement of these modifiable risk factors would yield substantial savings. For example, a 5% increase in the percentage of physically active and leaner adults could have produced in cost savings of approximately $1.3 billion annually, or $6.4 billion by 2005. A 10% increase would have yielded savings of about $2.6 billion per year or $13 billion from 2001 to 2005. (See Figure 7.2.)