The Economics of Overweight and Obesity - Weighing The Price Business Pays

Employers report that obese employees incur substantially higher health-care costs than normal-weight employees. In "Watching the Corporate Waistline" (Forbes, August 4, 2003), Kasia Moreno reported that at Bank One the average health-care costs of an obese worker totaled $6,822 over three years, while non-obese employees averaged health-care costs of $4,496. Although Bank One charges workers who smoke $28 per month more in health premiums than it does nonsmokers, obese employees are not asked to contribute to offset their excess health-care costs. Bank One's medical director, Dr. Wayne Burton, asserted that the company does not wish to be viewed as "discriminating against obese workers, or to create the impression that it considers obesity a purely behavioral issue."

According to the U.S. Department of Health and Human Services (HHS) in Prevention Makes Common "Cents" (September 2003), U.S. companies pay $13 billion per year for medical-care costs to treat obesity-related diseases, lower productivity, and absenteeism. Health insurance costs ($8 billion) make the greatest contribution to the total, followed by paid sick leave ($2.4 billion), life insurance ($1.8 billion), and disability insurance ($1 billion). According to the National Business Group on Health, a consortium of large employers that researches and develops solutions to health-service delivery challenges, higher health-care utilization rates, such as 45% more inpatient hospital days, produce higher health-care expenditures—36% higher for inpatient and outpatient care and 77% higher prescription drug spending ("Healthy Weight, Healthy Lifestyles," 2006). About 8% of private employer medical claims are attributable to overweight and obesity, and in 2004, obesity-related disabilities cost employers an average of $8,720 per claimant per year for wage indemnity.

These findings are consistent with an earlier estimate of $12.7 billion reported by David Thompson and his colleagues in "Estimated Economic Costs of Obesity to U.S. Business" (American Journal of Health Promotion, vol. 13, no. 2, November-December 1998). The investigators attributed approximately $2.6 billion to mild obesity (BMI between 25 and 28.9) and $10.1 billion to moderate to severe obesity (BMI equal to or greater than 29). Health insurance expenditures were $7.7 billion of the total, representing 43% of all spending by U.S. business on coronary heart disease, hypertension, Type 2 diabetes, hypercholesterolemia, stroke, gallbladder disease, osteoarthritis of the knee, and endometrial cancer. Obesity-attributable business expenditures for paid sick leave, life insurance, and disability insurance amounted to $2.4 billion, $1.8 billion, and $800 million respectively.

Another study, "Obesity and Absenteeism: An Epidemiologic Study of 10,825 Employed Adults" (American Journal of Health Promotion, vol. 12, no. 3, January-February 1998), conducted by Larry Tucker and his colleagues at Brigham Young University in Provo, Utah, sought to determine the extent of the relationship between obesity and absenteeism due to illness. The investigators analyzed specific variables—age, gender, family income, length of workweek, obesity, and cigarette smoking—and data about absenteeism for 10,825 employed men and women. They found that obese employees were more than twice as likely to experience high-level absenteeism (seven or more absences due to illness during the past six months), and 1.49 times more

TABLE 7.3 Estimates of funding for various diseases, conditions, research areas, fiscal years 2003–06

TABLE 7.3
Estimates of funding for various diseases, conditions, research areas, fiscal years 2003–06
Research/disease areas (Dollars in millions)	Fiscal years				Research/disease areas (Dollars in millions)	Fiscal years
	2003 actual	2004 actual	2005 estimate	2006 estimate		2003 actual	2004 actual	2005 estimate	2006 estimate
Acute respiratory distress syndrome	$77	$72	$75	$76	Estrogen	210	204	207	207
Agent orange & dioxin	18	20	20	20	Eye disease and disorders of vision	688	693	708	711
Aging	2,211	2,343	2,403	2,416	Fasiocapulohumeral muscular dystrophya	N/A	2	2	2
Alcoholism	493	503	514	515	Fetal alcohol syndrome	29	25	26	26
Allergic rhinitis (hay fever)	2	2	2	2	Fibroid tumors (uterine)	15	13	13	13
Amyotrophic lateral sclerosis (ALS)	40	47	48	48	Fibromyalgia	10	9	9	9
Alzheimer's disease	658	633	647	649	Food safety	208	294	299	304
American Indians/Alaska Natives	108	134	135	136	Fragile x syndrome	19	20	20	20
Anorexia	10	12	12	12	Frontotemporal dementia (FTD)	N/A	21	21	21
Anthrax	219	249	207	177	Gene therapy	410	391	400	401
Antimicrobial resistance	181	203	208	211	Gene therapy clinical trials	39	37	38	38
Aphasia	N/A	5	5	5	Genetic testing	426	401	409	410
Arctic	33	25	26	26	Genetics	4,236	4,535	4,620	4,637
Arthritis	380	374	383	384	Health disparities	2,430	2,590	2,646	2,663
Assistive technology	126	131	134	135	Health effects of climate change	158	165	168	169
Asthma	248	272	285	290	Health services	873	887	905	908
Ataxia telangiecstasia	10	9	9	9	Heart disease	2,013	2,110	2,153	2163
Atherosclerosis	318	326	333	334	Heart disease: coronary heart disease	429	416	426	428
Attention deficit disorder (ADD)	103	104	106	107	Hematology	1,120	1,131	1,154	1,156
Autism	93	100	102	103	Hepatitis	N/A	162	164	168
Autoimmune disease	591	584	593	592	Hepatitis-A	N/A	3	3	3
Basic behavioral and social science	938	1,052	1,076	1,080	Hepatitis-B	N/A	32	33	33
Batten disease	8	8	8	8	Hepatitis-C	112	116	118	122
Behavioral and social science	2,684	2,932	2,992	2,998	HIV/AIDSb	2,716	2,850	2,921	2,933
Biodefense	1,554	1,629	1,688	1,694	Hodgkin's disease	17	17	18	18
Bioengineering	1,006	1,216	1,290	1,310	Homelessness	24	24	24	25
Biotechnology	9,893	10,685	10,976	11,043	Homicide and legal interventions	13	15	15	15
Brain cancer	164	187	190	190	Human papillomavirus (HPV) and/or cervical cancer vaccines	15	14	14	14
Brain disorders	4,740	4,821	4,931	4,961	Human fetal tissue	26	23	24	24
Breast cancer	693	708	716	716	Human genome	1,100	1,118	1,125	1,130
Burden of illness	424	429	438	440	Huntington's disease	45	49	50	50
Cancer	5,432	5,547	5,643	5,641	Hyperbaric oxygen	3	4	4	4
Cardiovascular	2,286	2,360	2,409	2,420	Hypertension	347	378	385	387
Cerebral palsy	18	22	22	22	Immunization	1,059	1,585	1,521	1,655
Cervical cancer	92	94	94	94	Infant mortality/(low birth weight)	523	513	521	523
Chemical preparedness and decontamination activities	0.2	0.4	0.4	0.4	Infectious diseases	2,441	3,055	3,102	3,104
Childhood leukemia	70	62	62	62	Infertility	38	36	36	37
Chronic fatigue syndrome	6	5	6	6	Inflammatory bowel disease	58	64	66	66
Chronic liver disease and cirrhosis	348	362	369	370	Influenza	57	113	119	119
Chronic obstructive pulmonary disease	54	55	56	57	Injury (total) accidents/adverse effects	349	361	369	371
Clinical research	8,028	8,495	8,712	8,792	Injury—childhood injuries	24	25	26	26
Clinical trials	2,723	2,877	2,946	2,966	Injury—trauma (head and spine)	234	243	249	250
Colo-rectal cancer	295	297	298	298	Injury—traumatic brain injury	74	80	83	83
Complementary and alternative medicine	296	309	322	323	Injury—unintentional childhood injury	21	20	22	22
Conditions affecting unborn children	111	113	115	16	Interstitial cystitis	20	24	25	25
Contraception/reproduction	330	355	363	365	Kidney and urologic—end stage renal	99	114	116	116
Cooley's anemia	55	47	48	49	Kidney and urologic—incontinence	23	29	29	30
Cost effectiveness research	N/A	102	104	105	Kidney and urologic—prostate disease	378	382	385	385
Crohn's disease	50	53	55	55	Kidney and urologic—urinary infection	18	27	27	27
Cystic fibrosis	117	128	131	131	Kidney and urologic diseases including nephritis	802	818	829	829
Dental/oral disease	401	410	418	417	Kidney disease	393	388	396	396
Depression	288	302	310	312	Lead poisoning	14	14	14	15
Diabetes	910	996	1,015	1,015	Liver disease	388	403	412	412
Diagnostic radiology	717	750	767	770	Lung	980	1,000	1,018	1,022
Diethylstilbestrol (DES)	8	8	8	8	Lung cancer	296	297	300	300
Digestive diseases	1,137	1,237	1,259	1,260	Lupus	96	87	88	88
Digestive diseases—(gallbladder)	7	7	7	7	Lyme disease	30	28	28	28
Digestive diseases—(peptic ulcer)	17	18	18	18	Lymphoma	157	166	168	168
Down syndrome	23	19	20	20	Macular degeneration	53	59	60	60
Drug abuse	1,023	1,047	1,058	1,059	Malaria	72	89	92	92
Duchenne muscular dystrophy	16	18	18	18	Malaria vaccine	23	30	33	33
Dystonia	13	15	18	18	Mental health	1,762	1,818	1,856	1,860
Emerging infectious diseases	1,362	1,807	1,869	1,876	Mental retardation	190	190	194	195
Emphysema	18	17	17	17	Mind and body	146	157	159	160
Endometriosis	14	9	9	9
Epilepsy	94	102	104	105

TABLE 7.3 Estimates of funding for various diseases, conditions, research areas, fiscal years 2003–06 [CONTINUED]

TABLE 7.3
Estimates of funding for various diseases, conditions, research areas, fiscal years 2003–06 [CONTINUED]
Research/disease areas (Dollars in millions)	Fiscal years				Research/disease areas (Dollars in millions)	Fiscal years
	2003 actual	2004 actual	2005 estimate	2006 estimate		2003 actual	2004 actual	2005 estimate	2006 estimate
Note: N/A = Data not available.
aUpdated on 9/21/2005 to include funding on new research/disease areas.
bIncludes research on HIV/AIDS, its associated opportunistic infections, malignancies, & clinical manifestations as well as basic science that also benefits a wide spectrum of non-AIDS disease research.
cUpdated on 9/21/2005 to reflect a change in funding under fiscal year 2004 and 2006.
SOURCE: "Estimates of Funding for Various Diseases, Conditions, Research Areas," U.S. Department of Health and Human Services, National Health, September 21, 2005, http://www.nih.gov/news/fundingresearchareas.htm (accessed January 12, 2006)
Minority health	2,091	2,288	2,341	2,357	Schizophrenia	335	343	350	351
Mucopolysaccharidoses (MPS)	9	10	11	11	Scleroderma	13	11	11	11
Multiple sclerosis	99	101	102	103	Septicemia	30	35	36	36
Muscular dystrophy	39	39	42	42	Sexually transmitted diseases/herpes	220	237	244	244
Myasthenia gravis	5	4	4	4	Sickle cell disease	95	90	91	92
Myotonic dystrophya	N/A	6	6	6	Sleep disordersc	197	196	202	201
Neurodegenerative	1,129	1,128	1,156	1,163	Smallpox	99	324	172	130
Neurofibromatosis	19	13	13	13	Smoking and health	532	537	545	546
Neuropathy	N/A	51	54	55	Spina bifida	17	13	14	14
Neurosciences	4,711	4,911	5,028	5,055	Spinal cord injury	89	89	91	91
Nutrition	1,035	1,035	1,058	1,060	Spinal muscular atrophy	13	14	14	14
Obesity	379	422	440	440	Stem cell research	517	553	566	568
Organ transplantation	314	328	337	343	Stem cell—human embryonic stem cell	20	24	N/A	N/A
Orphan drug	1,138	1,179	1,211	1,215	Stroke	330	313	322	327
Osteogenesis imperfecta	9	8	8	8	Substance abuse	1,462	1,496	1,515	1,517
Osteoporosis	190	192	196	196	Sudden infant death syndrome	69	81	83	83
Ovarian cancer	119	112	113	113	Suicide	31	33	34	34
Paget's disease	5	6	6	6	Teenage pregnancy	32	30	30	31
Pain conditions, chronic	199	223	228	233	Temporomandibular joint disorder (TMJ)	16	17	17	17
Parkinson's disease	230	224	232	232	Therapeutic human fetal tissue transplantation	0.3	0.0	0.0	0.0
Pediatric AIDS	318	280	283	283	Tobacco	531	536	543	544
Pediatric research initiative	164	148	N/A	N/A	Topical microbicides	58	66	67	69
Pelvic inflammatory disease	5	4	4	4	Tourette syndrome	17	16	17	17
Perinatal—neonatal respiratory distress syndrome	9	11	11	11	Transmissible spongiform encephalopathy (TSE)	31	33	34	34
Perinatal period—conditions in the perinatal period	430	428	435	437	Transplantation	504	530	544	550
Pick's diseasea	N/A	1	1	1	Tuberculosis	122	137	140	140
Pneumonia	N/A	174	176	176	Tuberculosis vaccine	13	18	19	19
Pneumonia & influenza	184	287	295	295	Tuberous sclerosis	8	10	10	10
Polycystic kidney disease	37	34	35	35	Urologic diseases	551	595	601	601
Prevention	6,546	7,185	7,227	7,375	Uterine cancer	34	35	35	35
Prostate cancer	379	378	381	381	Vaccine development	978	1,468	1,402	1,536
Psoriasis	5	6	7	7	Vector-borne diseases	296	419	431	442
Regenerative medicine	571	585	596	598	Violence	111	122	124	125
Rehabilitation	291	301	309	310	Violence against women	21	20	21	21
Rett's syndrome	5	6	6	6	West Nile virus	37	43	44	54
Reye's syndrome	0.8	0.9	0.9	0.9	Women's health	3,497	3,478	3,525	3,531
Rural health	169	178	181	181

likely to suffer from moderate absenteeism (three to six absences due to illness during the last six months) than their normal-weight counterparts.

A study conducted by Dee Edington, director of the University of Michigan's Health Management Research Center, and his colleagues confirmed that overweight and obese people have medical bills up to $1,500 greater a year than individuals of healthy weight. The study "Excess Costs Associated with Excess Risks in a Consortium of Companies" (American Journal of Health Promotion, January-February 2003) looked at about 178,000 adults in the General Motors health-care plan, which includes workers, retirees, and their family members. Researchers compared medical costs incurred to body weight, using federal categories that classified subjects as ranging from underweight to greatly obese. Medical costs rose with increasing weight—the average cost for normal or healthy-weight subjects was $2,225. The lowest category of overweight was slightly higher, at $2,388, but costs rose sharply after that, reaching $3,753 for the most severely obese subjects.

Obesity-Related Disability

In "Estimated Economic Costs of Obesity to U.S. Business," Thompson and his colleagues estimated that businesses spent approximately $800 million on obesity-attributable disability insurance during the late 1990s. Many industry observers believe that the price business pays for obesity-related disability is destined to rise as sharply as the prevalence of obesity has increased in the United States.

RAND researchers Darius N. Lakdawalla, Jayanta Bhattacharya, and Dana P. Goldman assert that obesity is a key cause of the more than 50% increase in disability rates over the last two decades, particularly among younger Americans. In "Are the Young Becoming More Disabled?" (Health Affairs, vol. 23, no. 1, 2004), Lakdawalla and his colleagues analyzed data from the National Health Interview Survey, an annual nationwide government survey of about 36,000 households. They identified disability trends among people ages eighteen to sixty-nine between 1984 and 2000 and found significant growth in reported disability rates among those under fifty years but not among the elderly.

The investigators reported that "Obesity accounts for about half the increased disability among those ages eighteen to twenty-nine." For those thirty to thirty-nine years old, the number reporting disabilities increased from 118 per 10,000 people to 182 per 10,000 people from 1984 to 1996. Among people forty to forty-nine years old, the number rose from 212 per 10,000 to 278 per 10,000 in the same period. Among people aged fifty to fifty-nine, disability rose only among those who were obese. The number of disability cases resulting from musculoskeletal problems and diabetes grew more rapidly than those from other problems during the length of the study, and the proportion that was diabetes-related doubled. The RAND researchers cautioned that the increase in the disability rate could translate into higher health-care costs in the future. Since people with disabilities generally use more medical services, should this trend persist, it could generate additional costs to the nation's already enormous health-care bill.

To address this issue, the National Business Group on Health established the Institute on the Costs and Health Effects of Obesity, which aims to:

• Serve as a source of information and resources for large employers about the health and cost consequences of obesity and related chronic conditions.
• Provide employer tool kits to jump-start efforts to offer employees healthy options and information.
• Propose innovative solutions that large employers can implement to control costs related to obesity. This will include identifying effective strategies to decrease the incidence of obesity and delay the onset or decrease the incidence of several chronic conditions among the U.S. workforce.
• Develop and disseminate clear messages emphasizing that obesity is preventable, as well as messages that communicate obesity as a health and well-being issue, rather than a cosmetic issue.

During 2005–06, the Institute was focused on several initiatives, including educating senior company managers about the economic benefits of obesity prevention; demonstrating the impact of obesity on productivity; educating employers about developments in pharmacotherapy and their implications for employers; and helping employers promote healthy weight through healthy dining at work.