Center for Communications, Health and the Environment
|Summer 2009||Vol. 4, Issue 1|
Developed and Developing Nations Face Obesity Challenge
THE ECONOMICS OF OBESITY:
Obesity exacts a heavy toll worldwide. And payment is not just in the form of poor personal health and a series of debilitating and potentially fatal health problems, such as hypertension, type 2 diabetes, heart disease and stroke. Being obese has significant financial implications, from lower and lost income to added personal, public and even environmental costs.
Overweight and obesity are also linked to poor academic performance, according to researchers at University of Minnesota’s School of Public Health. In addition, heavy people tend to accumulate less overall wealth: A 2004 study by Dr. Jay Zagorsky of The Ohio State University compared net worth with BMI (body mass index) scores and found obese Americans to be approximately half as wealthy as thin ones.
Meanwhile, in Australia, for example, an estimated $1.7 billion is lost annually from a drop in output caused by reduced employment and premature death of obese individuals, according to a 2006 Access Economics analysis commissioned by Diabetes Australia. Such statistics cause Student BMJ authors Hannily Harvey and Janneke Patterson to muse that “A nation’s developmental gains could...be undone by a large reduction in the people’s capacity to work.”
Meanwhile, in developing countries like India, obesity-related conditions such as diabetes are depleting the assets of, and in some cases even bankrupting, scores of middle-class urbanites, who may spend more than a quarter of their incomes on diabetic treatments because of a nationwide lack of medical insurance.
In the United States: These increased costs amount to a whopping $93 billion annually, says Finkelstein.
According to Dr. Kelly D. Brownell and Dr. Thomas R. Frieden in an April 2009 issue of the New England Journal of Medicine (NEJM), an estimated $79 billion is spent every year just on health care related to overweight and obesity, “and approximately half of these costs are paid by Medicare and Medicaid, at taxpayers’ expense.”
A 2004 Economics of Obesity report by Jay Bhattacharya of Stanford University and Neeraj Sood of the RAND Corporation details that “the lifetime medical costs related to diabetes, heart disease, high cholesterol, hypertension, and stroke among the obese are $10,000 higher than among the non-obese.”
Meanwhile, as reported in a December 2006 article in the monthly insurance magazine Best’s Review, “Kaiser Permanente studies show that a weight gain of 20 pounds results in more than $500 per person of increased costs over the next three years...So anytime someone gains some weight, there's cost to the health-care system."
On the opposite coast, New York spends $6.1 billion each year to treat obesity-related health problems, according to recent statistics released by the state governor’s office.
In addition to the increasing financial burden on national and state health care coffers, hospitals have to pay more to treat the obese. Oversized wheelchairs can cost about $2,500, eight times the cost of an ordinary wheelchair, explain Finkelstein and Zuckerman in The Fattening of America, and operating tables that are strong enough to support the severely obese can run as much as $30,000.
Around the Globe: Obesity could cost the global economy as much as malnutrition, warns the World Bank. In 2001, Barry Popkin and his colleagues at The Food Policy Research Institute reported that China sacrificed more than 2 percent of its gross domestic product to cover the costs of diet-related chronic diseases – more than it spent on undernutrition. By August 2006, Popkin noted in National Geographic News that the cost to China of poor diet, physical inactivity and obesity was now up to 5 percent of the country’s gross national product (GNP), and that it was only “a matter of time” before obesity-related spending there caught up to that of the United States, “which spends 17 to 20 percent of its GNP” on such costs.
According to a November 2006 Natural News article, 6 percent of health costs in the World Health Organization's European region are a result of obesity in adults. For example, obesity cost France $6.41 billion in direct outlays in 2002, and in July 2008 following publication of Britain’s largest obesity study, the country’s health secretary estimated that obesity-related costs to Britain’s National Health Service were likely to rise sevenfold by 2050. Meanwhile, including indirect costs, the price tag for obesity in Australia was an estimated $21 billion and $58 billion in 2005 and 2007, respectively, based on studies commissioned by Diabetes Australia.
One special concern is that obesity-related costs could overwhelm the health care systems of developing countries. This may especially apply to China and India, which are already reeling from outlays associated with communicable diseases and malnutrition, and where, according to the World Bank, average per capita health expenditures “are less than 10 percent of expenditures in developed countries,” explain Stacey Rosen and Shahla Shapouri in their September Amber Waves article, “Obesity in the Midst of Unyielding Food Insecurity in Developing Countries.”
The “economics of food choice” figure particularly prominently in the obesity equation, contend Adam Drewnowski and Nicole Darmon in a 2005 article in The American Journal of Clinical Nutrition. In short, people use price as a guide to food shopping. In simple terms, sweets and fats cost less, whereas vegetables and fruits cost more, so more and more people are opting for less expensive energy-dense simple carbohydrates over healthier legumes – and putting themselves at risk for obesity.
That’s not to say that unhealthy food is cheap. Snacks, soda, desserts and prepackaged ready-to-cook foods are not only calorie-dense and laden with sugar, fats, and salt, but many prepackaged meals are also much more expensive than freshly prepared ones. It is a cost associated with convenience, as freshly prepared food entails more physical activity and energy expenditure than oven-ready dishes.
Nevertheless, studies conducted in Australia, Canada and the European Union have found that healthier diets cost more, and studies of increases of the number of obese adults in the United States (Lakdawalla and Philipson 2002; Chou, Grossman, and Saffer 2004) reveal that much of America’s obesity trend can be attributed to lower prices, reports the September 2008 issue of Today’s Research on Aging. The same publication points to research that shows that the drop in food prices between 1980 and 2005 may have accounted for up to 40 percent of the increase in BMI since 1980.
“[T]he changing incentives that people face have conditioned unhealthy choices to become the economically smarter choices,” note Yach, Stuckler and Brownell. Finkelstein agrees. “Modern society is giving Americans many more incentives to gain weight than to lose it,” he quips in a February 2008 interview, citing new technologies and the “abundance of cheap, tasty foods” as “the two most obvious factors.” Meanwhile, he notes, the health costs of obesity are actually declining: “...research by the Centers for Disease Control reveals that today’s obese population has better blood pressure and cholesterol values than normal-weight adults did 30 years ago...[and] if the costs of being obese go down, and there are people who like to eat and don’t like to exercise, we are bound to see obesity rates go up.” Which, apparently, is what has happened.
Success on the obesity front will require multifaceted interventions – and fiscally driven ones.
According to Yach, Stuckler and Brownell, “market-led solutions, along with public policies, may combine to make healthy choices the economically easy and readily available choices.” They discuss the development of country-specific roadmaps to determine which approaches would have the greatest national impact.
In The Fattening of America, Finkelstein and Zuckerman argue that in the United States “the government should revisit past policies that may have inadvertently helped promote the rise in obesity rates.” They point to agricultural subsidies for farmers, zoning laws that discourage pedestrian transportation, subsidies to employers for providing health insurance, and even the existence of the Medicare program. And then there are the 30-year-old national nutrition standards in effect in the vast majority of U.S. public schools. These standards prohibit the sale of seltzer water, but include pizza, doughnuts and cheeseburgers, as well as vending machines hawking soda and junk food, on school menus and in school buildings.
Past policies should certainly be reevaluated, but new measures need to be instituted to reduce the costs – physical, social and economic – of obesity worldwide. Proposed market and policy options around the globe include higher taxes on unhealthy foods and beverages; the regulation of fast foods and food advertising; and the mandatory inclusion of calories on restaurant menus on more than a local level.
In a 1999 study conducted in China and published in The Journal of Nutrition,” Xuguang Guo, Barry Popkin, Thomas A. Mroz and Fengying Zhai found that an increase in the price of an individual food group led to signiﬁcant reductions in the probability of consuming any food within that food group – and on the quantity of food consumed. For instance, price changes for animal protein foods had a large effect on reducing fat intake, a primary contributor to obesity in China. Since people, especially those facing economic constraints, tend to forego more expensive foods for less expensive ones, increasing the cost of foodstuffs that play a pivital role in the development of obesity, such as animal proteins, fats and sugars, while simultaneously demonizing them in a cultural context, could limit their consumption.
A price-policy approach would be both technically and politically complex to execute, but it is, nonetheless, a viable option – one that must take into account cultural and socio-economic tendencies. In Scandinavia, for example, aggressive state policies related to taxation and import tariffs are believed to have had an effect on dietary choices and public health (Milio 1990 and 1991). And Yach, Stuckler and Brownell remind us that high taxes on cigarettes have proven to be one of the most effective ways of reducing smoking rates. “Data indicate that higher prices also reduce soda consumption,” note Brownell and Frieden; they cite a review by Yale University’s Rudd Center for Food Policy and Obesity suggesting that for every 10 percent increase in price, consumption decreases by 7.8 percent, as well as an industry trade publication report revealing that as prices of carbonated soft drinks increased by 6.8 percent, sales dropped by 7.8 percent.
Taxes and tariffs in particular can also generate substantial revenue while conferring health benefits – especially when applied to heavily consumed items. According to Brownell and Frieden in their 2008 NEJM “Ounces of Prevention — The Public Policy Case for Taxes on Sugared Beverages,” something as seemingly insignificant as a penny-per-ounce excise tax on such drinks would raise an estimated $1.2 billion in New York State alone. This money could fund anti-obesity efforts, including healthy food programs, but, they emphasize, “only heftier taxes will significantly reduce consumption.” Nonetheless, even this penny-per-ounce excise tax could reduce consumption of sugared beverages by more than 10 percent – results an education campaign would be hard-pressed to deliver.
Employers too could play a key role in supporting healthy lifestyles and reducing obesity by “promoting wellness in their workforce.” In fact, companies that bankroll workplace health promotion programs reap average “savings of $3 for every $1 invested,” report Yach, Stuckler and Brownell. That may be one reason why, according to Dr. Susan Okie in her 2007 NEJM article, “The Employer as Health Coach,” many of today’s larger companies, like General Mills, are tackling employees’ bulging waistlines and burgeoning medical bills through annual health risk assessments and a host of health-related offerings such as free preventive services at work, subsidized corporate cafeterias that serve nutritious, low-calorie choices, and even on-site medical clinics, gyms and pharmacies. To encourage workers with chronic diseases to take medication, for example, Pitney Bowes reduced co-payments on all drugs for hypertension, asthma and diabetes to 10 percent; and while the company's spending on these drugs increased, its overall costs for the three diseases dropped and its health costs per employee were reported to be roughly 20 percent below those of comparable employers.
According to Yach, Stuckler and Brownell, the areas of food, nutrition and physical activity are far-reaching and complex. They comprise numerous vested, and monied, interests, including governments, politicians, health care systems, insurance giants, multibillion-dollar food companies, the fitness industry, and billions of independent-minded consumers. The stakes are high, and real progress will require broader alliances and stronger bonds between public, private and civil societies.
Forging those bonds is imperative if effective intervention is to take place and the cumulative costs of obesity are to be controlled, capped and curtailed. Otherwise, “the costs of obesity might well become catastrophic,” laments Dr. David Ludwig of Harvard Medical School in the NEJM. And the sacrifice of human life and productivity would be immeasurable.
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