Will reducing obesity lower health care costs?

Posted by Nolan Miller on Dec 11, 2009

Filed Under (Health Care)

A number of the comments on my recent postings have focused on the idea that we could reduce health care costs in the U.S. if we lived healthier.  In particular, if we reduced obesity.  Sounds plausible.  So, I thought I’d check it out.

First, obesity in the U.S. is high and growing.  The obesity rate in the U.S. was about 25% in 2006.  One study estimated that, based on current trends, all adults in the U.S. will be overweight or obese.  Clearly this is not going to happen.  But, obesity is a clear and growing problem.

Second, what does obesity do to health care spending?  A recent study by Eric Finkelstein and coauthors in the journal Health Affairs estimated that the medical costs of obesity in 2008 could have been as high as $147 billion dollars, which is around 10 percent of all medical spending.  That’s a lot.  The average obese person incurs $1429 annually in additional medical costs when compared to a typical non-obese person.  If we could reduce this cost from our medical bill, this could represent a significant savings.  It wouldn’t bring our per-capita health expenditures in line with those of Europe, but it would help.

Or would it?

The Finkelstein paper above answers a particular question.  If you compare the annual health expenditure for an obese person and a non-obese person, how much higher are the obese person’s medical expenditures?  This answer provides an important part of the answer to the overall question of whether reducing obesity will reduce health care costs, but it isn’t the whole story?  Why, because reducing obesity will result in people living longer.  And, the longer you live, the more years you are around to incur health care costs.

Now, moderate obesity reduces life expectancy by 3 years and severe obesity reduces life expectancy by around 10 years.  So, let’s say that eliminating all obesity increased life expectancy by 5 years.  These years probably come when the beneficiary is on Medicare, and average annual Medicare spending is about $8000, so this would add $8000*5 = $40,000 on average to a person’s lifetime health care cost.

So, eliminating obesity reduces average health expenditure by $1429 per year but adds about $40,000 in health expenditure at the end of life.  So, it would basically take about 28 years of annual savings to offset the additional spending at the end of life.  Of course, there are many factors that must be taken into account, like the time-value of money,  changing technology, and the fact that when people live longer they also draw non-health benefits like Social Security for longer.  But, once you factor in that the obese people will live longer and make greater use of the medical system during that time, it is no longer so clear that reducing obesity will reduce overall health care costs.  In fact, here’s a study that looks at this trade-off (between lower costs and longer life) and concludes that while “obesity prevention may be an important and cost-effective way of improving public health, … it is not a cure for increasing health expenditures.”

Now, you may think that what I’ve said is absolutely nuts.  So, let me take a moment to defend myself.  Here are statements I agree with:  (1) reducing obesity would improve health.  (2) if a person loses weight and goes from being obese to not, they will on average reduce their annual health care expenditures.  (3) if a person loses weight and goes from being obese to not, they will on average increase their life expectancy.  (4) the U.S. should be making greater effort to reduce obesity, especially among the young.  But, based on the available evidence it seems that these goals, while desirable, will not result in lowering the overall cost of health care in the U.S.

2 Responses to “Will reducing obesity lower health care costs?”

  • Megan says:

    While reading your blog I first inherently disagreed with your argument. My disagreement stemmed from my belief in the betterment of people’s lives through making better choices-in terms of exercising and watching their diet. After my initial reaction I realized that your argument is practical and probably actually makes the most sense from an economic point of view. Your blog reminded me of an article I was recently reading about value based insurance design. Value based insurance design rewards individuals for utilizing preventative care in leading healthier lives. The problem with value based insurance design is that firms are helping finance programs for their employees that they may never see the result of. If you encourage your employees to start an exercise regimen, you as an employer may not see the benefit of providing these services as there is a lag in time before the benefits of preventative care are made apparent. I greatly enjoyed your blog in that it made me look at an issue from a new point of view.

  • Jean says:

    While I genreally agree with your points above, I think it would be interesting to find some research on the difference in health care cost for obese and non-obese Americans near end of life. Yes, the longer you live the more years you are around to incur health care costs, but wouldn’t the costs for those years still be less for non-obese individuals compared to the obese?