The Consequences of Obesity for the External Costs of Public Health Insurance in the United States

Joanna P. MacEwan, Julian Alston and Abigail M. Okrent

Applied Economic Perspectives and Policy, 2014, vol. 36, issue 4, 696-716

Abstract: Over the past five decades in the United States, total medical expenditures and the proportion of medical expenditures financed with public funds have both increased significantly. A substantial increase in the prevalence of obesity has contributed to this growth. In this study we measure the external cost of obesity in the form of publicly funded health-care expenditures, and how this cost changes when the distribution of obesity in the population changes. We use a continuous measure of obesity, Body Mass Index (BMI), rather than discrete BMI categories to represent the distribution of obesity and changes in it. We predict that a one-unit increase in BMI for every adult in the United States would increase annual public medical expenditures by $6.0 billion. This estimated public cost equates to an average marginal cost of $27 per year, per adult for a one-unit increase in BMI for each adult in the U.S. population—or $4.35 per pound. Separately, we estimate that if every U.S. adult who is now obese (BMI ≥30) had a BMI of 25 instead, annual public medical expenditures would decline by $166.2 billion (in constant 2009 dollars), or 15.2% of annual public medical expenditures in 2009. Assuming a socially optimal BMI of no more than 25, we estimate that the prevalence of obesity in 2009 resulted in a deadweight loss of $148.2 billion in 2009.

Date: 2014
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