The Obesity Epidemic and Health Care Utilization in the United States

1. The Obesity Epidemic and Health Care Utilization in the United States Ramzi G. Salloum Department of Economics Wayne State University Detroit, Michigan December 3, 2007

2. Overview • Introduction • Cost – Benefit Analysis • Existing Models • Data • Model (Tobit Regression) • Conclusions

3. Why Obesity? • U.S. Health Care expenditures (2006) - $1.89 trillion 1 • 59 million adult Americans (31%) are obese 2 • Almost 65% are overweight • U.S. - Obesity Trends: • 12.8% - 1976-1980 • 22.5% - 1988-1994 • 30.0% - 1999-2000 • Americans spend more than $90 billion annually in overweight and obesity costs 3 1 Organisation for Economic Co-operation and Development (OECD 2007) 2 U.S. Department of Health and Human Services, Office of the Surgeon General (2001) 3Finkelstein et al., “National Medical Spending Attributable to Overweight And Obesity: How much and who is paying?” Health Affairs (2003)

4. What is Obesity? Weight (pounds) • Associated with: • diabetes • heart disease • hypertension • sleep apnea • osteoarthritis • gallbladder disease • some types of cancer • Causes: • diet high in fat and calories • sedentary lifestyle Weight (kilograms) An accumulation of excess body fat to an extent that may impair health 1 1 World Health Organization (WHO 2007)

5. Cost – Benefit Analysis 1 • Direct Benefits / Costs • ↓ treatment expenditures vs. ↑ prevention expenditures • Indirect Benefits / Costs • ↑ productivity, ↓ sick time, ↑ opportunity costs • Controversial Issue • should obesity be classified as a disease? • Non-Market Factors • quality of life • Comparable to Smoking (treatment/prevention) 1 Folland, Goodman, Stano, The Economics of Health and Health Care. 5th edition. Pearson/Prentice Hall, 2007

6. Cost – Benefit Analysis (2) $ • Other Concerns • discounting • risk adjustment (public project) • future inflation • human life valuation MSB MSC Point E: MSB=MSC Net Benefit E Q1 Q2 Q* 100 percentage reduction in obesity • Possible Use of QALYs • Quality Adjusted Life Years

7. Existing Models 1 National Health Interview Survey, Center for Disease Control and Prevention (CDC) (1988, 1994) 2 Healthcare for Communities, Robert Wood Johnson Foundation (1997-1998) 3Medical Expenditure Panel Survey (1998), and NHIS (1996, 1997)

8. Data • National Epidemiologic Survey on Alcohol and Related Conditions (NESARC) • Conducted by National Institute on Alcohol Abuse and Alcoholism (NIAAA) • 1st wave interviews in 2001-2002 • survey of 43,093 Americans • results weighted to represent U.S. population • focused on female and male samples, aged 40+ • samples representative of 59.9 million females (n=13,615) and 52.3 million males (n=10,027)

9. Model • hdays = b0 + b1obese + b2smoker + b3drinker + b4injuries + b5crimes + b6mental + b7age + u • Variable Definitions: • hdays: number of hospital days in past 12 months • obese: bmi ≥ 30 * • smoker: current or ex-smoker * • drinker: current or ex-drinker * • injuries: number of injuries in past 12 months • crimes: number of times crime victim in past 12 months • mental: diagnosis of mental disease * • age: participant age in years * dummy variables

10. Linear and Tobit Regressions * pseudo R-squared = 1 – LL(full model)/LL(constant only model)

11. Limitations • Low R-Squared • survey does not account for many determinants of hospital utilization • Non-Comprehensive Measure • survey does not cover outpatient utilization of health care • Self-Reported Weight and Height • overweight and obese people tend to underreport their weight • Other Non-Sampling Errors • differences in interpretation of questions • inability/unwillingness to provide correct information • Inability to recall information • errors in data collection and processing • errors in estimating values for missing data

12. Conclusions • Prevention vs. treatment expenditures • Obesity has significant positive effects on health care utilization (rivals effects of smoking) • Obesity and its costs will continue to rise • Full effect of obesity epidemic yet to be realized! • Policy needed to curb the growth in obesity

13. Need for Policy • Economic incentive for payers to reduce prevalence of obesity (similar to smoking) • Health insurers (including Medicaid) established strong incentives against smoking (higher rates for smokers, sponsored smoking cessation treatments, etc.), but weak incentives to fight obesity • Government heavily involved in reducing smoking rates (taxation, regulation, etc.), however, little done to curb weight gain

14. References • OECD Health Data 2007 (oecd.org) • U.S. Department of Health and Human Services, Office of the Surgeon General (surgeongeneral.gov) • World Health Organization, Obesity (who.org) • Folland, Goodman, Stano, The Economics of Health and Health Care. 5th edition. Upper Saddle River, NJ: Pearson/Prentice Hall, 2007 • Wolf, A.M., Colditz, G.A., “Current estimates of the economic cost of obesity in the United States” Obesity Res 1998 6: 97-106 • Roland Sturm, “The Effects Of Obesity, Smoking, And Drinking On Medical Problems And Costs,” Health Affairs, 2002; 21(2): 245-253 • Finkelstein, Fiebelkorn, Wang, “National Medical Spending Attributable to Overweight And Obesity: How much and who is paying?” Health Affairs (2003) • Grant, B.F., Kaplan K., Shepard J., Moore T. Source and Accuracy Statement for Wave 1 of the 2001-2002 National Epidemiologic Survey on Alcohol and Related Conditions. National Institute on Alcohol Abuse and Alcoholism: Bethesda MD; 2003.