The Health-Care Buffet

The obesity bubble is in no danger of bursting.

By ALLYSIA FINLEY

While lawmakers like to vilify insurance and pharmaceutical companies for driving up health-care costs to make fat profits, obesity is actually a far bigger reason for ballooning costs. Call it the obesity bubble, and a study out this week shows that it's in no danger of bursting.
Obesity is defined as having a body-mass-index (BMI) of 30 or greater. For example, a person who is 5'8 and weighs 200 pounds has a BMI of 30 and would be considered obese. According to the study's author and the executive director of the Partnership to Fight Chronic Disease, Kenneth Thorpe, 43% of American adults will be considered obese by 2018 if current trends continue. That's up from 34% today. Mr. Thorpe notes that obesity is the fastest growing health condition in this country and a huge impediment to bending the health-care cost curve.
According to the Centers for Disease Control, obesity was responsible for $147 billion of medical costs in 2008. Mr. Thorpe calculates that obesity accounted for 27% of the rise in health-care costs between 1987 and 2001. But here's the real whopper: If current obesity trends continue, obesity-related health-care costs will total $343 billion in 2018. Who knew that fat could weigh so heavily on our health-care system?
Mr. Thorpe figures that obesity's health-care toll today is $361 per person per year (and that's not counting the economic costs of missed work, workers' compensation, etc). He puts that number at $1425 in 2018 if trends continue. That's a pretty hefty price for Americans to pay regardless of whether they're consuming their share of the health-care pie. On the other hand, just holding obesity constant for the next ten years could save each American $821 and the nation a collective $198 billion per year by 2018.
Unfortunately, the pending health-care legislation in Congress isn't going to help reduce obesity-related costs, despite the supposed increased emphasis on "prevention." Sure, there's a provision mandating that chain restaurants include calorie counts on their menus, but two scientific studies have come out this year demonstrating that New York City's calorie labelling law hasn't had a significant impact on people's caloric intake. People see the information and then usually choose to ignore it.
What's more, the House legislation specifically bars incentives for Americans to lose weight. The National Association to Advance Fat Acceptance (NAAFA) lobbied against provisions that would help businesses use financial incentives to promote weight loss. The NAAFA also opposed allowing insurers to use a person's weight or BMI to differentiate rates or deny coverage. With two thirds of the population overweight or obese---and that share is predicted to increase to at least three in four in the next 10 years---a slim portion of the population is going to be bearing disproportionately the health-care costs of the large majority. That's a fat tax on thin people.
But most Americans regardless of their size are already paying this tax through Medicare and Medicaid payroll deductions. Today, government entitlement programs pay for about half of all obesity-related health-care costs, largely because poor and elderly people are more likely to be obese and suffer obesity-related health complications. The CDC estimates that obesity is responsible for 36% of Medicare and 47% of Medicaid spending. Americans can expect to pay an even bigger toll when Medicaid is expanded to 150% of the federal poverty level.
Because of the nature of our third-party payer health-care system, the costs of obesity aren't just borne by the over-eaters. This can result in the demonization and scapegoating of overweight people ("I wouldn't be paying so much for health care if you didn't keep eating Cheetos!). No one likes to feel that they're picking up the tab for other people's unhealthy behaviors, but most people don't like to feel that they're unfairly costing other people money either.
The public option, expansion of Medicaid, and government health-care subsidies will just exacerbate these resentments by making the costs of obesity more dispersed among the public. As Marilyn Wann, author of "Fat! So?" and a strong advocate of the public option, notes "We're all in this life raft together."
Obesity has become a collective action problem with people failing to take positive action because they don't reap the benefits. If Americans were told that they could save $821 a year by maintaining their current weight for the next 10 years, most people probably would. If told that they could double those savings by dropping 20 pounds, most probably would. So why don't they? Because they don't have any skin in the game. If they lose weight, they don't reap the financial benefits through lower insurance premiums, though they may reap the health benefits. Unfortunately, for many people, that's just not enough.
The solution to this collective action problem isn't to impose a tax on soda and sugary beverages to offset the externality. Rather, the solution is to make the problem less collective. It's easier to make Mark pay more for his health insurance than to make Mark, Mary and Paul pay a tax on sodas to cover Mark's higher health-care costs. Once Mark sees that his fast food predilection is costing him twice as much, he may think twice as hard about ordering that twice-as-big cheeseburger.
People are remarkably receptive to financial incentives. A 2006 survey of CEOs by the Conference Board, an organization that collects and analyzes business information, reported that wellness programs yield up to $5 of health-care savings per dollar invested. CEOs noted that awarding employees who drop weight with cash, extra vacation days, and insurance rebates has helped them reduce their health-care costs. And no doubt such incentives could work on a national scale with insurers offering reduced premiums or rebates to individuals who maintain a healthy weight. But the House health-care legislation prohibits such incentives because it is "discriminatory."
That's right. It is price discrimination. Health care shouldn't be a buffet where everyone pays the same amount no matter how much they consume, though that seems to be what Congress wants. But we all know the problem with buffets. It's too easy to consume too much.
Ms. Finley is Assistant Editor of OpinionJournal.com.