Tag: Obesity

Who Pays for Obesity?

When it comes to dealing with the growing medical and social crisis of obesity in America, public health policy expert Jay Bhattacharya of Stanford University said there is only one law that truly comes into play: The law of unintended consequences.

Bhattacharya, who since the mid-2000s has been studying both the costs of obesity and the impact of possible solutions, offers the example of a proposed tax on ground beef, which would take aim at the problem of children from low-income families getting too many of their daily calories from high-fat, fast-food hamburgers.

In many low-income neighborhoods, however, those hamburgers from McDonald’s or Burger King may also be the only sources of iron children have, Bhattacharya noted during a recent health policy lecture for the University of Pennsylvania’s Leonard Davis Institute of Health Economics. A high tax on beef might price fast-food burgers out of reach for low-income families, which in turn could increase cases of anemia among poor children, creating a new public health problem.

“Obesity is not the only outcome of food,” Bhattacharya said during his speech, titled, “Who Pays for Obesity?” Unlike cigarette smoking, which has clear public health consequences but offers no social benefits, people need to eat daily to live, making it all the more difficult to regulate overeating.

In fact, according to Bhattacharya, an effective tax to discourage obesity would begin at an individual’s 2,500th calorie of the day — an idea that would be not only impractical, but impossible to carry out.

The taxing difficulties that Bhattacharya raised during his lecture are just some of the complications that America faces in tackling the rising costs, both economic and social, of obesity.

Indeed, Bhattacharya laid out a variety of factors affecting obesity policy in America, including Social Security and Medicare policies; agricultural price supports, and governmental and philanthropic funding for biomedical research. In addition, social factors well beyond the reach and influence of regulators also lead to unintended consequences and sometimes contradictory outcomes.

Some proposed solutions, he stated, do not even tackle the real problems. For example, well-intended policy advocates have called for taxes on sugar and other sweeteners because obese children get many of their calories through sugary drinks. “I don’t believe the solution to [ending] obesity among poor people is to raise the price of sugar,” Bhattacharya stated. “When you look at the total price of a sweetened drink, most of it is actually marketing — most of the price of a can of Coke is the marketing.” What’s more, he added, drinks such as orange juice that also have a positive health impact would be affected by such a tax.

Few experts would disagree that obesity is a major health issue in the United States. Although obesity has been rising throughout the world in recent decades because of easier access to high-calorie junk foods, lack of exercise and other factors, the number of Americans who are overweight or obese is particularly alarming. The percentage of obese U.S. adults grew in one short decade — from 1997 to 2007 — from 19.4% to 26.6%, with childhood obesity also emerging as a major new health problem.

The cost of obesity to the American economy is enormous as well, largely due to increased medical costs, including hospitalization, for weight-related maladies such as heart disease, diabetes, hypertension and stroke; one major federal study in 2003 pegged that price tag at $75 billion annually, a figure that has surely risen sharply since then. Alarm over these trends has prompted government on both the local and national levels to attempt to tackle the problem, from broad public awareness campaigns by the likes of First Lady Michelle Obama to cities that have sought to ban outright the high-calorie trans-fats in restaurant food.

For Bhattacharya, the question regarding obesity is whether the problem is a public health issue; that is, are the substantial costs of obesity imposed on all citizens — regardless of their personal eating and exercise habits — or is only the overweight individual paying most of the financial burden himself?

“Obesity costs a lot,” Bhattacharya noted. “To me, this is not the question. The question is not does it cost a lot to take care of a person who is obese. The key question is: Who pays?” If research shows that the out-of-pocket costs of obesity are largely paid by individuals, he said, this undercuts the argument that obesity is a public health crisis that then requires extensive government intervention.

Bhattacharya and his colleagues focused on health insurance as the arena where Americans are potentially most impacted by the cost of obesity. He said he was particularly interested in typical employer-provided health care, in which the costs of coverage are pooled among all employees, since that could lead to a transfer of dollars from thin employees — who have lower medical costs on average — to overweight ones.

But Bhattacharya’s research has shown that employees of companies that provide health insurance to all workers earn less money on average if they are obese. In other words, businesses compensate for the higher health-insurance costs related to its overweight workers by paying those workers lower wages. That means that when all is said and done, obese Americans are actually paying the price for their health issues.

Bhattacharya — who looked at federal wage and health data for workers in the age 20-50 category — found that for employees who do not have company-provided health insurance, there was virtually no wage differential between obese workers and their non-obese colleagues. The research also showed that while more generous insurance increased the willingness of people to visit a doctor, the better insured did not become more obese.

“The underlying principle behind all of this work is — should we tax people for their bad body decisions?” Bhattacharya asked. “I’m still not convinced that the answer is ‘no,’ but I still don’t know yet that the answer is ‘yes.’”

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When Fat Is No Longer Free

When Arizona governor Jan Brewer proposed that certain participants in the state’s Medicaid program — specifically obese people and smokers who don’t take steps to change their unhealthy behaviors — should pay a fine of $50 a year, it didn’t take long for the reactions to come rolling in.

Those in favor state that people who eat to the point of obesity or who smoke should have to contribute to covering the costs of that behavior. In addition, they note that any money collected through these fees will help the state’s financially strapped Medicaid program and allow it to expand current coverage. Opponents of the proposal say that for some individuals, obesity is the result of occurrences beyond their control, such as accident or illness.

An article in The Wall Street Journal notes that 25.5% of Arizona residents were considered obese as of 2009, and about 46% of the state’s Medicaid participants smoke daily, according to a 2006 survey. Moreover, the Journal added, “Unlike private insurers, which often charge different premiums based on customers’ health status, Medicaid must enroll all those who meet its eligibility requirements.”

Knowledge@Wharton asked two Wharton professors — Katherine Milkman, professor of operations and information management, and Kevin Volpp, professor of health care management — for their thoughts on three issues raised by the Republican governor’s proposal.

First: Is this proposal fair?

Volpp: Many of the people in question likely have a BMI (body mass index) far above 30, the cutoff for being considered obese. It is unlikely that people with BMIs much above 30 would be able to successfully lose enough weight to avoid this penalty.

Differential premiums based on weight are tricky from an ethical standpoint; to the extent that weight is based on genetic factors or larger social/environmental factors that individuals can’t control, adjusting premiums based on weight undermines the concept of risk pooling that is the basis for insurance. To the extent that weight is based on behaviors that an individual can control, it is arguably fairer to adjust premiums than not to do so, since otherwise, people with healthy lifestyles subsidize unhealthy behaviors of others. We don’t really know, for a given individual, how much of their obesity is due to their behaviors vs. genetics/environmental factors.

Another important factor is that reasonable accommodation should be made to those who can’t meet a particular incentive; for example, those who are in wheelchairs.

Milkman: It is no surprise to me that people are concerned about the fairness of this proposal. Classic judgment and decision making research about what people perceive as fair shows that any loss relative to our current reference point is viewed as extremely unfair. In this case, the reference point is no surcharge (in spite of higher medical costs) for obesity and smoking, and the change relative to that reference point (a $50 fee) is experienced as a loss. 

We know from prospect theory (a Nobel-prize winning theory describing human behavior) that losses loom larger than gains, so in spite of the gains associated with this new program (coverage of more people, etc.), it is no surprise that the losses are getting more attention. I do think it’s wise that those who are obese or who  smoke will be offered actionable steps (and hopefully realistically achievable ones) to avoid the fee. 

2. Would this proposal be effective? Is $50 enough of an incentive?

Volpp: It is unlikely that this will be effective in making people lose weight. Losing weight and maintaining weight loss is extremely difficult for most people, and a one-time $50 penalty, once paid, will not provide sufficient motivation throughout the year. Most people are very focused on the present; a once-a-year incentive will not likely be effective in sustaining weight loss.

Milkman: $50 may not be enough to make a significant dent in the problem, but it should affect some people meaningfully. The question is, how many? It would be very interesting to calculate that percentage if the program is implemented.

3. Do you think this proposal will be passed, given its controversial nature?

Volpp: A similar provision is part of the Affordable Care Act (Section 2705), which stipulates that starting in 2014 employers can adjust health insurance premiums based on outcome-based wellness incentives using measures such as BMI by up to 30% of the total employer/employee premium. Employers currently are allowed to adjust premiums by up to 20% using outcome-based wellness incentives. Few use this full amount but clearly there is precedent for these types of approaches to be used more widely.

Milkman: I think it is likely that proposals like this will become increasingly common. I think that could be a good thing to the extent that these incentives help educate people about the risks associated with obesity and smoking and help motivate them to take steps to lose weight or quit smoking. However, there is also the risk that these types of programs will simply function as regressive taxes.

 From Incentives to Penalties: How Far Should Employers Go to Reduce Workplace Obesity? Knowledge@Wharton

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Can Walmart Make Us Thinner?

man eating junk foodWith approximately 65% of Americans either obese or overweight, it would seem that a push for healthier eating by a behemoth like Walmart would go a long way towards helping people shed some unwanted pounds. Will it?

Walmart announced last week that it will reduce, by 2015, the sodium content of thousands of packaged food items by 25% and added sugars by 10%, and that it will remove all industrially produced trans fats. The company has also said it will make healthier choices more affordable – saving customers about $1 billion per year on fresh fruits and vegetables – by improving the efficiency of its supply chain.

“Ultimately, Walmart can’t control what consumers eat, but it can influence the set of options from which consumers make food choices,” says Wharton marketing professor Patti Williams. “To the extent that these options are healthier, consumers have more opportunities to eat a healthier diet.” Still, it’s not a slam dunk. “If processed foods, even with lower sodium and sugar, are cheaper or more efficient for consumers than fresh foods,” Williams adds, “this [new initiative] may not result in the kinds of changes” that society needs.

Then there is the taste question. Can consumers come to love food with less salt and sugar? Linda Sartor, a diabetes nutritionist at the Penn Rodebaugh Diabetes Center, thinks they can. “It takes at least a week or two for our taste buds to make the adjustment,” she says. “But it can happen. It’s just a matter of the average person being  willing to give it a shot.” Many people don’t realize that for those who are significantly overweight, “it can take as little as an eight-pound weight loss to really bring down cholesterol and blood pressure which can make a huge difference in health care costs, medications and quality of life.”

Walmart shoppers, many of whom are working class, often haven’t had “access to healthier foods at a fair price,” Sartor adds. “The company is saying that these people deserve the same healthy food as those who can afford specialty items.” An earlier effort five years ago to sell more organic foods at affordable prices, however, fizzled. Questions were raised at the time as to whether the company could lower organic food prices enough to appeal to its shoppers, and whether its supply chain system could handle the unique challenges of organic food distribution.

Can the company, which had sales last year of $408 billion and employs 2.1 million people in 8,400 stores around the world, be doing anything else? “They could always offer discounts on their exercise equipment,” says Sartor, and they could also make sure that fresh fruits and vegetables are available in all Walmarts, which isn’t the case today.

Overall, says Williams, Walmart is “to be commended.” Obesity and poor nutrition are “serious issues that need to be addressed; having such an enormously important food retailer begin to make changes in this area is tremendous. It will have ripple effects throughout the category.”

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