The Marginal External Cost of Obesity in the United States.

• Agricultural Economics Workshop

Date and Location

Friday, April 27, 2012, 1:10 PM - 2:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

Over the past five decades in the United States both total medical expenditures and the proportion of medical expenditures financed with public funds have 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, BMI, rather than discrete weight categories to represent the distribution of obesity and changes in it. We predict that a 1-unit increase in BMI for every adult in the United States would increase annual public medical expenditures by $32.6 billion. This estimated excess public cost equates to an average marginal cost of $147 per year per adult for a one unit change in BMI for each adult in the United States population. 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 $126 billion (in constant 2008$), or 12.5% of annual public medical expenditures in 2008. Assuming a socially optimal BMI of no more than 25, we estimate that the prevalence of obesity in 2008 resulted in a deadweight loss of $152.0 billion in 2008.