Health Reform and Obesity--Posner

The biggest problem besetting the Administration's program of health reform is how to pay for it. The heart of the program is extending insurance coverage to tens of millions of people who at present are not insured. This will cost more than $100 billion a year just in subsidies, but the total cost will be higher because demand for medical services will rise. At present, people who are not insured are billed directly for medical services. Often they cannot pay, but then their credit takes a hit, or they are forced into bankruptcy. And emergency rooms use queuing to increase the cost of their services to the indigent. When the uninsured become insured, the marginal cost of medical services to them falls to the copayment or deductible that they are charged; the total price (pecuniary plus nonpecuniary) is now much lower, so more service is demanded, and prices to all consumers of medical services rise because supply is inelastic. Some advocates of extending coverage argue that it will reduce aggregate medical costs. They point out that people may defer preventive care that might ward off an illness, or a worsening condition, that might cost more to treat than preventive care would have cost. The other side of this coin is that preventive care may keep alive people who would have died, thus ending their demand for medical care. But everyone dies eventually, and a very high fraction of total medical costs are incurred in the last few months of life. Moreover, because of technological progress and the high value that people place on extending their life, medical expenses are growing far more rapidly than per capita income, and, as a result, postponing death imposes disproportionately greater costs on the next generation. A partial offset, however, may be that greater and therefore more costly efforts may be undertaken to postpone death the younger the dying person is. Preventive care can also be very costly, especially when it takes the form of expensive screening: screening costs are incurred by the healthy as well as the sick. The most attractive form of preventive care, at least from a government budgetary standpoint (disregarding for a moment nonpecuniary benefits and costs, to which I'll return), is behavioral change: for example, safe sex as an AIDS preventive--or losing weight, or, more realistically, not gaining excessive weight in the first place, to prevent obesity. Obesity has increased rapidly in the United States, to the point where, at present, more than half the adult population is overweight and 25 percent is obese. A recent study estimates that the average obese person incurs annual medical expenses that exceed by 42 percent the average annual medical expenses of the non-obese; the aggregate excess cost is almost $150 billion a year. Average expense is potentially misleading because of the shorter lifespan of unhealthy people. However, I believe that except in cases of extreme obesity, the effect on lifespan is less than the effect in creating medically treatable conditions such as diabetes, joint problems, complications from surgery, and cardiovascular disease. The economist Tomas Philipson and I have written about the economics of obesity. We have pointed out that the decline in the price of fatty foods, along with the rise in the opportunity cost of physical activity (work is more sedentary than it used to be, so one has to invest extra time to get exercise, and television and video games have increased the utility that people derive from sedentary leisure pursuits), explains the dramatic long-term increase in the percentage of Americans who are seriously overweight. It might seem that if people derive greater utility from consuming fatty foods in large quantity than the costs in illness and medical care, the increase in obesity actually is optimal from an economic standpoint. But there are three reasons to doubt this. The first is that the obese externalize part and probably most of the excess medical costs that their condition imposes, because health insurers (including Medicare) generally do not discriminate on the basis of weight. The second reason to doubt that we have the optimal amount of obesity is that high and rising aggregate health costs, because financed to a large extent by government, are contributing to the serious fiscal problems of the United States: the United States has a soaring national debt that may have very grave long-term consequences for America's prosperity. Obesity thus has potential macroeconomic significance. Third, there is reason to doubt that the obese actually gain more utility from the behaviors that contribute to their obesity than the costs of obesity, which are not limited to medical costs but include discomfort, loss of mobility, discrimination by employers, and social ostracism by people who consider obesity repulsive or believe it signals lack of self-control, gluttony, or low IQ (or all three characteristics). Obesity is highly correlated with education. Highly educated people are much more likely to be thin than people who are not highly educated. This is partly but not only because highly educated people have on average higher incomes than other people. They can afford more expensive foods, which are low in calories, and the cost of exercise, which can be considerable, as it may require joining a gym or having a personal trainer. But income is not a complete explanation, because highly educated people in low-paying jobs, as many teaching (including college teaching) jobs are, tend to be thin. But is this because one needs education to realize that eating fatty foods makes one fat and that fat people have medical and other problems that thin people do not? Surely not. It is rather that educated people have better impulse control, or, in economic terms, a lower discount rate (the rate at which a future cost or benefit is equated to a present cost or benefit), than uneducated people do, on average at any rate. To get an education means incurring present costs for future benefits, and that is less attractive the higher one's discount rate. Moreover, intelligent people derive greater benefits from education in terms of present enjoyment and future income than unintelligent people do, and intelligence implies lower costs of foreseeing consequences of one's actions: it is easier for an intelligent person to realize the consequences of indulging one's tastes for fatty foods than an unintelligent person, given that obesity is not an immediate consequence of eating such foods. Low-IQ people (and many high-IQ ones as well) may also fail to realize how much more difficult it is to lose weight than to avoid gaining weight in the first place. A further problem with people of low intelligence and (what goes with it) low income is poor parenting, as a result of which children grow up with bad eating habits, including excessive consumption of fatty goods; these habits may be difficult to break in adulthood. If the unintelligent experience greater costs of imagining the consequences of eating fatty foods, that is an argument for providing them with greater information about those consequences, to offset their deficit in understanding. Maybe with full knowledge the unintelligent would be willing to incur the costs, in somewhat more expensive food and in fewer sedentary leisure pursuits, of avoiding becoming obese. So aggregate utility might actually be increased, as well as aggregate medical costs reduced, by an effective campaign of warning people about the consequences of eating fatty foods. I do not think that government should regulate behavior on the premise that it knows better what makes people happy than people themselves do; but controlling external costs is or should be an uncontroversial governmental function. Such an educational campaign as I have suggested would be a cheap form of preventive care, but would it be effective? The evidence is mixed, but a 2008 review article by Lisa Harnack and Simone French in the International Journal of Behavioral Nutrition and Physical Activity finds that labeling restaurant menus with calorie information does reduce consumption of high-calorie foods. Conjoined with reduced calories in school lunches, elementary- and high-school courses in nutrition, and warnings in food advertising and labeling similar to the warnings in cigarette advertising and labeling, the prevalence of obesity might be reduced at slight cost--possibly to the benefit of almost everyone except the sellers of fatty foods. One of the health-care-reform bills pending in the Senate would relax legal limitations on "discrimination" by private group-health insurers; that is a step in the right direction, as are growing efforts by employers to encourage their workers to control weight (the motive is to reduce the cost of health insurance to the employer). Medicare could be modified to reduce fees to thin people. In addition, a calorie-based food tax (which would, for example, fall heavily on sugar-flavored soft drinks), would reduce obesity at negative cost to the public fisc. Such a tax may seem "unfair" to people who consume such foods but are thin, but this is just to say that the tax would be at once a regulatory and a revenue tax, and in the latter aspect would be subject to criticism only if it were an inefficient tax relative to alternative methods of taxation.

Comments

[Anonymous]

Professor Posner

Perhaps excessive usage of carbohydrates is more important factor in obesity than the fat.

I recommend my obese patients to avoid white bread, potato, plain coffeebread, sugar, beverage, pasta etc.

Patients are allowed to use freely vegetables, fruits, skim milk, meat, fish. Dark bread is allowed when not used excessively.

Yours

Pekka Nykänen
Internist and rheumatologist
Espoo
Finland

[Anonymous]

This is among the least-persuasive arguments I have read from Professor Posner. He says that there are three reasons to suspect behaviours which lead to obesity are non-optimal:

1. fiscal externality: government relieves the individual of some of the costs of obesity, separating private and social costs.

2. the government spends more than it earns.

3. obesity has large private costs.

Point 1 is the most plausible.

Points 2 and 3 are, I think, absurd. Quite obviously, the US government's irresponsible fiscal behaviour on unrelated issues has nothing whatsoever to do with the optimality of any individual's eating and exercise decisions. The costs mentioned in point 3 are entirely privately borne and easily anticipated. The mere existence of these costs, even noting they are perhaps large, is useless without a corresponding assessment of benefits.

Point 1 at least makes some sense - but again it is dubious. Browning (1999) makes the case that the correct response to fiscal externality is to remove the externality, rather than regulate what it affects. In this case, asking public insurers to take obesity into account when setting premiums would internalise the problem.

To be honest, I doubt it would make much difference, for two reasons. One, obesity is not a major driver of total health care costs unless one is morbidly obese. Two, I strongly suspect that health care costs are a small fraction of the total costs of obesity, including health care costs but also social stigma, reduced earnings, physical difficulties of movement, and so on. Even if premiums rise 20% due to obesity, I suspect that represents only a small fraction of total costs and, accordingly, a small fraction of total benefits.

The danger in Posner's argument if it is accepted is that there is that a great deal of human enterprise can be regulated or banned outright if fiscal externality, a fiscal deficit, and large private costs are sufficient conditions for public intervention.

Not a well thought-out argument by Professor Posner, in my opinion.

[Anonymous]

Does anyone know of a study comparing the medical costs incurred in the last year of life for different causes of death -- i.e., heart disease versus lung cancer? I think that sort of study is needed to determine whether increased preventative care will reduce aggregate medical costs: If the preventive costs of a particular disease are lower than the end-of-life costs, increased preventive care would probably reduce aggregate costs after appropriate discounting. Or the opposite could be true. Regardless, this sort of comparison would be much more informative than Posner's broad statements that preventative care is expensive and end-of-life medical costs are high. Both could be true, yet increased preventative care would still reduce aggregate costs.

Daniel

[Anonymous]

Haven't studies established that the costs of medical care from age-related health problems are higher than for obesity-related health problems?

Obesity has risen because (1) tasty, fatty foods have become cheap and plentiful, (2) sedentary jobs are more common, and (3) there are plenty of ways to deal with it. It's not that the less-intelligent, less-wealthy types gravitate to poor eating habits -- there are scads of educated, elitist obese people as well. The first group might eat Big Macs while the latter eats creamy sauces and expensive chocolates, but the end result is the same.

[Anonymous]

As I understand it, there is no evidence at all that mild success via calorie labeling in getting people to avoid some high-calorie foods at a particular meal translates into lower caloric intake overall and so to reduction in weight, to a significant enough reduction to change an obese person into a non-obese one, and finally to reduction in health-care costs. Counting on that to yield savings...

[Anonymous]

Maybe youth sports should be banned because MRI's are too expensive in a socialized healthcare system? Seriously, let's only allow the Lebron James' of the world to play youth sports and tell everyone else there isn't enough money in the system for you to play. This will reduce healthcare costs big time.

Where do you draw the line when it comes to government rationing healthcare? Maybe allowing Obama to masterplan our lives isn't a good idea? There is no end to this assault on liberty.

The only thing more disgusting than watching people throw down Big Mac's is watching a society become totally and utterly dependent on a bankrupt government. It is wreckless and irresponsible for a society to rely on government for everything when it has to print and borrow money at unsustainable rates. I don't care what your weight is, a KEYNESIAN is more irresponsible than a person who diets on fast food. A keynesian can have all the college degrees his credit score can leverage, but he still doesn't realize that Marxism doesn't work in the real world.

[Anonymous]

"the cost of exercise, which can be considerable, as it may require joining a gym or having a personal trainer."

Excercise NEVER requires joining a gym or hiring a personal trainer. Sure, those things can make it easier* to get in shape, but there are an infinate amount of excerise opporunities in which someone can partake outside of the gym.

*I think a lot of people that join gyms have a mentality that they can only workout at the gym, and if they don't have time to go they skip working out entirely rather than putting in 10-15 minutes of excerise at or around the home. The net effect being that it becomes "harder" to workout. Of course that's just my opinion.

[Anonymous]

I very much enjoyed reading this post, especially when differing discount rates were discussed. I think that this very well could be a very important distinction between those who chose to eat unhealthy and become obese, and those who watch their diet and weight. I think it has less to do with IQ or intelligence, however, and more to do with simple personal preferences. If this is true, doesn't it make the argument that instead of imposing some excise tax on sugary, fatty, or high calorie foods-- as Professor Posner suggested here, and discussed in previous posts-- that discriminating costs of health-care based on risky or destructive behaviors would be better?

[Anonymous]

The obesity problem can be easily explained by a very simmple formula:

(C X P.E.)- 2000 = F.A.

Where: C=caloric intake
P.E.= physical expenditure coefficient
2000= constant caloric body mass
maintenance coefficient
F.A.= fat accumulation

So it becomes quite apparent that if C rises and P.E. stays the same Fat accumulates. If one drops C and increases P.E. Fat does not accumulate or accumulates more slowly over time. For fat people, the desired equation is to create a negative F.A. until the "ideal" body mass index is reached. As for those who are undernourished, create a positve F.A. until the "ideal" Body mass index is reached. Once the "ideal" BMI is reached in both cases, the equation needs to be balanced so that F.A.=0. "Simple" huh?

As for the social phenomena of the "poor" being obese, this is due to the food stuffs that they can afford. Mostly fats and carbohydrates, all high C value materials. So the solution lies in decreasing their P.E. coefficient by working them more in heavy physical labor. It might even help to stimulate the Economy. At least society would get something valuable and decrease the crime rate at the same time.

[Anonymous]

I understand the arguments, and find that since I am morbidly obese, I must therefore be unintelligent, poor, and incapable of making decisions. Will you then further decide that I should die by age 60 (or 50 or 40 whatever age thin people think we should disappear) and take us out of the equation? You would eliminate medical costs and make lots of space in the job and housing market if we were dead first.

[Anonymous]

"If this is true, doesn't it make the argument that instead of imposing some excise tax on sugary, fatty, or high calorie foods-- as Professor Posner suggested here, and discussed in previous posts-- that discriminating costs of health-care based on risky or destructive behaviors would be better?"

---

Again, where do you draw the line when RATIONING out government healthcare...?

Should we deter kids from playing youth sports? Afterall, sports injuries are costly and most kids will never make the NBA or NFL anyway. For the social good and overall effort of government-masterplanned equality (is this equality...?), should we eliminate youth sports for non-athletic kids or penalize them somehow?

Should the Government continue to fund injuries for those who partake in extreme behavior (say for example: downhill skiing)? Why should these people be allowed to exploit our government run healthcare while fat people be penalized? One knee surgery is probably as costly as a heart attack.

Has anyone even considered equality here? Some say obesity is a disease that you are born with. Imagine if we rationed out healthcare but instead penalized a specific race or gender coverage because statistics illustrate they are a greater burden to the healthcare system. How about gay people and AIDS victims. They are a burden on the budget too relative to healthy people. We cannot possibly provide State-healthcare for these people due to costs, but we can send foreign aid to Africa with borrowed money from the Chinese every year so Bono can perform a concert?

We are watching a train wreck unfold. This is a catastrophe in the making. Either the Democrats are going to get whipsawed once the American people wake up and realize what is going on, or this country is going down exactly how Rome went down.

[Anonymous]

This post by Posner is almost frightening. First, his policy proposal is Stalinist. Second, emulating Holmes in an earlier context, Posner appears to be saying that "three generations of obese imbeciles are enough."

[Anonymous]

Seriously, Posner is more like Hitler than Stalin here. Maybe we should just euthanize the obese in order to eliminate healthcare cost burdens on the STATE....? The obese are such a drag on society, let's just rid them of our utopian society.

Guys, this really is crazy. Posner is rationalizing the RATIONING of government healthcare before Obama and the liberals have even nationalized healthcare. If this is not a wake up call for rational citizens of this country, then I don't know what is. It won't stop with the obese, anyone could be next. The Statist will argue that the government must fund late-term carte blanche abortion, but will penalize people who eat more than they should.

Do we really want Obama and Nancy Pelosi controlling your life like this?

This is pure insanity. Revolution is nearing. I'm almost certain of that after reading opinions like this from our so called scholars. They rationalize Hitler's dream based on something they read in a textbook, yet they have zero understanding of the real world we all live and work in.

Don't Tread On Me...!

[Anonymous]

The lead sentence in the Posner blog was, "The biggest problem besetting the Administration's program of health reform is how to pay for it." What evidence exists to show the federal government cannot pay for health care via deficit spending?

It widely is assumed large deficits are harmful, but I've not seen statistical evidence to substantiate this belief. I have seen evidence that:
1. Surpluses have caused depressions
2. Reduced deficit growth has caused recessions
3. Large deficits have not caused inflation
But I have not seen evidence showing the government cannot afford to support health care. I very much would like to receive such evidence.
To date, I have received many irate Emails telling me how foolish (to put it mildly) I am to dare to ask for evidence, but I'm from the old school that prefers data to other people's intuition.
If you have data (not just opinion), showing that large deficits are harmful to the U.S. economy, please send it to me at [email protected] Thank you for your assistance.

Rodger Malcolm Mitchell
[email protected]
http://www.rodgermitchell.com

[Anonymous]

The lead sentence in the Posner blog was, "The biggest problem besetting the Administration's program of health reform is how to pay for it." What evidence exists to show the federal government cannot pay for health care via deficit spending?

It widely is assumed large deficits are harmful, but I've not seen statistical evidence to substantiate this belief. I have seen evidence that:
1. Surpluses have caused depressions
2. Reduced deficit growth has caused recessions
3. Large deficits have not caused inflation
But I have not seen evidence showing the government cannot afford to support health care. I very much would like to receive such evidence.
To date, I have received many irate Emails telling me how foolish (to put it mildly) I am to dare to ask for evidence, but I'm from the old school that prefers data to other people's intuition.
If you have data (not just opinion), showing that large deficits are harmful to the U.S. economy, please send it to me at rmmadverti[email protected] Thank you for your assistance.

Rodger Malcolm Mitchell
[email protected]
http://www.rodgermitchell.com

[Anonymous]

Mr. Posner,

Ceteris paribus, obesity occurs when one consumes more calories than they exert on a daily basis. Did it occur to you that your correlation of eduction and obesity is, in fact, a correlation of laziness and obesity? Education, in this country, is a pursuit against laziness. It is a pursuit against inertia. Lazy people do not often pursue education at higher levels. Please understand that education is not the proper correlation. Work smarter, not harder!

[Anonymous]

The issue here also seems to be a lack of trust by the American people for our government. When people side with a government, a great many number of changes and accomplishments can happen. Funding is important, but gaining the public's trust is more important.

[Anonymous]

just a good issue

[Anonymous]

Posner claims highly educated people tend to be thin. What a joke posing as reason. I was thin when lowly educated and made a living with my hands and aching back. Many lowly educated people today are thin for the same reason, even if Posner declines to acknowledge their existence.

What elitist claptrap.

[Anonymous]

Are there studies of the pleasure some people get from medical treatment. Posner seems to think medical treatment is all misery, which it probably is to most people, myself included. But lots of people seem to love to talk about all the drugs and therapies they are taking, the specialists they have seen, the operations they have undergone. I suspect they not only love to talk about it but love the attention they get from the doctors, nurses, therapists, etc. There are, of course, classic hypochondriacs, but people with genuine illnesses also fit into this category. The fact that so few people pay much of the cost of their treatments or pay insurance premiums based on their individual histories or risk makes these pleasures all the more attractive.

Glenn S

[Anonymous]

"It widely is assumed large deficits are harmful, but I've not seen statistical evidence to substantiate this belief. I have seen evidence that:

1. Surpluses have caused depressions
2. Reduced deficit growth has caused recessions
3. Large deficits have not caused inflation

But I have not seen evidence showing the government cannot afford to support health care. I very much would like to receive such evidence."

---

Rodger Mitchell,

SINCE DEFICITS DON'T MATTER, LET'S JUST PRINT AND BORROW OUR WAY TO UTOPIA, SHALL WE...?

This is precisely how the Roman Empire collapsed. That day is coming because this KEYNESIAN irresponsibility is destroying this once-great nation.

The belief that DEFICITS DON'T MATTER is more irresponsible than an obese person jamming big macs down his throat 24/7.

[Anonymous]

"The biggest problem besetting the Administration's program of health reform is how to pay for it. The heart of the program is extending insurance coverage to tens of millions of people who at present are not insured. This will cost more than $100 billion a year just in subsidies, but the total cost will be higher because demand for medical services will rise. This will cost more than $100 billion a year just in subsidies, but the total cost will be higher because demand for medical services will rise. At present, people who are not insured are billed directly for medical services. Often they cannot pay, but then their credit takes a hit, or they are forced into bankruptcy."

Except the government already pays at least a substantial portion of those costs once the indigent, uninsured patient goes into bankruptcy, so this statement is at best misleading.

None of this, of course, addresses the issue that even though the U.S. government already spends three times as much annually per person than the next highest spender (Australia), the real reason other countries adopted UHC is not because it is cost-effective but because they realized that thinking the government had more important things to spend money on than the basic health of its citizens is hard to characterize as anything but sociopathic.

[Anonymous]

Correction, with apologies: private expenditure per capita in the U.S. is three times the next-highest, which is again Australia. Even so, U.S. government expenditure on health care is still the highest of any nation in the OECD at around $2880 per person, with the next highest being France with $2714.

There are a variety of reasons we spend so much more on health care than other countries, but I have a very hard time swallowing the argument that obesity is the single tipping point when Europeans smoke so much more than Americans. If I had to venture a guess as to the economics of it, I would say the biggest factor is that under a universal system, the government's monopoly power coupled with a lack of the profit motive puts it in a unique position to keep drug costs and salaries down, fewer administrative costs, and so forth.

[Anonymous]

If you are fat, sorry you are too dumb and irresponsible and government must ration your healthcare.

But if you want to have a late term abortion for no reason whatsoever... you are a responsible genius and OBAMACARE will cover you 100% all day long...!!!

http://news.yahoo.com/s/ap/us_health_care_overhaul_abortion

[Anonymous]

While tackling the obesity issue is, undoubtedly, a big chunk of preventative care, we're overlooking two issues that could also cost the health care system untold amounts: alcohol and tobacco consumption. I'm not convinced that these two aren't worse than obesity, especially since they usually come in a package deal to begin with.