Economic Impact of Obesity
Obesity exacts a tremendous price on overweight individuals, leading to serious chronic health conditions, disability, and psychological suffering. Society-wide, the economic burden of obesity is similarly substantial, calling for urgent preventive action from health insurers, businesses, government and other stakeholders.
Policy makers have long accepted that public intervention is appropriate when the consequences of individual decisions imposed on others—known in economics as externalities—lead to significant impact on society as a whole. The negative health effects of secondhand smoke are a good example of externalities being addressed by government intervention. Obesity imposes significant external costs on society through health care expenses and disability payments pooled through group health insurance and public programs.
National Healthcare Spending
Evidence on the considerable costs of obesity to individuals and society is rich. At the individual level, obesity is associated with health care costs that average about 30 percent above those for normal weight individuals. Overall, obesity-related direct and indirect economic costs exceed $100 billion annually, and the number is expected to grow. In relative terms, obesity accounts for 6 percent to 10 percent of U.S. health care spending, compared with 2 percent to 3.5 percent in other Western countries. The burden of obesity-related medical costs falls disproportionately on public health care in the U.S., draining resources from public programs like Medicare and Medicaid. Obesity accounted for 27 percent of the growth in real U.S. health care spending between 1987 and 2001. Despite these sobering statistics, the full effects of obesity trends since the 1980s are not yet fully apparent because health problems caused by weight gain take time to appear.
Obesity and the Workplace
Given the significant financial burden imposed by obesity, employers have a stake in reducing obesity in the workforce. Obese workers miss more days of work and cost employers more in medical and disability claims as well as workers compensation claims. As a result, an average firm with 1,000 employees faces $285,000 per year in extra costs associated with obesity. In addition to the costs of obesity to businesses, obese employees are subject to significant discrimination in the workplace due to weight stigma.