The Financial Burden of Overweight and Obesity among Elderly Americans: The Dynamics of Weight, Longevity, and Health Care Cost

Approximately 35 percent of U.S. adults are overweight, and an additional 30 percent are obese (Flegal et al. 2002, 2004; Hedley et al. 2004). The increase in rates of overweight and obesity represents a major change in the biological and behavioral characteristics of the U.S. population, and has become a major focus of public health policy interventions (Ogden et al. 2006; Parikh et al. 2007). Because of the high prevalence of costly chronic diseases among the overweight and obese (e.g., diabetes, cancer), the epidemic of obesity could place heavy financial burdens on the U.S. health care system (Must et al. 1999). The central issues are, how much will this epidemic cost, and who will pay for it? (Finkelstein, Feibelkorn, and Wang 2003; Daviglus 2005; Lakdawalla, Goldman, and Shang 2005) The magnitude of increase in health care expenditures associated with higher body weight differs by patient demographics, service type, and, more importantly, by health care payer. Among working adults, employer-provided health insurance and out-of-pocket payment by employees and their families are the major payers of health care. Previous research found that after controlling for educational achievement and work experiences, overweight and obese working adults are more likely to earn lower wages in the labor market relative to their normal weight peers. One major explanation for lower wages among the heavier adults is that they are more likely to suffer chronic diseases and/or related acute medical events that lead to more expensive medical bills to be paid by employer-provided insurance. Instead of raising the insurance premiums, employers are likely to shift the higher medical care cost to their heavier employees by offering lower wages in order to maintain actuarial fairness in insurance coverage (Cawley 2004; Bhattacharya and Bundorf 2005). Among the elderly population, the major payers of health care are publicly financed health insurances. In 2003, for individuals 65 years and older, public health insurances (Medicare and Medicaid) payments accounted for approximately 62 percent of all health care payments (National Center for Health Statistics 2006). Unlike private insurance, Medicare and Medicaid cannot shift the higher health care expenditures associated with overweight or obesity to the heavier beneficiaries by increasing their premiums. Therefore, public funding (i.e., tax revenues) will bear the bulk of the financial burdens of higher health care expenditures associated with overweight or obesity among the elderly. The majority of deaths in the United States occur after age 65. The elderly experience a comparatively faster rate of health deterioration, and have higher demand for health care than younger adults because of the natural aging process. From a public finance and policy point of view, what matters is not the extra health care expenditures among the heavier elderly per year, but their lifetime health care expenditures from age 65 to death. Previous research suggests that it is critically important to understand the dynamic relationship between bodyweight, the prevalence of chronic diseases, the development of functional disability, and longevity when investigating the health care expenditures associated with increased body weight among the elderly population. The higher health care expenditures among the overweight or obese elderly per year could be offset by their shorter life expectancy due to their higher mortality rates induced by the high prevalence of chronic diseases. Therefore, estimating cross-sectional relationships between body weight and health care expenditures could lead to overestimates of the financial burden of overweight or obesity (Newman et al. 2001; Finkelstein, Feibelkorn, and Wang 2003; Lubitz et al. 2003; Lakdawalla, Goldman, and Shang 2005). On the other hand, although, an important issue that has stirred much discussion but has not been explored thoroughly is the natural weight-loss that happens as individuals get older because of the aging process (e.g., loss of bone density) and/or the development of consuming chronic diseases and the associated treatments. This makes it difficult to trace the medical events in older age to extra body weight in younger age (Willett et al. 2005). For example, a 65-year-old overweight diabetic elderly individual will likely experience episodes of acute comorbidities, such as acute myocardial infarction (AMI) or stroke, and survive into her 70s with functional disabilities. Her weight in her 70s could drop into normal weight, or even underweight, because of natural aging, consuming diseases, medical treatment, and possibly some behavioral adjustment to control her weight. If we examine the cross-sectional relationship between her body weight and health care expenditures in her seventies, we cannot associate the medical treatments, such as rehabilitation, long-term care, or prescription drugs for her AMI or stroke, to her overweight condition in her 60s. Therefore, investigating the cross-sectional relationship between current body weight and health care expenditures could also lead to underestimates of the financial burden of overweight or obesity among the elderly. In this study, using a nationally representative longitudinal sample of Medicare beneficiaries age 65 or older, we extend the literature on the economic consequences of the epidemic of obesity by developing a dynamic model to estimate both the direct relationship between body weight and four major types of health care expenditures (inpatient, outpatient, nursing homes, and outpatient prescription drugs) at the cross-sectional level, as well as the indirect relationships between body weight and subsequent health care expenditures which are induced by comorbidities associated with weight-related health problems longitudinally. Then, based on our estimation, we conducted a simulation of one age cohort with different baseline weights from age 65 to death or up to age 100 to gauge the lifetime health care expenditures attributed to extra body weight since age 65.