The%20Nexus%20Between%20Obesity%20and%20Comprehensive%20Health%20Insurance

1
The Nexus Between Obesity and Comprehensive
Health Insurance
2
The Buffet Problem

• It is difficult not to over-consume at zero or
  low marginal cost.
• It is difficult not to overeat at a buffet or
  while on a cruise (or at a conference).
• This is the reason we no longer see
  bumper-to-bumper warranties on anything but the
  powertrain of cars.
• We pay for insurance, then only pay the copay for
  more health care services.

3
Comprehensive Health Insurance is Like a Health
Care Buffet

• We over-consume because, with low copays and low
  or no deductibles, medicating is cheaper than
  watching what we eat. Copay
• 50 higher rate of obesity among those on
  Medicaid, compared to privately insured.
• People in countries with public, universal health
  care appear more likely to become obese, as they
  become relatively more affluent.
• IOTF map

4
The Inverse of Engels Law

• We over-consume because (in the converse of
  Engels Law) we choose to spend part of our
  discretionary income on dining/health care rather
  than weight control.
• We treat food prepared for us and health care as
  luxury products. (Hence, spending grows faster
  than income).
• Nearly half of Americans food budget is spent
  outside the home.
• Obesity has spread with affluence, particularly
  where public health care prevails.

5
The Problem of Moral Hazard

• Moral hazard arises when a party does not bear
  the full consequences of his/her actions, leaving
  some other party to bear some consequences.
  Tends to act with less care.
• Just as we are more careful about our health
  while we are waiting for our health insurance to
  take effect after a job change
• And may defer necessary health care
• Once we have insurance, we tend to be less
  vigilant about weight gain, because our health
  insurer will cover most of the cost of
  remediating.

6
Moral Hazard and Obesity

• We over-consume because a portion of the cost is
  borne by the health insurer which is to say,
  normal weight members of our insurance pool.
• Those who struggle to control weight as a means
  of controlling hypertension and cholesterol are
  often counseled by their doctors to give up in
  favor of drug therapy. Its not uncommon for
  these people to give up attempts to control their
  weight, too.
• Insurance mandates for treatment of diabetes seem
  to lead to a 10 higher BMI among those with the
  disease.

7
Negative Consumption Externalities

• When some part of the costs of an individuals
  actions falls on third parties.
• Similar problem to second hand smoke.
• The fact that obese individuals pay the same
  insurance premiums as normal weight individuals
  of the same age, creates a transfer payment from
  thinner to heavier individuals.
• To the extent that individuals are more likely to
  add weight as they age, these transfers from
  heavier to thinner individuals are likely to
  involve transfers from the young to the old.

8
The Negative Externality of Obesity

• Percent of obese population grew as the costs of
  obesity to the insured individual went down due
  to
• falling out-of-pocket and copay expenses during
  the 1970s 80s.
• And a surge in medical, prescription and surgical
  remedies for the effects of obesity.

9
Implications Scolding Will Have Little Effect

• E.g., Surgeon Generals warnings go on to
  cigarette packages 1966 1970.
• Rand Fact Sheet proposals may have little effect.
• Reducing potion size.
• Limiting access to ready-to-eat foods.
• Limiting access to snack foods at work school.
• Reducing food advertising.

10
Implications Economic Options

• Obesity rated insurance premiums.
• Similar effect to a tax.
• Eliminates transfer from normal weight over
  weight to obese, and therefore, the externality.
• Higher co-pays and deductibles.
• Between 20 30 copays appear effective.
• Personal economic stake in weight loss.
• Health savings accounts.
• More Cash Counsel programs.
• Swiss model, without the price controls.
• Costs already coming down, obesity will too.