Over the past five decades in the United States both total medical expenditures and the proportion of medical expenditures nanced 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 $38.7 billion. This estimated public cost equates to an average marginal cost of $175 per year per adult for a one unit change in BMI for each adult in the U.S. 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 $173.7 billion (in constant 2008$), or 17.2% 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 $216.7 billion in 2008.
See PDF of the paper here: The Marginal External Cost of Obesity in the United States. Joanna C. Parks, Julian M. Alston, and Abigail M. Okrent (2012). RMI-CWE Working Paper number 1201.