Why are we so fat? Our food, health care are so cheap

June 2, 2014
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Dr. Aaron Carroll, a pediatrician and health policy expert at the IU School of Medicine, drew my attention today to a fascinating study on the economics of obesity.

Since obesity is an especially big problem in Indiana, as I noted last week, I thought this study was especially relevant for Hoosiers.

Author Roland Sturm’s conclusion is strikingly simple: Obesity is a growing problem due to the simple fact that the real cost of food has fallen steadily for nearly a century. Americans today spend a smaller percentage of their disposable incomes on food—about 10 percent—than any other people at any time in history.

“Americans now have the cheapest food in history when measured as a fraction of disposable income,” wrote Sturm, who is an economist at the RAND Corp. “In the 1930s, Americans spent one-quarter of their disposable income on food, dropping to one-fifth in the 1950s.”

As we all learned in Economics 101, lower prices lead to higher demand. Americans’ consumption of calories has gone up and up—as has the percentage of Americans who are obese. And the rise in obesity has been remarkably consistent across income and education levels—as the charts in Carroll’s post show so clearly.

Sturm's study also debunks several common explanations for steady expansion of American waistlines.

According to Sturm’s long-term data analysis, rising obesity is not due to a decrease in overall physical activity. In fact, the opposite has occurred.

It’s not due to decreased leisure time. Leisure time has actually increased overall in the past several decades.

It’s not due to a lack of healthier foods, including fruits and vegetables. Their availability is greater now than ever before.

It is partly due to increased consumption of sweeteners and carbohydrates, which has been fueled by the greater availability of all kinds of food.

"As food becomes relatively cheaper, there is constant access, and individuals become wealthier (all of which occurred in the past 50 years), the simple economic theory predicts that obesity rates should increase,” Sturm wrote.

In other words, cheap, plentiful food makes it virtually impossible for someone to eat himself or herself “out of house and home.” And without that economic constraint in place, Americans eat more and more.

Of course, there are very expensive health consequences to long-term overeating. Diabetes, heart disease, joint replacement surgery--just to name a few.

But those consequences are felt only weakly because health care policy has suppressed the true cost of those consequences.

That much was clear to me when I read the latest report by actuarial firm Milliman Inc. on the cost of employer-sponsored health insurance for a family of four. It hit $23,215 last year.

Employers contribute on average 58 percent of those costs. Employees pay another 25 percent of the cost via premiums and are now, on average, exposed to out-of-pocket costs of $3,787 (although some of those are offset by employer contributions to their workers’ health savings and health reimbursement accounts).

As a member of a family of four, I am astounded by the fact that our health care costs $23,000 per year.  And yet, the way health benefits are structured makes the actual purchasing of health care a fairly low-cost affair.

The average premiums of $5,900 are salty. But since U.S. tax law makes employer-sponsored insurance a much better deal than buying individually, there’s little choice but to pay them.

Once an employee does pay premiums, the only way he or she can receive value from them is to consume health care. And when Americans go to buy health care, their deductibles and co-pays make them pay only 16 percent of the true cost of care.

(I got that 16 percent figure by dividing the average out-of-pocket expenses, $3,787, by the total cost of a family policy, $23,215.)

In strict economic terms, that means Americans will be willing to spend money on health care until the point that the value they derive from their health care purchases is less than 16 cents they would spend on anything else.

Or, looked at another way, it also means it would make sense for Americans to buy at least $6 worth of health care services before they’d be willing to spend an extra dollar on anything else.

So put these two things together. Americans have every economic incentive to consume lots of food and then, when that food creates health problems for them, to consume lots of health care to fix it.

And what do we see? A 2009 Health Affairs study found that health care for issues related to obesity approached $150 billion per year.

When food and health care are so cheap to the people actually doing the buying, there’s little reason to skimp on either.

  • Absurd
    The logic employed in this article is so absurd!The article misses the entire point of why we have epidemic obesity in our culture. We have become a society of fast foosd and processed food which has resulted in the USA being the fattest society in my memory. We need to disallow fast food and processed food to be sold in the USA, and like cigarettes it shold have warning labels.
  • More complicated
    It certainly is fast food and processed food. But another factor is that young people, children don't get out and play anymore. They don't move around like my generation did. When my sister and I got home from school in the 1950's and 1960's we were out riding our bikes, playing tag, screaming and yelling, playing ball or in the pool. Kids don't seem to even want to do these things anymore. I remember crying at the backdoor when it would rain because our mom wouldn't let us go outside. Has the desire been bred out of them? They've got middle aged bodies at 12 with cubby legs, pot bellies and knocked knees. It's so sad and I miss the shouts of joy and laughter in the summer evenings. It's so eerily quite.
  • Misguided Article
    With all due respect, I believe that this article, while well intentioned could do real damage to the thinking of decision makers and mislead people to believe that food should simply just be more expensive to dissuade overeating. One critical point of the study summary that was linked (not the study itself which can be found here http://onlinelibrary.wiley.com/doi/10.3322/caac.21237/full ) cited, "Our food also comes with more calories than ever before for the price." Like a previous commenter acknowledged, to lower classes, and even working/middle class families who lack time and resources, foods with higher caloric value and lower nutritional value are the cheapest most accessible foods. It is also misguided to believe that everyone in our society has the opportunity to choose his or her food equally. Those in poorer neighborhoods, who make less money to buy the most nutritional foods, live in food desserts. I live on the near East side of Indianapolis myself. I am fortunate enough to be able to afford groceries from the boutique March marketplace that is the only grocery within walking distance. However, when my impoverished neighbors, many of whom do not have cars, seek affordable foods they have to travel miles, by bus, bike, or foot to the nearest moderately priced grocer who still does not have the same bountiful selection as our beautiful new downtown Marsh, that carries a higher pricetag. I write all of this to say that we are obese as a country. We have clearly eaten ourselves into an epidemic, but maybe we should look to blame not the eaters, but instead a government that incentivizes corporations that produce products (food) at the lowest cost, despite the obvious cost to the communities' health.
  • That always works!
    I chuckled at Rick's solution, though I agree in general with his sentiment and understand his umbrage. Our knee jerk response to everything that outrages is "there oughta be a law"...alas, prohibition of anything never works, and warning labels don't work either...the human being is a complex animal, willing to make the unhealthy or dangerous choice every time (smoke, drink, ride a motor cycle without a helmet, not fasten a safety belt, tan to a golden brown in a tanning booth, eat fast food daily, purchase a reusable insulated 64 oz container from Speedway so that we can fill it twice a day with soda) rather than be told they cannot do so. Alas, on some level, we value free choice over our health, and sabotage ourselves to prove it. As for health care being the most affordable it has ever been, that is a laughable laboratory conclusion or at the very least a considerable oversimplification that Strum has drawn...he needs to get out of the lab more often...JK has written article after article on the, hospitals, insurance carriers, big pharma, employee health plans, the ACA, the indigent going to the emergency room for the highest cost care whenever they have a health problem, tec. ad infinitum...even if health care is cheaper, or less of a % of your income than it was in the past, that fact is lost on pretty much all of us...it is still prohibitive. As for Sarah's sentiment that we should look to blame someone (the government in this case) other than the "eaters" for our nation's obesity...unless you have a glandular problem, you won't get fat unless you eat more calories than you burn off. To suggest that people in lower income areas have less information on nutrition, and less concern about the consequences may be a fair statement, but to eliminate personal responsibility from the equation is a much larger leap than I am willing to make. To me, it speaks to lack of education, lack of hope, just the general malaise of being caught up in the poverty cycle, with no clear way out...better we educate, and provide opportunity, instead.
  • Just Look to Europe to Debunk Assertions/Conclusions
    Let me add one comment to Jim's. European nations' health costs are about one-half of the US' costs on a per capita basis. In addition, Europeans are generally healthier than US citizens. These simple facts seem to contradict the assumptions in the article. But...thanks JK for again bringing some good info to the table (no pun intended) for discussion.
    • To everyone
      I appreciate the feedback this post has generated. The whole thing was intended to be provocative and stir up discussion. Let me clarify a couple things: 1) Sturm did not make the assertion about health care being "cheap;" that was my argument alone. 2) In case you are wondering, I am not disavowing all my previous posts about health care costs being out of control. They are. And the $23,000 real cost of an insurance policy for a family of four is proof of that. My point here was not about the total cost of health care--which is sky high--but the out-of-pocket cost of health care to consumers. Historically, we pay a relatively small portion of the true cost of health care. Look at Page 14 of this slide deck: http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/H/PDF%20HealthCareCosts11.pdf. It shows that out of pocket spending on health care has fallen from about 50% in 1960 to about 10% today (when looking not just at employer-sponsored coverage, as I did, but also the participants in government sponsored health insurance too). Medicare actually predicts out of pocket spending will keep going down over the next decade. So from that perspective, as the actual amount of money we spend out of pocket has been falling, relative to our incomes, it's understandable that our consumption of health care has gone up. That's the point I was making. I think it's important to keep in mind these long-term structural issues when we try to think up policy responses to obesity and unsustainable health care spending. The economic structures may not be the sole cause of these problems, but ignoring their role in these trends is almost certainly a recipe for failure when it comes to fixing them.
      • Not quite
        The problem with your logic is a lack of understanding of the very specific vocabulary used in health economics. "Out of pocket costs" are not an individual's or family's actual costs incurred but only those that are paid at the point of service or sale. Total family burden of healthcare costs (called Household Sponsored costs in the NHEA) have risen steadily over the time you indicated. Also do not forget that the portion of health insurance premiums paid by the employer is widely considered a wage substitute.
        • WOW
          Really? Who here can actually say they think food is cheap? MAYBE, just maybe, only 10% of Americans' budget goes to food is because THAT'S ALL THEY CAN AFFORD. And, guess what? That processed junk that is so unhealthy is all that most of us can afford! Again, WOW.
        • Health Care is Cheap
          Health care is cheap?? I work for a company that helps patients find a way to pay for their medical bills even when they have insurance. Deductibles are so high that even the insured are having to file bankruptcy to pay these facilities. Medical bills are the number one reasons for filing bankruptcy in America. Most people don't just go to the hospital because there's nothing better to do. In fact, more people skip treatment altogether because of the cost of healthcare.
          • To Ryan
            Thank you for trying to make this distinction clear for readers. But it's not something I missed in my argument. Rather, I argued that because premiums for employer-sponsored insurance are paid prior to and separate from the actual purchasing of health care, that those premiums really do not play much of a role in the cost-benefit analysis that happens when health care consumers decide whether or not to purchase health care services. And to the extent premiums do play a role, they most likely encourage additional health care purchases, not less. Just because I have $6,000 withdrawn from my paycheck to pay premiums for health insurance, does not make me more price sensitive at the point of care. If anything, it makes me less price sensitive, which is to say, more likely to purchase health care services so I can get some value from the $6,000 I've already shelled out. In other words, what I'm saying is that when we use third-party payers to shield us from the true cost of care at the point of care, it makes health care appear cheaper to us than it really is, which gives us an incentive to buy more of it than we otherwise would. I'm not saying whether that's a good or bad outcome. But it does limit the economic impact of the consequences of poor health habits such as overeating--which is the point I was making in my post.
          • To Tina
            I was waiting for someone to make this argument--that no one goes to the hospital for no reason. That statement, on it's face, is obviously true. No one goes for surgery for the fun of it. But take a look at this USA Today article and slide show, which summarizes various academic studies by medical professionals showing thousands of surgeries each year are unnecessary: http://www.usatoday.com/story/news/nation/2013/06/18/unnecessary-surgery-usa-today-investigation/2435009. That doesn't mean there wasn't anything better to do than get surgery. But it does mean that health care problems could be dealt with in less intense, less expensive ways than they often are dealt with. I am arguing that these unnecessary health care procedures are at least partly caused by patients being shielded from the true cost of care. If spine surgery costs me no more than a course of physical therapy, I might just choose the spine surgery, even though the true cost of the surgery is many times higher than the physical therapy. There is now broad agreement within health care circles that 10-30 percent of the money spent on health care is unnecessary waste.
            • Cheap food
              A positive side effect of increasing the minimum wage and/or unionization of fast-food workers would likely be a reduction in the amount of fast "food" consumed. I eat too much of it, in part because it is so cheap. Any displaced workers could then work in grocery stores or restaurants selling better quality foods. And maybe if the food ingredient costs became an even smaller share of restaurants' overall costs, they might have less incentive to cut corners using cheaper and less nutritious ingredients.
            • Wheres your response to disparity of access to nutrition
              I appreciate that you have defended and clarified your intention behind the argument that healthcare is "too cheap" but what do you have to say about assumption that all food is accessible equally, it is all equally affordable, and that cheap food as nutritious as expensive foods?
              • Bingo
                JK - You (and R Sturm) nailed it! Another similar phenomenon in American society has been then substaintial decline in the relative cost of clothing. Look how much closet sizes/space has increased in homes over the last century! Furthermore, nearly everyone (rich and poor alike) have many more clothes than they could ever possibly need. The rich just have more excess than the poor.
              • To Sarah
                I thought your comment was a nice addition to my post and I try not to argue with everyone who takes a slightly different view than me, so I just let your comment stand as is. But if you want my response, here it is: I agree that it is far easier and cheaper for all of us to eat high-calorie, nutritionally light foods than ever before. I also agree it is harder and more costly for lower-income folks to obtain nutritionally dense foods than for middle-class folks. But I also agree with Sturm's point that even if we solved the access issues tomorrow, there's little reason to believe that Americans--whatever their class--would substitute healthy foods for unhealthy ones. Rather, they would likely add healthy foods on top of the unhealthy ones. Based on this graph from Sturm's study, it appears that Americans over the past 30 years have simply added a bunch of carbs on top of the fairly stable levels of protein and fat they were already consuming: http://onlinelibrary.wiley.com/store/10.3322/caac.21237/asset/image_n/caac21237-fig-0006.png?v=1&t=hw0s5lg0&s=67f0ffbb51bf1194ae2acedaac5adee77f6edf02. So there are economic, geographic and cultural issues that have all played into the obesity epidemic and will likely all need to play a role in reversing it. Sturm's study affirms what you're saying--that the problem is most acute for low-income Americans. But he also, in my view, pretty convincingly showed that the problems are afflicting people with the means and the knowledge to eat healthy foods. The trick will be getting them to actually do it.
              • Fast Food
                JK, your article definitely stimulated conversation and clearly there are differing opinions on the topic of obesity. I think Rick's statement makes the most sense: We need to disallow fast food and processed food to be sold in the USA, and like cigarettes it shold have warning labels. Someone else stated that making new laws is not the answer. I disagree. There needs to be a "fat tax" on high calorie foods with little nutritional value. Only when it starts hitting their pocketbooks will people stop eating this crap. Cigarette smoking in this country has gone down from about 40% of the population to 19%. Much of this can be attributed to the tax on cigarettes. Also to the scary advertisements on the effects of smoking. These same tactics needs to be used to fight obesity.
              • Subsidies
                We don't need to MAKE laws; we need to repeal them. Sugar, salt and fat in the American food system is highly subsidized. Just like people that make arguments about the relative prices of energy, take away the goodies and let's see what happens. I believe in the case of food, many will still make poor decisions. Maybe they just won't be able to make as many, or as frequently.
              • Endless studies
                Really, how many people would chose surgery (and the associated time off from work etc) over physical therapy (citing the above example), unless you were in severe pain that was limiting your ability to work. There seems to be an endless argument that insurance makes health care too cheap (and thus overused), vs. the lack of insurance, which forces people to avoid care and/or go to the ER for treatment when not necessary. Also, the whole idea of price shopping is time consuming and cumbersome. For example, if you go to the doctor with a potential bone fracture, are you really going to go home and call around to get prices on an MRI, then try to schedule an appt? Not realistic.
              • Lack of movement
                To say that a reduction in physical activity does not play a role in this is quite naive. Kids sit and play video game and stare at computer screens more than ever before and us adults sit an average of 11 hours each day. How can we possibly burn the calories off that we pile on all day? The rise in obesity rates is of course a combination of poor eating habits coupled with a reduction of physical activity.

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