This document discusses obesity's contribution to rising healthcare costs in the US and proposes reallocating some of those costs through taxes on unhealthy foods. It finds that in 2007, 74.1% of Americans were overweight or obese, costing $168 billion annually in direct and indirect healthcare costs. The authors propose special taxes on carbonated drinks and potato chips, which could generate $15 billion annually. This revenue could fund health promotion programs to address market failures in the food industry and educate people on nutrition, portion control, and weight loss. Specific program examples from West Virginia, Virginia, and the National Cancer Institute are provided, showing potential cost savings from reduced obesity-related healthcare costs.

1. Obesity Health Care Costs and the Reallocation to the
Food Sector
Rachel Johnson Eliana Owens
Linda Givens Brian Wiggs

3. Obesity’s Contribution to Health Care Expenditures
Key Figures
 IN 2007, 74.1% of individuals 15 years or older were
categorized as overweight or obese
 The current annual cost associated with obesity is $168
billion or 16.5% of health care expenditures
• Including Direct and Indirect Costs
 If current obesity levels continue to increase the United
States is expected to reach $344 billion in healthcare
expenditures by 2018

4. How Can the Health Care Costs be
Reallocated to the Food Sector?
 Research indicates that
in order to compensate
for an unhealthy food
environment, foods high
in calories, fat, or sugar,
namely “snack foods,”
be subjected to special
taxes

5. Targeted Food Products for Taxation
CARBONATED SOFT DRINKS POTATO CHIPS
• Possible largest source of tax • Over the course of a year an
revenue estimated 91.3% of
• In 1999, US residents on households purchase potato
average consumed 49.7 chips
gallons • A national 1% tax on potato
• A national tax of 1 cent per chips can generate $27
once would raise $14.9 billion million
in one year

6. How Can Tax Revenue be Utilized?
• Examples of current states’ tax revenue utilization

7. Market Failures in the Food Industry
 Imperfect Information
 Time-Inconsistent Preferences
 Presence of Financial Externalities

8. Health Promotion Programs
 Through taxation of soft drinks and potato chips an
estimated $15 billion would be available to fund
health promotion programs to address the market
failures of the industry

9. Health Promotion Examples
 Clarksburg, WV Low Fat Milk Campaign
 Involved paid television & radio
 Cost was 22 cent per taxpayer
 After 7 weeks the market share of low-fat milk increased
from 18% to 41%

10. Health Promotion Program Examples
 Virginia Adult Expanded Food and Nutrition Program
 Examined dollar benefits of avoiding/delaying the health-
care costs/losses of productivity associated with ten
nutrition-related diseases/conditions
 evidence found that the dietary changes attributed to
education would persist indefinitely
 $15 billion that could be generated by taxing soft-drinks and
potato chips, would result in a $16.5 billion reduction in
health care costs associated with obesity

11. Health Promotion Program Examples
 National Cancer Institute’s 5-A-Day campaign
 encourage greater consumption of fruits and vegetables
 media component of this campaign totals $1 million
annually
 At a similar cost, the resources available through taxation
could fund 15,000 such programs

12. Rome Braves Health Promotion
Program Recommendation
• Similar to the 5-A-Day and Weight Watcher
campaigns educate people:
 Caloric needs for adults/children and men / women using
height ranges
 Tracking calorie consumption on a daily basis
 Portion size
 Low calorie foods
 Expectations for weight loss
• Utilize television, radio, newspaper media
• Partner with public schools and health insurance
companies

13. Recommendation continued..
• Offer financial incentives to States whose obesity
rates reach the established obesity reduction goals
over a 5 year period

14. THANK YOU