Food Subsidies As Preventive Care in the United States Jonathon Whitlock

Obesity-Related Medical Expenditures The United States is estimated to spend as much as $92.6 billion a year in obesity-related medical expenditures

Obesity-Related Medical Expenditures The United States is estimated to spend as much as $92.6 billion a year in obesity-related medical expenditures, half of which falls to taxpayers through the Medicaid and Medicare systems. ½ of $92.6 Billion = $46.3 Billion

Mega-Millions Jackpot

Mega-Millions Jackpot $92,600,000,000 / $300,000,000

Mega-Millions Jackpot $92,600,000,000 / $300,000,000 = .003 Or 3/1000ths of $92.6 Billion

Obesity Related Medical Conditions Obesity has been associated with health risks such as increased blood pressure, high blood cholesterol levels, heart disease, hypertension, stroke, gallbladder disease, sleep apnea, breathing problems, asthma, complications of pregnancy, menstrual irregularities, stress incontinence, depression, hirsutism (irregular growing of hair on women in parts where it normally does not occur), type 2 diabetes, and premature death (USDHHS 2001).

Obesity Obesity occurs when a person consumes more calories than they burn in a day, over a period of time. US authorities recommend 2,700 calories per day for men and 2,200 for women. -National Institutes of Health (NIH, USA)

Health Policy Questions Are we not, in some cases, such as the Medicaid/Medicare obesity-related medical expenditures, already subsidizing obesity? Are we in a position to decide as a society how we are going to spend that money? If there are preventive programs or policies that can target obesity related behaviors, how do these programs compare financially to the burden we already face in treating obesity?

Health Policy Questions If there are preventive programs or policies that can target obesity related behaviors, how do these programs compare financially to the burden we already face in treating obesity?

First Objection: Libertarianism No government intervention in the marketplace! Violates the rights of producers and consumers (Non-Consequentialist) Producers have the right to charge what they decide is worth their skill

First Objection: Libertarianism Who’s rights? Subsidies in favor of the consumer Farmer’s rights weighed against the rest of society

First Objection: Libertarianism Medicare & Medicaid $92.6 billion, paid for by individuals For the obese, approx. 37 million, roughly $2,602 a year as a “fat tax”

Market Failure & Externalities Occurs when there is an unintended cost for a good, product, or service Low income jobs, working at minimum wage, result in families needing government assistance for food, the cost of which goes to taxpayers

Market Failure & Externalities Low cost, high energy-dense foods Price of a calorie Convenience of easily made box/can food (Non-Perishables)

Market Failure & Externalities Private-group health insurance premiums are increased Productivity loss and other inconveniences that come with having an obesity related illness Cost of treating illness

Price Elasticity Change in consumption as compared to the percentage of increase/decrease in price 1% price increase results in a > 1% decrease in sales Low fat snacks reduced by 50% results in 127% increase in sales

Price Sensitivity Target population's change in consumption of targeted food when the price of that food changes If the price decreases, consumption increases

Price Sensitivity Children in poverty are 50% more price sensitive Those who are at risk for becoming overweight are 39% more price sensitive

Subsidize Healthy Food! $500 million to subsidize vegetables and fruits by ten percent for families on food stamps Lower economic status as vulnerable population for obesity related illnesses Lower economic status as more price sensitive

Utilizing Food Stamps for Subsidies Case One Targeting groups who are both price sensitive and are at risk for absorbing market failures Case Two Teaching healthy eating habits at a young age

…and everyone else? Making subsidies available to everyone else would cost approx. $3.5 billion Public expenditures would equal approx. $50 billion, up from $46.3 billion A 20% subsidy would cost $7 billion

Subsidies as Correcting for Market Failure If $7 billion worth of subsidies reduces obesity related medical expenditures by more than $7 billion, market failure is corrected for

Taxes as Revenue for Subsidies Taxing 12-ounce soft drinks by one cent would bring in $1.5 billion a year Taxing candy, chips, and other snack foods $314 million total. Together, these taxes would total close to $2 billion (approx. $1.8 billion) Taxing by 5 cents would total close to $9 billion

Second Objection: Disproportionate Burden for the Poor Lower socioeconomic status families spend a higher percentage of income on food An increase in price due to taxes disproportionately burdens the poor

Second Objection: Disproportionate Burden for the Poor However, the benefits would be greater for this population as well More price sensitive More at risk for obesity related illness

Deductive argument Increased consumption of healthy foods, and reduced consumption of non-healthy foods, would decrease the risk for obesity related illnesses. The decrease in pricing for healthy foods increases the consumption by target populations more at risk for obesity related illnesses.

Deductive argument Therefore, the decrease in pricing for low energy-dense foods would decrease the risk for obesity related illnesses.

References Alcohol and Tobacco Taxes http://www.ttb.gov/tax_audit/atftaxes.shtml Finkelstein, E.A., I.C. Fiebelkorn, and G.Wang. 2003. National Medical Spending Attributable to Overweight and Obesity: How Much, and Who’s Paying? Health Affairs W3-219–W3-226. French, S.A., R.W. Jeffery,M. Story, P. Hannan, and M.P. Snyder. 1997. A Pricing Strategy to Promote Low-Fat Snack Choices through Vending Machines. American Journal of Public Health 87(5):849–51. French, S.A., M. Story, R.W. Jeffery, P. Snyder, M. Eisenberg, A. Sidebottom, and D. Murray. 1997. Pricing Strategy to Promote Fruit and Vegetable Purchase in High School Cafeterias. Journal of the American Dietetic Association 97(9):1008–10.

References Lin, B.-H., and J.F. Guthrie. 2007. How Do Low-Income Households Respond to Food Prices? In Can Food Stamps Do More to Improve Food Choices? An Economic Perspective, Economic Information Bulletin Number 29-5.Washington, D.C.: U.S. Department of Agriculture, Economic Research Service. Sturm, R., and A. Datar. 2005. Body Mass Index in Elementary School Children, Metropolitan Area Food Prices and Food Outlet Density. Public Health 119(12):1059–68. U.S. Department of Health and Human Services (USDHHS). 2001. The Surgeon General’s Call to Prevent and Decrease Overweight and Obesity. Rockville, Md.: USDHHS, Public Health Service, Office of the Surgeon General.