The Simultaneous Effects of Obesity, Insurance Choice, and Medical Visit Choice on Health Care Costs

• Activity Number: 237
• Type: Contributed
• Date/Time: Monday, August 4, 2014 : 2:00 PM to 3:50 PM
• Sponsor: Government Statistics Section
• Author(s): Ralph Bradley*+
• Companies: BLS
• Keywords: Selection Effects ; Ex Ante Moral Hazard ; Tobit Models

Abstract

While previous studies of obesity's effects on healthcare costs conclude that obesity increases costs, they do not control for the endogeneity of insurance and do not estimate a tobit model for the corner solution when individuals have no medical expenditure. This study recognizes that there are unobserved heterogeneous factors that guide choices on health insurance, body mass index (BMI) and visiting a provider. Therefore, neither health insurance nor BMI can be treated as exogenous when estimating a cost function. Since there are corner solutions, a tobit model is also necessary for consistent parameter estimates. We find that obesity raises medical costs by $430.33, and that a 10% reduction in the BMI of each obese person would only lower costs by $45.28. The obesity elasticity with respect to cost is only .0115%.