What if Healthier People Cost Us More Money?

RAND study finds that longer, healthier lives are expensive.

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Here's a scary thought. What if Congress figures out a way to craft a health-reform package that works—more people are insured, the costs are acceptable and there is at least some effort to create incentives that reward doctors and hospitals not for performing procedures but for actually producing healthier patients? And what if we do, in fact, become healthier? And what if it turns out that the resulting gains in longevity produce not savings but higher healthcare expenses?

[See Summer Recess for Health Reforms is Welcome.] It could happen. In fact, the healthcare landscape is littered with many landmines of unintended consequences. No wonder health reform is so hard.

The National Bureau of Economic Research recently released a study by RAND Corporation researchers that looked at two of the major health swings of our lives—tremendous reductions in smoking and alarming increases in obesity. Common sense might argue that less smoking would reduce government spending and obesity would increase it. Wrong. Both trends cause higher government outlays, the researchers found. In fact, from a purely fiscal standpoint, they concluded, a truly cost-effective policy would be to help people to lose weight—by taking up smoking!

"Our analysis suggests that, while obesity growth and smoking reduction have offsetting effects on longevity and health, they both have deleterious effects on the public purse," the RAND study said. Obesity does lead to shorter life spans, and this reduces Social Security and other old-age entitlement benefits. However, obese people get really sick before they die, and these higher medical expenses exceed reduced government benefit outlays. Smoking cutbacks, on the other hand, extend lives and reduce sickness. But it turns out that smokers tend to get really sick in a short period right before they die, so the medical expenses of treating them aren't as high as you'd think. Reducing smoking, then, doesn't save so many healthcare dollars, but those extended life spans really jack up Social Security and entitlement spending.

In a bit of research that may seem like a cruel joke, RAND looked at what would happen if we rolled back the levels of smoking and obesity to their levels in 1978. It was like hitting the jackpot. In 2004, 16.9 percent of the population aged 50 and up smoked and 28.1 percent of this age group was obese (defined as having a body mass index of 30 percent or higher). In 1978, 37.5 percent of this group smoked, but only 13.9 percent was obese.

"The 'roll-backs' would lower annual Medicaid spending by 10 percent, and annual Medicare spending by 7 percent," they found. "While they also lower federal payroll and income tax collections, even in total, these are only about one-third the absolute size of the effect on Medicaid, and one-sixth the effect on Medicare. Overall, we project these two trends together have added approximately 4 percent to the U.S. national debt."

Obesity growth and smoking reductions, then, represent a "perfect storm" for public spending, the authors conclude. "They both add fuel to the growing public debt burden in the U.S. . . . Each newly obese individual will add $8,338 to Medicare over his lifetime (after age 50), while each fewer smoker adds $20,563."

See also:

  • Low CPI Creates Medicare Winners and Losers
  • Better Planning Needed for Health Expenses