Wednesday, August 12, 2009

Health Insurance Debate

There has been a lot of media attention on the continuing debate over the Obama Health Care proposals that are tortuously making its way through the U.S. legislative process. Well here is another thing to consider - a new study by the folks at Stanford University, the Rand Corporation and the University College of London entitled:

Does Health Insurance Make You Fat?

The conclusion reached was that "We find stronger evidence that being insured increases body mass index and obesity."

Abstract

"The prevalence of obesity has been rising dramatically in the U.S., leading to poor health and rising health care expenditures. The role of policy in addressing rising rates of obesity, however, is controversial. Policy recommendations for interventions intended to influence body weight decisions often assume the obesity creates negative externalities for the non-obese."

"We build on earlier work demonstrating that this argument depends on two important assumptions: 1) that the obese do not pay for their higher medical expenditures through differential payments for health care and health insurance, and 2) that body weight decisions are responsive to the incidence of medical care costs associated with obesity. In this paper, we test the latter proposition – that body weight is influenced by insurance coverage - using two approaches.'

"First, we use data from the Rand Health Insurance Experiment, in which people were randomly assigned to varying levels of health insurance, to examine the effect of generosity of insurance coverage on body weight along the intensive coverage margin. Second, we use instrumental variables methods to estimate the effect of type of insurance coverage (private, public and none) on body weight along the extensive margin."

"We explicitly address the discrete nature of the endogenous indicator of health insurance coverage by estimating a nonlinear instrumental variables model. We find weak evidence that more generous insurance coverage increases body mass index. We find stronger evidence that being insured increases body mass index and obesity."

Bhattacharya, Jayanta, Bundorf, M. Kate Kate, Pace, Noemi and Sood, Neeraj,Does Health Insurance Make You Fat?(July 2009). NBER Working Paper No. w15163. Available at SSRN: http://ssrn.com/abstract=1435601

4 comments:

Penny Trader said...

Wow never heard this argument before, but I guess it does make sense. I guess when your comfortable you get lazy and fall back on your cushion. It also could be though, that those who could afford insurance, have a higher disposable income for food. I think that argument may not hold up though when you look around in poorer areas.

Daniel M. Ryan said...

Moral hazard strikes again. To an economics major, it makes perfect sense: if the insurance company's gonna pick up the cost, why not fatten yourself up, especially if the social sanctions against obesity are vanishing?

If this study gets recognized by the insurance companies, they'll almost certainly become more 'wicked' and 'evil'.

Riva said...

This is interesting. My question is, are CATS covered under family health care plan?

Eric J. Fox said...

I would not have suspected that this post would generate so much interest.

"Moral hazard strikes again. To an economics major, it makes perfect sense: if the insurance company's gonna pick up the cost, why not fatten yourself up, especially if the social sanctions against obesity are vanishing?"

Daniel..I don't think the new health care proposals have unhealthy people paying more so it looks like moral hazard is not confined to the financial markets.