On Fat and Inflation

Did you notice that Sarah P. took a shot at Michelle Obama over the issue of obesity in America? Clearly another blunder by the functional leader of the Tea Party (AKA: Republican Party). I went out to find some conclusive information on this topic. Guess what? It’s not as conclusive as you might think.

For example, whose average health bills are higher? A person who is overweight or a person who is underweight? Surprise, surprise. Underweight people have higher health care bills than do the overweight set. Possibly the press should start doing belly shots of all those skinny folks (instead of the fatties they always have on).

I don’t want to cloud this issue too much. There is clear evidence that if one is either below or above an “optimal” weight level it is statistically probable that this person will have higher lifetime health care costs. More importantly, there is evidence that overweight children are increasingly having medical problems. So Michelle is right to focus her attention on those under 18.

But as a numbers guy I thought it would be interesting to look a bit closer at the issue of adults who are overweight and compare them to the rest of society. My conclusion was that the problems of rising health care costs had little to do with our collective waistlines. Overhead and old people are the real problem.

This chart from the CBO is 2007 data adjusted for 2009 costs. Therefore is reflective of current conditions:

The thin line on the left is the cost for under-weights, as I pointed out, they cost more on average then the over-weights. Notice that the average costs between “normal” and “overweight” is really not that big a deal. Finally, the graph clearly shows that obesity has a real cost attached to it.

The following chart puts some numbers to the graph. Again, the evidence connecting obesity to health problems is clear. Notice that the average estimate from the CBO on all categories comes to $4,550. An interesting number.

From another part of the government (Department of Health and Human Services) I find this information.

Per person personal health care spending for the 65 and older population was $14,797 in 2004, 5.6 times higher than spending per child ($2,650) and 3.3 times spending per working-age person ($4,511).

Using the above information let me spin some numbers.

-Over weight people cost an extra $18.5 billion versus those who have “normal” weight. A significant number.

-People who are 65 or older cost $420 billion per year more than those who are younger (overweight or not). Therefore the cost of our aging population is 22X’s the cost of our overweight population. This is a very significant number.

-The total DIRECT costs of health care for all ages comes to $1.3 trillion based on the CBO numbers. But according to both the CBO and DHHS total health care cost is equal to 16% ($2.3 trillion) of GDP. The difference of $945 billion is the dreaded Overhead. Administrative costs are equal to 51X’s the cost of over-weights. The latter is an extremely significant number

Please don’t read this piece to be a defense of poor eating habits or being overweight. That is not my intent. My point is that numbers can tell a lie. If you have an axe to grind you can make a set of numbers prove your thesis. You just have to spin them in the proper way.

The mainstream media (and the CBO) are selling a story that people who weigh too much are the problem. That is not the case at all. A look at the numbers show that this is a relatively small issue versus those who are elderly and it is an very small problem when it comes to overhead in the medical industry.

On the matter of spinning numbers to make a point consider our methods of defining inflation. The Federal Reserve is pursuing an insane policy of monetizing debt. What is their justification? INFLATION IS TOO LOW. But is inflation really so low? Based on the way the calculation is made the convenient conclusion is that our biggest problem is that inflation is too small a number. Hogwash.

The Barron, Alan Abelson had this to say on inflation in his weekly commentary.

The annual tab for homeowners' insurance is up some 108% since the turn of the century. During this period, yearly taxes on real estate have climbed 77%. A gallon of heating oil costs a whopping 150% more. The average electricity bill is 50% higher. And filling up your rig at the friendly neighborhood service station is more that twice as much per gallon. Monthly Medicare Part B premiums have climbed 143%. A humble potato goes for 67% more than it did 10 years ago, an equally humble egg 93% more, and the price of a loaf of plain old white bread is up a decidedly unappetizing 50%.

So why in the world during these years have all the pundits and Washington mucky mucks been feeding us that stuff about how there's no inflation? Good question. And so is this: With incomes lagging badly, how does the run-of-the-block household make ends meet? The answer, of course, is: with great difficulty.

I think the Barron is spot on with this. Inflation that real people are feeling has very little to do with the GDP deflator that Ben Bernanke uses to defend his reckless monetary policy. Ben is spinning the numbers and coming to an inaccurate conclusion. Not at all unlike the MSM and the CBO who blame overweight people for our rising health care costs. We are led to believe that fat and the absence of inflation are our problems. Nothing could be farther from the truth.