Cost of obesity, and evaluation of policy options to reduce its prevalence in New Zealand

Presenter: Guy Scott, Massey University

Abstract

Background: Obesity related illnesses result in premature death, increase health costs and reduce productivity. In New Zealand, obesity is defined as body mass index (BMI) equal to or greater than 32 for Māori and Pacific peoples and equal to or greater than 30 for all others. The prevalence of obesity in New Zealand is 20% (the rate doubled between 1977 and 2003).
Aims: The aims of the study were to; identify policies to reduce the incidence of obesity, discuss the economic theory underpinning such policies, evaluate the economic costs and benefits, and identify problems of implementation.
Methods: A systematic review of the international and New Zealand literature was conducted to identify the range of policy options.
New Zealand-specific prevalence rates, unit costs and prices were used to estimate the health costs of obesity and the costs and benefits of policy interventions. Policy initiatives were evaluated by comparing potential costs and benefits of the new policy against the current policy settings. Prices and unit costs are were in 2004 New Zealand dollars million.
Results: Cost estimates of obesity amounted to $1353mill, (health $451mill, productivity loss $902mill). Between 8% and 15% of all disability-adjusted life-years lost to illness and about 4% of the nation’s health expenditure can be attributed to obesity.
Policy options and instruments to reduce the prevalence of obesity were categorised as: (1) economic, (2) regulation and control, (3) information and education, and (4) environmental. Economic measures usually focused on changing price signals to encourage production, supply, and the consumption of healthy food, and to discourage unhealthy food. Regulation and other government interventions are concerned with controls on advertising, labelling, and food marketing and sales. Information and education involved the provision of information on healthy eating and physical activity. Environmental initiatives were designed to make physical exercise safer, more enjoyable and easier to access.
Conclusions: The change in consumption of different foods induced by changes to market prices through price controls, taxes and subsidies can be evaluated with confidence only if there are data on own price and cross elasticity of demand on different foods.
No one policy in isolation was considered to be effective. Recommendations included: (1) controls on advertising and marketing unhealthy food to children, (2) education and promotion of healthy food and exercise, (3) colour coding of food to indicate healthy/unhealthy food, (4) subsidising fruit and vegetables, and (5) taxing foods high in fat and canned and bottled soft drinks containing sugar.
New Zealand politicians and government officials are very reluctant to introduce policies that interfere with market prices or complicate the current flat rate value added tax system. In particular, policies that involved differential sales taxes applying to different goods and services would not be acceptable.