Economics of obesity
Rising health costs burden taxpayers
By Kang Ye-won
As obesity has become a world’s epidemic, South Korea, which used to be one of the leanest countries, has raised red flags warning the nation is getting fatter thanks to cheap junk food and lack of exercise.
Today Koreans are 1.5 times more likely to be obese than 10 years ago, according to the Ministry of Health and Welfare. And one in every four men in their 30s and 40s are obese as well as for women in their 60s.
The World Heath Organization defines people overweight if their body mass index (BMI) is over 25, and it is a cut-off point for obesity in Korea.
As the rising obesity pushed up health-care costs, the burden has fallen on all taxpayers.
“The obesity rate jumped more than 30 percent from 10 years ago and health-care spending grew more than four-fold,” said Kang Jae-heon, a professor of medicine at Inje University Hospital.
“Obesity is not an individual’s problem anymore, it’s a social concern,” Kang said.
The National Health Insurance Corporation estimated the total cost of obesity at 1.8 trillion won, or $1.6 billion a year. Nearly 4 percent of national heath-care spending was invested in treating obesity-related illnesses such as diabetes, heart disease, bone disorders and cancer, and non-medical costs including loss of productivity from sickness and early death, according to Kang’s latest research in 2005.
The proportion of obese people took up 3.2 percent in Korea, relatively low compared to traditionally fat OECD nations including the U.S. with 34 percent, Mexico with 24 percent and the U.K. with 23 percent, according to the WHO’s data in January.
In an effort to discourage poor eating habits and raise revenue, many European nations have adopted fat tax, levying surcharge on junk food.
Last October, Denmark enacted a tax imposing about $3 fees on every kilogram of saturated fat included in food such as butter, oil and processed products. Around the same time, Hungary introduced the so-called, hamburger tax targeting fatty food with high sugar and salt as well as carbohydrate and caffeine. Unlike the name, the law would not tax hamburgers but only prepackaged foods.
For the last few years, the U.S., too, has proposed soda tax, charging extra for sugary drinks, but has confronted strong opposition mainly from the beverage industry claiming that such tax would unfairly hit low-income consumers and wouldn’t deter consumption.
Some suggested Korea to adopt the similar tax system but the proposal never moved forward.
“I personally doubt whether it will be effective in curbing obesity in Korea, which is not as serious as in other Western countries,” said Kim Hye-ryun, a research fellow at the Korea Institute for Health and Social Affairs.
A common socioeconomic analysis on obesity argues that low-income people are more likely to be obese due to a lack of access to healthy food and lifestyle, but Kim says it doesn’t necessarily apply to Korean society. Middle-class Korean men are the fastest growing group in terms of their waistlines due to after-work socials which involve heavy drinking and late-night eating. And although low-income women tend to be getting bigger than other class groups, the overall obesity rates for Korean women have not ballooned.
“Then there’s a question of what to tax, whether it be fatty food or soda,” Kim said.
On the other hand, Kang at the Inje University Hospital has been an advocate for bringing fat tax in Korea.
“I disagree with how some countries adopt fat tax to make up for their deficits, then the law ends up being a punishment tool,” Kang said. He said the revenues should be used to make healthy food affordable for the poor.
“Because the problem with obesity is rooted in the system, we can’t hold an individual accountable for fighting obesity but rather have to approach it from an institutional level.”
In consequence to the snowballing obesity rates worldwide, the weight-loss drug markets grew to $514 million in 2008 and are projected to reach $10.5 billion by 2018. The Swiss company Roche Holding’s Zenical is a leading diet pill and a California-based firm Vivus’s Qnexa is soon to be the next U.S. FDA-approved drug.
Korea, too, is one of nations with heightened demand in diet treatments. Its market size is up to 3 trillion won, according to Lee Seung-chul, a research fellow at Samsung Economic Research Institute.
“In effort to dieting, Koreans tended to focus on weight loss but it needs to be about healing and healthy lifestyle,” Lee said.
Economic ways to fight global epidemic
Denmark: “fat tax”
-enacted in October, 2011
-levies 16 kroner, or about $2.90 per kilogram of saturated fat in food such as butter and oil.
Hungary: “hamburger tax”
-enforced in September, 2011
-tax foodstuffs with high sugar, salt, carbohydrate content and caffeine
-taxed items include chips, snack, salted nuts, energy drinks and packaged products
France: “cola tax”
-implemented on Jan.1, 2012
-levies about 1 euro cent (about 1.4 U.S. cents) per soda container
-expected to generate around 120 million euros, or $156 million in revenue
U.S.: “soda tax”
-proposed in New York, Philadelphia and other states in 2009, still on pending
-New York recently made a new proposal to excise 1 cent tax per ounce for sweetened beverages
-The Congressional Budget Office estimated that a tax of 3 cents on every 12-ounce can of soda could raise $50 billion over 10 years
Japan: waistline measure requirement
-enacted in April, 2008
-requires people in ages of 40 and 74 to measure waistlines in annual checkups and those who exceed the limit are given dieting guidance if they do not shed extra pounds in three months.
Sources: The Ministry of Strategy and Finance, The New York Times, Reuters