The cost of a fatter America

As Americans continue to pack on pounds, advisers need to brace their clients — and themselves — for the looming societal costs associated with this seemingly individual problem. America’s weight problem is as much

a financial crisis as it is a medical one.

Nearly one-third of all adults are considered obese, which is generally defined as having a body mass index of 30 or higher. That’s up significantly from 13% a little more than two decades ago.

Since it’s well known that extra weight increases the risk of diabetes, heart disease, hypertension and many types of cancer, look for medical costs to skyrocket.

In fact, the direct health cost of obesity in the United States is estimated to be as high as $147 billion a year. In aggregate, the medical burden of obesity climbed to 9.1% of annual medical spending in 2006, from 6.5% in 1998, according to the most recent estimates from the Centers for Disease Control and Prevention and RTI International, a research organization with a special focus on health care.

Overall, obese Americans pay $1,429 more in medical care a year than people of normal weight. Each year, $1,723 more is spent on medical care for obese Medicare recipients and $1,021 more on medical care for people in the Medicaid program than on their normal-weight counterparts, according to the CDC and RTI International.

In light of the federal budget deficit and the budget shortfalls in many states, public- and private-sector spending on obesity-related illnesses and conditions is a major cause for concern. Indeed, as Medicare and Medicaid spending climbs, so too will the pressure to reduce government-funded health care benefits and/or raise taxes.

“The obesity epidemic is having an impact on the entire tax base,” Justin Trogdon, a research economist at RTI International, told the InvestmentNews editorial board last week.

Higher medical costs threaten retirement income security and erode clients’ retirement savings. For advisers, this means making sure that clients are prepared to meet rising costs.

Fidelity Investments estimates that a 65-year-old couple retiring this year will need $230,000 to pay for medical expenses throughout retirement, not including nursing-home care. While that represents an 8% decline from last year’s estimate, thanks to changes in the Medicare prescription drug program contained in the Affordable Care Act, projected medical expenses are up nearly 44% from Fidelity’s 2002 estimate of $160,000.

And rising costs — not just projections — are already here. Last week, Wellmark Blue Cross Blue Shield proposed a 9.35% rate increase for its more than 70,000 customers in Iowa. The increase, which would result in clients’ paying up to $45 more a month for health insurance, is due in part to Iowa’s 28% obesity rate, said David Brown, executive vice president and chief financial officer of Wellmark.

As business owners, many financial advisers and planners will likely shoulder a direct financial burden due to America’s expanding girth in the form of higher insurance premiums for their employees. At companies with fewer than 200 employees, the average premium is now $5,326 for a single person and $14,098 for a family of four — 6% higher than premiums in 2010, according to the Kaiser Family Foundation’s 2011 annual survey on employer health benefits.

Those costs inevitably will increase as the nation’s obesity epidemic worsens.

Given the immensity of the looming crisis, it’s not surprising that some states and the federal government are attempting to reverse the trend by launching anti-obesity policies. Those policies run the gamut from punitive taxes on sugar-laden soda to more affirmative tactics such as promoting healthier school lunches.

Whether or not advisers believe that the government has a role in helping Americans slim down, financial advisers can play a part. The next time you are sitting across from a client who is fretting about the size of his or her retirement account or harping about the federal budget deficit, you might want to suggest that staying healthy is one of the best ways to make a difference on both fronts.

Most clients of advisers are sufficiently affluent and educated to understand that “staying healthy” is the code phrase for cutting back on high-calorie foods and exercising more. Without hectoring, advisers can make the point that their clients’ physical and financial health — and, in a very real way, the nation’s — depends on getting into shape.