The Medical Care Costs of Youth Obesity: An Instrumental Variables Approach

This paper is the first to use the method of instrumental variables to estimate the causal impact of youth obesity on U.S. medical care costs. We examine data from the Medical Expenditure Panel Survey for 2001-2013 and instrument for child BMI using the BMI of the child’s biological mother. IV estimates indicate that obesity raises annual medical care costs by $1,354 (in 2013 dollars) or 159%, which is considerably higher than previous estimates of the association of youth obesity with medical costs; thus, the cost-effectiveness of anti-obesity interventions have likely been underestimated. The costs of youth obesity are borne almost entirely by third party-payers, which is consistent with substantial externalities of youth obesity, which in turn represents an economic rationale for government intervention.