Obesity is at epidemic levels

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1 Health care and lost productivity costs of overweight and obesity in New Zealand Abstract Objective: To estimate the costs of health care and lost productivity attributable to overweight and obesity in New Zealand (NZ) in Methods: A prevalence-based approach to costing was used in which costs were calculated for all cases of disease in the year Population attributable fractions (PAFs) were calculated based on the relative risks obtained from large cohort studies and the prevalence of overweight and obesity. For each disease, the PAF was multiplied by the total health care cost. The costs of lost productivity associated with premature mortality were estimated using both the Human Capital approach (HCA) and Friction Cost approach (FCA). Results: Health care costs attributable to overweight and obesity were estimated to be NZ$624m or 4.4% of New Zealand s total health care expenditure in The costs of lost productivity using the FCA were estimated to be NZ$98m and NZ$225m using the HCA. The combined costs of health care and lost productivity using the FCA were $722m and $849m using the HCA. Conclusion: The cost burden of overweight and obesity in NZ is considerable. Implications: Policies and interventions are urgently needed to reduce the prevalence of obesity thereby decreasing these substantial costs. Key words: obesity, health care costs, lost productivity costs Aust NZ J Public Health. 2012; 36:550-6 doi: /j x Anita Lal, Marj Moodie Deakin Health Economics, Population Health Strategic Research Centre, Deakin University, Victoria Toni Ashton National Institute for Health Innovation, School of Population Health, University of Auckland, New Zealand Mohammad Siahpush Department of Health Promotion, Social and Behavioral Health, College of Public Health, University of Nebraska Medical Center, United States Boyd Swinburn WHO Collaborating Centre for Obesity Prevention, Population Health Strategic Research Centre, Deakin University, Victoria Obesity is at epidemic levels worldwide. In New Zealand (NZ) in 2007, an estimated 35% of the population aged 15 and over (1.2 million people) were overweight and 25.4% (850,000 people) were obese. 1 The prevalence of overweight for Māori (31.7%) and Pacific (24.5%) populations was lower, however the prevalence of obesity was much higher for the Māori (43.2%) and Pacific (65.1%) populations. 1 These ethnic groups comprise approximately 14.6% and 6.9% of the NZ population respectively. 2 Ethnic differences in obesity may originate from genetic factors, different patterns of eating and physical activity or low socioeconomic status. Obesity has been well established as a key risk factor for major chronic illnesses such as cardiovascular diseases, 3-6 type 2 diabetes 7,8 and some cancers. 9 Because of the growing demand for limited health care resources, it is important to assess the cost burden of obesity in order to inform resource allocation. Cost of illness studies help to demonstrate the adverse effects of diseases in monetary terms. 10 This information, along with cost-effectiveness studies, can then be used by policy makers to prioritise areas in terms of the allocation of resources to prevention, treatment and research. Cost of obesity studies carried out in other western countries have estimated the health care costs to be between 2% and 7.6% of national health care expenditures. Australia had the highest proportion at 7.6%, 11,12 followed by the US (6.8%), 13 Canada (4.1%), 14 The Netherlands (4%), 15 the UK (2.3%), 16 Sweden and France (2%). 17,18 However, these proportions are for different years and jurisdictions, and are calculated using different methodologies, including the actual costs included. A previous study estimated the health care costs of obesity in NZ to be 2.5% of total health care expenditure or $135m in 1991 NZ dollars. 19 The NZ estimate requires revision using new and updated evidence. The prevalence of obesity has increased by over 10 percentage points since the last published estimate 1 and additional diseases have been identified as being attributable to obesity. 20 This previous study also included only the health care costs, which is just one aspect of Submitted: August 2011 Revision requested: November 2011 Accepted: February 2012 Correspondence to: Anita Lal, Deakin Health Economics, Poulation Health Strategic Research Centre, Deakin University, 221 Burwood Highway, Burwood VIC 3125; anita.lal@deakin.edu.au 550 AUSTRALIAN AND NEW ZEALAND JOURNAL OF PUBLIC HEALTH 2012 vol. 36 no. 5

2 Costs of obesity in New Zealand the financial cost of overweight and obesity. The purpose of this study is to estimate the health care and lost productivity cost burden that was attributable to overweight and obesity in NZ in There have been very few published studies that include productivity losses in the cost of obesity. Productivity losses are the costs associated with lost or impaired ability to work due to health status. 21 Time off work can be permanent or temporary and due to morbidity or premature death. There are two main techniques which have been used in economic evaluations to measure and value productivity gains and losses: the Human Capital Approach (HCA) and the Friction Cost Approach (FCA). The HCA estimates the value of potential lost production from death until retirement age, assuming full employment. 22 Alternatively, the FCA assumes that individuals on long-term sick leave can be replaced by someone currently unemployed after a friction period. 22 Given the debate surrounding which method is appropriate, both methods will be used. An Australian study estimated productivity losses using the HCA at 44% of the total financial costs of obesity. 23 Methods and Procedures Obesity and overweight co-morbidities The prevalence of overweight and obesity is usually assessed by body mass index (BMI), defined as the weight in kilograms divided by the square of the height in metres (kg/m 2 ). A BMI of kg/ m 2 is defined as overweight, and a BMI of over 30 kg/m 2 as obese. 24 Our analysis included diseases for which associations found between BMI and disease outcomes satisfy the widely accepted criteria for causal relationships 20 : type 2 diabetes, 7,8 stroke, 25 ischemic heart disease (IHD), 3-6 hypertension which leads to hypertensive heart disease, 26,27 osteoarthritis, 28 colorectal cancer, postmenopausal breast cancer, uterine cancer and kidney cancer. 9 Population attributable fractions (PAFs) were used to calculate the proportion of each disease attributable to overweight and obesity. They were derived using the formula: PAF= P 1 (RR 1 1)+ P 2 (RR 2-1) 1+ P 1 (RR 1 1)+ P 2 (RR 2-1) where P 1 is the prevalence of overweight, P 2 is the prevalence of obesity, RR 1 is the relative risk for the disease for an overweight person and RR 2 is the relative risk for the disease for an obese person. 29 The relative risks associated with overweight and obesity were obtained from meta-analyses and reviews detailed in Mathers et al. 7 and James et al. 20 and are presented in Table 1 along with the PAFs. Separate PAFs were calculated for Māori and Pacific populations using the age standardised prevalence figures outlined in Figure 1. Health care costs Cost of Illness Health care costs included both private and public sector costs and were estimated under the following categories: hospital costs (inpatient and outpatient), allied health professional costs, general practitioner visits, residential/aged care, pharmaceuticals and laboratory tests. A prevalence-based approach to costing was used, such that costs were calculated for all cases of disease in the year A combination of bottom-up and top-down approaches to the estimation of costs was used depending on the type and level of data available. The bottom-up approach uses patient level data to calculate costs whereas top-down uses aggregated data. All costs are expressed in NZ dollars for the 2006 reference year. Where costs were not available for the reference year (such as private hospital admissions where the most recent available data were for 2004), costs were inflated to 2006 prices based on the NZ health care price index. 30 In 2006, NZ$1.00 was equivalent to US$ Hospital inpatient costs A bottom-up approach was used for the costing of inpatient services, based on hospital admissions extracted from public and private hospital inpatient data obtained from the NZ Health Information Service (NZHIS). Patients with obesity-related diseases were identified based on the International Classification of Diseases codes ICD-10 set out in Supplementary Table For simplicity, and to avoid double counting, the costing was based on principal diagnosis only. Cost weights and cost weight multipliers were provided by the NZHIS to calculate the total costs for hospital inpatients for each discharge. 32 The cost weight for each stay takes account of length of stay as well as other issues related to the cost complexity of admissions. The cost-weight multiplier converts the cost-weight to a dollar amount. 32 In the absence of information for private hospital admissions, the same costing methodology was used. Hospital outpatients costs Disease-specific outpatient costs were available for diabetes. An average cost per person by age group was provided by the NZ Ministry of Health based on all people (about 190,000) diagnosed or treated for type 1 and 2 diabetes. 33 These costs were then multiplied by the number of incident cases of type 2 diabetes. 33 For all other diseases, the only data available were from the national Non-Admitted Patient Collection from the NZHIS which contains only the number of events, with no data on diagnosis or costs. Since clinical practice at the secondary care level in NZ is similar to Australia, 34 estimations based on the ratio of outpatient to inpatient costs from the Australian Institute of Health and Welfare (AIHW) were used. 34,35 The relevant proportion was then applied to total NZ costs to give the cost of allied health services for each disease. Pharmaceutical and laboratory test costs Pharmaceutical and laboratory test resource use and costs were provided by the NZ Ministry of Health (MOH). 36 Patients with cancers and chronic conditions using pharmaceuticals and laboratory tests were identified using cancer registry data and public hospital patient data. As well as diabetes patients identified from the primary care pharmaceutical collections, the MOH identified some diabetes patients from outpatient data records. General Practitioner costs A GP visit was costed at $50 based on a report by PHARMAC Pharmaceutical Management Agency. 37 The mean number of visits 2012 vol. 36 no. 6 AUSTRALIAN AND NEW ZEALAND JOURNAL OF PUBLIC HEALTH 551

3 Lal et al. Table 1: Relative risks and population attributable fractions (PAF) for overweight and obese and the Pacific and Māori population. Overweight Relative Risk Obesity Relative Risk PAF* (%) PAF* Pacific (%) PAF* Māori (%) Men Women Men Women Men Women Men Women Men Women diabetes type stroke <65 year old stroke 65 years old ischemic heart disease <65 year old 7 ischemic heart disease years old 7 osteoarthritis hypertension (including hypertensive heart disease) colorectal cancer breast cancer, * 9.1 * 16.1 * 12.5 postmenopausal 20 uterine cancer * 36.3 * 53.2 * 45.3 kidney cancer * PAF = P(rr 1)/[P(rr 1) + 1] where P is the prevalence of obesity and rr is the relative risk for the disease for an obese person. to a GP 1 by persons diagnosed with obesity-related diseases 1 was then multiplied by the cost of a GP visit to obtain a GP cost per person. 38 The number of prevalent cases for each disease (Stevens G. Burden of Disease Estimates Data Set. Unpublished data, World Health Organization, Geneva, 2004.) was then multiplied by the GP cost per person. For hypertension, the number of prevalent cases currently taking medication 39 was multiplied by the GP cost per person. Figure 1: Prevalence of obesity and overweight by ethnic group. Allied health professional costs This cost category includes services delivered outside of hospitals by allied health professionals such as physiotherapists, chiropractors, occupational therapists, audiologists, speech therapists, podiatrists, therapeutic and clinical massage therapists, clinical psychologists, dieticians and osteopaths. In the absence of NZ-specific numbers of allied health services utilised or their costs, estimations were based on the Australian ratio of out-of-hospital medical services costs to total health costs for each disease. 35,40 The relevant proportion was then applied to total NZ costs to give the cost of allied health services for each disease. Residential care costs In the absence of readily available data from NZ, the proportion of those disabled by disease in Australia was applied to the NZ population. 41 Specific rates for those diagnosed with the four cancers from NZ were applied to the total number of people disabled by cancer. 42 Specific rates for those diagnosed with osteoarthritis from NZ were applied to the total number of people disabled by arthritis. 43 The percentage of disabled people with a disease or illness in residential care was calculated by dividing the number of people disabled by disease in residential care, by the total number of disabled people in NZ with disease. The number of people in care Total population Maori Pacific Islander Ethnic group European/ Other Asian Asian was determined by multiplying the percentage of people disabled in residential care by the disabled population in NZ. The average number of bed days was calculated by dividing the total number of bed days in 2006 by the total number of clients. 44 The cost per day was taken as the average of the rest home and the hospital day rate. 44 The number of people in care was multiplied by the average number of bed days by the date rate to calculate total costs. Allocation of costs attributable to obesity and overweight For each disease, NZ specific data on the proportional breakdown of males and females having the disease was obtained from the World Health Organization. (Stevens G. Burden of Disease Estimates Data Set. Unpublished data, World Health Organization, 552 AUSTRALIAN AND NEW ZEALAND JOURNAL OF PUBLIC HEALTH 2012 vol. 36 no. 6

4 Costs of obesity in New Zealand Geneva, 2004.) The total cost category for each disease was then proportioned between males and females. The PAFs for males and females were multiplied by the sex-specific total cost for each disease. Based on the PAFs, weights were calculated for each ethnic group in the population and then a weighted distribution for each population group was determined. These were then multiplied by the obesity and overweight costs to determine the costs for each ethnic group. Sensitivity Analyses Two-way sensitivity analysis was undertaken to determine the influence of variations in the prevalence of obesity and overweight on the PAFs and health care costs. The prevalence of overweight and obesity was varied using the 95% confidence intervals 1 (Supplementary Table 1). Gamma distributions were employed to vary each category of health care costs using a ratio of the standard deviation to the mean of 0.2.The impact of uncertainty around input values on the main outcome measures was estimated by a Monte- Carlo simulation (1,000 iterations) using (Palisade Corporation) program as an add-on to Microsoft Excel. Productivity costs Human capital and friction cost approaches The HCA counts all future potential income lost from an individual who leaves the workforce due to death. FCA takes into account the period of time that it takes organisations to restore production levels and includes the time and cost of organising a replacement. A complete list of inputs, data sources and uncertainty distributions around the estimates is provided in Supplementary Table 3. Where NZ data were not available, Australian data were used. Permanent absences due to premature death Productivity losses associated with premature death were calculated using both the HCA and FCA. While both the HCA and FCA count deaths in the same way, different monetary values were assigned to a lost working life. Using the HCA, long-term absences were valued at the net present value of the current and future gross wages stream using age specific workforce participation rates and wage rates, until the deceased employees would have reached retirement age. All calculations employed age and sex specific data. Production effects were valued in real prices for the reference year 2006 after incorporating a wages growth factor of per year. 45 Using the FCA, long-term absences were valued as a fraction of the current year only, at current gross wage and workforce participation rates, adjusted by the wage multiplier, on the understanding that the employee would be replaced. A base friction period of three months was used, and varied to six months in the sensitivity analysis. 46 Training and recruitment costs No data were available on training and recruitment costs for New Zealand. We therefore applied the results of a recent Australian study which estimated such training and recruitment costs to be 97% of the costs of productivity losses under the FCA. 45 Training and recruitment costs were not applied in the HCA calculations as the method assumes full employment. 22 Short-term absenteeism Absenteeism refers to the cost of lost productivity when employees do not work because of illness. To calculate the productivity loss associated with overweight and obesity-related absenteeism in 2006, the average extra number of days taken off by overweight and obese workers in Australia (0.4) 47 was multiplied by the number of overweight and obese workers. This was calculated by multiplying the prevalence of overweight and obese males and females by the number of males and females in the workforce. 48 This was then multiplied by the average daily wage rate for males and females. 49 Results Health care costs attributable to overweight and obesity in NZ in 2006 were estimated to be NZ$623.9m. The estimated health care cost for overweight and obesity equates to 4.4% of New Zealand s total health care expenditure of $15.4b in Costs attributable to the Pacific and Māori populations were 10.5% and 18.5% of the total costs, respectively. The breakdown for each cost category is shown in Table 2, which details the total health care costs for all of the specified diseases and the obesity and overweight attributable component. The costs attributable to obesity and overweight were the largest for type 2 diabetes at $238.7m or 38%. Hypertension accounted for the second largest share of obesity and overweight related costs at $167m or 27%. Of the cancers, colorectal cancer had the highest level of expenditure for overweight and obesity at $7m or 1%. The diseases with the highest PAFs were also the diseases with the highest costs attributable to overweight and obesity. Diabetes type 2 had the highest PAFs for all populations, the highest PAF being for the male and female Pacific population at 62.1% and 62.0% respectively. Osteoarthritis had the second-largest PAFs and the third-highest costs attributable to osteoarthritis at $143.3m or 23%. Hypertension had the third-highest PAFs and the second-largest cost of $167m or 27%. The costs of permanent productivity losses from premature death calculated using the HCA and the FCA are presented in Table 3. These costs were more than eight times higher ($145m) under HCA than under the FCA ($18m). Adding these costs to the costs of short-term absenteeism ($80m) give a total cost of productivity losses of $225m under the HCA and $98m under the FCA. Adding the two categories of health care and productivity losses together gives a total cost attributable to overweight and obesity in NZ in 2006 of $849m under the HCA and $722m under the FCA. Sensitivity analyses Results of the sensitivity analyses are shown in Table 2. Simultaneously varying the prevalence of obesity and overweight in the PAFs and the health care cost categories revealed that the costs could be as low as $539.5m or as high as $698.5m. This represents 3.5% and 4.5% respectively of the total health expenditure in NZ. The total costs for the Pacific population ranged from $55.7m to $71.6m, and $99.2m to $128.5m for the Māori population. Sensitivity analyses of the productivity losses using HCA and FCA generated from Monte Carlo simulation are 2012 vol. 36 no. 6 AUSTRALIAN AND NEW ZEALAND JOURNAL OF PUBLIC HEALTH 553

5 Lal et al. Table 2: Estimated health care costs of obesity-related diseases (NZD 2006 million). Disease Hospital inpatients Outpatients GP a Cost category Allied Health Aged care Pharma Lab. test Total health expenditure Total obesity and overweight costs Pacific population obesity and overweight costs Māori population obesity and overweight costs Diabetes type Stroke Ischaemic heart disease Hypertensive heart disease Hypertension Osteoarthritis Colorectal cancer Breast cancer Endometrial cancer Kidney cancer Total % confidence intervals for uncertainty analyses in brackets a GP is general practitioner , ( ) ( ) ( ) displayed in Table 3. Productivity losses from premature death using HCA ranged from $136m to $155m, and $7m to $12m using the FCA. Discussion The only previous published study estimated that, in 1991, 2.5% of total health care costs in NZ were attributable to obesity. 19 This estimate is two percentage points lower than our estimate for health care costs. However, the results of the two studies are not directly comparable for a number of reasons. First, Swinburn et al. estimated costs attributable to obesity alone, whereas our study looked at costs attributable to both overweight and obesity. Second, the prevalence of obesity has increased over the intervening 15-year period. 1 Third, the relative risks (RR) used by Swinburn et al. were higher than those used in our study. 19 Our study used the RRs calculated by Mathers et al., 7 who halved the excess relative risks for diabetes type 2 to allow for confounding by factors such as physical inactivity. For stroke and IHD, the RRs in our study have been split into two categories: less than 65 years of age and 65 and over. Most strokes and cases of IHD occur in the older age category, where the PAF is virtually zero for overweight and relatively low for obesity. Furthermore, our methods and data sources used for costing differed from those used by Swinburn et al. 19 in each of the cost categories. When compared to Canada, where the only other recent cost of obesity study was carried out, NZ is very similar in terms of the percentage of total health care expenditure attributable to overweight and obesity. Table 3: Productivity losses and health care costs (NZD 2006 million). Cost type Mean (95% confidence interval) Health sector costs 624 ( ) Productivity losses HCA Premature deaths 145 ( ) Short-term absenteeism costs 80 Total productivity losses HCA 225 ( ) Productivity losses FCA Premature deaths 9 (7-12) Recruitment and Training costs 9 Short-term absenteeism costs 80 Total productivity losses FCA 98 (96-101) Total health and productivity costs HCA 849 ( ) Total health and productivity costs FCA 722 ( ) HCA: human capital approach, FCA: friction capital approach The higher prevalence of obesity for Māori and Pacific Island people is reflected in the proportion of costs attributable to the two populations; 29% of the costs of obesity and overweight are attributable to these populations, yet they comprise 21.5% of the NZ population. Pacific men and women have three times the prevalence of diagnosed diabetes than men and women in the total population. 1 A higher incidence and mortality from cancers has also been found 554 AUSTRALIAN AND NEW ZEALAND JOURNAL OF PUBLIC HEALTH 2012 vol. 36 no. 6

6 Costs of obesity in New Zealand amongst the Polynesian population. 51 Future research should focus on cost-effective interventions for the prevention of overweight and obesity for these groups. While the current study has benefited from some new data sources, it has been limited by the unavailability of outpatient and allied health professional costs, which appears to be due to services in NZ being decentralised to District Health Boards (DHBs). Outpatient cost data were only available for diabetes, so the remaining diseases were based on proportions from Australian estimates. However, in a study analysing the cost of arthritis in NZ, this method of approximation was thought to be more reliable than estimates obtained from DHBs because it is based on actual outpatient costs by disease category, and clinical practice at the tertiary care level is similar in NZ and Australia. 34 Approximations for allied health services were also based on proportions from Australian estimates. Nevertheless, Australia and NZ have close links between the medical professions in the two countries which would tend to lead to similar approaches to treatment. 52 Also, both countries spend the same proportion of Gross Domestic Product on their health systems. 53 The use of PAFs allows the estimation of costs across a large population and is recommended by the World Health Organization for cost of illness studies of obesity, 54 however there are some limitations to this method. The calculation of the PAF relies on the estimates of relative risks that were not based on the NZ population, but one could argue that the calculation of the relative risks was based on large populations and different studies. PAFs have also been criticised for the assumption that the co-morbidities are mutually exclusive and therefore are not comprehensive. 55 With regards to the estimates of the lost productivity costs, it could be argued that obesity and overweight is more prevalent among low SES groups and therefore using an average wage to calculate the productivity cost estimates is not a true reflection of the costs. Our analysis was based on the availability of average wage and participation rates data in NZ. Some Australian data were used where NZ data were not available, for example, short-term absenteeism rates from Australia were used, but New Zealand rates should not be dissimilar to these. Also the proportion of deaths and incident cases of disease from Australia were applied to the NZ population. Whilst NZ has special health care issues associated with the Māori and Pacific Island communities, Australia similarly has particular health needs with its Indigenous population. The overall prevalence of overweight and obesity is similar for the overall population of the two countries. The health care costs are likely to be an underestimate for a number of reasons. Additional resources are required to treat obese patients in hospitals when compared to non-obese patients. 56 For simplicity, only the primary diagnosis was used in the costing of the inpatient hospital services. The pharmaceutical costs provided are based on hospital patient data, and exclude the pharmaceutical costs of people who did not attend hospital. Some health conditions were excluded for various reasons such as back pain due to a lack of studies with reliable estimates of hazard due to any specific risk. 20 Costs incurred by patients and/or their families in attending or complying with medical treatment were not included. Given these factors contributing to an underestimate of the costs, the higher cost estimate is likely to be closer to the true cost of obesity and overweight. The sensitivity analysis allows the imprecision around the costs and the prevalence of obesity and overweight in the PAFs to be incorporated. There are general limitations to any cost of illness study. The methodology concentrates on costs and does not provide information about the cost effectiveness of particular interventions. 57 Related to this point is the possibility that a high-cost condition may divert decision makers attention away from areas where important health gains can be made at low cost. 58 Future research should therefore focus on the investigation of cost-effective interventions that can reduce the prevalence of obesity and overweight. This study estimated two components of the cost of overweight and obesity: the costs of health care and lost productivity. However, the total burden of overweight and obesity to society includes other financial costs such as carer costs, dead weight losses from taxation foregone and the costs of aids, equipment and modifications. Non-financial costs include the costs of disability, loss of wellbeing and reduced quality of life that result from obesity and its health impacts. An Australian study found that health care and productivity costs (using HCA) accounted for 70% of the total costs of obesity to society. 23 Conclusion This study is the most comprehensive analysis to date of the costs of obesity and overweight in New Zealand, covering a wide group of diseases and cost categories. Our study found that as a percentage of total health care expenditure, the health care costs of overweight and obesity in NZ are amongst the highest in the world. Diabetes accounted for almost half the costs and hypertension accounted for more than a quarter of the costs. Due to the higher prevalence of obesity, disproportionate costs are attributable to Māori and the Pacific populations. Aside from the economic costs, obesity and overweight are a substantial cause of morbidity and premature mortality. With public spending under intense scrutiny, it is important to ensure that funds available are going towards the highest priority health needs. Policies and interventions that reduce the prevalence of obesity and overweight could decrease these sizeable costs and may result in substantial savings. Acknowledgements This research was conducted as part of the Pacific Obesity Prevention in Communities (OPIC) project, which was funded by the Wellcome Trust (UK), the National Health and Medical Research Council (Australia) and the Health Research Council (New Zealand) through their innovative International Collaborative Research Grant Scheme vol. 36 no. 6 AUSTRALIAN AND NEW ZEALAND JOURNAL OF PUBLIC HEALTH 555

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