Environmental Health Section

Program on Health Equity and Sustainability

Sweetened Beverage Nexus Study

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The Public Burden of Liquid Candy: The Costs of Sugared Beverages to San Francisco

Introduction

Executive Summary

In the last 35 years, obesity has grown into a health problem of epidemic proportions. Nearly one third of all American adults are obese and another third are overweight. And at least 17% of children ages 2-19 years are now considered overweight or obese, with another 17% identifiably at risk of joining them. It has not always been this way. Just since the late 1970s, obesity in American adults has more than doubled, from 15% in 1976-1980 to 32% in 2001-2004. In the same time period, obesity rates have doubled among preschool children ages 2-5 years and adolescents aged 12-19 years, and more than tripled among children aged 6-11 years.

Calorically sweetened beverages, or "CSBs," have accelerated the obesity epidemic. CSBs are drinks containing sugar or any other caloric sweetener and include such beverages as non-diet soft drinks, fruit drinks, energy drinks and bottled coffee drinks. CSBs add substantial calories to the diet without providing significant (or often, any) levels of nutrients. When the added calories from CSBs are not offset by eating or drinking fewer calories elsewhere in the diet, CSBs lead to increased weight gain. An ever-heavier population creates a substantial cost to public entities like San Francisco. Economists estimate that the aggregate costs of obesity are as much as 7% of annual medical expenditures, adding an estimated $117 billion nationally to health care costs each year. In addition to direct medical care costs, obesity raises other costs associated with caring for the obese, such as workers' compensation benefits.

These steep medical costs drain public health resources just as much as private ones. San Francisco taxpayers must absorb the obesity-related medical expenses of the resident poor, who have no other source of support. Because CSBs impose a cost on its taxpayers, San Francisco may assess a regulatory fee to shift the public medical costs caused by CSBs back where they belong: onto the businesses that profit by selling them.

The purpose of this report is to explain the justification for a fee on CSBs and to calculate the proper amount of the fee. To do this, the study (1) describes how CSBs contribute to obesity; (2) quantifies the extent of the connection between CSBs and obesity; (3) calculates the dollar amount of obesity-related medical costs borne by the City and County of San Francisco (“City”); and (4) suggests how best to structure fees to take into account the differences between the types of CSB sellers in San Francisco. A more detailed explanation of these four steps follows.

CSBs Help Cause Obesity

The first section of this study draws on the epidemiological expertise of the City of San Francisco Department of Public Health (SFDPH). SFDPH experts reviewed in-depth the body of research on the relationship between CSB consumption and obesity with close attention to the merits of study methodologies and soundness of studies’ conclusions. The main conclusion of this section is that the biological mechanism, experimental evidence, and consistent effects among diverse study designs provide a compelling case for a causal effect of CSB consumption on weight gain, obesity and/or overweight. Overall, the stronger studies with better design features, analyses and interpretation consistently point to a causal effect of CSB consumption on obesity.

About 8.66% of Obesity is Attributable to CSB Consumption

Section 1 also describes the use of a statistical summary technique to calculate the magnitude of the role of CSBs in causing obesity in San Francisco. Based on the extensive review of the literature, we employed study aggregation techniques (referred to as “meta-analysis”) to aggregate the findings of the four most appropriate studies for this purpose. Through this calculation we found that 8.66% of the cases of obesity in San Francisco are due to consumption of CSBs (alternatively, that 8.66% of obesity would be prevented if the population stopped drinking CSBs).

About 6.8% of the City's Medical Expenditures are Attributable to Obesity

In Section 2, we develop estimates of the City’s expenditures that are attributable to obesity for the population whose medical expenditures fall to the City for payment. We used nationally representative medical expenditure data to estimate the percentage of annual medical payments that are attributable to obesity for those receiving health care services reimbursed by the City of San Francisco. We used a regression-based approach to estimate obesity-attributable payments, treating medical payments as a function of obesity status and several other individual-level characteristics likely to influence medical payments, including age, gender, race/ethnicity, education, income, marital status, insurance status, underweight and smoking status. We found that 6.8% of medical payments were attributable to obesity in this subset of the population.

The City is Justified in Imposing an Approximately $1.8 Million Fee

In Section 3, we calculate the City’s CSB-related direct medical care costs. We do this by multiplying the City’s total direct expenditures on medical care services by 6.8% (from Section 2), and then multiplying that number by 8.66%-- the proportion of obesity that is caused by CSBs (Section 1). The result is that $969,748 of the City’s annual general fund health care costs is attributable to CSB-attributable obesity costs. We add to this number the costs to the City of administering the regulatory fee ($285,356 per year) and maintaining an account to be used to fund programs aimed at reducing CSB consumption ($550,000 per year). Thus, we estimate that the costs to the City of San Francisco for caring for health problems related to obesity, including some of the costs of preventing a fraction of those cases in future years, is equal to $1,805,104 in FY2009-2010.

It is Fair to Divide the Fee According to the Type of CSB Seller

Section 3 describes the methods used to calculate regulatory fees by retail distribution channel. Using data from industry trade organizations and the U.S. Economic Census and industry, we develop “channel shares” for each type of retail organization selling CSBs in San Francisco. The recoverable amount ($1,805,104) is then allocated across those channel shares to derive aggregate fees by retail channel. These aggregate shares are then divided by establishment count data provided by the San Francisco Department of Public Health, resulting in proposals of per-establishment fees.

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