OBJECTIVES: To assess the impact of severity of obesity on medical comorbidities, perceived health status and medical costs in the US. METHODS: This study analyzed the 2004 Medical Expenditure Panel Survey (MEPS). Based on the Body Mass Index (BMI), weight groups were defined as Underweight (UW, BMI<18.5), Normal Weight (NW, BMI 18.5-24.9), Overweight (OW, BMI 25-29.9), Obese I (BMI 30-34.9), Obese II (BMI 35-39.9), and Obese III (BMI>=40). Multiple logistic regressions were modeled to estimate the impact of severity of obesity on medical comorbidities and perceived health status. Two part models (TPMs) were employed to estimate the cost functions controlling for socio-demographic characteristics and physical health conditions. All estimates are weighted to be nationally representative and the costs are adjusted for the Smearing effect. RESULTS: In the nationally representative sample (mean age 45.5 years; 51.4% female), 2.1% were UW, 37.0% NW, 35.1% OW, 16.4% obese I, 6.1% obese II and 3.4% obese III. Compared to NW, obese I, II and III were more likely to have diabetes (odds ratio (OR) = 3.5, 5.7, and 10.8, p<0.001), asthma (OR =1.4, 2.1, and 2.6, p<0.001), and joint pain (OR = 1.7, 2.2 and 2.9, p<0.001), and reported significantly poorer perceived health status (OR= 0.6, 0.4 and 0.3, p<0.001), respectively. The TPMs results showed that compared to NW patients, obese II and III were more likely to incur higher costs (OR = 1.3, and 1.4, p<0.05), and patients from obese I, II and II also had significantly higher costs compared to NW patients ($4643, $5000, $4811 vs $3999, p<0.001). CONCLUSION: Obesity is a major public health concern and has a large economic impact to the US population. The severity of obesity is significantly associated with increased medical comorbidities, decreased health status and high medical costs.