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$72.7 Billion: Smoking's Annual Health Care Cost

By Patricia McBroom, Public Affairs
posted September 16, 1998

The total cost of caring for people with health problems caused by cigarette smoking -- counting all sources of medical payments -- is about $72.7 billion per year, according to health economists at the University of California.

The figure is almost six times higher than the cost per year of smoking-related Medicaid payments alone, reported last spring by the same Berkeley and UCSF economists.

The new total estimate "translates the adverse health effects (of smoking) into dollar terms, the universal language of decision makers," said the analysis published today in Public Health Reports. All payments made in 1993 by Medicare, Medicaid, Veterans Administration medical programs, military medical programs, private health insurance companies and out-of-pocket payments were analyzed for that fraction of illness caused by cigarette smoking. By comparison, the March report counted only the cost of smoking-related Medicaid payments -- $12.9 billion that year.

"I am not surprised by these costs," said Leonard Miller, an economist and professor in the School of Social Welfare at Berkeley, who is first author on the report.

"You expect a figure of this magnitude for the impact of smoking on health care, when you consider that one in five deaths per year is due to cigarette use," said Miller.

Smoking accounted for 11.8 percent of all medical expenditures in the U.S. in 1993, according to the analysis.

The report was co-authored by Dorothy Rice, professor emeritus of health economics at the UCSF Institute for Health and Aging and former director of the National Center for Health Statistics. Other authors are Xiulan Zhang, a Berkeley graduate student, and Wendy Max, associate professor of health economics at UCSF.

"We can now see the tremendous burden of smoking on society," said Rice. "These are very high costs."

She pointed out that the 1993 bill for California alone amounted to $8.7 billion, the highest total in the nation, followed by New York, with $6.6 billion in smoking-related disease costs. Wyoming, at $80 million in 1993, had the lowest expenditure for illness caused by cigarette smoking.

Rice also said that if a proposed financial settlement between Congress and tobacco companies had been reached last spring, it would not have come close to compensating private and public insurance payers for the cost of smoking-related illnesses.

That settlement, now off the boards, would have cost tobacco companies $368.5 billion, paid out over 25 years, in exchange for a cap on future lawsuit liability against the tobacco industry. The tobacco industry pulled out of the negotiations when the proposed settlement rose above $500 billion over 25 years.

But according to the Miller-Rice report, the actual cost of medical care for smoking-related disease in the next 25 years will be an astronomical $1.8 trillion.

"The amount being considered was clearly well below the actual amount that will be spent for the health care of smokers whose health has been damaged by cigarettes," said Rice.

Estimates in the report of "smoking-attributable expenditures" (SAEs) are derived from 11 equations that link smoking history with health in two ways: (1) the likelihood of a prior treatment for a tobacco-related disease (lung cancer, chronic obstructive pulmonary disease, coronary heart disease, stroke and arteriosclerosis); and (2) self-reported poor health. Other calculations then analyzed the impact of self-reported poor health on direct medical expenditures.

Miller accounted for the impact of 11 such factors: age, gender, region of the country, education, income, body mass, seat belt use, smoking history, self-reported health status, previous treatment for tobacco-related diseases and type of medical expenditure.

"These are the best federal and collective state data. It's the best we can do at this point to estimate the impact of smoking on health costs in all 50 states," said Miller.


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