Keep smoking, die early, save money

One of the dirty little secrets of healthcare is that most preventive medicine does not save money. Sure, it saves lives, and it improves worker productivity, but it costs a lot more. That’s because those whose lives are saved live longer, thereby incurring increased Social Security benefits, and live to develop chronic diseases, thereby consuming increased Medicare resources. This unfortunate fact is revealed in an article on MSNBC:

Willard Manning, a professor of health economics and policy at the University of Chicago’s Harris School of Public Policy Studies, was lead author on a paper published two decades ago in the Journal of the American Medical Association that found that, taking into account tobacco taxes in effect at the time, smokers were not a financial burden to society.

“We were actually quite surprised by the finding because we were pretty sure that smokers were getting cross-subsidized by everybody else,” said Manning, who suspects the findings would be similar today. “But it was only when we put all the pieces together that we found it was pretty much a wash.”

Expert witnesses for tobacco companies in their endless stream of litigation have seized on this fact.

Vanderbilt University economist Kip Viscusi studied the net costs of smoking-related spending and savings and found that for every pack of cigarettes smoked, the country reaps a net cost savings of 32 cents.

“It looks unpleasant or ghoulish to look at the cost savings as well as the cost increases and it’s not a good thing that smoking kills people,” Viscusi said in an interview. “But if you’re going to follow this health-cost train all the way, you have to take into account all the effects, not just the ones you like in terms of getting your bill passed.”

This dirty little secret calls into question the proposed financing of universal healthcare plans. The conventional wisdom about healthcare costs is that preventive medicine saves money. During the recent presidential election campaign, candidates relied on the assumed savings from preventive medicine to either control healthcare costs or to provide the money to extend healthcare coverage.

Smoking is a case in point. Although the calculations of the Centers for Disease Control (CDC) estimates that smokers cost the country $96 billion a year in direct health care costs, and an additional $97 billion a year in lost productivity, another less publicized calculation calls any cost savings into question. However, since smokers die approximately 10 years earlier than nonsmokers, each smoker forgoes 10 additional years of savings to Medicare, Social Security, and pensions.

According to The economics of tobacco: myths and realities published in the journal Tobacco Control in 2000:

Most societies devote a significant proportion of their health care resources to treating people made ill by smoking … It is certainly reasonable that a country should want to reduce smoking produced disease so that it could devote these resources to other health and social welfare needs.

It is also true, however, that non-smokers live longer than smokers, and thus that the health care costs of non-smokers during the “extra” years of their lives (compared to smokers) balance, at least to some extent, the higher costs smokers experience during each of their (fewer) years of life…

…[T]o appeal to the high medical costs of smoking as a fundamental reason to reduce smoking seems at least a bit disingenuous.

The cost of caring for the elderly in this country has been rising dramatically. According to a recent estimate by the Congressional Budget Office (CBO):

… the federal government will spend roughly three and one-third times more on the elderly this year than it did three decades ago (in constant dollars, excluding the effects of inflation). Since 1971, per capita spending on older people (in 2000 dollars) has risen at an annual rate of 2.4 percent a year, although over the past decade that rate of growth was 1.5 percent.

This year, spending on the elderly will account for more than one-third of the federal budget, up from about 22 percent in 1971 and 29 percent in 1990. That draw on the federal Treasury is projected to climb to nearly 43 percent by 2010 (according to CBO’s April 2000 baseline budget projections)…

Should people quit smoking? Of course they should. The cost to them and their families is very high, in terms of lives lost and productivity reduced. The cost to society, however, is not particularly high, and the premature deaths of smokers may actually represent a cost saving. So those who continue to smoke despite the myriad health warnings at least have one consolation. They may die early, but they’ll save the US government money.

  • Elena Genuos

    Others say the illnesses are typically short. And the Scientific American article you reference appears to be talking only about short-term benefits.

    Anyway the article above is just saying that if you are going to use the bean counter argument to support attacking tobacco, don’t get upset when the numbers go against you.