The Impact of Smoking on Healthcare Costs

Introduction 

Smoking causes various health issues that are inclusive of pulmonary illnesses, cancers, and cardiovascular complications, among other health problems. However, according to Zhu et al. (2017, para 1), the prevalence of smoking has declined in the United States in previous decades. In spite of the decline, tobacco smoking is still one of the leading preventable causes of healthcare problems and deaths in the country. Nevertheless, large demographic differences that could be used to determine smoking habits might be growing, which is a provision that could be used to suggest that a significant subpopulation of smokers are not deriving the benefits attached to non-smoking. For instance, Zhu et al. (2017, para 2) suggest that low-income populations are consistently ceasing the habit in a progressive manner, which might not be the same trend enjoyed by the general population.

In the light of the trends identified above, this paper focuses on the impact of tobacco smoking and the manner in which the habit affects healthcare economics. The study looks into the major parties that are involved, the market forces involved, the way in which the demand and supply of the issue are presented, and the impact of the affordable care act has on the issue. Other elements covered are inclusive of the attached health disparities and the manner in which the issue has improved in the global market. Addressing these provisions would assist in coming up with suitable recommendations that could be used for making improvements, which should be based on economic principles. For this reason, it would be possible to indicate that the objective of the study relates to the need for comparing estimates of healthcare costs related to smoking, consequently considering the relevance of these costs in determining the attached net economic burden.

Literature Review 

An overview of the issue 

The issue of smoking and its relation to healthcare expenditure recognizes the important role of Medicaid programs in the reduction of the national costs attached to tobacco-related illnesses and deaths. In this light, several federal agencies have been focusing on improving the manner in which the Medicaid programs deal with the use of tobacco by the registered members. For this reason, the Public Health Service in the United States provides recommendations that are inclusive of the idea that all medical insurers, including Medicaid programs, should provide comprehensive coverage for the treatment of tobacco dependence. The treatment options are inclusive of medication as well as counseling. The treatment options are in line with the objectives of the Healthy People 2020, which provides for the use of Medicaid to cover smoking cessation (Zhu, 2017, para 4). The cover falls in line with the need to work on the recommendations that focus on ensuring that interventions needed to improve the health of the people and reduce the health care costs would include the integration of smoking cessation provision for care providers and purchasers.

Why smoking is a concern from a health care economics perspective 

According to Victor Ekpu and Abraham Brown (2015, p. 11) the direct costs as well as the externalities to the society, which emanate from tobacco smoking, outweigh the benefits that could be accrued. However, the identified costs and externalities only occur when socially desirable outcomes are considered. In this regard, smoking poses significant indirect costs to the non-smoking individuals, which are inclusive of the costs attached to second-hand smoking and the loss of productivity among employees, some of who are likely to be absent from their working stations due to smoking-related illnesses. It is possible to consider these costs as tangible costs since they can be measured either directly or otherwise. Since it is not possible to quantify costs such as deaths and the pain acquired through smoking-related illnesses, the attached costs can be identified as the intangible costs.

Even though the health risks that are associated with second-hand smoking have been documented in a significant number of studies, the hazards bring about significant economic costs. The health-related costs associated with tobacco use are distinctively high. For instance, Ekpu and Brown (2015, p. 6) provide that the healthcare expenditures caused by smoking, which both the public and private entities incur, amounts to close to US$170 billion in the United States. The authors further indicate that this cost represents approximately 1% of the nation’s GDP. It would be possible to use this information to indicate that smoking accounts for a considerable share of Medicaid expenditure, which means that the habit creates an economic burden to the nation.

The parties involved 

The major parties involved in the issue are inclusive of the smokers, the passive smokers, healthcare insurers, and the government. These parties are involved in different levels. For instance, the smoker is the primary party that affects all the other parties in various ways. In spite of the provision that the smoker harms his or her health by engaging in the action, second-hand smokers are also highly likely to be affected in the sense that their health can be affected by the action. In this case, the smokers are not only exposing themselves to health risks, but they are also putting the passive smokers in harm’s way. For example, Xin Xu and Ellen Bishop et al. (2015, p. 327) refer to statistics from the year 2000-2004 to indicate that smoking and the exposure to second-hand smoke could lead to the premature deaths of more than 400,000 individuals annually during the stated period in the US. This example indicates that both the smokers and the passive smokers constitute the major parties involved in the health-related issue.

The other major parties involved are inclusive of the government, which funds the Medicaid programs that can assist individuals in smoking cessation. The need for funding such programs is a derivative of the costs attached to taking care of the illnesses that the individuals might obtain from engaging in the act. The smoking-attributable healthcare costs are one of the components of the overall economic costs annually. In addition to medical insurers, the parties work towards the provision of comprehensive health benefits for both smokers and the passive smokers. Conversely, they implement programs that would assist in eliminating treatment barriers by providing the required resources.

Market forces that have an impact on the issue 

The foundation for determining the market forces that affect the issue of smoking involves the distinction between the tangible and the intangible costs. As identified earlier, the actual costs are inclusive of the hospital costs that might be incurred in case an individual's health is negatively affected by the habit. When these costs are reduced, it is possible to release resources to take care of other things within a particular economy. In this light, the market forces that can be accounted for in determining the impact of the issue related to the smoking externalities and internalities are inclusive of the market prices and the time costs (Marti, 2011, p.14). These forces determine the perceived occurrence and implication of smoking, which can be discounted by the individual smoker. In this case, the primary assumption is that a smoker has diminutive knowledge regarding the costs attached to smoking. Conversely, the smoker might not be privy to knowledge related to the personal probability of being affected by tobacco smoking. In this light, the market forces are characterized by the market prices, the implementation of access limitations, smoking bans, as well as the number of point-of-sale vendors.

The manner in which demand is illustrated in the issue 

The demand is illustrated in this issue based on the anticipated prices and consumption of the past as well as that of the future (Marti, 2011, p. 11). Marti (2011, p. 25-26) relies on empirical studies to reveal that the link between the increase in tobacco prices and the consumption of the same is negatively related. He refers to a study by Chaloupka and Warner to indicate that the price elasticity of tobacco consumption is at around -0.4. This provision confirms the idea that that the demand for tobacco products has a relatively low response to the prices of these products (Marti, 2011, p. 26). However, considering this responsiveness, it is possible to indicate marketing the tobacco products is likely to affect the demand.

The manner in which supply us illustrated in the issue 

The supply of tobacco products also affects the impact that smoking has on the health of individuals. One of the strategies that healthcare advocates might use to influence the supply of tobacco products involves the implementation of interventions that are likely to affect the supply-side of the products. Other provisions that affect the supply of the tobacco products include the banning of the sale of these products to young people, the implementation of tariffs on imports, the enforcement of non-trade restrictions, smuggling controls, and the implementation of programs that can be used to assist tobacco farmers (Callard, Thompson, & Collishaw, 2005, p. 279). These measures affect the supply of the commodity since they are part of the control strategies that can be used to limit the supply of the products, consequently ensuring that the externalities from the use of the products and the related healthcare costs are reduced.

The impact of the affordable care act on the issue 

The Affordable Care Act (ACA) has seen the expansion of Medicaid, which is an indication that the government is strongly interested in reducing the smoking rates among the Medicaid beneficiaries (Zhu, 2017, para 3). The interests of the government could be categorized as humanitarian as well as financial in nature, based on the need to improve the overall health of the residents and the need to reduce the costs that it might incur to take care of the health issues that the smokers and passive smokers might have. These interests are in line with the need for ACA to fulfill its objectives. For this reason, ACA recognizes the important role that implemented Medicaid programs have in the reduction of diseases and deaths from smoking. The objectives of the act do not only relate to smoking cessation, but also the cessation medications that are used to ensure a smoking reduction in the country.

How health disparities are demonstrated in the issue 

It would be essential for the traditional public health practices in the US to be reexamined and restructured to take care of the shifting demographics. In this case, the actions likely look into the health disparities existing in the nation, which is necessary for the recognition of the disproportionate toll of illnesses related to smoking in the ethnic as well as racial minorities. The disproportionate toll is exacerbated by the intertwined relationship between elements such as gender, the geographical location of individuals, and their socioeconomic disadvantages. An examination of these disparities is essential for developing appropriate interventions and resource allocation to ensure the realization of effective tobacco control. Conversely, the examination also assists in putting in place best practices that could be tailored to take care of the needs of the affected populations.

How the issue has been improved in global markets 

Other global markets, such as the Swiss market, the citizens of the nation voted for their constitution to be modified to ban tobacco advertising. However, this ban was rejected primarily because of influences from a significant number of interest groups as well as the lack of balance in the financial resources between the opponents as well as the proponents of the ban (Marti, 2011, p. 37). However, there is restrictive legislation that has put in place to limit tobacco advertising, which primarily affects billboard advertising. However, tobacco companies implement sophisticated strategies that have been used in circumventing legislation put in place to prevent the advertising of tobacco. The ban on billboard advertising is also implemented in the US, through the MSA Billboard advertising ban (Marti, 2011, p. 38). Such strategies could be considered as the suitable preventive measures that can be used to prevent the initiation of smoking among the young population.

Discussion 

From the literature review, it is possible to take note of the idea that there is no convincing evidence that could be used to determine the impact of tobacco control costs on smoking initiation. However, the review provides compelling evidence to indicate that there is a positive association between controlling the consumption of tobacco and the probability of smoking cessation. An outstanding factor that affects the economy, which relates to the consumption of tobacco products, is the idea that the related health illnesses not only affect the smoking population but the secondary-smokers as well. These illnesses are costly and affect the economy of the nation negatively. In this case, Ekpu and Brown (2015, p. 6) indicate that the costs associated with taking care of the individuals whose health is affected by smoking accrue to approximately 1% of the nation's GDP. The cost is can damages the economy of the nation annually, which is a provision that calls for the need to implement measures that could be used to encourage cessation.

Several measures could be used to ensure that the smoking population is reduced. In this light, cessation is not only beneficial for ensuring the improvement of the health status of both the smokers and the passive smokers, but it will also assist the government to save on the attached costs, which is a resource that could be used on other governmental programs. Notwithstanding the costs associated with smoking, there are beneficial economic benefits that could be derived. For instance, the activities that are derived from the production of the tobacco products, as well as the consumption of these products, could be factored in to indicate that smoking provides economic stimulus (Ekpu & Brown, 2015, p. 19). In this case, the government derives revenue from the taxes imposed on the products and the industries also reduce the unemployment rates in the economy due to the provision of jobs for the residents. Ekpu and Brown (2015, p. 9) further posit that smoking yields cost savings that are derivatives of the premature deaths of the smokers, which originates from pension payments.

The aforementioned provisions point toward the fact that the economic impact of smoking relates to the costs of the use of tobacco products as well as the costs attached to the reduction of smoking prevalence in the population. These costs move beyond the face value determined by tobacco purchases, which constitutes the costs that have significant economic as well as health implications for individuals, employers, and the taxpayer. In this regard, the individual smoker's health status is not only affected but the health of his or her family since they are considered as secondary smokers. On the other hand, taxpayers are also affected since the tax they pay is used to fund the Medicaid programs that take care of the effects of smoking. The productivity of organizations is also likely to be affected. In this case, an employee that has been hospitalized because of the effects of smoking will not be in a position to work, which is a provision that reduces the overall productivity of an organization.

Recommendation 

About the identified provisions regarding the economic implications of smoking, it would be vital to consider implementing policy-based interventions that could assist in the reduction of the costs related to smoking. One of the recommendations would be to increase the percentage of taxes on tobacco products. This suggestion mirrors Ekpu and Brown’s (2015, p. 10) argument, which suggests that the increase is likely to reduce the demand for the products. This is a price-based strategy that might be used to reduce tobacco consumption. The recommendation is also supported by the World Bank, which stated that a 10% increase in the price of cigarettes is likely to reduce the smoking rate by 7% (Ekpu & Brown, 2015, p. 10). However, this recommendation is likely to affect the middle-income, and low-income populations since the price elasticity of demand for these products is higher in this population category.

Even though there are restrictions in place that might be used to prevent smokers from affecting non-smokers. In this light, it would be vital to put in place smoking restrictions in public areas, including the different workplaces in the country. This recommendation recognizes the dangers associated with passive smoking. For this reason, the implementation of this recommendation would ensure that government protects the citizens from the externalities of smoking, which might also escalate the attached costs that might be incurred. According to Ekpu and Brown (2015, p. 10), the net present value of implementing such a strategy is likely to ensure that the government enjoys a reduction in the medical costs associated with taking care of the illnesses that the population might get by smoking directly or passively.

Conclusions 

To conclude, it is vital to take note of the idea that smoking there are both negative and positive economic costs attached to smoking. The positive costs include those associated with the economic benefits that the government derives from the taxes they collect from both the consumers and producers of tobacco products. The activities that are derived from the production of the tobacco and the consumption of these products could be factored in to indicate that smoking provides economic stimulus (Ekpu & Brown, 2015, p. 19). The government derives revenue from the taxes imposed on the products and the industries also reduce the unemployment rates in the economy due to the provision of jobs for the residents. Ekpu and Brown (2015, p. 9) further indicate that smoking yields cost savings that are derivatives of the premature deaths of the smokers, which originates from pension payments.

The healthcare costs associated with tobacco smoking could be categorized as the negative costs that the government incurs when taking care of tobacco-related illnesses. As noted earlier, the US government spends approximately $175 billion annually to take care of tobacco-related illnesses. This study has assisted in determining the economic impact of the healthcare costs, which should be reduced through the introduction of measures needed to ensure the decrease of the number of smokers. For this reason, policy-based recommendations are provided, which could assist in smoking cessation, consequently making it possible for the government to save on the costs that could be used for the treatment of individuals affected by smoking.

References

Callard, C., Thompson, D., & Collishaw, N. (2005). Transforming the tobacco market: why the supply of cigarettes should be transferred from for-profit corporations to non-profit enterprises with a public health mandate.  Tobacco Control ,  14 (4), 278-283. http://dx.doi.org/10.1136/tc.2005.011353

Ekpu, V., & Brown, A. (2015). The Economic Impact of Smoking and of Reducing Smoking Prevalence: Review of Evidence.  Tobacco Use Insights ,  8 , TUI.S15628. http://dx.doi.org/10.4137/tui.s15628

Marti, J. (2011).  Three essays on the economics of smoking (Ph.D.). The University of Neuchâtel.

Xu, X., Bishop, E., Kennedy, S., Simpson, S., & Pechacek, T. (2015). Annual Healthcare Spending Attributable to Cigarette Smoking.  American Journal of Preventive Medicine ,  48 (3), 326-333. http://dx.doi.org/10.1016/j.amepre.2014.10.012

Zhu, S., Anderson, C., Zhuang, Y., Gamst, A., & Kohatsu, N. (2017). Smoking prevalence in Medicaid has been declining at a negligible rate.  PLOS ONE ,  12 (5), e0178279. http://dx.doi.org/10.1371/journal.pone.0178279