Tobacco Documents Online

1 AMERICAN PSYCHOLOGICAL ASSOCIATION TESTIMONY OF ROBERT M. KAPLAN, PhD Chief, Division of Health Care Sciences Department of Family and Preventive Medicine University of California, San Diego on behalf of The American Psychological Association before the UNITED STATES HOUSE OF REPRESENTATIVES Committee on Ways and Means on the subject of Financing Provisions of the Administration's Health Security Act November 18, 1993 m Ca ~ W tlt 1+ The Honorable Dan Rostenkowski, Chair 1100 Longworth House Office Building 750 First Street, NE Washington, DC 20002-4242 (202) 336-5500 (202) 336-6123 TDD

I Mr. Chairman, members of the Committee, thank you for this opportunity to testify on behalf of the American Psychological Association (APA), a scientific and professional organization representing over 118,000 psychologists in the United States. I am Dr. Robert M. Kaplan, Professor and Chief of the Division of Health Care Services, Department of Family and Preventive Medicine, University of California, San Diego. In addition, I am co-principal investigator (along with Dr. John Pierce) of the California Tobacco Surveys, a series of large scale studies designed to assess tobacco use in California and to monitor the effects of California's 1989 $0.25 per pack tobacco tax increase. I am pleased to testify today on the subject of the financing provisions of the Administration's Health Security Act, in particular on the proposed increase in the tobacco excise tax. APA supports a $2 per pack cigarette tax increase, maintained in real terms and applied proportionately to other tobacco products. As a scientific organization, we believe that good public policy must be grounded in sound science. Psychological scientists have contributed substantially to the body of research that bears out the assertion that a tax increase would not only raise substantial revenue to finance health care reform, but would also reduce tobacco- related morbidity and mortality. The Tax Will Raise Revenue The use of tobacco products, and particularly cigarette smoking, is a widespread problem in America. In California alone, the $0.25 per pack tax raises nearly 600 million dollars per year. We estimate that the proposed $0.75 per pack tax will raise between $15 billion to $21

Robert M. Kaplan, Ph.D. November 18, 1993 Page - 2 billion per year to help finance health care reform, and that a $2.00 tax would raise significantly more. These figures are significantly higher than the $12 billion suggested by the Administration, but we believe they are still conservative. Although projected reductions in tobacco use will reduce these revenues, these loses will eventually be offset by savings in the cost of providing health services for adults with tobacco related chronic illnesses. Cigarette Use is Destructive Substantial evidence reported by the Surgeon General in 1989 suggests that cigarette smoking causes an excessive number of preventable deaths. Although cigarette smoking has declined in the United States and the United Kingdom within recent years, the worldwide trend is toward increased use of tobacco products. Richard Peto, through the World Health Organization, projects that, worldwide, there will be 10 million tobacco related deaths per year by the Year 2010. The importance of the cigarette smoking problem are summarized in recent data reported by J. Michael McGinnis (U.S. Department of Health and Human Services) and William H. Foege (Carter Presidential Center). Their calculations suggest that about 25,000 deaths in the US can be attributed to motor vehicle crashes, and about 20,000 deaths can be attributed to illicit drug use. In contrast, there are about 400,000 deaths associated with tobacco use--20 times the number associated with drug use and 16 times the number associated with auto crashes. The public is very concerned about dramatic causes of death such as being killed by an accident at work, or being killed by a drunk driver. However, for each person killed by a drunk driver, nearly 74 active smokers die prematurely (see Figure 1).

Robert M. Kaplan, Ph.D. November 18, 1993 Page - 3 Tobacco Excise Tax Will Result in Reduced Tobacco Consumption There are many different approaches to the reduction of cigarette smoking. One of the most effective ways to control cigarette use is to increase the price of these products. Economists use the term elasticity to refer to changes in demand that occur as a function of price. Although there has been some debate about whether or not the demand for tobacco products is "elastic," the emerging consensus is that a significant proportion of the variation in tobacco use is responsive to price. Figure 2 shows the relationship between price per pack of cigarettes and cigarettes consumed in 22 European countries. As the figure shows, there is a rough linear relationship between price and consumption. Countries charging more per pack tend to have lower rates of cigarette smoking, while countries charging less per pack tend to have higher rates. Norway, for example, with a $4.17 per pack charge which includes $2.71 in tax, has evolved the lowest smoking rate in Europe. However, these data are cross-sectional and do not address how the introduction of a tax affects consumption. This is being examined in our evaluation of the California tax. Figure 3 shows the smoking prevalence trends among Californians age 20 years and older before and after the introduction of the $0.25 tax. Data for this analysis come from the US National Health Interview Survey, the Current Population Survey, the Behavioral Risk Factor Survey, and our California Tobacco Survey. Combining these sources, we estimate that prior to the tax, the prevalence of smoking was declining at a rate of 0.70 percent per year. Since the introduction of the tax, the rate of decline has accelerated to 1.27 percent per year. Other evidence from the study indicates that price is a factor in these decisions. For example, the change in the rate of decline is significantly greater for socioeconomically disadvantaged groups.

, Robert M. Kaplan, Ph.D. November 18, 1993 Page - 4 Reduced Consumption Will Result in Health Status Improvement The motivation for health care reform is to save lives and improve the public health. It is assumed that the best way to accomplish this goal is to invest in medical care. However, a significant tobacco excise tax will enhance health status while raising revenue. In order to evaluate the impact of tobacco taxes, we developed a series of computer simulations. Employing a series of different assumptions to estimate the impact of increasing the tobacco tax, under the model presented here, we assumed an elasticity (a change in the percentage demand divided by the change in the percentage price) of -.26. The assumption used here suggests, for example, that if there is a 20% increase in price, there will be approximately a 5% decrease in demand. The -.26 value was taken from the estimates of price elasticity for smokers of all ages as reported in the US Surgeon General's report in 1989. These estimates are based on three studies by Lewit and colleagues. The elasticity estimate is among the most conservative reported in the literature. In one analysis that we conducted, using a method called a Monte Carlo simulation, we assumed that there are about 56 million smokers in the US and that one in four of these smokers will eventually die of a tobacco related disease, and a tax increase of 20% (considerably less than that proposed). Using a computer to generate data under various assumptions, this analysis considers the expected change in life expectancy for smokers and builds in a model of reduced quality of life for smokers beginning at age 50. The prevalence rate for reduced life expectancy and dysfunction are based on national estimates from the Health Interview Survey. According to the analysis, there is a 50% chance that we could save 6.4 million Quality-Adjusted Life Years in the US by increasing tobacco taxes by 20%. The model shows that there is a 90% chance of saving about three million "well years." m CD .~ CJ Vt N To put these figures into perspective, the total health `~ effect of arthritis is estimated to be the equivalent of about 5 million equivalents of Quality-

Robert M. Kaplan, Ph.D. November 18, 1993 Page - 5 Adjusted Life Years, while the impact of homicide is about 1.5 million years. In other words, the public health benefits of an increased tobacco tax may well exceed the benefit of eliminating our epidemic of homicide. We know of no other health services that can improve the public health to the extent estimated to be attributable to an increased tobacco tax. The tax would benefit society by reducing the burden of disease and disability and may directly benefit smokers by providing incentives to quit early. The losers in this scheme would be smokers who choose to continue their habit, and the tobacco industry. However, data from our California surveys indicate that the great majority of smokers want to quit and about 50% of smokers make an active attempt to quit each year. Overall, the analysis suggests that there is a public health advantage to raising tobacco taxes. Similar conclusions have been reached by other researchers. It is important to emphasize that this is among several simulations we have conducted. However, even under the most conservative assumptions, the model shows that increased tobacco taxes will improve health more than many accepted medical care programs. Options for Consideration The proposed tobacco excise tax of $0.75 will produce significant health benefits. 1 However, it can be argued that an even higher tax may be appropriate. Some unexpected findings have emerged in California in support of a significantly higher tax. Among adolescents there has actually been a slight increase in smoking behavior. We believe that this is attributable to an aggressive industry marketing plan that seeks to offset the impact of a tax-related price increase by offering single cigarettes for sale, cheap generic brands, and catchy cartoon advertisements. A larger price increase, not as easily offset by the industry, may be required to Z

Robert M. Kaplan, Ph.D. November 18,,1993 Page - 6 place these deadly products out of range for non-addicted youths. Our data from the California Tobacco Survey indicate that 40% of the citizens would approve of quadrupling the tax rate. APA believes that a $2.00 tax is appropriate. There are clearly precedents in Canada and in Europe for even higher tax rates. Although a tax will stimulate some reduction in smoking, we are concerned about the addicted smoker who desires to quit, but is unable. We also recognize the need to combat a tobacco marketing campaign that must recruit 3000 new smokers per day to replace those who quit or die. Our data from California suggest that these new recruits are almost exclusively children and youths. We also hope the Committee will consider setting aside a portion of the tax for programs that will help smokers quit. Currently, we know too little about the determinants of smoking and the variables associated with successful quitting. By setting aside a small amount of money, perhaps $.03 per pack, a fund could be created that would support important new research on smoking cessation, health promotion, and disease prevention. This fund (estimated value $700 million) could contribute to community antismoking campaigns. Summary Tobacco taxes are appealing because there are multiple beneficiaries. The government benefits because raising taxes, in turn, increases revenues and reduces consumption will lower health care costs. Cigarette smokers also benefit from increased tobacco_.taxes. About one-half of all cigarette smokers attempt to quit each year and increasing the tax may provide extraa incentives to reduce cigarette smoking and eventually improve health status. A small set aside ($.03 per pack) could create a fund to improve knowledge about smoking habits and to supplement programs for the addicted smoker. The California survey suggested that both non-

Robert M. Kaplan, Ph.D. November 18, 1993 Page - 7 smokers and smokers would support increases in tobacco tax. Finally, I would like to remind the Committee that psychological scientists study behavior, and our research domain encompasses the full spectrum of issues related to tobacco use. The work of psychologists includes studies of: how people decide whether or not to use tobacco products and the role of different factors entering into that decision (including cultural factors, minors' access to tobacco products, tobacco industry advertising, and cost); understanding modes of addiction and what changes it causes in the central nervous system; and identifying ways to prevent people from engaging in risk-taking behaviors such as tobacco use, as well as effective community interventions for bringing about widespread changes in behavior. Given these resources available within our membership, the APA Science Directorate and Public Policy Office stand as a resource and offer our assistance to you as you consider related issues over the coniing months. Thank you for this opportunity to testify; I would be happy to answer any questions.

ROBERT M. KAPLAN, PhD Dr. Kaplan holds the academic appointment of Professor and is Chief of the Division of Health Care Sciences, Department of Community and Family Medicine, University of California, San Diego. He is formerly the Associate Director of the UCSD Cancer Center Division of Epidemiology, Prevention, and Control. Dr. Kaplan has been a recipient of an NHLBI Lung Division Research Career Development Award and is Co-Principle Investigator of the California Tobacco Survey. He is the immediate past President and an elected Fellow of APA's Division of Health Psychology, Division 38. Dr. Kaplan is Associate Editor of the Annals of Behavioral Medicine and Consulting Editor of four other academic journals , including the Journal of Psychosocial Oncology. Selected additional honors include APA Division 38 Annual Award for Outstanding Scientific Contribution in 1987, Distinguished Research Lecturer, 1988, and HealthNet Distinguished Lecturer, University of California (system), 1991, and Most Distinguished Alumnus, University of California, Riverside, 1992. He is an elected member of the Board of Directors of the Society of Behavioral Medicine and the Academy of Behavioral Medicine Research. His public service contributions include various NHLBI grant review groups, and service on the local American Lung Association (ALA) Board of Directors. Dr. Kaplan is the author of 13 books and over 210 publications.

Activity Bee Sting Lightning Football Air Pollutants Passive Smoking Swimming Work Drunk Driving All Cancers Active Smoking Data from Surgeon General Report, 1989, p 160 ~ 113 95 0 1,917 ~,ooC 2000 2000 4000 6000 80 ( 6000 800 QzzsC&se Fatalities/Million 0 Figure 1