RJ Reynolds
the Health Care Costs of Smoking.
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p87/10-044
The New England Journal of Medicine
-Nonsmokers
- - -smokers
a
~
O
a I ; f 1 o i
0 4.000I / % '~ ~
E
. . -
soo
[f
n ~ . ~ o
.
V 3.000 : ~ .. e
4
0
a
; w
5
a
2.0001 ,1- / . 1 2
h°30 00 ,,0 °K°° I°:`° fis?`'
Age Group (years)
Figure 1. Estimated Annual per Capita Health Gare Costs for Dutch Men in 1988 and
for the Male Population in a Life Table, According to Age and Smoking Status.
Per capita health care costs for women in the same aga groups era very similar to
those for men. .
sunhal is 50 percent and 21 percent, respectively
(among women, 67 percent and 43 percent).
These differences in the numbers of elderly people
have a profound effect on the health care costs for
the population, as Figure 1 shows. In the younger
age groups, in which mortality even among smokers
is quite low, a population of smokers has higher
health care costs than a population of nonsmokers,
but in the groups of men 70 to 74 and over (and
those of women 75 to 79 and over), the lower per
capita cost of the nonsmokers is outweighed by the 11 19 percent of totat costs among men and 12
percent
the mixed, the smoking, and the nonsmoking pop-
ulations are presented according to disease category.
All the smoking-related diseases (with the nota-
ble exception of stroke among men) arc associated
ttith higher costs in a population of smokers and
Iower costs in a population of nonsmokers. This rc-
lation is particularly strong for the diseases with the
highest excess risk: lung cancer and COPD. Howev-
er, in the mixed population of smokers and non-
smokers, smoking-related diseases account for only
greater number of people remaining alive. I of total costs among t%nmen, and the costs of allthe
As Figure 1 shotts, the nonsmoking population as
a whole is more expensive than the smoking popu-
lation. The area bentren the curves in which the
smokers have higher health care costs than the non-
smokers is smaller than the area between the curves
in which the nonsmokers have higher health care
other diseases have precisely the opposite relation.
In a population of smokers, the costs associated with
all the other diseases are less than those in the mixed
population: 14 percent less for men and 18 percent
less for womcn. Among nonsmokers, the costs of all
the other diseases are I S percent higher for men and
costs than the smokers. This is shown in greater dc- I 7 percent higher for women.
I The risk of the diseases not related to snwking is
tail in Table 3, where the total hcalth care costs for I
1054 Octobcr 9, 1997

P97 /10.044
The New England Journal of Medicine
THE HEALTH CARE COSTS OF SMOKING
JAN J. BARENDREGT, MA., tuc BONNEUX, M.D., AND PAUI J. VAN DER MMS, PH.D.
ABSTRACT
Bachqround Although smoking cessation is de- '
sirable from a public health perspective, its conse- _
quences with respect to health care costs are still
debated. Smokers have more disease than nonsmok- ;
ers, but nonsmokers live longer and can incur more
health costs at advanced ages. We analyzed health i
care costs for smokers and nonsmokers and esti- ;
mated the economic consequences of smoking ces- :
sation.
Metbodr We used three life tables to.examine the
effect of smoking on health care costs - one for a i
mixed population of smokers and nonsmokers, one i
for a population of smokers, and one for a popula- ;
tion of nonsmokers. We also used a dynamic meth- ;
od to estimate the effects of smoking cessation on ;
health care costs over time.
Rcrulrr Health care costs for smokers at a given
age are as much as 40 percent higher than those for
nonsmokers, but in a population in which no one !
smoked the costs would be 7 percent higher among '
men and 4 percent higher among women than the '
costs in the current mixed population of smokers ;
and nonsmokers. If all smokers quit, health care j
costs would be lower at first, but after 15 years they
would become higher than at present. In the long !
term, complete smoking cessation would produce a I
net increase in health care costs, but it could still be !
seen as economically favorable under reasonable
assumptions of discount rate and evaluation period. ;
Conclusions If people stopped smoking, there :
would be a savings in health care costs, but only in ;
the short term. Eventually, smoking cessation would
lead to increased health care costs. IN Engl J Med
I
1997;337:1052-7.)
I
I
S MOKING is a major health hazard, and since
nonsmokers are healthier than smokers, it
seems only natural that not smoking would
sare monn spent on health care. Yet in eco-
nomic studies of health care it has been difficult to
determine ufio uses more dollars - smokers, who
tend to suffer more from a large variety of diseases,
or nonsmokers, who can accumulate more health
care costs because they live longer. The Surgeon
General reported in 1992 that "the estimated aver-
age lifetime medical costs for a smoker exceed those
for a nonsmoker by more than S6,000." On the
other hand, Lippiatt estimated that a 1 percent dc-
cline in cigarette sales increast:s costs for medical
care by S405 million among persons 25 to 79 years
old.= Manning et al. argued that although smokers
incur higher medical costs, these are balanced by to-
bacco taxes and by smokers' shorter life spans (and
hence their lower use of pensions and nursing
homes).+ Leu and Schaub shonved that even when
only health care expenditures arc considered, the
longer life expectancy of nonsmokers more than offi
sets their lower annual expenditures.c
We have analyzed comprehensively the health care
costs of smoking. in doing so %ve have distinguished
between the assessment ofdifPerences between smok-
ers and nonsmokers and the assessment of what
would happen after intervenaons that changed smok-
ing bchaioc Would a nonsmoking population have
lower health care costs than one in which some peo-
ple smoke? Are antismoking interventions economi-
cally attrac[ive? We sought to answer these questions
and to determine the consequences for health policy.
METHODS
Analysis of Smokers end Nonsmokers
We examined the effect of smoking in the general population
(a mixture of smokers and nonsmokers). We studied the insi-
dence, prevalence, and monality associated Nith fnC major cace
gories of disease - heart disease, stroke, lung eancer, a heteroge-
ncous group of other cancen, and chronic obswaisc pulmonary
disease (COPD). We used data on these diseases, in addition to
mortality from all othEr causet, in an extension of the standard
life table, the multistate life table, that includes multiple health
states, such as "alh+e, heolthr" and "alne, with hean disease.""
Differences in the frcquency of the smoking-related.diseases
between smokers and twnsmoken arc commonly expressed as
rate ratios. lning these rate ratios, the precalence of smoking in
the pofwlation, and the age- and sexspt.ific incidence of the
smoking-rclated diseases in the mixed population of smokers and
nonsmokers, at can estimate the incidence of the diseases sepa
rately among smokers and nonsmokers. -
Assuming that the «lathe sunfial of persom with these diseas-
cs is the same among both makers ard nommokers, nso addi
tional life tables can be calculated -one for smokers and one for
nonsmokers. The three life tables differ with regard to the inci-
dcnce of the smokingrclated diseases and therefore in their asso-
ciated prcraknce, disease-specific nwrtalin, and ocer9l mortality.
Because of the difference In mortality, more people remain alive
in the life table for nonsmokers than in the table for smokers, par
ticulary in the older age groups, and there are corresponding dif
fercnces in life expectancies. In constructing the life tables, e-c used epidemiologie data on
the incidence and pm'iknce of the diseases; -t' data on mortalin
from Statistics \ethedanJs,u data on smoking (Table 1).12 and
rate ratios from an rnxniexof the litenturc!s tVe tested the sen
From the tkpartment uf htNic Fkalth. Erasmus t'nkersitc, CQ Box
17dA, 1000 DR R,xterdam, the Nnherbnds, wfierc reprint rcquests xh,mtJ Iv aJJrc+seJ w alr aucnJrcgt.
1052 Octobcr9, 1997

p97/10-044
The New England Journal of Medicine
the health care costs associated with "all other dis-
ease" at the 65-to-69-year-old level for people over
the age of 65. The costs for the mixed population
and for the nonsmoking population became virtttal-
ly the same, and those for the smoking population
ivere still the smallest, albeit by a small margin.
Figure 2 shows what the economic consequences
would be if all smokers stopped smoking. After this
abrupt change, the total health care costs for men
(the "no discounting" cune) would initially be low-
er than they would have been (by up to 2.5 percent),
because the incidence of smoking-related diseases
among the former smokers would decline to the Iev-
el among nonsmokers. Prevalence rates start to de-
cline, costs decline, and the intervention shows a
benefit. With time, however, the benefit reverses it-
self to become a cost. The reason is that along with
incidence and prevalence, smoking-related mortality
declines and the population starts to age. Growing
numbers of people in the older age groups mean
higher costs fbr health care. By year 5, the benefit de-
rived from the presence of the new nonsmokers
starts to shrink, and by year 15 these former smokers
are producing excess costs. Eventually a new steady
state is reached in which costs are about 7 percent
higher - the difference between the mixed and the
.nonsmoking populations.
Figure 2 shows the consequences of discounting
the projected costs and bencfits by various percent-
ages. It is apparent that discounting, even at a rate as
!mt as 3 percent, has a huge impact, and this impact
becomes greater as the costs become more distant
in time.
Having all smokers quit becomes economically at-
tractive when the future benefits arc larger than the
future costs or, in terms of Figure 2, when the area
below the x axis is bigger than the area above it.
From the figure it is clear that this depends heavily
on the duration of follow-up considered and on the
discount rate. With a shorter evaluation period and
higher discount rates, stopping smoking looks eco-
nomically more attractite.1V;th a longer evaluation
period and lower discount rates, quitting smoking
loses its economic advantages. The break-eten year,
when the initial benefit is exactly balanced by the
eventual cost, occurs after 26 years of follow-up when
there is no discounting, after 31 years with 3 percent
discounting, and after 37 years with 5 percent dis-
counting. At 10 percent discounting, the break-even
year occurs after more than 50 years and may not oc-
cur at all.
DISCUSSION
This study shows that although per capita health
care costs for smokers are higher than those of non-
smokcrs, a nonsmoking population would have high-
er health care costs than the current mixed popula-
tion of smokers and nonsmokers. Yet given a short
enough period of follow-up and a high enough dis-
count rate, it would be economically attractive to
eliminate smoking.
Some earlier studies have had differing results,
partly because many have focused on costs attribut-
able to smoking. From rate ratios and the prevalence
~ of smoking in a population, the proportion of the
total number of cases of a disease that can be attrib-
uted uted to smoking - the population attributable risk
f - can be calculated19 Given the costs according to
I disease, one can calculate the' costs attributable to
I smoking.r" For instance, in the life-table population
~ of mixed smokers and nonsmokers about 8 percent
I of total health eaoe costs among men and almost
3 percent of total costs among wromen can be attrib-
uted uted to smoking. Attributable costs, hoast(er, can be
interpreted as potential savings only when the dis-
eases do not affect mortality. In the case of most
smoking-related diseases, reductions in smoking re-
duce mortality, creating new possibilities for mor-
bidity from other diseases in the years of life gained.
Other studies of this subject estimate lifetime
I health care costs, taking the differences in life expect-
ancy ancy into account, and find that smokers have high-
er medical costs.3,2ta: In our study, lifetime costs
for smokers can be calculated as $72,700 among
men and $94,700 among xomen, and lifetime costs
among nonsmokers can be calculated as $83,400
and 5111,000, respectively. This amounts to lifetime
costs for nonsmokers that arc higher by 15 percent
among men and 18 percent among ammcn.
The studies cited above apply discounting to the
lifetime cost estimate. Because costs incurred at old-
er ages are discounted more, this approach reduces
lifetime costs for nonsmokers more than those for.
smokers. For example, when one applies discount-
ing to our Gfe tables for smokers and nonsmokers,
smokers have higher health cane costs when the dis-
count rate is at least 4.5 percent in men or at least
5.5 percent in eromen. We disagree with this ap-
pnoach, however. Discounting should be used for
purposes of evaluation and should'not be applied in
a descriptive context, such as the estimation of life-
time costs.
Our analysis is not very sensitive to substantially
different values in the rate ratio. Neither is it very
sensitive to the age-related increase in the cost of "all
other diseases"; that is, an increase that is less steep
in the United States than in the Netherlands will not
lead to different conclusions. Including additional
smoking-related diseases could change 'the results
only if those diseases generate morbidity and costs
without raising the excess risk of mortality. There
may be some of these eonditions, such as cataracts,
but they are unlikely to change outcomc. For exam-
ple, in our data all eyre diseases, most of which arc
not related to smoking, account for about I percent
of total health care costs.
1056 - Uttnhcr 9, 1997

p97/10-044
THE HEALTH CARE COSTS OF SMOKING
sitl.9n of the analysis M recalculating the life tables with excess
risks (the rate utio-1) that werc 50 percent higher and 50 per-
cent kmer (Tabk 2).
The medical costs we used werc based on a study that allocated
the total costs for health carc in the \ethcdands in 1988 (39.8
billion guilders, or $19.9 billion, at the present exchange rate) to
categories of age, sex, and diseasc.1 We used the Dutch popula-
tion in 1988 and the pm'alcnce rates of the smokingrclatad d'o-
cascs from the life table for mixed smokers and nonsmokers to
estimate the costs per case of disease according to age and sex.
The remaining costs werc assigned to'per capita costs for all oth-
er diseases" (in categories according to age and sexl by dividing
the costs by the number of people in the eategory in question.
Using the per capita costs for each disease and the `all other d-n-
ease" costs, we calculated the health care costs for the populations
included in the three life taWes.
TaSEE 1. t'ttE\:UE\CE OF SMOxIS4'.'
. AaE m) SwoeEa
lIUE rxftLLE
percant
0-la 0 0
15-19 20 20
20-34
35-19 . 39
42 37
36.
-e0-64 39 27
a63 34 13
i
Assessment of the Effect of Complete Smoking Cessation
`
The estimated health care cost derimed from the life table of ;
(
nonsmokers can be seen as an estimate of the cost of health care
if no one ever smoked. It does not ptoside an estimate of the °
health care cost if all smokers stopped smoking. In the latter ease, ;
the size of the elderly population would initially be the same as ~
in the mixed population of smokers and nonsmokers. For it to be- :
come similar in size to the elderly population among nonsmokers, ~
in which more elderly people arc alhe, would take several lYars, '
even if mortality declined rapidly '
To describe the epidemiologic changes asHt the changes in the :
population over time, a dtramic model is needed. For this purpose, .
we needed a series of 4nked life tables, one for each point in tiose, with the population at a given
age (a) and time (t) depending on :
the population at age a-I and time t-I, and on the incidence of '
disease and the associated mortality between r-I and t. We used ',
the Prevent Plus computer prognm, witich is designed to evaluate
~
interventions concerning risk faaors dytlamially:us ~
This dynamic analysis produces a projection of future health !
care costs. To asuss the economic attracthxness of an intencn- j
tion that would make smokers quit, these costs arc compared i
with those expected when no intervention is made. One ditliculty :
in such an evaluation is the fact that most people prefer to rcceixn
benefits as soon as possible and to postpone payments. E.roms- 'mists call this phenomenon "time
prcfercnce,"'a' and it is taken into account by discounting the future benefits and costs - that .
is, those further away in time arc given lower weights in the oser-
ail evaluation.
. .
The degree of time preference is expressed in the discount rate. Typical values range from 0 to 10
percrnt, with 0 pcrxnt mean-
ing that thero is no discounting and no time prdercnce and 10
percent mcaning that there is a strong time prckrenee. Since
there is no genenlly agrecd-upon discount rate, we used various
rates (0, 3, 5 and l0 percent) in cvaluating the intervention.
A second difficulty in evaluating future costs and berKlits is de- ~
'
ciding how far into the future the anahsis should go. Therc is no
generally agreed-upon duration of follow--up in this type of analysis.
For each projection of discounted costs and benefits, we thercfure
report the duration of follow-up at which the bcncfits and costs ex-
pected in the future exazly balance each other. (the break-nrn ~
year) - the point at which cartying out the intcnention is neither
more nor less economically attractive than not doing so.
RESULTS
Figure I shows the annual per capita health care
costs for male smokers and nonsmokers 40 to 89
years old, in 5-year age groups (the costs for women
in the same age groups arc very similar). Per capita
costs rise sharply Nvith age, increasing almost 10
times from persons 40 to 44 years of age to those
85 to 89 years of age. In each age group, smokers
'Data arc atvragea for 1988-1993 in the 4ther-
IandsP
Tatxt 2. R+TE Rarios a..D SE.srrnTn
RI.GFS ASSOCUTED wiTH Fn'E CATt00Mt5
I OF DISEASE.
eattccar R.R R.ne
ISrsmsmts RanuEN
Heart . 342-a)
Lungeancer 10l3.3-1J.ss
Struk . 2 t I S-2S)
Other eanasst 211.3-2.31
COPDj 23113-37)
'Rate rn&w'elcr u, the nte uf the disease in
ulsuken a.vmparcJ with nansmuken. The bw<r
and upper bmnds nf the sensitdny nnge wesc eal-
avbsed a 1+0.31RK-11 and I+I.3/RR-1). n:-
. sr[RIYelY, wtlQt RK ,ICINKR the nle ratio.
tThis categuwy includes ne,plas/m etspt Fw
aonu.h. ulkxYaal, lung. bnau. rnxitalr, and skin
canccnand knign tunxes,
zcorn deM,cr chnmic ubarucais< pulmun.sry
disease.
incur higher costs than nonsmokers. 71te difference
varies with the age group, but among 65-to-74-ycar-
olds the costs for smokers are as much as 40 percent
higher among men and as much as 25 percent high-
cr among women.
Hmt'L%'er, the annual cost per capita ignores the dif-
fercnces in longetity between smokers and nonsmok-
ers. These difl'ercnces are substantial: for smokers; the
life expectancies at birth are 69.7 )rars in men and
75.6 tears in women; for nonsmokers, the life expect-
ancies are 77.0 and 81.6 vtars (these life-table esti
mates agree %'rn' w'rll %tith the empirica) 'findings of
Doll et al!"). This means that many more nonsmok-
ers than smokers live to old age. At age 70, 78 percent
of male nonsmokers are still alit'e, as compared with
only 57 percent of smokers (among women, the fig-
ures are 86 percent and 75 percent); at age 80, men's
Volume 337 Number 15 - 1053

THE HEALTH CARE COSTS OF SMOKINO . -
considered equal for smokers and nonsmokers, but ~
the nonsmoking population lives longer and there-
fore incurs more costs due to those diseases, partic-
ularly in old age, when the costs arc highest. On bal-
ance, the total costs for male and female nonsmokers
are 7 percent and 4 percent higher, respectively, than
for a mixed population, whereas for smokers the to-
tal costs are 7 percent and 11 percent lower.
Table 3 also shows that changing the assumptions
about the excess risk associated with smoking-relat-
ed diseases by as much as 50 percent in either direc-
tion does not change the conclusion, except in the
case of stroke. The age-related increase in incidence
is steepest for stroke, and there is also an age-related
increase for stroke in the cost per case; therefore the
health care costs associated with stroke are the most
sensitive to changes in Hfe expectancy.
Because of the costs of other diseases, the popu-
lation of nonsmokers has higher health earc costs,
partly because these costs increase with age. -Ib test
the sensitivity of the analysis to this age-related itt-
creasc, we recalculated the three life tables, keeping
- No discounting
-3%digeountrgte '
--SR ditequnt nta
--- t0%diuount rate
Break-even year
with 5% direounlir
Years since Smoking Cessation
Figure 2. Pertrent Changes in Total Health Care t:osta for the
Male Population after Smoking Cessation, as Determined In a
Dynamic Analysit, According to the Number o( Years since
Cessation, with No Discounting and with Three Discount Rates.
The labels show the 'break-iwn' years, when the coet and
benefit of the Inter»ntion balance each other. Shorter follow-
up times make gmokhg cessation anractive economically, and ,
longer follow-up makes @ OnaitraetWe. With 10 percent dis-
counting, the break-even year is later than 50 years.
TA&E 3. HEUTH CARE COSTS FOR THE THREE POPtMT1wS Sn'DIED
wnH L1rE TAeLES, AccoRDwc To Srx A.\D DIfEA(E CATECORt,
NTIH THE RATIOS OF THE C.06[s FOR SMOKEas AND NOSSR1oIiFS
TO TNOSE FOR THE MIxED POFUUTIO\ COYLV%*iNG SOTH.
Soc wo
DrufE
CanoGal^
lxEn
POIwAIqu
fMU1ERS
uwAOC[as
SMOImu:
Mm6 PptMtqN
Norsr6nq:
Mpro F6naA1nM
.
millione of g . eoft ratio (aeroitivky range)t
Men
Heart .
$26
676
371
129U.18-L3s1
0.71(0.IM.0.61)
Sttokc 416 390 428 0.94(0.91-0.97) 1.03(1.06-0.98)
Lungcarrca 114 211 33 t.BS(1.76-1.87) 0.29(0.44-0.22)
OtAernncea
COPD
- 226
165 254
275 203
' 23 1.12(1.05-1.18)
1.67(1.72-Ib3) 0.90(0.97-0.83).
0.14
f0.23-0.111
Ag othrr
.
Total 6,360
7,806 5,463
. 7,270 7.284
. 8,342 0.86 (0.89-0.84)
0.93 (0.95-0.921 l.l S 1 I.09-1.181
1.07 (1 A4-1.09)
Women
Heart
386
538
330
1.39 (1.24-1.48)
0.g610.93-0.79)
Svak 510 571 502 1.12(1.04-L19) 0.9811.01-0.961
Lungeancer 23 70 9 3.10(2A1-3.32) 0.39(0.55-0.31)
Oncwrcancers 297 387 264 1.30(1.16-1.42) 0.g9(09a-0.84)
COPD 102 254 20 3.48(2.45-2.451 0.20(0.31-0.15)
All ocher 9353 . 7,653 10.013 0.12 (0.87-0.79) 1.07 (1.04-1 A9)
Total 10.676 9,473 11,138 0.89 (0.92-0.87( . 1.0i U.03-1.05)
COPD denou. chronic obsmictive puhtwnary dwcuc. . . . . .
tThc mmiwuy range was nkvlarcd aith the bwer and u(per toundi of the rarc ntiaa in Table
2. A bwer nu ratio ndum the dilkrence bnween mwken and nomnwken In the inciderla, prer
aknce, and morWiry Gan mwkingrd.ted disease. Therefare, nonmoken t,.en k.vreaee uf mmk-
ing.mlarcd diuau (kading to kr.er uvinge) but rimuh+ncauM, gdn ka in Ore especww~, (kading
to lorer added can Oom'odier' dheaer). For most unokinpreb(ed diseases an6 `ahK' disan,
lower rate nriot make the diHcrence in cosn una0er. .
Volume 337 Number 15 - 7055
Break-even year
whh 3% diacountir
..J-----r-----.
..
..: ...... .i...... L ..
15 20 25 30 35 40 iS 50
Braak-ewn year ,
with no diaaounli

i
THE HEALTH CARE COSTS OF SMOKING
This study relied on rate ratios from epidemiologic
studies to express the differences between smokers
and nonsmokers. To the extent that the rate ratios do
not describe these differences sufficiently, the results
will be affected. For example, the much lower cost
for lung cancer among female smokers than among
male smokers (Table 3) is hard to explain physiolog-
ically. But as long as the smokers have higher rates
of lung cancer than the nonsmokers, such shortcom-
ings of the data will not affect the overall conclu-
siorts.
The results of this study illustrate the ambiguities
in any economic method of evaluation. Even a well-
designed study of this type is marred by inevitable
arbitrariness concerning what costs to include, which
discount rate to apply, and what duration of follow-
up to use. There are differences of opinion - on the
discounting of Gfetime costs, for example, and the
evaluation of long-term efi'ecL1.33t4 Recent efforts at
standardization will remedy some of the arbitrari-
ness,2r27 but fundamental problems with the meth-
od still remain.
Finally, with respect to public health policy, how
important are the costs of smoking? Society clearly
has an interest in this matter, now that several states
are trying to recoup Medicaid expenditures from to-
bacco firms and the tobacco companies have agreed
to a settlement. Yet w'e believe that in formulating
public health policy, whether or not smokers impose
a net financial burden ought to be of very limited
importance. Public health policy is concerned with
health. Smoking is a major health hazard, so the ob-
jective of a policy on smoking should be simple and
dear: smoking should be discouraged.
Since we as a society are clearly willing to spend
money on added years oflife and on healthier years,
the method of choice in evaluating medical inter-
ventions is cost-effectiveness analysis, which ~ields
costs per year of life gained. Decision makers then
implement the interventions that vield the highest
return in health for the budgct?a 4Ve have no doubt
that an efl'ective antismoking policy fits the bill.
Supptxted by the Dutch Ministry of Health.
REFERENCES
1. Ma.Kenzie TD. 8artecchi CE, Schricr RW, The human cmn of tobacco
uss. N Engl 131cd 1994;330:975-50.
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