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Smokers Cost Taxpayers $10 Billion

If all Medicaid beneficiaries quit smoking, taxpayers would be $10 billion richer

November 29, 2007

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Five years after all current smokers who receive Medicaid benefits quit smoking, program expenditures would be an estimated $9.7 billion lower, according to a new report by researchers at RTI International.

The report, funded by the American Legacy Foundation, found that Medicaid expenditures attributable to current smokers account for 5.6 percent of total national Medicaid expenditures.

"Reducing the number of smokers in the United States could save taxpayers billions of dollars in Medicaid costs," said Justin Trogdon, Ph.D., an RTI health economist. "Policy makers looking for ways to reduce health care costs in America would be wise to look at areas of health behaviors that both improve health and reduce health care costs."

According to the research, New York smokers top the list, costing Medicaid $1.5 billion each year. Wyoming had the least Medicaid expenditures due to current smokers, but they still cost the program $15 million each year. The report showed that North Carolinians who smoke cost Medicaid $294 million each year.

The researchers also looked at the cost of Medicaid over the lifetime of 24-year-old smokers because nearly all smokers begin smoking before age 24.

"The benefits of preventing smoking initiation accrue over a longer time horizon," Trogdon said. "Life-cycle estimates are important in gauging the long-term impact of youth smoking prevention on state Medicaid programs. These estimates take into account the differences in life expectancy for smokers and nonsmokers as well as payments into the Medicaid system by smokers."

"This study underscores the need for strong and effective smoking prevention and cessation campaigns," said Cheryl G. Healton, Dr. PH, president and CEO of the American Legacy Foundation. "We hope that this report will serve as a tool for states to use when setting both long- and short-term goals for reducing Medicaid expenditures associated with tobacco use."

Women smokers more costly

The results showed that, over the course of their lifetime, today's 24-year-old smokers will cost Medicaid almost $1 billion. However, most of those costs are due to female smokers, not males.

The researchers found that over the course of their lifetime, tax payments by young male smokers make up for most of their extra Medicaid expenditures from smoking, but the expenditures for female smokers cost Medicaid about $1,300 per person.

This impact is highest in Texas, where the lifetime costs of 24-year old smokers to Medicaid is estimated to be $125 million. In North Carolina, those costs are expected to reach almost $37 million.

"The lifetime costs of young smokers are for one cohort of 24-year-olds," Trogdon said. "Every year a new group of young people will turn 24. Based on these findings, preventing and reducing youth smoking, especially among females, could lower Medicaid costs by billions of dollars."

The research is based on data from the 2000 through 2004 Medical Expenditure Panel Surveys.

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