How Costly Are Smokers to Other People? Longitudinal Evidence on the Near Elderly

Many studies have estimated the cost of smoking. In recent years, such estimates have been widely used in litigation against the tobacco companies. Both longitudinal and cross-sectional methods have been used. On balance, the longitudinal approach, the one used in this study, is much preferable since one can account for the effects of smoking on the pool of eligibles rather than just conditioning expenditures on being eligible. We used data from four waves of the Health and Retirement Study to assess the impact of smoking on use of hospital and physicians' services and nursing home care. The analysis was limited to utilization among persons aged 51 to 67 ("near elderly"). During this phase of the life cycle, many adverse effects of smoking, measured in terms of mortality and morbidity first occur. In contrast to past studies, we computed the health expenditure burden of smoking by type of health insurer. The net effect of smoking on expenditures on health care services was positive for this age cohort. We found substantial differences in the burden that smoking imposes on various payers. The largest impact was on other government payers, which includes the Veterans Administration, followed by the effects on Medicare and Medicaid. By contrast, the effects of smoking on private insurers' cost were negligible.