Smoking Behavior and Healthcare Expenditure in the United States, 1992-2009: Panel Data Estimates

Abstract

Background: Reductions in smoking in Arizona and California have been shown to be associated with reduced per capita healthcare expenditures in these states compared to control populations in the rest of the US. This paper extends that analysis to all states and estimates changes in healthcare expenditure attributable to changes in aggregate measures of smoking behavior in all states.

Methods and findings: State per capita healthcare expenditure is modeled as a function of current smoking prevalence, mean cigarette consumption per smoker, other demographic and economic factors, and cross-sectional time trends using a fixed effects panel data regression on annual time series data for each the 50 states and the District of Columbia for the years 1992 through 2009. We found that 1% relative reductions in current smoking prevalence and mean packs smoked per current smoker are associated with 0.118% (standard error [SE] 0.0259%, p < 0.001) and 0.108% (SE 0.0253%, p < 0.001) reductions in per capita healthcare expenditure (elasticities). The results of this study are subject to the limitations of analysis of aggregate observational data, particularly that a study of this nature that uses aggregate data and a relatively small sample size cannot, by itself, establish a causal connection between smoking behavior and healthcare costs. Historical regional variations in smoking behavior (including those due to the effects of state tobacco control programs, smoking restrictions, and differences in taxation) are associated with substantial differences in per capita healthcare expenditures across the United States. Those regions (and the states in them) that have lower smoking have substantially lower medical costs. Likewise, those that have higher smoking have higher medical costs. Sensitivity analysis confirmed that these results are robust.

Conclusions: Changes in healthcare expenditure appear quickly after changes in smoking behavior. A 10% relative drop in smoking in every state is predicted to be followed by an expected $63 billion reduction (in 2012 US dollars) in healthcare expenditure the next year. State and national policies that reduce smoking should be part of short term healthcare cost containment.

Fig 1. Real annual per capita state healthcare expenditure in each of the 50 states and the District of Columbia modeled as a function of smoking behavior (current smoking prevalence and mean annual cigarette consumption per smoker).

Because available data on mean consumption per smoker may be contaminated with measurement error that increases over the sample period due to increasing interstate tax differentials, the individual state cigarette tax rates are included to adjust for the effects of this possible measurement error. Other state-specific control variables that might affect per capita healthcare expenditure are included. To account for long run trends in healthcare expenditure that are correlated with the observed state-specific explanatory variables as well other correlated but unobserved trends, the national averages of the dependent and explanatory variables are included in the regression. Finally, state-specific intercepts are included in the regression to model regional and state-specific factors that may affect state healthcare expenditure and that remain constant over the sample period. All the independent (explanatory) variables are lagged by 1 y.