The economics of smoking: an overview of the international and New Zealand literature

The majority of work to date on the costs of smoking has focused on the enumeration of direct medical care costs. Published estimates of excess medical care expenditure attributable to smoking range from $US54 to $US1058 per smoker per year (1990 prices). Most of these studies used a cross-sectional approach to costing, however consensus increasingly favours the 'life cycle' approach to estimating the costs of cigarette smoking. The life cycle approach to costing consists of tracking all expenditures associated with smoking over the individual's lifetime. The purpose of taking this approach is to separate out the opposite impacts on medical care expenditures of higher utilisation and higher mortality. Thus, in a cross-sectional costing approach, smokers always appear to incur higher medical care costs. Using the 'life cycle' methodology, however, some of the higher medical care costs of smokers are offset by their shorter life expectancy. The policy question is whether smoking is associated with higher healthcare expenditures over the lifetime. The conclusion from studies that have adopted the 'life cycle' approach have been inconsistent. One of the earliest studies, based on Swiss data, concluded that the lifetime medical care costs for a cohort of nonsmokers was equivalent to the costs of providing care for a society of smokers. This conclusion was based on the finding that nonsmokers lived longer than smokers and used medical services more heavily during the last years of their lives.(ABSTRACT TRUNCATED AT 250 WORDS)