Do smokers pay their way?

The Policy Exchange believes that even with tax on cigarettes being nearly £5 a pack, smokers are a drain on the economy. Let's see what other studies have concluded, shall we?

Lifetime Medical Costs of Obesity: Prevention No Cure for Increasing Health Expenditure, van Baal, 2008

Despite the higher annual costs of the obese and smoking cohorts, the healthy-living cohort incurs highest lifetime costs, due to its higher life expectancy, as shown in Table 1. Furthermore, the greatest differences in health-care costs are not caused by smoking- and obesity-related diseases, but by the other, unrelated, diseases that occur as life-years are gained (Table 1). Therefore, successful prevention of obesity and smoking would result in lower health-care costs in the short run (assuming no costs of prevention), but in the long run they would result in higher costs.

The Proposed Tobacco Settlement: Who Pays for the Health Costs of Smoking? Gravelle, 1998

A more complete accounting of the health costs of smoking not only increases the size of the costs, but also reallocates costs and implies net financial benefits for some parties. Governments save on the costs of old-age medical care, social security, and nursing home care due to the earlier death of smokers. (This result does not mean that it is desirable that people die early; it means that in determining financial cost, if that is the justification for a payment, a correct measure of the loss will only be calculated if these effects are included.) Smoking has apparently brought financial gain to both the federal and state governments, especially when tobacco taxes are taken into account. In general, smokers do not appear to currently impose net financial costs on the rest of society.

Smokers' burden on society: Myth and reality in Canada, Raynauld, 1992

Net additional external costs borne by non-smokers worked out to $244 million for Canada in 1986. However, smokers are responsible for a much larger flow in the other direction. In the pension area alone, nonsmokers benefit from a transfer of $1.4 billion mainly because smokers tend to die before non-smokers do if we use risk coefficients established by the medical profession. Finally, the massive tax burden borne by smokers alone means that they account for a further transfer of close to $3.2 billion to the benefit of non-smokers.

Social cost and the cigarette excise tax: A misguided rationale for an inefficient and unfair policy, D. Lee, 1995

The widespread belief that smokers do not pay their own way is the result of repeated assertions that are totally lacking in empirical support. There is simply no evidence that smokers impose costs on others by making more use of medical care than do nonsmokers.

Risk perception, addiction, and costs to others: An assessment of cigarette taxes and other anti-smoking policies, Menzel, 2005

The proper goal of tobacco taxation policy should be to recoup only the extra costs that smokers place on others (at most a $1/pack tax on cigarettes)

Confusing, misleading CDC figures on economic costs of smoking, Entin, 2002

On balance, most studies find that smokers cost the government less in terms of health care outlays than the sum of what they save the government in unclaimed retirement benefits and pay the government in tobacco taxes at existing tax rates.

The Taxes of Sin: Do Smokers and Drinkers pay their way?, Manning, 1989

Although nonsmokers subsidize smokers' medical care and group life insurance, smokers subsidize nonsmokers' pensions and nursing home payments. On balance, smokers probably pay their way at the current level of excise taxes on cigarettes; but one may, nonetheless, wish to raise those taxes to reduce the number of adolescent smokers. In contrast, drinkers do not pay their way: current excise taxes on alcohol cover only about half the costs imposed on others.

Does smoking increase medical care expenditure? Leu, 1982

The results imply that lifetime expenditure is higher for nonsmokers than for smokers because smokers' higher annual utilization rates are overcompensated for by nonsmokers' higher life expectancy. Population simulation, taking into account the effects of past smoking on present population size and composition, suggests that 1976 expenditure would have been the same if no male born since 1876 had ever smoked. The male population would have been larger, particularly at older ages, increasing medical care expenditure, but this increase would have been offset by lower annual medical care utilization rates. Thus the results imply that smoking does not increase medical care expenditure and, therefore, reducing smoking is unlikely to decrease it.

Bear in mind that since many of these studies were conducted, tobacco taxes have risen substantially and, therefore, the government's net profit from smokers has increased further.

The Policy Exchange also reckons that smokers are absent from work more often than nonsmokers, but that's not what this study found...

Do smoking, body mass and exercise affect sickness absence and job satisfaction?, Critchley (2006)

There was no difference in sickness absence between smokers and non smokers, however there was an increase in sickness absence with increasing Body Mass Index (BMI) (correlation coefficient 10.9 %-p=0.005) and perhaps surprisingly there was an increase in sickness absence with increasing exercise participation (correlation coefficient 7.7% p=0.045).

So what do we do? Tax people who take exercise?

Thanks to Klaus K.

UPDATE!

A couple more...

The Health Care Costs of Smoking, Barendregt 1997

Results: 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. 

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.

Does Preventing Obesity Lead to Reduced Health-Care Costs?, McPherson, 2008

The study found that although annual health-care costs are highest for obese people earlier in life (until age 56 years), and are highest for smokers at older ages, the ultimate lifetime costs are highest for the healthy (nonsmoking, nonobese) people.

Thanks to Dave A for spotting these.