New Study Details Skyrocketing Costs to State Governments From Smoking and Potential Taxpayer Savings in Medicaid from Tobacco Prevention Programs

Washington, DC — Smoking-caused Medicaid spending more than doubled from 1993 to 2001, and states that fund tobacco prevention programs can save even more taxpayer dollars in reduced Medicaid costs than previously known, according to a new study released today by the nation's leading public health groups. The study comes as Medicaid cost increases are being frequently cited as a large contributor to the budget deficits many states currently face.

Smoking-caused Medicaid costs have increased from $12.9 billion in 1993 to $27.2 billion in 2001, of which $12 billion is paid directly by state government and state taxpayers as their portion of the federal-state Medicaid program, according to the report. The study also finds that by funding programs designed to reduce tobacco use at or near the levels recommended by the U.S. Centers for Disease Control and Prevention, the states can save half a billion dollars in Medicaid costs per year in the short term with savings growing over time.

The 1998 legal settlement between the tobacco industry and the states provided an opportunity for states to invest in comprehensive tobacco prevention programs, which have been proven to significantly reduce this cost burden, according to the study. Recent studies have shown that successful tobacco prevention programs can save up to three dollars for every dollar spent on prevention efforts.

The report, titled 'Saving Lives, Saving Money: Why States Should Invest in a Tobacco-Free Future,' shows that a 25 percent reduction in smoking rates would reduce the state portion of Medicaid expenditures that go to smoking-caused healthcare costs by $552 million annually. The report was released in Washington, DC by the American Legacy Foundation and endorsed by the American Cancer Society, American Heart Association, American Lung Association, Campaign for Tobacco-Free Kids and the SmokeLess States Initiative.

'At a time that most states are facing budget shortfalls, state legislators need to understand the enormous benefit of investing in prevention programs,' said the public health groups in a joint statement. 'Rather than diverting money for short-term budget fixes states would be wise to use the money to reduce the long-term budgetary impact of tobacco use. Tobacco prevention programs are proven to save lives and money.'

The savings identified in the report – reduced state and local government expenditures on smoking-caused Medicaid costs – are only a small fraction of the overall savings the states and their residents would enjoy. For example, the savings calculated in the report do not include the money taxpayers would save from the parallel reductions to the smoking-caused Medicaid costs paid by the federal government. In fact, based on the report's data, overall Medicaid program savings from a 25% smoking decline in each state would total more than $1.25 billion. The report's savings projections also do not include taxpayer savings from reductions to the smoking-caused expenditures in other federal or state programs, such as those incurred by Medicare or by government-paid health insurance for federal and state employees. Nor do they include the enormous amount of individual and private-sector savings that would also accompany the smoking declines. As the report notes, public and private smoking-caused healthcare costs total at least $85 billion per year, nationwide, and all of those costs would be reduced by state investments to prevent and reduce smoking.

The report makes it clear that investing in tobacco control efforts is a proven way to reduce costs. It cites California, Massachusetts, Maine and Florida for their success in producing real results. The study outlines how these programs are not only reducing health care costs, but also reducing tobacco use and saving lives. In California, for example, since the inception of the program in 1989, the incidence of lung and bronchial cancer has declined five times as fast as the rest of the country.

Tobacco use remains the leading preventable cause of death and disease in the United States, responsible for more than 400,000 premature deaths each year. Given current trends, more than five million children alive today will ultimately die prematurely from smoking.

View a copy of the full Legacy Foundation report

Campaign Factsheet: Increases to State Smoking-Caused Medicaid Costs 1993 to 2001 and Future Savings from a 25% Reduction to State Smoking Rates