The Impact of Smoking on Medicaid Spending With Acute Care in Massachusetts and Potential Cost-Savings of Smoking Cessation

Background: Smoking causes higher incidence of certain diseases and greater severity of most health conditions. Smokers and recent quitters have higher health care utilization than never smokers and long-term quitters; as a result, smoking causes an increase in health care costs. This raises the hypotheses that (1) smoking cessation may promote cost savings by reducing the health care costs of patients who become long-term quitters, and (2) smoking cessation programs may be cost-effective. The prevalence of smoking is higher among Medicaid enrollees, compared to the overall population, so potential cost savings afforded by smoking cessation are especially relevant. Objectives: The objective of this paper is to provide a basis for a future cost-effectiveness analysis of smoking prevention and smoking cessation programs aimed at Massachusetts Medicaid enrollees, by estimating (1) the total costs with acute care for adults associated with current and past smoking and (2) the excessive costs with acute care for adults imposed by continuing smoking. Methods: The costs associated with smoking were estimated as the product of the smoking attributable fraction (SAF) and the total Medicaid acute care costs. The SAF is the ratio between the total additional utilization by current smokers and former smokers and the baseline utilization of all recipients. The application of a two-part model (probit and OLS) on NHIS data allowed us to estimate the health care utilization for each individual, and then to estimate the hypothetical utilization of each current and former if they were never smokers. The additional utilization is the difference between the estimated hypothetical utilization and the estimated utilization for each group (current smokers, former smokers). The costs associated with continuing smoking were estimated analogously. In this case, we estimated the hypothetical utilization of current smokers as if they were former smokers. The difference between the estimated hypothetical utilization and the estimated utilization yielded the additional utilization due to continuing smoking. The ratio between the additional utilization due to continuing smoking and the baseline utilization gave us the continuing smoking attributable fraction (CSAF). Results: The estimated smoking-attributable costs with acute care for adults between 1999 and 2003 were $842 million, which is equivalent to 5% of the total spent on inpatient and outpatient care and 2% of the total expenditures. The estimated excessive costs with continuing smoking between 1999 and 2003 were $284 million. Conclusion: This study addresses an important yet understudied issue of financial impacts of smoking on state Medicaid programs. In addition to updating previous work on the Massachusetts Medicaid program and estimating the total costs with acute care for adults associated with smoking in the period 1999-2003, it developed an estimation for the potential savings afforded by smoking cessation among adults in the same period. Despite significant limitations, this study serves as a basis for future cost-effectiveness analysis of smoking prevention and cessation programs.