Economics of Tobacco in Health Care Industry

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Health economics is a study of the issues concerned with the provision of health services, access to medical care, efficiency, effectiveness, production and supply of health and healthcare services. Other factors include demand and consumption process as well as costs related to the industry. The study of healthcare economics is somehow different from other commodities in the market. Factors which make the industry unique include government control and intervention as well berries as an entry of the other providers. There are also third parties in the course of provision which include the physicians and medical professionals. Mastery of the costs, charges and other related expenditures ensures effective decision making and planning for the government and other stakeholders. In most cases, the demand for healthcare is termed as derived demand, meaning that is different from other typical goods.

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The main players include the contributors, the citizens the country, providers of the services and consumers of the products. In this case, a study of the tobacco economics is the crucial segment of the healthcare economics(Abrams, David B., et al, p 296). Mastery of the care costs associated with the medical platform such as caring for the patients, preventive measures, access to medicines, as well as demand and supply is crucial for both short-term and long-term planning. The study of tobacco gives extensive knowledge which allows various bodies to plan and arrive and critical decisions.

Tobacco and tobacco use is one of the leading causes of preventable deaths around the globe. The commodity kills more than 7 million people every year. Studies indicate that use of tobacco leads to various things such as high toll diseases, suffering from the affected parties, death cases and hence it has become the burden to the users and non-users. In the US alone, the economic burden has been rising over the years, with global level hitting at US$ 1.4 trillion regarding healthcare costs as well as losses in the production in each year. Studies across the globe indicate that tobacco use kills people through direct and indirect ways as well as draining the treasuries large sums of money to take care of the negative impact associated with the drug. Though some economist argues that there is the economic contribution from the whole process of tobacco production, the input and the output cannot be matched. Studies done by the Center for Disease Control indicates that costs are associated with lifetime personal healthcare charges of the people who smoke as well as the passive smokers(Abrams, David B., et al, p 299). In a year, costs associated with governmental expenditures on tobacco costs are currently standing at $1,227 US per person in a year with other information indicating that lifetime costs are $16,500 per male while in a female, the cost is higher by $3000.

Scientific Data on Tobacco Use and Impact on Healthcare Industry

Tobacco smoking is one of the cost factors when it comes to healthcare. The use, distribution, health impact, and the death rate has been rising due to lack of effective control. Studies have been done in various parts of the globe. Being one of the mostly smoked product in the globe, the indication is that close to 46 percent of men and about 13 percent of women aged 16 years in over 15 countries across the globe use the commodity. In middle-income and low-income countries, the trend has been raising.

According to the World Health Organization, tobacco is the leading cause of deaths which can be prevented across the globe. Data from medical studies indicate that there are 6 million deaths which account for 11 percent of all deaths with over 650,000 deaths occurring in the non-smokers(World Health Organization). The total number of deaths as per 20th century is estimated to be over 110 million with the US leading in the death toll. Common diseases associated with the disease can be prevented at lower medical costs. However, the control measures have been ignored in most cases due to the contribution factor associated with revenues from tobacco commodities. Most of the common diseases include respiratory, liver and heart complications. Common cases are manifested as heart attacks, high level of stroke in men and women, chronic cases and cancer if many types.

Mortality Rate and Costs

One of the leading economic impacts of healthcare is mortality rate cases. Smoking of tobacco is associated with a cause of over 5 million deaths in a year. Studies indicate that female smokers are less tolerant of an average loss of 14.3 years of life, while men loss 13.1 years of life. One stick of cigarette is associated with loss of 10 minutes per individual while the cost of a packet retails at an average of $6.6 in common outlets. Smokers have been found to die earlier than non-smokers, with most of them, died before the age of 60 years or even 70. The costs of associated with mortality rates are high in the healthcare industry(World Health Organization). The medical professionals have to treat, educate and provide their time in the course of service provision. Studies indicate that in the United States, use of tobacco commodities accounts for 1 out of every six early cases of deaths on annuals basis. The translation is close to half million deaths per year. The costs associated with premature deaths are very high for the government as well as the taxpayers.

Cancer Costs Associated With Tobacco Use

Tobacco use is the leading cause of several types of cancer. One of the most costly treatment includes cancer patients across the globe. There are several types of severe cancer caused by tobacco use such as kidney cancer, larynx cancer, and bladder cancer. Others include esophagus, pancreas, stomach and cervical cancer in women. Data indicate that smoking of tobacco causes death rate of 22.4 percent for males and 11.6 percent for female smokers before the age of 80 years(Lightwood, James, Alexis, and Glantz, p 798). Lung cancer is one of the leading types of killer causes. The probability of death is currently standing at eight over 10. Medical costs associated with taking care of the cancer patients is prohibitive for the government as well as well as the medical bodies. Other common case is pulmonary diseases and complications due to smoke exposure. Studies indicate that chronic obstructive pulmonary disease linked tobacco use leads to serious and permanent cases. Individuals with terminal complications have been found to be very expensive to access treatment and provide for the basic needs. Deaths associated with smoking have been rising of late, due to the high level of access to the commodity across the globe.

Treatment Costs

There is also healthcare cost associated with the use of tobacco. Studies indicate that the outbreak of influenza has been linked with smoking cases. Data showed that 69 percent of the smokers have high chances of getting complications associated with influenza than non-smokers. On the other hand, non-smokers have been found have fewer chances of contracting the disease, which stands at 30.35 percent. Studies done in South Carolina indicate that earlier cases were closely associated with smoking. People who smoked heavily that is more than 20 cigarettes in a day were found to have 23 more likely to illness than no smokers. Findings from earlier studies show that there is high relative influenza risk in the people who are older than those who are younger(Lightwood, James, Alexis, and Glantz, p 780). The medical costs associated with influenza disease and control during the earlier time was found to be close to 1 percent of the total gross product of a country. The costs were associated with the creation of awareness, education, treatment, and eradication. Others were associated with specialized care and immunization.

Pregnancy Costs in Healthcare

Examination of the pregnancy costs associated with tobacco use has been rising over time. Consumption of the commodity among women has been linked with miscarriages and threat of health of the unborn. Exposure to smoking during pregnancy shows that it leads to the birth of the infant who is underweight. There are also prenatal exposure cases related to the environment. The overall impact is disorder in the children. There are also post-natal tobacco smoke exposure cases which causes the behavioral impact on children. Data shows that women who smoke actively have the higher chance of giving unhealthy births. Control measures have been found to be costly since people have to be educated on how to handle the children with disorders.

The Budgetary Impact of Smoking

Use of tobacco is very costly both to the individuals, the government and the households. The individual’s costs are reacted to the family as well as those who are close to the individuals. When a person is diagnosed with diseases associated with the terminal or even other common illness, there are direct and indirect costs. Direct costs are associated with access to medical care, special treatment, special meals and other expenditures which individual undergo to access the medical services(Lightwood, James, Alexis, and Glantz, p 799). Then we have the burden of the societal costs. Those are charges which the community incur in the process of eradication of the negative impact of the disease. There are several approaches which have been developed in the course of estimating the economic impact of tobacco smoking in the society. The process entails weighing the benefits and shortcomings of campaign and eradication process. Cases of high costs indicate that social impact in use of restrictive measures is relatively costly, while low costs indicate that approach is economical.

Individual costs of smoking healthcare include medical bills which are paid directly in the course of controlling the condition. Treatment costs of the individual are part of direct costs. When individuals become sick, there is lost personal productivity. In such cases, the family suffers due to reduced access to income from the individual. Then, we have the hospital and care bills which have to be catered. The common people associated with the individual hence have to bear such charges. Studies done on the real costs of tobacco smoking economics indicate that the total revenues collected by the government cannot match the costs associated with control and treatment of the negative impacts. The studies indicate that budgetary allocation does not match the level of income associated with tobacco effects. There is direct government spending which includes medical care for the individuals(Lightwood, James, Alexis, and Glantz, p 790). Then there is the indirect medical care which includes medical working hours which are spent in the course of treatment. A cost of packet goes for an average of $6.6, while medical care costs and lost value of productivity is far much more than the amount of production.

There are personal and business costs associated with healthcare provision of the individuals who smoke. Private costs and business costs include health insurance policy covers, travel costs, medical bills and reduced time allocation in the working station. There are also costs associated with lifetime care of the individuals. They are calculated using a comparison approach with non-smokers. In this case, the costs of reduced productivity, reduced family time and the overall care in the medical access gives a clear image that tobacco economics are crucial in a mastery of the flow of allocation of resources. Non-smokers live the longer life, and most of them are productive compared to smokers(Lightwood, James, Alexis, and Glantz, p 795). Still, the comparison shows that smokers spend more money in the course of purchase of tobacco commodities. The overall impact of reduced personal care and health of the individual. The medical costs in some studies have shown that have been increasing over time. The supply of tobacco has been rising due to demand on the end users. More than $19.9 billion is spent in Netherlands alone to eradicate and control the use of the commodity.

Studies done by the World Bank indicates that economic costs associated with the use of tobacco across the globe have been rising. The global net loss was at US$400 billion per year in the year 2014, with 50 percent of the losses being witnessed in the developing countries. The true value of loss may not be calculated due to reduced lifespan of the smokers. Use of prevention measures in the healthcare industry has been having been cited as the most effective control approaches from the point of cost-benefit analysis. In developing countries, the healthcare industry incurs US$20 to US$40 per year in single treatment for the individuals(Prokhorov, Alexander V., et al p 895). Treatment in medical centers indicates that prolonging lives of the affected individual by 10 percent costs US$ 18 000 per year.

Supply of Tobacco and Its Economics

Supply of the tobacco in the course of study of healthcare industry can be done through examination of the sources of the commodity. The trigger of supply is a demand for the product. The economists have been advocating that production of the commodity leads to revenues generation. Tobacco farming is the source of live hood for most of the people who engage in farming. The collection of taxes from the crop and employment creation have been cited as one of the leading factors which encourage its slow eradication. The government has cited reduction of taxes from reduced supply and decline of employed as very serious cases. Economic policy-makers have under looked at the long-term impact of the product as an expense of the short-term gains. The government reaps various types of income from the activity of taxing tobacco commodities. The federal tax of cigarette stands at $1.02 per unit packet of with over 18 billion packets sold in on annuals basis(Prokhorov, Alexander V., et al p 897). The government hence collects over $40 billion from the product. Countries with weak administrative taxation methods have been found to experience challenges when it comes to controlling of the tobacco use. Lack of suitable analytical methods of the commodity flow in the market limits the process of increasing taxes. Taxation should also be broad and not just on end commodities alone. There should be precise legal methods of handling the smokers and the sellers of the products.

Control Measures of Tobacco and Impact of Healthcare Industry

There are several methods which can use to control access and use of tobacco by the public. Several studies have been done on the approaches of control. One of the methods is through legislation approaches. Member of the Congress has passed bills on how to control the use of tobacco through the legal system. The objective has been pushed through the manufacturing process of the products, marketing, and sales process. Others include restrictions on places and pricing. For instance, the manufacturing should meet certain standards to ensure that the impact is reduced to the users. There should be clear labeling of the products and how they are consumed. Still, marketing and distribution have been controlled by the government. The objective is to balance demand and supply and ensure that there is reduced access. The packaging has been used as an indicator and warning to the users about the commodity use. Restrictions on sale to underage have also been put in place to ensure that people who are minors do not engage in the use of the products(Prokhorov, Alexander V., et al p 901). Still, restriction ensures that the products of tobacco do not enter in the private and public place which are designed to be tobacco-free zones. The public sector has also been in the front line in ensuring that there is control of the access of the tobacco. Measures such as campaigns and creation of awareness have been in use. Individuals who smoke have also been provided with counseling services and access to medical healthcare.


The tobacco economics can be analyzed from demands, supply, and the control measures in the healthcare industry. Millions of money are spent annually in the process of treatment and care of the smokers. Even though tobacco industry generates billions of dollars through taxation process and offers employment to the millions of people, the final impact outweighs the income. Control measures have been put across manufacturing, supply, and distribution of the commodities. There should be the strong approach to ensure that promotional activities of the products are done effectively. The healthcare industry should ensure that there are public education and creation of awareness. Still, the government should work with private bodies to eradicate access and consumption of the commodity. Young people should be given information regarding medical care and other side effects of tobacco. The total costs of healthcare attention cannot be compared income generated by the products. It hence evident that control of the tobacco should be put in place to ensure that lives are saved. The more than $100 billion spent on matters of healthcare can hence be reduced through effective control approaches.

Work Cited

Abrams, David B., et al. “Integrating individual and public health perspectives for treatment of tobacco dependence under managed health care: a combined stepped-care and matching model.” Annals of Behavioral Medicine 18.4 (2016): 290-304. John, R. M., H. Y. Sung, and W. Max. “Economic cost of tobacco use in India, 2004.” Tobacco control 18.2 (2009): 138-143. Prokhorov, Alexander V., et al. “Youth tobacco use: a global perspective for child health care clinicians.” Pediatrics 118.3 (2016): e890-e903. Lightwood, James M., Alexis Dinno, and Stanton A. Glantz. “Effect of the California tobacco control program on personal health care expenditures.” PLoS Medicine 5.8 (2008): e178. World Health Organization, and Research for International Tobacco Control. W.H.O. report on the global tobacco epidemic, 2014: the MPOWER package. World Health Organization, 2014.

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Economics of Tobacco in Health Care Industry. (2018, Dec 14). Retrieved December 4, 2022 , from

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