Tobacco consumption drives out spending on basic household commodities, especially education, and on medical care. Our results reinforce those published from other Chinese surveys. A 2002 rural health insurance survey in two poor rural provinces in China showed that rural households spent 6.5% of their total expenditure on tobacco, and showed that for every 100 yuan spent on tobacco, there was a 30 yuan decrease in spending on education and a 15 yuan decrease on medical care.9 23
A further study found that poor urban households spent 6.6% of their expenditure on cigarettes, and 11.3% in poor rural areas. Again, tobacco spending was associated with reductions in spending on other goods and services.24
This finding is a particular concern as expenditures on education and medical care both tend to increase productivity—that is, are human capital investments. As education expenditures mainly benefit children (from school fees), it is conceivable that children in poorer smoking households may be forced to give up some education. This has particular concerns for China’s continued economic and social development. Tobacco consumption was associated with higher food costs, but the food category included the costs of alcohol, and smokers are far more likely to drink alcohol regularly than non-smokers (crude OR
8.99, 95% CI 8.63 to 9.37), which may account for this. Tobacco consumption was also associated with slightly increased spending on transport; it is possible that this is because of the association of smoking with social activities in China.25
There are two main conclusions from our analyses of medical expenditure by smoking status. One is that households with former smokers have very high medical spending, and the second is that ETS exposure is also associated with raised medical care expenditures. These costs are proportionally greater for the poorest 20% of rural households, where excessive medical spending due to smoking as a percentage of income is 3.5 times that for the highest income quintile.
Fractional logit modelling estimating the “direct” costs of smoking indicated that increases in tobacco consumption were associated with reductions in spending on medical care as a percentage of total household expenditure, while log-linear models estimating the “indirect medical care” costs associated with tobacco found that households with smokers had slightly increased absolute medical care costs. Although we controlled for household income within quintiles in the log-linear models, there is likely to be some residual confounding as even within the poorest quintile (and decile) of rural households, smoking households still had slightly higher incomes than non-smoking households, allowing for differences in percentage and absolute tobacco expenditure to arise. Particularly in rural areas, it is likely that those in the very poorest households do not smoke because of the economic burden. The appropriate interpretation is therefore that tobacco consumption reduces medical expenditure, but those in slightly wealthier households (even among poorer rural areas) are more likely to smoke, and also spend more on medical care, probably because of their slightly higher incomes.
It may seem surprising that the medical care costs of current smoking households are not higher, although the costs among households with former smokers were very high. Only direct household costs were collected by the survey. Smokers with health insurance, and in some cases their families, may be partly sheltered from the direct costs of excessive medical expenditure due to smoking-related diseases. This is unlikely to be a major factor though, as health insurance coverage was low in 2003 (nearly half of the urban population had no coverage at all),13
and out-of-pocket payments represent a high proportion of total healthcare expenditure in China (59% in 2000); in particular outpatient services (including primary care) are not covered at all in most parts of China.26
Probably more importantly, health service utilisation data do not necessarily reflect health need, and there is clear evidence from the NHSS that smoking households are less likely to obtain secondary medical care, even when this has been recommended by a doctor (data not shown). Finally, the survey was cross-sectional in design; smokers who become ill may decide to quit, resulting in a “healthy smoker” bias.22
Our data source was a very large, nationally representative household survey, the NHSS. We believe this is one of the first attempts to estimate the household-associated costs of smoking from a nationally representative survey in a developing world country. However, our analyses have several limitations. The main limitation is that the NHSS survey did not collect data on spending on cigarettes directly; we therefore used household tobacco consumption as the dependent variable. Cigarette prices vary considerably in China, and it has been reported elsewhere that while poor rural households overwhelmingly choose cheap local brands, richer urban households may purchase more expensive brands. We could have estimated cigarette price using data from other Chinese surveys,24 27
but we preferred to use the tobacco consumption data, collected by the NHSS. Critically, we found the expected dose-response relation in both urban and rural areas—increasing categories of tobacco consumption reduced spending further on other categories, such as education and medical care. However, it is possible that our approach may underestimate the effects of smoking costs on wealthier urban households, if these are purchasing more expensive cigarette brands. We may also underestimate the direct costs of smoking through misclassification of smoking costs—as some households, categorised as “low” consumption may be buying more expensive cigarettes, while some categorised as “high” consumption may be buying cheap cigarettes. Most of our survey data (on cigarette consumption, household incomes and medical care costs) were self-reported, and thus may be subject to bias. However, we used trained local interviewers, and were able to validate some income data against household benefits and expenditures. Finally, our data are cross-sectional; even if smokers quit we do not know how households would use potential savings.
What this paper adds
- Households with current smokers spend significantly less on other goods and services, particularly education and medical care.
- Household medical care expenditure costs are substantially higher among households with one or more ex-smoker.
- Exposure to environmental tobacco smoke is also associated with increased medical care costs.
- The effects are most acute among poorer rural households, contribute to impoverishment and may have a substantial effect on China’s continued economic and social development.
Reducing smoking is not only critical in improving health, it also has an important role in poverty reduction in China, particularly in poorer rural areas. As well as the “direct” opportunity costs of smoking, reducing expenditure on education, the cost of medical care has been increasing rapidly in China over recent years compared with income, and the average cost of a single hospital admission is over double the average annual income of the poorest 20% of the population.26
It is therefore likely that the household medical costs associated with adult smoking have increased since the NHSS was carried out in 2003; and even if smoking falls, in absolute terms medical costs as a result of smoking are likely to rise further. It has been estimated that 35% of urban households and 43% of rural households have difficulty affording healthcare, go without healthcare, or are impoverished by health costs.28
Insurance coverage for most of the Chinese population is also inadequate.26
We found particularly high medical care costs among households with quitters; the true costs are probably far higher as many poorer smokers may be foregoing the healthcare they need.22
Policy initiatives should focus particularly on rural areas in China, where smoking prevalence and poverty are higher, and where sustained anti-smoking campaigns have been rare. Information on the opportunity costs of smoking should be widely disseminated in these areas. Smoking cessation advice and nicotine replacement therapies are not generally available in rural areas; their use should be promoted by doctors and covered by health insurance schemes. Extending and enforcing smoke-free policies in public places13 29
and, more controversially, increasing taxes, have both been shown to reduce smoking prevalence in similar areas, and may have both economic and health benefits for China.4 30
In China, assuming a price elasticity of −0.54, it has been estimated that a 40% increase in tax from 1.60 yuan per pack to 2.00 yuan tax per pack would reduce consumption by 4.57 billion packs, generate additional central government revenues of nearly 25 billion yuan, and save 1.44–2.16 million lives.30
The increase in central government tax revenue would be twice as large as the total losses to industry and agriculture.16
Our study suggests it would also reduce poverty and increase resources available for household spending on education and medical care, important for China’s future development.