These estimates for Arizona confirm earlier work for California (Lightwood, Dinno et al. 2008
) that large scale tobacco control programs are associated with substantial reductions in smoking and healthcare costs, despite the fact that implementation of the two programs has been quite different. Using a different state, the parameter estimates are very similar in the two analyses. The cointegrating regression coefficients for the effect of per capita cigarette consumption on per capita healthcare expenditure are similar for the two system: -$19.5 (SE 5.45) /pack per capita for Arizona vs. -$27.0 (SE 1.82) /pack per capita for California (P = 0.26). The effect of tobacco control expenditures on and difference in per capita cigarette consumption, 0.190 (SE 0.0780) packs per capita/$ per capita for Arizona vs. 0.261 (SE 0.0780) packs per capita/$ per capita for California (P = 0.096) suggest that the magnitude of the effect of the Arizona program may be smaller than the California program.
Using the same method as for California (Lightwood, Dinno et al. 2008
), the implied direct healthcare cost per smoker in Arizona is between $2068 and $2324, compared to $3940 to $4800 for California. The difference in these estimates may be due to differences the cost structure between California and Arizona (e.g., home health care is used more intensively used in Arizona than California), different patterns of utilization in current vs. nonsmokers between the two states, different age structures or intensity of smoking not captured in the measure used for smoking behavior (per capita consumption), different exposure to passive smoking, or some combination of all those factors. These estimates are not designed to produce cost estimates directly comparable to the cross-sectional estimates produced by the CDC SAMMEC system, however, they are roughly consistent with the CDC estimates, as are the California results (Lightwood, Dinno et al. 2008
The long-run price elasticity of cigarette demand in Arizona is in normal range of other estimates (Gallet 2004
) and are similar to those for the California estimates (Lightwood, Dinno et al. 2008
): they range from 0.190 (SE 0.0467), at the beginning of the available data in the 1970s, to 0.606 (SE 0.149) in the late 1990s, and increase towards unity after cigarette prices increased dramatically in 1999. This increase in the price elasticity of demand is to some extent determined by linear specification of the cigarette consumption equation (the cigarette demand relationship, (equation (2)
) that forces the elasticity to rise as the quantity of cigarettes consumed falls. To the extent that they are comparable with constant elasticity models, these elasticity estimates are consistent with existing long-run estimates (Gallet 2004
) until the recent large price increase of 1999. The authors are not aware of any estimates of the cigarette price elasticity of demand that isolate the effect of the price increases that occurred starting in 1999.
The research reported here has limitations similar to that for California (Lightwood, Dinno et al. 2008
): the regression estimates use observational data and the ability to determine the specification of the cointegrating regression specifications and the short run dynamics estimated with ECM model are uncertain due to small sample size.
The ratio of healthcare cost savings to program cost as of 2004, after the Arizona program had been in place for nine years, was 10 to 1 is smaller than in California ratio of 50 to 1 (Lightwood, Dinno et al. 2008
) which as of 2004 had been in place for 15 years, but is still large. As of 1998, when the California program had been in place for nine years, the same number of years as Arizona in 2004, the ratio of cumulative program cost to savings was 25 to 1. The difference in the mean estimated saving is due to the smaller coefficients describing the effect of the Arizona program expenditures and the differing time paths of historical funding of the two programs. While both states’ tobacco control programs yielded many times their costs in healthcare savings, the more aggressive California program may be associated with a greater return on investment.
Because the Arizona program has focused on youth prevention which, even if successful, would not affect health costs for many years, it is possible that over a longer time horizon the relative cost effectiveness (in terms of health costs) between it and the California program could be different than we found. This situation is unlikely, however, because, while the California program did not focus on youth, it led to substantial drops in youth initiation (Messer and Pierce, 2010
The results for Arizona in this paper and previous results for California have important implications for tobacco control policy worldwide. The World Health Organization Framework Convention on Tobacco Control, the first public health treaty negotiated under the auspices of the WHO, had been ratified by 171 countries as of October 2010 (World Health Organization, 2010
). Article 12 of the Framework requires parties to develop and implement “education, communication, training and public awareness programs” with the same elements as the large scale tobacco programs that have been implemented in the United States discussed in this paper. As of October 2010, the implementing protocol for Article 12 was still being developed. The results of this research provide evidence that such programs will be effective in reducing cigarette consumption, which will in turn reduce per capita healthcare costs.