Hai-Yen Sung, Ph.D. Institute for Health and Aging, School of Nursing

1. Case Study of SPHs/FPH That Have Impacted Policy in the Area of Tobacco Control: California Experience Hai-Yen Sung, Ph.D. Institute for Health and Aging, School of Nursing University of California at San Francisco, USA

2. Purpose of this Presentation Illustrate two case studies of using the economics of tobacco control research to influence the advocacy and implementation of tobacco control policies • The Economic Cost of Smoking Study • The Economic Effects of Cigarette Taxation Study

3. Case 1: The Economic Cost of Smoking Study • Conducted at the Institute of Health and Aging, University of California at San Francisco • Funding sources: • California Tobacco Related-Disease Research Program (established by 5% of the 25 cents tax increase from Proposition 99) • California Department of Health Services, Tobacco Control Section (established by 2/3 of the 20% of additional 25 cents tax increase from Proposition 99)

4. Motivation of the cost study:How to convince policy makers to initiate tobacco control policies? • Identify central political, economic, cultural, and public health issues. • Conduct evidence-based research to evaluate the effects of tobacco control policies on tobacco consumption, government revenues, health, healthcare costs to the society, and poverty. • Disseminate research findings through media, education, and news to promote the awareness of smoking epidemic among general population • Find appropriate or influential collaborators in policy areas for potential policy implementation

5. Background • Cigarette smoking is the leading cause of preventable death. Around 20% of deaths is smoking-related in both the U.S. & California. • From 1964-2004, the U.S. Surgeon General has documented a series of reports to relate cigarette smoking to cancer, cardiovascular disease, chronic obstructive lung disease, and other illness. • One way to document and assess the effects of smoking is to translate the adverse health effects of smoking into economic term (in dollar term), the universal language of decision-makers and the policy arena.

6. What is the economic cost of smoking? • Direct costs (expenditures) for: • Health care treatment costs incurred as a result of smoking (hospitalizations, doctor visits, medications, nursing home care, and etc.) • Indirect costs of lost productivity: • The value of time lost from work due to smoking-related illness • The value of lives lost due to smoking-caused premature death

7. Data and Methods • Data: • National and California surveys which contain smoking status, medical care utilization and cost, work-loss days, demographic, socioeconomic and other risk behavioral data • Relative risk of death for smokers • Earnings and labor force participation rate • Methods: • Smoking-Attributable Mortality, Morbidity, and Economic Costs (SAMMEC II) computer software package, developed by using an epidemiological approach • Econometric models

8. Major Findings • Total cost of smoking in California = $15.8 billion • direct cost = $8.6 billion • indirect cost of productivity losses =$7.2 billion • The annual cost of smoking for each California smoker = $3,331

9. Policy Implication • Smoking exacts a large financial toll and efforts to reduce smoking offer great potential for savings • If smokers paid for the smoking-related direct and indirect costs,the cost per pack of cigarettes would increase by $11.34 [Note that the retail price per pack of cigarettes in 1999 in California = $3.51 including state tax = $0.87 and federal tax = $0.34 )

10. How has this study influenced advocacy of tobacco control policy? The Tobacco Education and Research Oversight Committee (TEROC) presents recommendations for the 2003-2005 Master Plan for California’s Tobacco Control Program. One of their recommendations is: “TEROC recommends that the price of tobacco products be increased through an increase in the excise tax …... The price of tobacco products should be at a level commensurate with their cost to society, currently pegged at $11.34 per pack of cigarettes.”

11. Uses of Cost of Smoking Estimates • Measure impact of smoking on health care delivery, financing, and productivity of the populations • Justify anti-smoking interventions, such as increases in cigarette taxes • Guide health policy and health planning for smoking control initiatives • Inform state and local legislatures • Provide estimates of damages for lawsuits and litigation purposes

12. Max W, Rice D, Zhang X, Sung H, Miller L (2002). The Cost of Smoking in California, 1999. Sacramento, CA: California Department of Health Services, 2002

13. Case 2: The Economic Effects of Cigarette Taxation Study • Conducted at the School of Public Health, University of California at Berkeley • Funding sources: • California Tobacco Related-Disease Research Program (established by 5% of the 25 cents tax increase from Proposition 99)

14. Motivation To evaluate the effects of California’s cigarette tax increases on cigarette price, cigarette consumption, smoking prevalence, quitting, smoking initiation, and government revenues in California

15. A key question: How is cigarette consumption responsive to cigarette prices in California? Using an economist’s term, price elasticity of demand for cigarettes is a standardized measure indicating how cigarette consumption is responsive to a 1% change in price. For example, an price elasticity of –0.4 means that if cigarette prices increase by 10%, cigarette consumption would reduce by 4%.

16. Data and Methods • Data: • Time-series aggregated data for Californians: cigarette sales, cigarette price, demographic, socioeconomic and other risk behavioral variables • Cross-sectional individual-level survey data for Californians: smoking status, demographic, socioeconomic and other risk behavioral variables • Methods: • Statistical time series models • Structural econometric models

17. Elasticity Estimates from Aggregate Data (sales): Sung, Hu, Keeler (1994) used annual per capita sales data for 11 western states during 1967-1990: SR=-0.40, LR=-0.48 Keeler, Hu, et al (1993) used monthly per capita sales data for California during 1980-1990: SR=(-0.3, -0.5), LR=(-0.5, -0.6)

18. Elasticity Estimates from Individual-level Survey Data (consumption): Hu & Ren et al., (1995) used the California BRFS data during 1985-1991: -0.46 Sheu & Hu et al., (2004) used the California BRFS data during 1996-1999: -0.46

19. How has this study influenced advocacy of tobacco control policy? The price elasticity estimates has been used to forecast and simulate the effects of potential future increase in the cigarette tax. For example, based on our price elasticity estimate of –0.46, we prepared a report in 1993 to California Tobacco-Related Disease Research Program to forecast the cigarette sales and tax revenues for California under different scenarios of tax increases. The report provided key information for tobacco control policy makers and legislatures to initiate another ballot of tax increase in 1998.

20. Future Tax Increase Proposed in 2003 • Governor Gray Davis proposed a $1.10 cigarette tax increase • Assembly Speaker Herb Wesson proposed a $2.13 cigarette tax increase • Ong, Alamar, and Glantz (2003) used the results from these two case studies to prepare a report to predict the effects of these proposals.

21. Analysis by Ong, Alamar, and Glantz (2003)