With apologies to Chris Buckley (not just for stealing his clever title), I’m looking at the economics of health care costs.
In a debate over health insurance with a particularly health-conscious friend, he was adamant that obese people should be charged three times the norm for their health insurance.
That’s when I realized that smokers probably already pay a premium that big or more, with no justification from an actuarial standpoint.
It was some time back that I read about a study in a European country with government-provided national health care with a surprising factoid about costs and smoking.
In that study (sorry, no link), they tracked health care costs over the lifetimes of their citizens.
It turned out that the smokers cost less.
Did they have fewer cases of cancer? No, they had more. Heart attacks and strokes? Again, more, not fewer.
So how could a group of people with expensive illnesses cost less?
The answer falls to my joking reply to assertions about the death rate. I say the death rate will always be one per person.
Even healthy people eventually die. When they do, they have expensive illnesses. In the mean time, they have normal illnesses, checkups, etc.
Those who choose unhealthy lifestyles tend to die sooner, which limits the cost of their care. I know this sounds very hard-hearted, but the debate my friend and I were having was about costs.
The fascinating part of the discussion was that my friend (well into his 80’s, and he rides 100-mile bicycle races each year) is that he is an example of a person who lives with “healthy” habits, and costs the taxpayers millions as a result.
His Medicare and Social Security contributions ended 20 years ago, shortly after the 1986 tax increases that quadrupled Social Security and Medicare tax rates.
At that time, the idea was to increase the premiums paid to a level that would cover the expected costs. But there weren’t prescription drugs included in the calculation. Even if they had been charging enough during my friends’ working life to cover expected costs including prescriptions, they obviously couldn’t include treatments or diagnostic tests that hadn’t been invented yet.
That’s the problem. My healthy friend has a kind of macular degeneration that gets treated, quite effectively, with a drug that costs $50,000 per year. He has gotten the treatment for several years, and my well get it for many years to come. When he was paying into the insurance pool, that treatment didn’t even exist.
Add in his Social Security, normal medical care, and the inevitable eventual end-of-life medical care, and my friend is really costing the taxpayers a bundle.
On the other hand, smokers often die before they turn 65, meaning they don’t cost Medicare or Social Security a dime. The “perfect” client for taxpayer-provided insurance is like Humphrey Bogart, who earned a lot of money in his working life, and then died of smoking-related cancer at the age of 58.
But smokers also pay higher health insurance premiums while they’re alive. They also pay huge taxes. They also pay the cost the cigarette companies pay out to the states, supposedly to compensate the states for additional health care costs.
As all of us in the securitization market know, that money from the tobacco settlement never gets spent on health care for smokers. In fact, most states turned around and securitized future receipts from that settlement, and used the proceeds from 20 years of future payments to cut taxes or spend on pet projects right away.
So, consider the smokers, who may well cost less than the rest of us (as a total), yet they pay three times – once for their current insurance, again in their cigarette taxes, and a third time in the extra that they pay for the tobacco litigation settlement extorted from the companies.
So, thank you for smoking.
Would you like a Twinkie chaser with that Marlboro Light?
PS to Chris if he reads this: Send me a message via the Blowback page, and I’ll tell you why I feel I owe you another apology, because it’s weighed on my conscience for 35 years.