The governmental composition of the insurance costs of smoking

The estimated health risks from smoking have significant external financial consequences for society. Studies at the national level indicate that ciga rettes are self-financing since external costs such as those due to illness es are offset by cost savings associated with premature death, chiefly pens ion costs. This paper extends this analysis to all 50 states and considers the costs considered in the state attorneys general suits against the cigar ette industry. Cigarettes are always self-financing from the standpoint of costs to each state. The extent of the cost savings is less than at the fed eral level. However, smokers' higher medical costs are outweighed by reduce d nursing home expenditures, lower pension costs, and excise taxes, where e ach of these factors alone usually exceeds the medical cost effect.