Cost of Smoking

Manufacturing costs of a pack of cigarettes are ridiculously low. According to an annual report from Philip Morris (2012), it costs the company 26 cents to manufacture one pack of Marlboro Gold. R.J. Reynolds Tobacco Company annual report (2013) shows that it costs them 23 cents to make one pack of Winslow Light cigarettes.

However, because of heavy taxation and shipping and handling costs smokers pay a lot more to feed their addiction. It’s difficult to come up with the exact numbers since the price for a pack of cigarettes varies from state to state but let us take a look at the highs and the lows.

The cheapest pack of cigarettes can be bought in the state of Virginia – only $5.25 per pack. Assuming a smoker smokes one pack a day in one year’s time they are going to spend approximately $1,916.25. Over the course of 50 years, assuming that they stay on one pack of cigarettes per day, the cost climbs up to $95,812.5. That amount of money can buy a decent vacation home, a new electrical car, or pay for college education.

The priciest pack of cigarettes can be bought in the state of New York. The average cost is $12.85. A bit of simple math tells us that that totals $4,690.25 per year for a smoker who smokes one pack a day. Over 50 years it climbs up to $234,512.5. For comparison, estimated cost of raising a child until the age of 18 is $250,000.

The numbers are mind-boggling as they are but just imagine how much money smokers could accumulate over the course of 50 years if they put what they spend monthly on cigarettes into a savings account. We’ll use a modest compound interest rate of 4%.

  • Virginia – Total Deposits = $94,800, Interest = $206,878, Final Balance = $301,678
  • New York – Total Deposits = $231,600, Interest = $505,412, Final Balance = $737,012

When we put it like that, smoking cessation seems like a smart choice, right?

Of course, the cost of cigarettes is only a fraction of real costs smokers accumulate over the years. This calculation doesn’t take into account home refurbishing, material damage related to smoking, or health care costs associated with the habit.

Smoker’s Medical Expenses

Typically, smokers will pay more for their healthcare coverage. Due to the fact smoking causes a myriad of health issues, most of which are quite serious, insurance companies charge higher premiums to smokers. This is because insurance companies pay a lot more in health claims for smokers but also because they collect less revenue from them due to higher smoker mortality rates. On average, smokers pay 15 – 20% more on their monthly premiums than non-smokers.

For example, if a non-smoker pays $200 per month, a smoker can expect to pay $240. Using the same calculation as we did for a pack of cigarettes smokers will pay $24,000 more than non-smokers in insurance premiums over the course of 50 years. Of course, not everything is included in basic coverage and should smokers require treatment of serious conditions related to smoking, out of the pocket costs can number in tens of thousands of dollars.

Usually, current smokers can expect to pay highest premiums but the cost is also larger for anyone who has ever smoked in their life. Lifelong non-smokers pay the lowest rates, assuming we hold all other qualifiers at a normal level (no pre-existing conditions, good physical condition, no obesity, and others).

Smokers will pay more even under Obamacare – sometimes up to 50% more in premiums. However, Obamacare requires all plans to cover smoking cessation programs at no extra out-of-the-pocket cost.

Employer Smoking-Related Costs

CDC estimates that employers acquire $156 billion dollars in cost every year in lost productivity that is related to smoking. A smoker costs the employer thousands of extra dollars per year.

  • Smokers tend to get sick more often and their illnesses last longer, requiring the employer to hire a temporary worker to cover the workload.
  • Property maintenance costs are higher (clean-up, refurbishing, extra facilities).
  • Fires related to smoking
  • Smokers retire earlier
  • Settlements – non-smokers regularly win secondhand smoke-related lawsuits

Smokers take, on average, four 10-minute breaks every day from smoking. In this manner, 12 working days are lost every year for one employee who smokes. When talking about health care premiums, companies end up paying $170 billion more because every worker costs $21 extra per day when compared to a non-smoker.

Tobacco-Related Government Spending

Smokers and employers aside, the government also spends a great deal of money on smoking-related diseases, accidents, and clean-ups. In 2009, total combined state spending on smoking in terms of Medicaid was $17.1 dollars. The state of New York was the biggest spender, spending just over 3.3 billion and a distant second was California, spending close to $1.8 billion. The most conservative spender was Wyoming – only $22.4 million.

Federal Medicaid costs totaled $22.5 billion and other health and smoking-related federal costs came to about $4 billion. Other related government costs came to nearly $69 billion – wildfires, environmental protection and other, more on which you can read here (Smoking and Environment).

To sum up, the government spends $112.4 billion of taxpayers’ money every year to cover expenses that can be directly related to smoking. The actual cost possibly exceeds that amount when we factor in all the environmental issues that the tobacco industry is contributing to.

On the other hand, smoking-related government revenues barely reach $25 billion per year. Money spent by the government on smoking could be put to better use by funding colleges, schools, health research and more.

In conclusion, smokers need to be aware that smoking costs not only them but all around them as well. Every smoked pack of cigarettes comes with the $35 healthcare cost related price tag. Quitting will not only make you healthier – it will also make you richer.