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OIA Letter Eric Crampton H201001916

OIA Letter Eric Crampton H201001916

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Published by EricCrampton
Response to my Official Information Act request regarding the workings underlying the MoH figures on the cost of smoking.
Response to my Official Information Act request regarding the workings underlying the MoH figures on the cost of smoking.

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Published by: EricCrampton on Jun 16, 2010
Copyright:Attribution Non-commercial


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Excess Public Health System Costs associated with SmokingStatus - Methods
This paper gives an overview of two methods that can and have been used, internal tothe Ministry of Health (MOH), to calculate the direct excess health system costs
 associated with smoking status.At this stage, analyses have been undertaken and the results of these have becomefamiliar to some MOH staff, however no formal report detailing the methods andresults has been produced. This report serves to fill that gap and bring coherence tounderstanding of the range of results.Two different methods have been used to estimate the direct public health systemcosts associated with smoking in a year. Over the last 18 months these methods havebeen used to produce estimates between $0.775 and $1.5 billion depending on themethod, specification and assumptions involved. These figures may already befamiliar to some MOH staff but, as they were derived under different assumptions,they may be used in a misleading fashion without a clearer explanation.Both rely on the same initial assumption – if you take two groups of people who aredistinguished only by the fact they currently smoke or they have never smoked, thedifference in average health costs for these two groups will be reflective of the cost tothe health system of the first group’s tobacco use. That is, the excess cost for thesmokers group is due to smoking.Readers should note that if everyone stopped smoking today the health system wouldnot immediately accrue these cost benefits. In particular, the reduction of risk of premature death and other poor health outcomes due to smoking would probably takeat least five years to be realised to a significant extent.That said, part of this work identifies that people who stopped smoking more than fiveyears ago have nearly the same average costs as non-smokers (the excess cost isreduced by 85% compared to non-smokers) after adjusting for age, gender, ethnicgroup and deprivation score. One particularly encouraging result of these analyses isthat people who have stopped smoking within the five years appear to have muchlower costs as well (the excess cost is reduced by 66% compared to non-smokers).This analysis does not account for length of time since the individual started smokingso some caution should be taken in how quickly the expected cost benefits will start toaccrue to health system spending. It maybe that those people who stopped morerecently are predominantly those that have been smoking for a short period of timeand hence, have found it easier to quite and have suffered less from the affects of the
This paper, released under the Official Information Act in June 2010, is an internal report on work undertaken over the latter part of 2009 in the Health and Disability Intelligence Unit within the Healthand Disability System Strategy Directorate of the Ministry of Health.
We have chosen to use the word “cost” throughout this report – in the context the word “price” mighthave been more appropriate because in some of the health service utilisation collections an averagecontracted value was all that was available. An example is Emergency Department (ED) services,which are contracted at a fixed cost for each triage level even though actual costs in the ED will varywithin a triage category.
2exposure over the shorter period. The period the individual has been smoking isavailable so future analyses could test this hypothesis and provide potential estimatesaround the time until one would see most of the cost benefit in prevalence reductionaccruing.
Background information about the two methods
Figure 1 illustrates visually the excess cost attribution based on the comparison of mean costs for two groups distinguished only by their smoking status. The scale isindicative of relative cost difference but we do not provide actual dollar values at thisstage.Figure 1 Example of method output
Smoker Non-smoker
   M  e  a  n  p  u   b   l   i  c   h  e  a   l   t   h  c  o  s   t   (   $   /  y  e  a  r   /  c  a  p   i   t  a   )
Cost Excess Cost
 An extension of this idea is the assignment of people not to two groups but to three orfour. For example, the non-smokers can be divided into ex-smokers and people whohave never smoked. In addition the ex-smokers can be separated into recent quitters ornot so recent quitters (e.g. more than 5 years or fewer than five years since quitting).Here again the assumption has been that non-smokers and more particularly never-smokers will have the lowest average health costs (if the groups are sufficientlysimilar in other respects).
Stratification (adjusting for confounders)
The two methods used the same methodology for adjusting for the socio-demographicvariables of gender, NZDEP, age and ethnic group, in other words the control of confounding factors. Both methods rely on the stratification of people into socio-

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