The Economic impacts of the tobacco settlement

David M. Cutler, Jonathan Gruber, Raymond S. Hartman, Mary Beth Landrum, Joseph Newhouse and Meredith B. Rosenthal
Additional contact information
David M. Cutler: Department of Economics, Harvard University, Postal: Department of Economics, Harvard University
Jonathan Gruber: Department of Economics, MIT, Postal: Department of Economics, MIT
Raymond S. Hartman: Lexecon, Inc., Cambridge, Massachusetts, Postal: Lexecon, Inc., Cambridge, Massachusetts
Mary Beth Landrum: Department of Health Care Policy, Harvard Medical School, Postal: Department of Health Care Policy, Harvard Medical School
Meredith B. Rosenthal: Department of Health Policy and Management, Harvard School of Public Health, Postal: Department of Health Policy and Management, Harvard School of Public Health

Journal of Policy Analysis and Management, 2002, vol. 21, issue 1, 1-19

Abstract: Recent litigation against the major tobacco companies culminated in a master settlement agreement (MSA) under which the participating companies agreed to compensate most states for Medicaid expenses. Here the terms of the settlement are outlined and its economic implications analyzed using data from Massachusetts. The financial compensation to Massachusetts (and other states) under the MSA is substantial. However, this compensation is dwarfed by the value of the health impacts induced by the settlement. Specifically, Medicaid spending will fall, but only by a modest amount. More importantly, the value of health benefits ($65 billion through 2025 in 1999 dollars) from increased longevity is an order of magnitude greater than any other impacts or payments. The net efficiency implications of the settlement turn mainly on a comparison of the value of these health benefits relative to a valuation of the foregone pleasure of smoking. To the extent that the value of the health benefits is not offset by the value of the pleasure foregone, the economic impacts of the MSA will include a share of these health benefits. © 2002 by the Association for Public Policy Analysis and Management.

Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
http://hdl.handle.net/10.1002/pam.1037 Link to full text; subscription required (text/html)

Related works:
Working Paper: The Economic Impacts of the Tobacco Settlement (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:jpamgt:v:21:y:2002:i:1:p:1-19

DOI: 10.1002/pam.1037

Access Statistics for this article

More articles in Journal of Policy Analysis and Management from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().