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Effects of Tobacco Taxation Upon Population Health Status

Institution: University of California, San Diego
Investigator(s): Robert Kaplan, Ph.D.
Award Cycle: 1997 (Cycle 6) Grant #: 6PT-2004 Award: $206,547
Subject Area: Public Health, Public Policy, and Economics
Award Type: Integrated Research Project

Initial Award Abstract
The purpose of the proposed project is to estimate the health status effects of changes in tobacco excise tax policies for Hispanic residents of California. In order to build the model, we will first evaluate the effects of tax upon consumption using data files maintained by the UCSD Cancer Center. The data include monthly cigarette sales, average price and state and federal tax data for each state since 1983. Time trend analyses on these data will be conducted using LOESS. Using a national database, we will divide states into those that raised taxes by 10 cents or more since 1989 and those that did not. Next, we will use the California Tobacco Surveys to estimate the effects of price upon consumption for California Hispanic adults and adolescents. Preliminary evidence suggests that Hispanic consumers may be more price sensitive because they are (on average) less addicted and may have less disposable income. After estimating the effects upon consumption, a second model will link consumption to health status. Most models of health outcome emphasize effects on mortality or on life expectancy. However, early mortality offers only an incomplete picture of the consequences of cigarette smoking. In addition to early death, tobacco consumption causes significant and prolonged loss in quality of life through illnesses such as chronic obstructive pulmonary disease (COPD). This proposal uses a combined index of morbidity and mortality known as the quality adjusted life year (QALY) to demonstrate changes in life expectancy with adjustments for quality of life. The proposed project will create estimates of the policy impact of tobacco excise tax variations upon (QALYs) specific to the California Hispanic population. A wide variety of simulations will be performed in order to develop confidence interval estimates for various proposals. Alternative policies will be evaluated and estimates of the revenue and health benefits associated with different alternatives will be discussed.

Final Report
The purpose of this project was to estimate the public health benefits of tobacco excise tax for Latino residents of California. Tobacco excise tax may benefit public health for at least two reasons. First, a significant tobacco tax increase may generate substantial revenue that might be used to support public health programs. Second, tobacco tax may result in reduced consumption of tobacco products, and these behavioral changes may ultimately be recognized in improved population health status. We created mathematical models to estimate the health status effects of changes in tobacco excise tax policies for California residents and for the Latino population of California. The study had four specific aims and progress toward each aim is briefly discussed below: Specific Aim 1) Simulate expected changes in tobacco consumption in the Latino community as a function of different excise tax policies. Result: We showed that in the base case of a $.50 tax and an elasticity -1.00, the policy would produce an immediate gain of about 3000 Quality Adjusted Life Years (QALYs) for the Latino Population and a gain of about 4,100 QALYs each year at steady state. Specific Aim 2) Build computer models to estimate the number of Quality Adjusted Life Years each policy would produce. Result. In order to complete the project, a general model was developed. The model suggests that for all California citizens in the base case of a $.50 tax and an elasticity -0.40 the tax would produce an immediate gain of about 8,300 QALYs and a gain of about 14,900 QALYs each year at steady state. Specific Aim 3) Compare the cost-effectiveness of tobacco excise tax polices to other public health policies. Result. We have demonstrated that tobacco tax is one of the few public health policy options that produces revenues while also improving public health benefits. The analysis suggested that the policy is "dominant" which means that ordinary cost-effectiveness comparisons are not necessary. In contrast to other programs that use resources in order to obtain health benefit, tobacco tax programs enhance health benefit without adding cost. Specific Aim 4) Estimate the additional QALYs that could be produced using tax revenues. Result: We considered potential health benefits that might be derived from tobacco tax revenue. Assuming that 250 million dollars in tax revenues might be directed to other health programs, we estimated that more than 50 thousand life years might be added for the California population if the money was directed toward smoking cessation programs, 10,500 added with Lovastatin treatment of 55-64 year old men with total cholesterol levels greater than 300 mg/dl, and 2 thousand life years could be added through treatment of moderate hypertension with Captopril.