Premium
The Economic impacts of the tobacco settlement
Author(s) -
Cutler David M.,
Gruber Jonathan,
Hartman Raymond S.,
Landrum Mary Beth,
Newhouse Joseph P.,
Rosenthal Meredith B.
Publication year - 2001
Publication title -
journal of policy analysis and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.898
H-Index - 84
eISSN - 1520-6688
pISSN - 0276-8739
DOI - 10.1002/pam.1037
Subject(s) - settlement (finance) , medicaid , valuation (finance) , business , value (mathematics) , payment , economic impact analysis , economics , public economics , demographic economics , finance , economic growth , health care , microeconomics , machine learning , computer science
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 fromMassachusetts. The financial compensation to Massachusetts (and other states) under the MSA issubstantial. 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 healthbenefits ($65 billion through 2025 in 1999 dollars) from increased longevity is an order ofmagnitude greater than any other impacts or payments. The net efficiency implications of the settlement turnmainly on a comparison of the value of these health benefits relative to a valuation of the foregone pleasure ofsmoking. To the extent that the value of the health benefits is not offset by the value of the pleasureforegone, the economic impacts of the MSA will include a share of these health benefits. © 2002 by theAssociation for Public Policy Analysis and Management.