Article Text

Economic burden of smoking in Korea
1. H Y Kang1,
2. H J Kim2,
3. T K Park3,
4. S H Jee1,
5. C M Nam2,
6. H W Park4
1. 1Graduate School of Health Science and Management, Yonsei University, Seoul, South Korea
2. 2Department of Preventive Medicine, College of Medicine, Yonsei University
3. 3Department of Economics, School of Business and Economics, Yonsei University
4. 4Department of Medical Law and Ethics, College of Medicine, Yonsei University
1. Correspondence to: Hyoung Wook Park, Department of Medical Law and Ethics, College of Medicine, Yonsei University, 134 Shinchon-Dong, Seodaemun-Ku, Seoul, South Korea; hykang{at}yumc.yonsei.ac.kr

## Abstract

Objective: To support tobacco control policies in Korea by providing the estimated annual economic burden attributed to cigarette smoking.

Methods: The following two different approaches were used to estimate the cost: “disease specific” and “all causes”. In the disease specific approach, we focused on estimating direct and indirect costs involved in treatments of cardiovascular, respiratory, and gastrointestinal diseases, and cancer as a result of smoking, by using an epidemiologic approach—the population attributable risk (PAR). To compute PAR, the relative risks of smoking in terms of physician visits, hospital admission, and death were estimated using the Cox proportional hazard model. In the all causes approach, we examined the differences in direct and indirect costs between smokers and non-smokers for all conditions and types of disease. The major data source was the Korea Medical Insurance Corporation cohort study, which had complete records of smoking status as of 1992 for 115 682 male and 67 932 female insured workers.

Results: By the disease specific approach, the estimated costs attributable to smoking in 1998 in Korea ranged from US$2269.42 million ($4.89 million per 100 000 population; 0.59% of gross domestic product (GDP)) to $2956.75 million ($6.37 million; 0.78% of GDP). The all causes approach yielded a minimum cost of $3154.75 million ($6.79 million; 0.82% GDP) and a maximum of $4580.25 million ($9.86 million; 1.19% GDP).

Conclusion: The study confirms that smoking places a substantial economic burden on Korean society. In light of this, our study provides evidence for a strong need to develop a national policy to effectively control tobacco consumption in Korea.

• economics
• policy
• Korea
• GDP, gross domestic product
• KMIC, Korea Medical Insurance Corporation
• PAR, population attributable risk
• PYLL, potential years of life lost
• RR, relative risk

## Statistics from Altmetric.com

The prevalence of smoking in Korea is among the highest in the world, making Korea an important target market by multinational tobacco companies. In 1999, about 66.6% of men and 3.3% of women over the age of 20 were smokers in Korea.1 Considering that secondhand smokers were barely protected at worksites or public places by any sort of relevant regulation, the size of the population exposed to smoking related risks would be much greater than the estimates that are based on the reported smoking rate.

Despite the high prevalence of smoking, and especially that of unprotected secondhand smoking in Korea, Korea lacks effective national policies to reduce its smoking rate. This is partly due to the special circumstance between the Korean government and the tobacco industry, in which the government holds the reins of the tobacco industry, from cigarette production to its distribution, and the profits generated from sales are transferred to the national treasury. The government displays two faces in regard to cigarettes: as the main producer of cigarettes in Korea, it needs to maximise revenues from cigarette sales, but at the same time it has the responsibility to reduce the smoking rate to improve public health. Because these dual roles are obviously in conflict with each other, the government has been ineffectual in improving anti-tobacco policies. In addition, the public holds the prevailing perception that national policies on tobacco control, whether through an increase in cigarette sales tax and/or restriction of smoking in designated areas, violate smokers’ rights rather than protect non-smokers’ rights.

With the obvious conflicting role of the government and public misconception, an effective mechanism to convince the negative impact of smoking on our society must be established to provide a persuasive support for the need of tobacco control policies in Korea. While the impact of smoking on public health has been well documented by a number of studies,2–5 no attempt has ever been made to estimate systematically the economic impact of smoking on Korean society. Thus, our study was conducted to provide an estimate of the costs imposed on our society as a result of smoking to justify the establishment of tobacco control policies.

## METHODS

### Study subjects and data source

The major data source was the Korea Medical Insurance Corporation (KMIC) cohort data, consisting of 115 682 male (a 25% random sample) and 67 932 female insured workers (100%) of KMIC. KMIC provides health insurance to civil service workers, teachers, and their dependants, representing 10.7% of the entire Korean population. All insured employees are required to participate in biennial medical examinations performed by KMIC. The examination is optional for dependents. The cohort data included the medical examination records for their smoking status as of 1992 and information on health care utilisation and mortality during the follow up period (January 1993 to December 1998), which was based on insurance claims data and vital statistics. The age distribution of the study cohort was from 35–59 years in the baseline year of 1992 and extended to a maximum of 64 years during the follow up period.

Study subjects were classified as current smokers if they had been smoking for at least one year as of the date of the medical examination, ex-smokers if they had smoked but had quit, and non-smokers if they had never smoked. About 57.5% of the male participants were current smokers and 21.3% were ex-smokers. These proportions were very similar to the national average for the same age group.1 For female subjects, the current smokers and ex-smokers were only 0.4% and 0.5%, respectively, which were considerably smaller than the national average of 2.4% and 1.5%.1 To control for the potential bias resulting from the phenomenon that smoking associated risks change with age (that is, aging effect) and accumulate (that is, calendar effect) during the follow up period, the number of medical utilisations, deaths, and person years were stratified by age and one year calendar period for males and females separately.6

To examine the excess risk among smokers ⩾ 65 years of age, we used the cross sectional data of 1997 medical examination report for a random sample of the elderly dependents of the KMIC enrollees, which consists of 57 061 male and 78 436 female dependents. Their health care usage and mortality in 1998 were examined to estimate relative risks of elderly smokers.

Younger smokers under the age of 35 were excluded from the analysis because of the general tendency that the cumulated effects of smoking on morbidity and mortality rarely appear before the smokers enter middle age.7,8

### Cost estimation

The total cost of smoking was assessed as the sum of direct and indirect costs related to smoking. Direct costs included medical costs for hospitalisation and outpatient visits, costs of transportation to health providers, and expenses for caring for the patients by caregivers. Indirect costs were the economic loss from absence from work resulting from hospital admissions and physician visits, and opportunity costs due to premature death.9 By combining the separate estimations of cost of smoking for each group of current and ex-smokers, total cost of smoking was computed.

Two different methodologies were employed to estimate the costs: the “disease specific” approach10–12 and the “all causes” approach.8,13 In both approaches, costs were computed according to the prevalence based method, which measured current costs associated with smoking currently and in the past.8,14,15 Table 1 presents the comparison of the two estimation methods. Appendix 1 shows the cost estimation equations.

Table 1

Comparison of cost estimation methods between the disease specific and all causes approaches

#### Disease specific approach

Figure 1 presents the conceptual framework of cost estimation by the disease specific approach. We examined additional costs incurred among smokers to treat four major disease categories (cardiovascular, respiratory, and gastrointestinal diseases, and cancers; see tables 2 and 3) proven to be caused by smoking 10–12,16–18 using epidemiologic methodology of population attributable risk (PAR) to smoking.6 To calculate PAR, adjusted relative risk (RR) of smoking in terms of physician visits, hospital admission, and death were estimated respectively, using the Cox proportional hazard model upon the first event of individual subjects during the follow up period. Each RR estimation for male subjects was adjusted for other risk factors, such as age, body mass index, alcohol consumption, and serum total cholesterol. Because the number of female smokers among the KMIC cohort was too small to obtain stable estimates of RR, the RR of male smokers was used as a proxy measure for female smokers. Diseases showing RR of ⩽ 1 were excluded from the analysis because it implies that smoking does not work as a risk factor for those diseases among the Korean population.

Table 2

Relative risks and population attributable risks of medical utilisation caused by smoking related diseases in Korea, male, 35–64 years old

Table 3

Relative risks and population attributable risks of mortality caused by smoking related diseases in Korea, male, 35–64 years old

Figure 1

Conceptual framework for estimating smoking costs by disease specific approach. *Smoking caused diseases include cardiovascular, respiratory, and gastrointestinal diseases, and cancers, which earlier studies had proven were caused by smoking (see tables 2 and 3 for specific diseases included in each disease category).

### All causes approach

A total cost of $3154.75 million ($6.79 million per 100 000 population, 0.82% of GDP) to $4580.25 million ($9.86 million per 100 000 population, 1.19% of GDP) was estimated according to all causes approach. This includes −$88.09 million for direct medical costs, −$19.83 million for transportation costs, $19.42 million for caregiver’s economic costs,$16.50 million for productivity loss costs, and $3226.75 million or$4652.25 million for premature death costs. About 284 260.7 and 61 470.1 years were estimated as PYLL related to current and ex-smoking, respectively (table 6).

Table 6

Estimates of the potential years of life lost because of smoking in Korea, by all causes approach, 35–64 years old

## DISCUSSION

The results of our study show that Korea spent an extra $2269.42 million to$4,580.25 million (0.59 to 1.19% of GDP) in 1998 because of cigarette smoking. This confirms that high prevalence of smoking in Korea not only has a considerable public health impact, but also imposes a substantial economic burden on society. Some people argue that tobacco consumption contributes to our economy by generating earnings for tobacco farms, revenue to all the business involved in production, distribution, and sales of cigarettes, and tax income for the government. However, the revenues generated from tobacco consumption are generally compensated by the price that smokers pay when they purchase cigarettes. Therefore, the economic costs estimated in this study represent the net costs attributable to smoking.

Among the various types of costs, premature death costs accounted for the largest proportion of the total costs, followed by medical, transportation, caregiver’s, and work loss costs. Medical costs represents only 6.6–8.6% (disease specific approach) of the total costs, which is considerably smaller than the case of the USA.7 This could be explained by differences in the level of medical fees and risk for smoking related diseases between the two countries, and the types of health care utilisation considered in the analysis. On average, the medical price for the same procedure provided in the USA is about 5–38 times that in Korea.27–29 In the present study, the amounts spent for nursing home care and home health services were not taken into account because patients rarely or minimally use these types of services in Korea yet, whereas they were included in most of the US studies.13

One strength of this study is that it estimated costs using the two distinct methods to complement the limitations of each method. Traditionally, the disease specific approach has been considered as a state of art to estimate costs of smoking. However, recent studies have revealed that the disease specific approach has a limitation of omitting substantial morbidity and mortality costs by restricting the cost estimation to the treatments of the major four disease categories (respiratory, cardiovascular, and gastrointestinal diseases, and cancers) proven to be directly associated with smoking.8,13,25 For instance, people suffering from smoking caused diseases are at a higher risk of having secondary diseases due to the greater difficulty of managing these diseases, most of which do not appear to be directly related to smoking, and are therefore likely to incur additional health care costs. Also, risk taking behaviours such as more drinking, less careful driving, and less health conscious behaviour by smokers than non-smokers24,25 may induce additional health care use, of which association with smoking is often overlooked. Therefore, if we restrict our analysis to the four major diseases, the full range of the costs attributable to smoking will not be captured. On the other hand, all cause smoking attributable expenditure might give us a risk of overestimation because all the morbidity and mortality costs were reflected in the cost estimation regardless of the strength of the association with smoking.24 In addition, the all causes approach is based on the average annual per capita difference in costs for smokers and non-smokers, whereas the disease specific approach is based on risk ratios. In general, differences are less generalisable than ratios. Thus, to overcome these shortcomings, the present study incorporates the results from both methods.

Interestingly, the current (−$88.08 million) smokers spent a lot less direct medical costs than non-smokers according to all causes approach, while ex-smokers (−$0.002 million) spent slightly less. There could be several explanations for this. Firstly, in general, smokers can remain smokers because the cumulated effects of smoking on their health have not appeared yet. On the other hand, most ex-smokers have quit smoking because they developed chronic health problems. Thus, it is possible that ex-smokers have a higher health care expenditure than current smokers.13 Secondly, it is argued that smokers tend to seek health care less actively than non-smokers because they have less concern for their health.25,30

### What this paper adds

While the impact of smoking on public health has been well documented by a number of studies, no attempt has ever been made to estimate systematically the economic impact of smoking on Korean society. Thus, this study was conducted to provide an estimate of the costs imposed on Korea as a result of smoking to justify the establishment of tobacco control policies.

By quantifying the economic burden of tobacco consumption on society, this study provided empirical evidence of potential savings that Korea could achieve by implementing effective tobacco control policies. It is hoped that the results of this study will help to motivate the government to take a more active role in implementing effective non-smoking policies to curb tobacco related illness and economic losses.

The total transportation costs spent by current smokers (−$22.08 million) were less than those by non-smokers according to the all causes method. On the contrary, for caregiver’s costs, current smokers ($9.92 million) spent more than non-smokers. Difference in utilisation patterns between inpatient and outpatient care among current smokers may explain these contradictory results. As mentioned above, smokers are less likely to seek health care than non-smokers. They tend to seek health care only when their conditions become so grave that they require hospitalisation. Thus, considering all types of diseases without restricting to the four major disease categories, we learn that smokers use less outpatient care, but more inpatient care, than non-smokers. Accordingly, transportation costs estimated on the basis of outpatient visit rates showed negative values, while caregiver’s costs based upon hospitalisation rates gave positive values.

Our estimation is subject to underestimation for several reasons. Firstly, to compute the costs of lost productivity, excess absence was defined as time spent during hospitalisation or ambulatory care in treating smoking related diseases. However, it generally takes time to recover normal productivity after discharge or physician visits and smokers have been found to have more short term illnesses and days off work.31 Thus, our definition for excess absence results in underestimation. Secondly, since Korea has an extremely high prevalence of smoking over a wide range of age groups, the rate of passive smoking would be considerable. Moreover, because of the lack of appropriate policies to protect non-smokers either at work sites or public places in Korea, the impact of passive smoking would be much greater than in other countries having appropriate protection policies. However, because data providing the information on the level of exposure of secondhand smoking are not available, it is difficult to estimate the rate of passive smoking. Thirdly, the expenses not covered by medical insurance were excluded from the cost evaluation. In particular, the use of oriental medicine, which is a very popular form of medical care among Korean people that is generally not covered by health insurance in Korea, could not be incorporated into the cost estimation. Lastly, because of the lack of empirical evidence in quantifying costs, many costs that are associated with smoking were omitted in the analysis. These costs include: cleaning buildings and streets, annoying non-smokers, fixing articles damaged by cigarette burns, time and costs spent in trying to quit smoking, implementing tobacco control policies, and smoking research and education programmes.32

There might be a problem in regard to how representative the KMIC enrollees are. Presumably, smokers with chronic health problems would not be in this workplace insurance scheme and this may also bias downwards the smoking related diseases. The working population would also presumably have some different characteristics from the whole population in terms of smoking rates and health care usage.

In conclusion, by quantifying the economic burden of tobacco consumption on society, our study provided empirical evidence of potential savings that Korea could achieve by implementing effective tobacco control policies. Recently, the need for tobacco control has received great attention and various strategies to reduce smoking rates have been developed and applied around the world. However, despite the high prevalence of smoking, Korea lacks effective strategies to reduce its smoking rate. It is hoped that the results of this study will help to motivate the government to take a more active role in implementing effective non-smoking policies to curb tobacco related illness and economic losses.

## APPENDIX: COST ESTIMATION EQUATIONS

### Disease specific approach

1) Direct medical costs for hospitalisation

where, i = 1,..., nth disease

j = 1 if male, 2 if female

INij = total number of inpatients with “i” in 1998

PAR(I)ij = population attributable risk for hospitalisation with “i” caused by smoking

where, RR(I)ij = relative risk of smoking for hospitalisation with “i”

P(C)j = % smokers among the national population over 35 in 1998

IPij = average per capita annual hospitalisation costs to treat “i”

2) Direct medical costs for physician visits

where, ONij = total number of outpatients with “i” in 1998

PAR(O)ij = population attributable risk for physician visits with “i” caused by smoking

OPij = average per capita annual physician visit costs to treat “i”

3) Transportation costs

where, Vij = average per capita annual physician visits to treat “i”

4) Caregiver’s economic costs

where, Hij = average per capita annual inpatient days to treat “i”

5) Costs of absence from work

6) Premature death costs

where, k = 1 if 35–39, 2 if 40–44, 3 if 45–49, 4 if 50–54, 5 if 55–59, 6 if 60–64, 7 if 65–69,

and 8 if ⩾ 70 years old

Dijk = total number of deaths among national population caused by “i” in 1998

PAR(D)ij = population attributable risk for death with “i” caused by smoking

PYLL jk = potential years of life lost

### All causes approach

1) Direct medical costs for hospitalisation

where, IC(S)jk = average per capita annual hospitalisation costs among smokers

IC(NS)jk = average per capita annual hospitalisation costs among non-smokers

T(S)jk = total number of smokers in the nation in 1998

2) Direct medical costs for physician visits

where, OC(S)jk = average per capita annual physician visit costs among smokers

OC(NS)jk = average per capital annual physician visits costs among non-smokers

3) Transportation costs

where, V(S)jk = average per capita annual physician visits among smokers

V(NS)jk = average per capita annual physician visits among non-smokers

4) Caregiver’s economic costs

where, H(S)jk = average per capita annual inpatient days among smokers

H(NS)jk = average per capita annual inpatient days among non-smokers

5) Costs of absence from work

6) Premature death costs

where, D(S)jk = probability of death per year among smokers

D(NS)jk = probability of death per year among non-smokers

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