Association for Public Policy Analysis & Management

The Center for Mississippi Health Policy was interested in estimating the actual costs to Mississippi Medicaid for treating tobacco use and tobacco related disease. Other state-level cost estimates of tobacco-related illness in the literature typically apply national estimates of Medicaid's share of costs, based on survey analysis, to state-specific Medicaid spending totals. The method used by The Hilltop Institute accounts for differing prevalence rates for tobacco-related diseases in the covered population, differences in Medicaid members’ rate of smoking, and the effects of a state’s provider payment policies on costs. This methodology could be adapted to other states to quantify their specific costs to Medicaid for tobacco-related illness.

To perform the analysis, the Mississippi Division of Medicaid (DOM) provided a limited data set of Medicaid and Children's Health Insurance Program enrollees and claims for calendar years 2016 and 2017. The authors reviewed literature to identify diagnosis codes from the International Classification of Diseases-10th edition (ICD-10) to select claims for Medicaid services that indicated a tobacco-related illness. The majority of the ICD-10 diagnosis codes were obtained from the U.S. Surgeon General’s 2014 Report, The Health Consequences of Smoking – 50 Years of Progress, along with additional diagnosis codes identified in more recent literature. A relative risk (RR) for smokers compared with non-smokers was determined from the literature for each tobacco-related disease studied that used regression analysis to determine the relative effects of smoking on disease outcomes controlling for confounders. The RR, along with the estimated rate of smoking among Mississippi Medicaid participants, enabled calculation of a smoking attributable fraction (SAF) for expenditures for health services with a primary diagnosis of a smoking-related illness. The resulting illness-specific estimates were summed to estimate Medicaid costs attributable to tobacco. In addition, the SAF for prescription drugs identified as treatments for tobacco-related illnesses, neonatal intensive care for infants affected by maternal tobacco use, and nursing facility costs for residents identified with tobacco-related illnesses were calculated. SAF of diseases likely to be caused by second-hand smoke were calculated separately. These additional cost estimates were summed to estimate total cost to Mississippi Medicaid for tobacco-related illness.

The net cost of tobacco-related illness to Mississippi Medicaid was estimated at $388 million in 2016 and $396 million in 2017, about 9 percent of annual Medicaid expenditures. The estimated costs using this methodology compares well to cost estimates derived using national estimates of the burden of tobacco-related illness to Medicaid. The comparison indicated that tobacco-related cost as a percentage of Medicaid spending in Mississippi was somewhat lower than national estimates, likely because children and younger adults are the dominant demographics in the Mississippi Medicaid population.