The Financial Implications of Coverage of Smoking Cessation Treatment by Managed Care Organizations

Abstract

This paper presents results from a simulation of the financial impact and cost effectiveness of smoking cessation in a hypothetical managed care organization (MCO), using data from three large managed care organizations and from existing literature. With base-case assumptions and a market cost of capital, at five years, coverage of cessation services costs an MCO $.61 per member per month (PMPM). In a steady-state situation, net cost is $.41 PMPM. Both values include altered medical expenditures and MCO revenue patterns attributable to coverage-induced cessation. Quitters gain an average of 7.1 years of life, with a direct coverage cost of $3,417 for each life-year saved. Coverage of cost-effective programs by MCOs should be strongly encouraged.