H.R. 1256, the Family Smoking and Tobacco Control Act

March 17, 2009

CBO released a cost estimate yesterday for H.R. 1256, the Family Smoking and Tobacco Control Act. This bill would authorize the Food and Drug Administration (FDA) to regulate tobacco products andrequire the agency to assess fees on manufacturers and importers of tobacco products to cover the cost ofthese new regulatory activities.

The effect ofthese activitieson the use of tobacco products is uncertain, in partbecause ongoing initiativesto reduce the use of tobacco products are expected to continue under current law. In particular, public health efforts by federal, state, and local governments and by private entities have contributed to a substantial reduction in underage smoking in recent years. For example, the recent increase in the federal excise tax on cigarettes, from $0.39 to $1.01 per pack, as a result of the Children's Health Insurance Program Reauthorization Act is likely to contribute to a continuing decline in smoking.

H.R. 1256would affectthe use of tobacco products through a combination of regulatory and economic factors. The regulatory changes with the largest potential to reduce smoking include: restricting access to tobacco by youths, requiring an increase in the size of warning labels on certain tobacco packaging (and authorizing the Secretary of HHS to mandate further changes to enhance warning labels), limiting certain marketing and advertising activities (especially those that target youths), and requiring FDA's permission before manufacturers can market tobacco products that suggest reduced health risks or exposure to particular substances. In addition, tobacco consumption would decline because the assessment of new fees on manufacturers and importers of tobacco products would probably result in higher pricesfor tobacco products. CBO expects that consumption of tobacco products in the United States would further decline as a result of enacting H. R. 1256. By 2019,CBO projects a decline of 11 percent among underage tobacco users and about 2 percent among adult users, as a result of this legislation.

CBO anticipates that FDA's regulation of tobacco products would lead to a decline in smoking among pregnant women, which would slightly decrease federal spending for Medicaid. A decline in smoking could affect health care spending for many other medical conditions, and CBO continues to examine the impact of smoking-related legislation on public and private payers. Counterintuitively, a reduction in smokingmight add to the government's costs in many cases by enabling some people to live longer and to incur health care costs over longer periods. In those cases, government spending forSocial Security, Medicare, andother retirement and mandatory spending programs, wouldincrease.