A new report shows Arizona could save billions of dollars if it lowered the number of residents who smoke.
Common Sense Institute Arizona released a report on Wednesday morning showing the effects that cigarette smoking has on Arizona’s fiscal costs. CSI discussed the report and smoking’s impact on Medicaid costs with The Center Square during an exclusive interview.
The report found cigarette smoking represents up to $11 billion in yearly total health care expenditures in the state.
Arizonans who smoke have fallen from 19.3% in 2011 to 10.2% in 2026, which ranks the state as the 17th lowest rate in America, the report found.
According to the report, 18.9% of Arizonans enrolled in the state’s Medicaid smoke.
Zachary Milne, a senior economist for CSI, told The Center Square that nationwide smoking rates are higher among Medicaid enrollees compared to the rest of the population.
Milne said the report is “as much about Medicaid costs as it is about cigarette smoking.”
The report is in the context of the federal and state governments seeking ways to reduce Medicaid spending, he said during the exclusive interview.
Milne referenced the changes in H.R. 1, also known as the One Big Beautiful Bill Act, to Medicaid eligibility rules, including who is eligible for the program, how people remain eligible and how states pay for the program.
He added it is becoming “increasingly important” for states to “find ways to limit” Medicaid costs.
Extensive research shows “that medical costs associated with cigarette smoking are quite significant,” Milne noted.
”Given the higher prevalence of cigarette smoking among Arizona’s Medicaid enrollees, it means those costs are disproportionately borne by the Medicaid system,” the economist stated.
Milne told The Center Square if Arizona can reduce its smoking population by 1 percentage point, it could save the state between $257 million and $1.1 billion in personal health care expenditures and decrease productivity losses by nearly $151 million.
On top of this, the report said if Arizona could get its smoking population below 5%, it could save the state $1.2 billion annually.
Milne said “smoking contributes about $182 million annually in excess Medicaid costs from Arizona’s general fund.”
To contextualize this number, he said the $182 million “could fund nearly 7%” of Arizona’s state Medicaid general fund budget.
The report said this excess money spent on Medicaid is around 22% of the average annual increase in Arizona’s general fund “spending over the past decade.”
According to Milne, a concern exists that Arizona’s Medicaid budget will continue to increase, given the numerous expansions over the last two decades.
Enrollment in Arizona’s state Medicaid has increased from 45 per 1,000 residents in 1985 to 260 per 1,000 residents in 2026, Milne noted.
As the number of people being enrolled in state Medicaid increased, its budget has nearly “quintupled in the last 20 years,” he said.
The report stated spending on state Medicaid accounts for almost one-third of Arizona’s total spending and nearly 12% of its general fund.
Based on fiscal year 2026 expenditures, Arizona’s seven Medicaid line items “would yield $3.8 billion in Medicaid expenditures tied to smoking related health care costs,” the report estimated.
