"taxation on cigarettes offsets the direct cost caused by smoking".

By about 25 percent. I calculated it a few years back combining the total US taxes on tobacco (state, federal and local) and comparing it to the Medicare expenditures on treating the percentage of lung cancer caused by tobacco smoking. This is actually pretty skewed against my claims since tobacco isn't always smoked so the tax from smoking is smaller than the total tobacco tax revenue, Medicare only pays for a portion of the lung cancer treatments (since not everyone uses Medicare but the private insurance data isn't as available), and this is only one albeit expensive aliment caused by tobacco smoking. So 25 percent is a generous estimate.

Long story short "sin taxes" don't actually pay for anything, it's a complete myth mostly promoted by people who want to use the product.

Smokers on average don't die that much younger. But they do have a much less healthy end of life.

The life expectancy of male smokers, ex-smokers, and never-smokers at age 40 years was 38.5, 40.8, and 42.4 years respectively. In women, the corresponding life expectancies were 42.4, 42.1, and 46.1 years.

For private healthcare maybe? A lot of the reasons private insurance groups are even somewhat functional is because the vast majority of healthcare cost are shifted over to medicare once people start falling apart.

Most things like cardiovascular disease and lung cancer happen in the late 50s or older. People who aren't yet old enough for medicare will file for disability to access it earlier in the event of severe illnesses.