Here the fault is not the buyer or seller but the government. If you didn't financially penalise the smoker for smoking, he would have a disincentive to smoke. However, the government might decide to subsidise healthcare, thereby taking away the financial penalty of smoking. The government now takes away the financial burden of smoking and encourages people to smoke. I don't think people should smoke, which is why I would object to the government subsidising it.

If people want to indulge their very immediate needs at the future cost to their hip-pocket or health that's Thier indulgence and is what they rationally decided will make them happy. I think it's immoral to take money from taxpayers to subsidise behaviour that has harmful long-term effects.