Tuesday, July 31, 2007

Under Plan to Use Cigarette Tax to Fund Children's Health Insurance, 22 Million New Smokers Would Be Required to Keep Program Solvent Over Next Decade

According to a report released by the Heritage Foundation, 22 million new smokers will be needed to fund the State Children's Health Insurance Program (SCHIP) by 2017 if a Congressional proposal to use a 61 cent per pack federal cigarette excise tax increase to fund expansion of the program is adopted.

A Senate panel has approved a plan to fund a $35 billion expansion of the SCHIP program using funds generated from a 61 cents per pack increase in the federal cigarette excise tax. The Heritage Foundation report notes that this proposal will make the government dependent upon continued smoking in order to adequately fund children's health insurance.

The major conclusion of the report is as follows: "Policymakers will somehow need to recruit new smokers if they insist on using the tobacco tax revenue to support SCHIP at proposed funding levels over the long term. In just five years, Congress will need over 9 million new smokers. Reauthorizing the program for 2013 to 2017 would require almost 22.4 million new smokers by the end of that period."

Policy makers may need even more smokers than this, since health insurance costs are rising: "But funding problems will likely begin before the end of the five-year horizon. Since the revenues from the tobacco tax are declining while the amount of SCHIP funds needed to maintain a level of purchasing power are increasing, Congress could face a shortage of smokers in just two years. In this case, Congress will need over 6.3 million new smokers between 2010 and 2012, which grows to 9 million new smokers needed in 2013 to support the government’s health program. Funding the expansion of a government health program through a tax on a toxic product with a declining revenue stream is not only paradoxical but also fiscally irresponsible. It is not a reliable source of continued funding."

The Rest of the Story

This is exactly the problem that I discussed in my earlier posts about this flawed proposal. You don't make something as critical as children's health insurance dependent upon recruiting a continuing new stream of smokers. Sure - the tax might cause some smokers to quit; however, those smokers need to be replaced in order for the nation's children to maintain their health insurance. This is an absurd way to fund health insurance for the children in this country.

If the cigarette tax is to be increased, revenues must be used for smoking-related causes. This is the one way to avoid the problem of making government programs dependent on recruiting new smokers. If the programs that are dependent on such revenues are programs such as smoking prevention, cessation, research, and treatment, then reducing the funding for them over time is ideal. It is a self-regulating system. As smoking falls, so does the need for the programs, and so does the revenue. Were smoking to increase, the need for the programs goes up, but so does the revenue to fund these programs.

Senator Enzi has introduced a proposal to increase the cigarette tax and use the resulting revenues to fund smoking prevention and cessation programs. He has done so both as an amendment to the FDA tobacco bill, which will be considered by a Senate committee tomorrow, and as a stand-alone bill.

Instead of wasting their time on two absurd proposals - one to ask the FDA to approve the most toxic consumer product on the market and the other to make the health care of our nation's children dependent upon recruiting millions of new smokers - Congress, if it is seriously interested in providing children's health insurance and making a dent in smoking, will nix the FDA and the SCHIP bills, find an alternative funding source to expand SCHIP, and consider using Senator Enzi's ideas as a starting point for a meaningful discussion about how federal policy might actually contribute something substantial to improving the public's health.

Incidentally, the winner of the T-shirt contest is Reynolds American, which designed the slogan "Congress Needs You To Smoke." That sums it up completely. Our policy makers, and ironically - our tobacco control groups - are promoting a measure that would require lawmakers to recruit millions of new smokers in order to provide health insurance for our nation's children.

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