Wednesday, February 11, 2009

Article Points Out Folly of Using Cigarette Taxes to Fund Children's Health Insurance

An article on the KXMB news web site (Bismarck, ND) points out a new concern that the government has to worry about, now that Congress has tied the financial solvency of the SCHIP (children's health insurance) program to continued cigarette consumption. "Cigarettes To Cost $10/Pack In New York, Government Worries About Too Few People Smoking," the article warns.

Noting that the price of cigarettes in New York City will be over $10 per pack, which will drive many to quit or at least cut down on their smoking, the article notes that these decreases in cigarette consumption will lower the tax revenues in future years, thus threatening the solvency of the SCHIP program and ensuring that children will need to be kicked out of the program if the government doesn't do something to maintain current levels of cigarette consumption or find alternative revenue sources.

But, notes the article, if the government needs to find alternative revenue sources anyway than why not identify those sources now to create a fiscally sustainable program, rather than create the appearance of a solvent program, which appears to be somewhat deceptive.

According to the article: "While the idea of smokers quitting their habit may seem like a good thing to some ... what’s problematic is that if people quit smoking tobacco taxes are never going to fund the CHIP expansion. ... That’s why the CHIP bill is such a fraud. Anybody with common sense knew that taxing tobacco use into extinction is not a sustainable way to fund government-provided health care. The taxes are too high, and the tax base is too small. ... the point wasn’t ever to have tobacco users fund the bill inevitably. The point was just to get the foot of government health care expansion in the door. Once they had the CHIP expansion in place they knew full well that it would never go away, even if tax revenues from tobacco users did. So while we Americans were sold on the idea of getting government-provided health care at the expense of a not-so-sympathetic demographic like smokers the reality is that we’re all going to end up paying for CHIP as soon as the smokers finally give up their freedom to smoke in the face of blatant economic prohibition. It was a bait-and-switch from the get-go."

The Rest of the Story

I really hate to admit it, but I think this article has it exactly right. By definition, tying children's health insurance to cigarette revenues means that the program is in trouble if cigarette consumption falls. Sustained levels of smoking are necessary to keep children insured. The only way to maintain the program in the future is either to kick children off the rolls or to find an alternative, sustainable revenue source. But if there is a need to find a sustainable revenue source in the future, then why not find one now. If there is not a consensus about how to find such a source in the future, then the program may really be in jeopardy.

It's not like the government's economic woes are not great enough. Now we have to worry about the possibility that our budgets are going to be further hampered by, and the health coverage of our children hampered by, the fact that people might quit or cut down on their smoking.

(Thanks to Harry for the tip).

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