Why the SCHIP Might Go Down
Last Wednesday, the House of Representatives passed a bill (289-139) to expand funding for the State Children’s Health Insurance Program (SCHIP). The bill is predicted to increase funding to SCHIP by $32 billion over a period of five years.
SCHIP, created in 1997, is the biggest public health insurance program since the creation of Medicaid and is targeted to insure children that come from households that earn too much to qualify for Medicaid, but too little to afford private health insurance.
A 61-cent tax increase on cigarettes, cigars, rolling papers, chewing tobacco and related products is supposed to fund the expansion of the program. This may not be a reliable funding source, however. Since 1964, the number of adult smokers in the United States has decreased by approximately 50 percent. A Kansas City Community Health Assessment released in 2006 reported that overall tobacco use in Missouri, for all ages, is expected to continue this decline. The same report noted, “Studies have shown that a 10% increase in the price of cigarettes reduces smoking by 7% for youth and consumption by 4% in adults.” This impact could be magnified after the passage of a tax increase as large as the current bill proposes.
It is possible that legislators have overlooked the number of smokers who may quit or find other ways of avoiding the tax — by purchasing cigarettes online, for example. An even greater cause for concern is the fact that in some cases (such as in Kansas), Medicaid covers the cost of tobacco counseling for quitters. Congress may be counting on revenues that have the possibility of turning into additional expenses. In addition, a Heartland Institute letter to Congress voices concern about the increased financial pressure that such a tax increase would bring for small businesses, “which often lean on tobacco sales to stay in business.”
Steve Voeller of the Arizona Free Enterprise Club joins other economic groups in his concern that an expansionary program is being funded by a declining source of tax revenue. Regardless of one’s level of support for increased government funding of health care coverage for uninsured children, long-term sustainability of the program should come into consideration.