Cigarette-Sized Hole

Friday’s editorial encourages the legislature to use an increase in cigarette taxes to pay for Medicaid spending.

Here we are again.

Two years ago, the S.C. House of Representatives and the S.C. Senate passed a law raising the cigarette tax by 50 cents, but Gov. Mark Sanford’s veto was (back then) too much for the legislature to overcome, and the effort was for naught.

Now, the House and the Senate have again each passed a cigarette-tax increase, but before the bill can brave Sanford’s desk once more, lawmakers must first decide how much to raise the tax.

The House version raises the tax by 30 cents per pack, raising an estimated $88 million that must be spent on health care costs and could not be used until next year. The Senate would raise the tax by 50 cents per pack to raise $129 million annually, and would likewise dedicate most of the money (except about $11 million for a few pet legislative projects) to a trust fund to pay for expected increases in the state’s share of Medicaid as a result of new federal health care laws.

First, a word about those new Medicaid expenses. S.C. politicians, in their continued “Waterloo” frame of mind, have been grousing loudly about the unfairness of it. Nearly 480,000 poor South Carolinians will be newly eligible for Medicaid, they complain. That’s a 61-percent increase, they exclaim with dramatic effect. The cost, they continue, could be as high as $914 million – and then they mumble a little as they add “over 10 years,” if they remember to mention that at all.

That amount (which is a worst-case scenario, assuming everyone eligible signs up) represents a 4.4 increase in the state’s projected $20.9 billion in Medicaid spending over 10 years under current law. In other words, South Carolina will insure 61 percent more low-income people (or 10 percent of the overall S.C. population) for a 4.4 percent increase in cost. Isn’t that a good thing?

Nevertheless, the increase must be paid for, and our lawmakers have the right idea – the cigarette tax should be used to prepare for that increase. The Senate’s 50 percent proposal appears to cover that cost over the 10 years, with a little room left over. Whatever is not needed for Medicaid would be well-suited to shoring up the general fund.

Finding a legislative compromise, of course, is only the first step. Sanford’s stated reason for opposing the increase two years ago was that he believed any increase in cigarette taxes should be offset by a decrease elsewhere. In the meantime, of course, there have been dramatic decreases in the state budget because of the recession. State government is radically smaller and will certainly continue to shrink next year.

The amount the tax brings in will likely dwindle as some smokers quit, but some of that revenue can help preserve vital state services – keeping jailers, state troopers and teachers employed – during the immediate crisis. We hope Sanford will recognize this and allow whatever compromise the legislature works out to become law.

A reform of our own

If our various politicians’ ill-advised efforts to kill the health care bill fail as expected – specifically, Henry McMaster’s lawsuit, Andre Bauer’s call for a constitutional convention or Jim DeMint and Lindsey Graham’s quixotic campaign for repeal – South Carolina still has a way out. Beginning in 2017 (the same year the state begins picking up part of the Medicaid costs), states have the option of creating their own reform plans. If they can insure more people than the federal plan, the state can then “opt out” – which would mean sparing the South Carolinians the individual insurance mandate that apparently so deeply offends S.C. politicians.

Newly elected Sen. Scott Brown is already proposing this for Massachusetts, where Obama-style reforms instituted by former Gov. Mitt Romney have already met success from the coverage standpoint. Isn’t this a more productive avenue? Instead of doing our utmost to buck the system, why not attempt to become best in the class? For those who believe ObamaCare is such an abomination, isn’t there someone in South Carolina who can craft a better free-market solution?

The House version raises the tax by 30 cents per pack, raising an estimated $88 million that must be spent on health care costs and could not be used until next year. The Senate would raise the tax by 50 cents per pack to raise $129 million annually, and would likewise dedicate most of the money (except about $11 million for a few pet legislative projects) to a trust fund to pay for expected increases in the state’s share of Medicaid as a result of new federal health care laws.

First, a word about those new Medicaid expenses. S.C. politicians, in their continued “Waterloo” frame of mind, have been grousing loudly about the unfairness of it. Nearly 480,000 poor South Carolinians will be newly eligible for Medicaid, they complain. That’s a 61-percent increase, they exclaim with dramatic effect. The cost, they continue, could be as high as $914 million – and then they mumble a little as they add “over 10 years,” if they remember to mention that at all.

That amount (which is a worst-case scenario, assuming everyone eligible signs up) represents a 4.4 increase in the state’s projected $20.9 billion in Medicaid spending over 10 years under current law. In other words, South Carolina will insure 61 percent more low-income people (or 10 percent of the overall S.C. population) for a 4.4 percent increase in cost. Isn’t that a good thing?

Nevertheless, the increase must be paid for, and our lawmakers have the right idea – the cigarette tax should be used to prepare for that increase. The Senate’s 50 percent proposal appears to cover that cost over the 10 years, with a little room left over. Whatever is not needed for Medicaid would be well-suited to shoring up the general fund.

Finding a legislative compromise, of course, is only the first step. Sanford’s stated reason for opposing the increase two years ago was that he believed any increase in cigarette taxes should be offset by a decrease elsewhere. In the meantime, of course, there have been dramatic decreases in the state budget because of the recession. State government is radically smaller and will certainly continue to shrink next year.

The amount the tax brings in will likely dwindle as some smokers quit, but some of that revenue can help preserve vital state services – keeping jailers, state troopers and teachers employed – during the immediate crisis. We hope Sanford will recognize this and allow whatever compromise the legislature works out to become law.

A reform of our own

If our various politicians’ ill-advised efforts to kill the health care bill fail as expected – specifically, Henry McMaster’s lawsuit, Andre Bauer’s call for a constitutional convention or Jim DeMint and Lindsey Graham’s quixotic campaign for repeal – South Carolina still has a way out. Beginning in 2017 (the same year the state begins picking up part of the Medicaid costs), states have the option of creating their own reform plans. If they can insure more people than the federal plan, the state can then “opt out” – which would mean sparing the South Carolinians the individual insurance mandate that apparently so deeply offends S.C. politicians.

Newly elected Sen. Scott Brown is already proposing this for Massachusetts, where Obama-style reforms instituted by former Gov. Mitt Romney have already met success from the coverage standpoint. Isn’t this a more productive avenue? Instead of doing our utmost to buck the system, why not attempt to become best in the class? For those who believe ObamaCare is such an abomination, isn’t there someone in South Carolina who can craft a better free-market solution?