The state's top two legislative leaders, faced with the prospect of soaring costs for the healthcare initiative, are considering raising the cigarette tax as one of several funding and cost-cutting strategies.
Both House Speaker Salvatore F. DiMasi and Senate President Therese Murray said a tax increase would be discussed as they look for ways to ensure that the universal health insurance initiative succeeds.
Healthcare advocates have proposed a $1 per pack tax increase that would raise an estimated $152 million a year, according to an analysis by the Campaign for Tobacco-Free Kids, a Washington advocacy group. Neither DiMasi nor Murray, who spoke in separate interviews Monday, has endorsed that specific proposal.
The top lawmakers said they would consider stiffer penalties on businesses that fail to insure their workers as a means to raise additional funds. And they are seeking ways to reduce healthcare costs, short of cutting back the health insurance initiative.
"We've made a commitment [to the healthcare initiative], and we have to keep it," Murray said. But, she added, "Everything should be on the table for discussion" in how to fund it.
The Globe reported Sunday that annual costs for the subsidized insurance program at the heart of the initiative are projected to double over the next three years, reaching $1.35 billion by June 2011.
Lawmakers are also working to address a more immediate issue, an increase of about $400 million in healthcare spending included in Governor Deval Patrick's proposed fiscal 2009 budget. In the budget, nearly $160 million of that increase would come directly from state taxpayers, with most of the rest coming from the federal government.
In fiscal 2009, a $1 increase in the cigarette tax would nearly cover the state's share of the cost. In future years, the cigarette tax would make a smaller dent in offsetting the growing expenses.
When campaigning for governor, Patrick endorsed a proposal that would have increased the cigarette tax to help fund universal health insurance. That proposal was dropped in favor of the initiative now in place. Patrick declined to comment yesterday on a cigarette tax increase.
DiMasi, Murray, and Patrick all continue to strongly support the insurance initiative, despite its rising costs. More than 300,000 state residents have insurance, and the coalition of health advocates, business leaders, hospital officials, and politicians that came together to push the initiative is holding strong.
"I don't think there should be any retreat," said DiMasi.
The House speaker also said he was not convinced the costs would rise as much as the Patrick administration has predicted, because more efficient and higher-quality healthcare would offset some of the growth in expenses. Most of the cost increase is based on a predicted doubling of enrollment in a state-subsidized plan.
"In the long run, I hope most of the costs will stabilize," he said.
An increase in the cigarette tax is being actively investigated as a revenue source in case it is needed, DiMasi said.
"It's probably an initiative that can work both ways: raise money and discourage young kids from smoking," he said. "I would direct that right to healthcare."
Murray is also working on a comprehensive plan to reduce healthcare costs in the state through strategies that include streamlining of billing, expansion of primary care services, and hearings on insurance rate increases.
The state last raised the tax in 2002, by 75 cents. Including the tax, a pack of cigarettes now typically costs between $4.50 and $5.50.
A bill to raise the tax by $1 per pack for the healthcare plan and tobacco cessation programs has languished in the Legislature for the last year.
House leaders briefly considered a smaller cigarette tax increase in 2005 to help fund an overhaul in healthcare before rejecting it in the face of strong opposition from Senate President Robert E. Travaglini and Governor Mitt Romney.
Any attempt to increase the tax now would be strongly opposed by the New England Convenience Store Association, which represents about 1,000 stores in Massachusetts.
"It's an incentive for our customers to purchase cigarettes over the border [in New Hampshire] or on the Internet," said Diana O'Donoghue, the association's executive director. "Our retail sales will suffer."
Besides the cigarette tax, lawmakers said they would examine the penalties that businesses must pay if they do not provide health insurance for many of their workers. The state expects to receive about $5 million in revenue from the penalties next year, tens of millions less than planned, because Romney weakened the regulations before leaving office.
DiMasi said Patrick should strengthen the regulations to increase the collections. Murray said she would turn to her Health Committee chairman for advice on this issue.
Senator Richard T. Moore, chairman of the Committee on Health Care Financing, said he would likely draft legislation to stiffen the penalties if the administration doesn't change the regulations.
Health Care for All, a Boston advocacy group that supports the cigarette tax increase, also suggests charging businesses that shift workers onto the subsidized insurance program, said John McDonough, the group's executive director.
"There are no sacred cows," McDonough said. "Everything is on the table and has to be to ensure public confidence" in the initiative.
But Richard Lord, president of Associated Industries of Massachusetts and a member of the state panel overseeing implementation of the insurance initiative, said policy makers must be careful not to destroy the compromise that enabled the state to launch the initiative in 2006.
"If we reopen some of those positions that were an integral part of the agreement, it's hard to predict what the reaction will be," Lord said.
