Free health benefits for families making $80,000?

Gov. Kulongoski has introduced his Healthy Kids Plan which will raise cigarette taxes to provide free and subsidized health benefits to families making as much as $80,000 a year. It doesn’t take long to figure out that many families will drop their current coverage, wait 60 days, and take up the free benefits from the state. Our tax dollars will be paid to people making wrong decisions, and who will be making it harder to fund the people who need it the most. Subsidizing health benefits for families making $80,000 also means our taxes will be paying for benefits for people who can afford it for themselves. Some families can’t afford it, while others can — don’t we care about the difference between the two? We should reduce taxes and health care costs so that everyone can afford it, and not create new plans with new taxes that will make the situation worse.

There is a hearing today on the issue in the State Capitol. Below is our review of why this is a disfunctional policy.

Unstable Foundation: Cigarette Tax

– Tobacco Tax Declines: During one of the longest periods of tobacco tax price stability (“˜98 —”˜02) witnessed revenue from the cigarette tax decline on average by 5% every year (Data source: 2007 Oregon Public Finance Basic Facts: Report #1-07).
– Estimated Revenue Declines: Of 40 state excise tax increases only eight met their projections (“˜03-“˜05). Oregon saw their estimated cigarette tax revenue decline by $22 million after the first six months of the last increases (KATU2 1-26-04, State Cigarette Tax Increases: A Comparison of projected versus Actual Revenue FY 2003-2005, Fiscal Planning Services Inc. 9-1-2006.).
– People Who Smoke is Declining: Nationally the number of smokers has declined by almost in half from 1965 to 1999. (Smoking in America:35 Years after the Surgeon General’s Report: A Report on the 2000 National Social Climate Survey Robert C. McMillen, Mississippi State University, 11/2000)
– Tax Declines due to Border Sales and Internet.

Unstable Plan: Healthy Kids Plan

– Cost to Rise Capturing Untargeted Audience #1: Offering benefits to families who earn up to $80,000 will benefit many people who can already afford it.
– Cost to Rise Capturing Untargeted Audience #2: Many families are without health insurance during transition periods that can last 1-3 months before it is regained. These families represent a large portion of the uninsured whose comparative need level is the least, but their effect will be to reduce funds available for those who need it the most.
– Plan will Cause Oregonians to Drop their Insurance: Offering free health care will make many people drop their current insurance to capture the free services from the state.