Cigarette Tax May Fund Child Health Plan

By Maureen Groppe
Gannett News Service

WASHINGTON -- Hoosier smokers adjusting to the recent 44-cent state tax increase on cigarettes may face an additional 61-cent per pack increase from the federal government.
That's one way some lawmakers want to pay for a proposed expansion of a 10-year-old health insurance program for children of the working poor.

Smokers and lower-income families aren't the only ones who could be affected by the debate. Taxpayers, senior citizens and two of the state's biggest companies might be as well.

The House version of the legislation -- supported by only two of the state's nine House members -- would redirect Medicare money to the program by scaling back federal payments to private insurers that offer an alternative form of Medicare coverage.

That could change coverage options available to seniors. It also could cut into the profits of companies like Indianapolis-based WellPoint that offer the Medicare Advantage plans.

Drug companies, like Indianapolis-based Eli Lilly and Co., could have to give bigger discounts on the drugs they sell to Medicaid.

Alternatively, if the administration gets it way, the children's health care program could shrink. States like Indiana that recently expanded eligibility to families earning up to 300 percent of the federal poverty level would not get federal reimbursement for providing care to those in families making more than 200 percent, which is $34,340 for a family of three.

President Bush has threatened to veto both the House and Senate versions.

The Senate proposed paying for its $35 billion expansion primarily by increasing the federal portion of the cigarette tax 61 cents, to $1 a pack. Sens. Richard Lugar, R-Ind., and Evan Bayh, D-Ind., voted for the bill, which passed 68-31 Thursday night.

The House bill would increase the cigarette tax by 45 cents.

Indiana's state cigarette tax recently rose 44 cents, to 99.5 cents, to pay for a new state health insurance plan for low-income Hoosiers.

The State Children's Health Insurance Program, a federal-state effort, began in 1998 to provide coverage to children whose parents earned too much to be eligible for Medicaid but found it difficult to pay for insurance.