US: New Tobacco Tax Bill Touches All Bases

Source from:  Kitsap Sun‎ 09/11/2015

A new bill introduced in the California Legislature yesterday proposes a new tax on cigarettes and electronic cigarettes to raise money for a variety of purposes including solving the managed care tax conundrum, funding regional centers and boosting some Medi-Cal provider rates.

A bill introduced on Wednesday in the California Legislature's special session on health care touches on almost all of the health policy concerns originally raised by the governor when he convened the special session in June.

SBX2-14, by Sen. Ed Hernandez (D-West Covina), would impose a $2-a-pack tax on cigarettes and an equivalent tax on e-cigarettes.

The bill includes several proposals:

It pays for the state's agreement with the courts to raise In-Home Supportive Services hours by 7%.

It increases spending to curb tobacco use: and

It raises some Medi-Cal provider rates;

It boosts funding for the developmentally disabled and the state's regional centers for that population;

It lays out a framework for reconstructing the impending $1.2 billion loss of the managed care organization tax (MCO tax);

That's a lot in one bill.

"Not only will it generate much-needed revenue for health care and developmental services," Hernandez said in a written statement, "it also helps reduce smoking rates and deters teenagers from getting hooked on a deadly habit."

"It's the only bill out there that comprehensively solves all the issues raised by the governor and the special session," said Tim Valderrama, chief of staff for Hernandez.

The MCO tax component is based on the governor's latest proposal of a tiered-tax system. Since federal officials declared California couldn't use its current MCO tax formula (taxing only those plans that participate in Medi-Cal and then matching that money with federal dollars and basically paying the plans back through provider fees), the state needed to come up with a broader-based formula that taxes all MCOs, even those that don't participate in Medi-Cal and therefore don't reap any benefit from the tax.

"The big difference is, this new proposal limits the net liability by half for the plans," Valderrama said, down to $317 million from the originally proposed $669 million.

The new "Mega Bill," by the numbers:

Provides funding for the 7% restoration of In-Home Supportive Services hours.

Increases funding for tobacco use prevention and research, law enforcement, medical school education and payments for Medi-Cal funded services. Also replaces any loss of tobacco-tax funding due to a decline in revenue from imposing the $2-a-pack tax; and

Increases funding to regional centers and raises provider rates for those working with the developmentally disabled;

Raises $1.3 billion by imposing the new MCO tax;

Raises $100 million by taxing electronic cigarettes or e-cigarettes by an amount equivalent to $2 a pack on traditional cigarettes;

Raises $1.2 billion by taxing cigarettes $2 a pack, also adding a tax on any cigarettes stored by dealers and wholesalers and raising the tobacco products tax;

"A budget is a reflection of a society's values," Hernandez said. "The revenue generated by enacting this bill will help provide care for the most underserved and neediest communities in California. These are our grandparents, parents, brothers, sisters and friends. As a society we cannot continue to ignore their cries for help." Enditem