Health Care Trial Balloons

March 01, 1993

President Clinton's latest trial balloon -- increased federal cigarette taxes to pay for health care reforms -- looks like it will stay aloft but in no way can it begin to finance the costs of extending universal access to all citizens and extending coverage to include long-term nursing care.

According to a study just released by the Congressional Budget Office, a doubling of the current 24-cents-a-pack federal tax to 48 cents would raise just $17.9 billion over the next five fiscal years. Compare that to administration estimates of health care costs ranging from $30 billion to $90 billion per year. The chairman of the House Ways and Means health subcommittee has put the price tag as high as $200 billion a year, if long-term care is included in the basic benefits package.

So any notion that cigarette puffers will be the sole sufferers can be discarded forthwith. Just how the administration will find the huge revenues needed to accomplish its aims will not be known until Hillary Rodham Clinton's task force makes its recommendations in May. Already, there are reports that for political reasons the First Lady has discarded a proposal to tax the health benefits most employers provide to their employees.

If so, that may be unfortunate. One of the greatest inequities in the nation's current system is that workers lucky enough to get employer-paid health benefits escape taxes while the self-employed and persons working in non-benefit situations have to pay taxes on any income used to purchase health insurance. These high costs are one big reason 35 million Americans do not have health insurance.

The CBO has estimated that revenues from a tax on benefits over and above a standard package would raise $67.4 billion over five years -- four times the projected tobacco tax revenues. It would pay a big chunk of the predictable costs, but not all of them, if for no other reason that it would encourage citizens to examine more closely just how much of a health benefits package they wish to purchase.

To get the revenues needed, the Hillary Clinton commission is believed to be examining equally contentious ideas: Higher taxes on health insurance companies, doctors and hospitals, a revenue raiser that would eventually be passed on to consumers; or tough federal price controls on all health care providers even though this would mean stark government intrusion of a kind that has not worked very well in other fields.

Fiscal realities are likely to force the administration to put cost controls and added revenues sequentially ahead of universal access. The nation's deficit problems will only worsen late in this decade if the government fails to come to grips with health costs that are devouring a huge portion of the gross domestic product.

It is entertaining to watch trial balloons rise from the White House. But until the nation learns this spring just what is proposed, any judgment on the credibility of the overall Clinton economic plan will have to be withheld.

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