2009-07-16 08:20:04 - Senators are being urged to impose a user fee - as an alternative to tax increases - to help fund health care reform, under a plan being proposed by America’s first antismoking organization.

Subjecting smokers to “user fees” - fees imposed on those who engage in an activity which creates additional governmental costs which would otherwise be imposed on taxpayers - are fair and appropriate because smokers choose to engage in an activity that is the major preventable cause of the health care costs which otherwise are being foisted upon nonsmokers through bloated insurance rates and /or higher taxes, argues Action on Smoking and Health (ASH).

Indeed, notes ASH, requiring smokers to pay through a user fee even a portion of the unnecessary excess costs they voluntarily impose on the health system would raise as much additional revenue as many of the competing tax proposals, and do so without violating any no-new-taxes pledge or

possibly reducing the incentive for investment and economic growth.

Moreover, imposing user fees - charging smokers more than nonsmokers for health insurance - will, unlike any proposed tax increases, by itself substantially reduce health care costs by providing strong incentives to help smokers quit, and thereby slash the number of heart attacks, strokes, and cancers which must be treated. It also provides a simple way for them to avoid the added cost.

“America’s approximately 46 million smokers already spend over $90 billion annually on tobacco, and their choice to use such products adds almost $200 billion in totally unnecessary health-related economic expenses to our already overburdened health care system and ailing economy,” says ASH.

Requiring smokers to pay an extra $60/month for health insurance - a fraction of what they now pay simply for tobacco products on the average - would bring in about $33 billion annually; about the same as the proposed “millionaires’ tax,” also estimated to yield about $35 billion/year.

ASH also argues that a user fee for smokers would be better than new taxes on sugary beverages and alcohol because most people use these products in moderation, and therefore do not impose additional health care costs on others. But, argues Professor John Banzhaf of ASH, any amount of smoking imposes substantial risks and therefore contributes to escalating health care expenses.

Tinkering with the costs of treating diseases, or trying to impose those costs on others, does little to address the overall problem of too many very costly diseases, and too few physicians to treat them; a problem which will be exacerbated when tens of millions of newly insured people seek medical care.

But, since most smokers already want to quit, and study after study shows that making smoking more expensive provides a very strong, direct, and immediate incentive which substantially helps them to quit, a user fee would directly address the underlying problem of too many diseases which are caused by easily preventable causes.

A copy of ASH’s letter to Members of the U.S. Senate appears below.


RE: Utilize a Smoker User Fee to Fund Health Care Reform Before Increasing Taxes on Anyone;
It is Consistent With No-New-Tax Pledge, and Can Slash Major Cause of Health Care Costs

America’s first antismoking organization urges Congress to utilize a user fee on smokers to help fund health care reform before considering any new taxes because it is fairer, would enjoy much stronger voter support, doesn’t break any no-new-taxes pledge/policy, and can help slash health care costs.

Charging smokers more than nonsmokers for health insurance – a policy twice approved by the federal government, and already being utilized by many companies as well as states (in one case, including Medicaid) – can be a simple popular fix for the conundrum of financing health care reform.

America’s approximately 46 million smokers already spend over $90 billion annually on tobacco, and their choice to use such products adds almost $200 billion in totally unnecessary health-related economic expenses to our already overburdened health care system and ailing economy.

Requiring smokers to pay as little as $220 more per year than nonsmokers for health insurance, under whatever plan is adopted, would produce over $10 billion annually to help fund health care reform.

This is roughly comparable to extending the current 1.45% Medicare payroll tax to capital gains earned by high-income taxpayers, which would also bring in about $10 billion each year – except that a user fee is not a tax, and therefore doesn’t violate policies or pledges against new taxes.

Similarly, requiring smokers to pay an extra $60/month for health insurance – a fraction of what they now pay simply for tobacco products on the average – would bring in about $33 billion annually; about the same as the proposed “millionaires’ tax,” also estimated to yield about $35 billion/year.

Unlike a variety of tax proposals – which many believe violate no-new-taxes pledges and policies, could slow down economic recovery including new-job creation, and which would have no effect whatsoever on overall health care costs – imposing a user fee on smokers is less likely to adversely affect investment (because they are largely lower income), and would help to slash health care costs.

User fees – fees imposed on those who engage in an activity which creates additional governmental costs which would otherwise be imposed on taxpayers – are fair and appropriate because smokers choose to engage in an activity that is the major preventable cause of the health care costs which otherwise are being foisted upon nonsmokers through bloated insurance rates and /or higher taxes.

Under most proposals to fund health care reform through new taxes, those being targeted to pay far more to cover the costs of others have done nothing to increase those health costs, and can do virtually nothing (other than cutting their own income) to reduce the cost burden.

In sharp contrast, smokers should be asked to pay more of their fair share (but far less than all) of the economic out-of-pocket costs their activity directly adds to health care expense, and they (unlike higher income taxpayers) can easily avoid the added economic burden by just quitting smoking.

Congress is reportedly considering increasing taxes on sugary beverages and alcohol, apparently because their use seemingly increases health care costs. However, the majority of people who use these products do so in moderation, and therefore do not require additional health care.

But unlike sodas and alcoholic beverages, which reportedly do not adversely affect health if used in moderation, it is now clear that there is no safe “moderate” level of smoking which doesn’t cause serious health risks. Thus all smokers contribute to excess and unnecessary health care costs.

It is now well established that increasing the costs of smoking – whether directly through manufacturer price boosts or higher excise taxes, or indirectly by charging smokers more for their health insurance – provides a very strong, direct, immediate, effective, and continuing incentive for smokers to quit, or at very least to substantially reduce tobacco use.

This, unlike most other funding proposals, will substantially reduce health care costs, rather than simply shifting the burden while leaving the overall costs unchanged. Also, unlike other proposals, there is also strong and ever-growing public support for imposing greater costs on smokers.

Although some might argue that a health-care user-fee on those who smoke must logically be extended to those who overeat, get insufficient exercise or don’t floss daily, etc., there are clear differences. In many if not most such situations, there are no major adverse health consequences – as there are with any and all smoking (since there is no safe level).

Moreover, while it’s easy to impose a user fee on smokers – since their habit is well known to their physicians, and can easily be medically verified – there is no feasible way to directly determine food consumption, amount of exercise, flossing, etc. upon which to base a user fee.

In summary, ASH suggests that any legislation require that smokers, in addition to the usual rates, be required to pay an additional amount for health insurance based upon the best estimates of the added costs their activity imposes on the system – or a least a substantial fraction thereof.

PROFESSOR JOHN F. BANZHAF III
Professor of Public Interest Law, and Executive Director
Action on Smoking and Health (ASH)
2013 H Street, NW, Washington, DC 20006, USA
(202) 659-4310 // (703) 527-8418 // ash.org/