The U.S. Senate this week will decide whether to restore billions of dollars of expected new revenues from tobacco legislation to Medicare and other public-health programs after a committee stripped all measures earmarking the funds.
"Jump ball," said Sen. John Breaux (D-La.) after the Senate Finance Committee approved his amendment to leave the spending priorities up to the full Senate.
Amid signs that Senate Republicans are cooling to the idea of diverting a large part of the money to Medicare, the American Hospital Association finally jumped into the tobacco-settlement fray last week.
The AHA and the American Medical Association co-sponsored newspaper advertisements urging Congress to pass legislation that, among other things, will spend tobacco funds on public-health programs such as smoking cessation and prevention, as well as Medicare and Medicaid.
"The issue is going to be the total level of dollars, and secondly, what do they do with it," said AHA lobbyist Thomas Nickels. "We would like the money to go for (added insurance) coverage; we would like some money go to Medicare and Medicaid."
The Finance Committee's legislation would raise federal cigarette taxes by $1.50 over three years beginning in fiscal 1999, and would be indexed for inflation thereafter (See chart, p. 3). The money, projected to total more than $50 billion over five years, would go into a tobacco settlement trust fund.
Of that, 30% would go to the states annually for the first five years, and 45% thereafter. The states could spend it for whatever they want, although they would be required to reimburse the federal government for its contribution to their Medicaid programs if they use the tobacco money on Medicaid.
Under the fiscal 1999 budget blueprint passed by the Senate in early April, all the federal money from national tobacco legislation would be reserved exclusively for the Medicare Hospital Insurance Trust Fund. That was the position of a group of conservative Republicans led by Sen. Phil Gramm (R-Texas).
But the initial tobacco legislation, as it emerged from the Senate Commerce, Science and Transportation Committee in April, only suggested generally that the tax revenues be spent on smoking prevention and cessation, as well as reimbursement to Medicare and other public-health programs for the cost of smoking-related illnesses.
It was that measure that was amended by the Finance Committee, which resisted using the money for Medicare, saying it could prompt provider groups to begin lobbying for increased reimbursement and effectively unravel the spending-growth limits included in last year's balanced-budget law, a Senate aide said.
Furthermore, the money that would be added to the Hospital Insurance Trust Fund would be insignificant in the context of a Medicare program that now spends more than $200 billion a year, the aide said.
In sending the tobacco settlement to the floor, the Finance Committee also nixed a measure to increase to 100% from its current 45% the amount of health insurance premiums that the self-employed and people not eligible for employer-sponsored plans can deduct from their federal taxable income. That measure would have cost $18 billion over five years but would have been paid for by the tobacco revenues.
Led by Sen. Orrin Hatch (R-Utah), the committee voted 12-7 to eliminate that measure.
"I do not believe we should use this tobacco revenue as a federal piggybank," Hatch said.
Gramm, however, argued that using tobacco revenues to finance health coverage was relevant to the tobacco bill. "I think having working people in this country able to buy health insurance is a public health issue," he said.
The committee did vote 11-9 in favor of an amendment sponsored by Sen. Alfonse D'Amato (R-N.Y.) that would require a minimum hospital stay following mastectomies.