The Carter administration is considering higher taxes on tobacco and alcohol to help pay the cost of national health insurance.
The idea is, in part, that both smoking and drinking cause disease and so should help bear the cost of curing it.
Even a big increase in existing alcohol and tobacco taxes would pay only a small part of national health insurance's expected cost. But the idea nevertheless has at least one influential supporter, Chairman Al Ullman (D-Ore.) of the House Ways and Means Committee.
Current revenues from the federal tobacco tax (largely from cigarettes) are $2.5 billion and from the alcohol tax $5.4 billion.
The cost of national health insurance is not clear; it depends on how extensive a plan the administration finally chooses and Congress enacts.
According to several officials, key decisions are yet to be made. The Department of Health, Education and Welfare has begun limited circulation of four broad proposals but they are not necessarily all that will considered.
The proposals are:
A semi-public corporation that would receive public funds for the aged and poor, and private premiums from employers and self-employed individuals, and would pay for hospital costs, physician care, lab and X-rays and other services for almost the entire population.
A publicly guaranteed health protection plan that would be financed by taxes and premiums covering the entire population. Employers and individuals could opt out by enrolling in private health insurance plans or health maintenance organizations that met federal standards and their taxes would be substantially reduced.Above a set amount (probably $15,000 or higher) the federal government would pick up the cost of a catastrophic illness.
A consumer choice plan that would give the poor and aged vouchers to use as they wished for health care, with financing of private insurance with federal standards continuing through premiums, and changes in tax credits that would give advantages to health maintenance organizations.
A target plan that would have limited coverage starting with catastrophic insurance for the entire population. It would also include federal medical aid to the poor (Medicaid), federally paid benefits for children in the form of preventive health measures, and federal regulation of standards for health insurance but without mandating coverage for the entire population.
No price tag has been placed on any of these plans and HEW officials working on them have not been given any dollar limit yet on what can be spent, according to Carter administration officials. The tobacco and alcohol taxes are mentioned as partial funding sources in position papers describing at least two of the proposals, but those taxes could be used to help fund any of them, according to an HEW official.
The tax plan is highly tentative, especially in view of the fact that, in addition to opposition from the tobacco and alcohol industries, the tax would not find much support from organized labor, in principle one of the strongest supporters of national health insurance. But the Treasury Department, at HEW's request, is studying how much more money could be raised from higher alcohol and tobacco taxes.
According to one official involved in drawing up the legislation, "We're looking at a series of issues in general and one of them is financing."
This official, who asked not to be named, said it would be too strong to call the idea a "proposal," adding, "I'm not at all sure that that smoking-drinking tax will wind up as part of the package, but I thought it should be looked into."
According to another HEW source, "They are clearly considering using a vice tax to finance part of national health insurance."
President Carter last week approved a policy review memorandum bringing into the White House responsibility for coordination of national health insurance proposals sent to other federal agencies for comment. Several administration officials insisted that the new process, used in the past for national security proposals and now being applied to domestic policy, did not diminish the authority of HEW or Secretary Joseph A. Califano Jr.
Other sources, however, including at least one in the administration, said the new process would allow Carter to monitor development of a proposal more closely, give him an opportunity to make decisions on a broader range of options and will insure that his commitment to national health insurance is met.