Some state Republican leaders are
miffed that Gov. Mark Sanford has given conditional support to
raising the state's cigarette tax to bolster the state's ailing
Medicaid system. But lawmakers need to consider who pulled the rug
out from under whom.
House Republicans were irate last week after the governor
announced that he supported raising the cigarette tax by 53 cents as
long as it was tied to a bill that would reduce the personal
income-tax rate during the next 15 years. That proposal mirrors
Sanford's pledge during the campaign to phase out the income tax
over several years.
But GOP lawmakers complained that Sanford hadn't consulted them
first.
Wait a minute, though, hadn't a House committee already rejected
a hike in the cigarette tax three days before House members
complained? Hadn't the committee proposed its own plan to refinance
the state's tobacco settlement bonds to help pay Medicaid costs?
We wonder whether committee members consulted the governor and
got his feedback before proposing that plan.
The bill to refinance tobacco settlements is headed to the full
House, but with Republicans at odds over how to finance Medicaid, it
is hard to predict what will happen there. If Sanford is serious
about advancing his plan, he will have to sell it to the House
leadership, but House Speaker David Wilkins, R-Greenville, who
remains firmly opposed to a hike in the cigarette tax, could be hard
to convince.
The state Senate, however, reportedly is more receptive to the
governor's plan.
The state needs to find a way to fund Medicaid and, from our
point of view, raising the cigarette tax is the most sensible
solution on the table. While we have opposed Sanford's proposal to
phase out the income tax, we welcome his willingness to consider
raising the cigarette tax.
The House committee plan would raise about $45 million for
Medicaid programs next year and $36 million a year afterward by
refinancing tobacco settlement bonds. But the state still faces a
shortfall of as much as $180 million in what is required to pay for
existing programs.
Failure to come up with adequate state funding for Medicaid would
be especially burdensome because of its impact on federal funding.
South Carolina receives 67 percent of its Medicaid funding through a
federal match. For every dollar the state cuts from its funding of
Medicaid, it would lose $2.25 in federal funds.
The GOP leadership apparently looks upon any tax hike as
anathema. But what they propose is no more than a tax shift. The
need to provide health care to the uninsured will continue whether
the state pays for it or not, and individuals and businesses in the
state would have to take up the slack.
Proponents of raising the cigarette tax estimate that a 10
percent cut in Medicaid funding by the state could increase medical
costs for hospital services between $107 million and $243 million,
representing a 4 percent to 9 percent cost shift to consumers. That
would result in higher insurance premiums and other health care
costs. South Carolinians also would lose federal matching dollars
that they have helped pay for in federal taxes.
In other words, in the name of rejecting a tax increase, state
residents would end up paying more in medical costs and hidden
taxes. That isn't good economy; it's bad government.
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In summary
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Failing to fully fund the state match for Medicaid would be
false economy.
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