Smokers Could Cough Up Billions for Health Care if Measure Passes

Local divisions are swelling over the latest proposed tobacco tax that would make California one of the most expensive places in the nation to buy cigarettes.

The San Diego Regional Chamber of Commerce public policy and legislative committees have agreed to oppose Proposition 86, which would raise $2 billion annually for health care if passed in the November statewide election, while the health care committee has endorsed the initiative. The chamber said it will take an official position this month.

Proposition 86 would raise the price of a pack of cigarettes by $2.60 beginning in January, bringing the average price of a pack to almost $7. California more than doubled its tobacco tax in 1998, but today about half the states still have higher taxes on cigarettes than California.

R.J. Reynolds Tobacco Co., the Cigar Association of America and Philip Morris USA Inc. are backing the “No on Prop 86″ campaign, and have already laid down at least $7 million in opposition, according to campaign spokeswoman Carla Hass, who is working from Sacramento.

On Aug. 17 in U.S. District Court in Washington, D.C., Philip Morris and R.J. Reynolds were found guilty of a five-decade scheme to defraud the public on the dangers of smoking.

Others against the tax include mostly retailers, taxpayer groups and some law enforcement agencies that worry about increased smuggling. The Food and Beverage Association of San Diego and the Deputy Sheriffs Association of San Diego County oppose the tax.

Funding for the tobacco tax initiative comes largely from the California Hospital Association, and also from the American Cancer Society, the American Heart Association, California Emergency Nurses Association and Campaign for Tobacco Free Kids.

The “no” campaign is arguing largely that the “yes” campaign falsely brands itself as funding tobacco cessation and prevention programs, yet, said Hass, “less than 10 percent of the tax goes toward helping smokers quit or keeping kids from starting.”

Backers: Money To Be Well Spent

That’s incorrect, said Maria Robles, a Sacramento-based spokeswoman for the initiative and registered nurse. She said around $558.5 million, or 28 percent of the tax revenues, would go toward tobacco-related prevention or disease, including $267 million for cancer, heart, asthma and other disease-prevention and control programs; $177 million for tobacco-use-prevention education and enforcement programs; $96.5 million for tobacco-related disease and cancer research; and $18 million for tobacco cessation services.

The rest of the tax revenue, according to the “yes” Web site, would be allocated as follows: $758 million would fund emergency services, which health care industry professionals here say are overloaded due to the large uninsured and immigrant populations in San Diego County. Millions more would go toward physician and nurse education, community clinics and children’s health insurance.

According to a telephone poll of 762 likely voters, conducted in late July by the San Francisco Sentinel, Proposition 86 has an early lead, with 63 percent of the respondents saying they would vote for the tax.

‘Regressive Tax’

But some prominent San Diego Republicans say the tax largely funds the “special interest” of hospitals and call it a temporary fix for health care problems.

“In my mind, that’s a regressive tax,” said Roxana Foxx, owner of Hunter International, a San Diego-based small business that helps attorneys merge and acquire partners. Foxx is the vice chairwoman of the chamber’s public policy committee and a former head of the San Diego County Republican Party. “This is ballot-box budgeting.”

Foxx and local businessman Jim Knight, also a Republican, say it’s an unreliable way to fund health care because as people quit smoking, the revenue could decline.

Knight, who is a urologist by training and the chief executive officer of San Diego-based Consumer Directed HealthCare Inc., as well as the chairman of La Jolla-based 1st Pacific Bank of California, said the tax “victimizes low-income people who are addicted to tobacco.”

But “yes” spokeswoman Robles said tobacco companies do the victimizing, even as they increase their own prices each year and spend millions on marketing.

Deep Pockets

Robles said tobacco companies are planning a hard and expensive fight because, as the initiative’s studies show, 43 percent of tobacco companies’ revenue from new addicted smokers could be lost if the proposition were approved.

An advertising campaign that began recently in the San Diego area, paid for by the “No on Prop 86″ campaign, includes TV commercials that say the proposition would allow hospitals to price-fix and avoid antitrust laws.

The yes campaign has asked TV stations to stop airing the ads, said Robles, because she said they are “false.”

Knight, a former president of the San Diego County Medical Society, is concerned that the initiative could allow hospitals to share pricing and salary information that could raise the cost of health care services for patients and cause doctors to refuse overnight emergency on-call shifts. He said at local hospitals where the shifts are required, doctors are beginning to talk about leaving altogether if the proposition passes.

“Already, in several hospitals here in town, there are no doctors taking call for certain specialties,” Knight said. “In one major hospital here in San Diego, there are no urologists taking call for kidney stones or fractured kidneys. In others, medical staff rules require physicians to take call. In these hospitals, it is already being discussed privately that the only alternative is to resign from the hospital staff rather than be forced to take call, get up in the middle of the night, leave your family, go care for a critically ill patient, see a full office the next day or operate while dead tired from the night call; all for little or no reimbursement.”

Jesse Markham Jr., who oversees the firmwide antitrust practice at Morrison