Dwindling tobacco sales take bite out of Health Plan budget
SALEM, Ore. (AP) -- Falling tobacco sales are good for the health of Oregonians, but bad for the Oregon Health Plan.
Voters passed a 30-cent-a-pack increase in the cigarette tax in 1996, and 27 cents of that goes directly to the Oregon Health Plan. With more people giving up smoking, the program that provides a safety net for about 350,000 low-income residents could wind up with an $8 million budget shortfall.
State budget analysts had projected that the health plan would get about $229 million during the current two-year period. After recalculating, it is now looking more like about $221 million.
"It's certainly a dilemma," said Hersh Crawford, the health plan's top administrator. "I don't think there's any question that we believe that the very best thing is for people to stop smoking."
Some said the state should come up with other ways to fund health coverage for the state's poorest residents.
"That's a very unstable funding method, and it's not one that we really should be depending on," said Sen. Gene Derfler, R-Salem.
Derfler, the Senate majority leader, said he will gladly deal with the bad news of budget problems when they're created by the good news of fewer people smoking. But the shortfall is part of a bigger problem, he said: The cost of the Oregon Health Plan is skyrocketing, and the state doesn't have sustainable sources to fund it.
This month, the state Health Division released new figures showing cigarette sales have dropped by about 20 percent since the 1996 tax took effect, said Clay Parton, who manages the Health Division's tobacco prevention program. Tobacco tax revenues account for more than 25 percent of the state's total $800 million contribution to the two-year health plan budget.
The Department of Human Services, which includes the health plan, is scheduled to rebalance its budget this April. When it does, officials will first try to fill the tobacco-tax gap with savings in other areas of the department, Crawford said.
Beyond that, Crawford said it's too soon to say how the state will come up with the $8 million. The Legislative Emergency Board will have final authority.
Even though the decline in tax revenue presents an immediate shortfall, Crawford said the lower smoking numbers could make health plan members less costly to insure in the long run. The state hasn't figured out how to calculate what that savings would be, he said.
"We have a high incidence of tobacco use in the health plan," Crawford said, "and to the extent that we can encourage people and help them stop using tobacco, there's a lot of savings down the road that can accrue from that."