The Charity-care Dilemma: How To Pay? Whitman And The Legislature Are Debating Possibilities. One Is A New Tax On Cigarettes.

Posted: November 11, 1997

TRENTON — For most of the public and their elected leaders in New Jersey, there has been broad agreement for years that the state should pay for hospital care for about 104,000 people who have no insurance.

Now, for the first time in several years of the debate over so-called charity care, the governor and legislature intend to decide, for good, how to pay those bills, which last year totaled $310 million.

Ideas range from adding a tax on cigarettes or liquor to boosting the state sales tax or using New Jersey's share of the proceeds from the national tobacco settlement.

But almost everybody agrees on the need to stop skimming the money from surpluses in the Unemployment Trust Fund, which is paid by employers and meant for laid-off workers.

``We're going to fight very hard for it to come out [of state] general funds before we look to any taxes, and I think the legislature may feel the same way,'' Phil Kirschner, senior vice president of the New Jersey Business and Industry Association, said yesterday.

Under state law, hospitals are required to provide medically necessary service to patients regardless of their ability to pay. Most of those patients are the urban working poor and single mothers who do not qualify for Medicaid but whose jobs do not provide health insurance.

Until the early 1990s, hospitals covered their cost of charity care by adding a surcharge to the bills of other patients. Former Gov. Jim Florio ended that practice, in order to lower hospital costs, and shifted the burden of charity care, temporarily, to the state's Unemployment Trust Fund. The charity program has been in search of a permanent funding source ever since, and the current arrangement expires Jan. 1.

Two years ago, during the last legislative fight on charity care, Gov. Whitman pushed for a higher cigarette tax to replace the jobless fund. But her proposal foundered in committee when neither party wanted to take responsibility for approving a tax increase ahead of the 1995 elections.

Some people yesterday said they were hoping this year will be different. This debate, they noted, is occurring in a lame-duck legislative session just after, not before, an election.

Supporters of the cigarette tax also are making a new push, saying the public in New Jersey, as nationwide, is more amenable to such a tax on the current $2.75 pack of smokes because of last year's revelations about tobacco companies' marketing practices aimed at children.

``I think it would be impolitic for the parties to play that kind of chess match when the health of children is at stake,'' said Paul W. Armstrong, chairman of New Jersey Health Decisions, a nonprofit group of academics, health professionals and insurance executives.

The group yesterday released a survey it commissioned from the Center for Public Interest Polling at Rutgers University. According to the survey, among eight proposed funding sources for charity care, 76 percent of respondents favor an increase in the cigarette tax.

The second-most-favored funding source - chosen by 73 percent - was an increase in the tax on alcohol products. The third choice (64 percent) was a rise in the tax on health-insurance companies.

The rest, in descending order, included a tax on health insurers, an increase in the sales tax, a tax on hospitals, a slice of the unemployment fund, and a surcharge on patients' hospital bills.

The telephone survey of 800 people, conducted during the week of Oct. 13, has a 3 percent margin of error. Its results mirrored a 1995 poll on the same subject.

Armstrong and Rick Sinding, executive director of the group that commissioned the survey, said raising the cigarette tax for charity care would serve a dual purpose: creating a permanent funding source for the program and making it harder for juveniles to afford cigarettes.

But Bob Stewart, a lobbyist for RJR Reynolds Tobacco Co., called cigarette taxes an unstable source of money and said smokers would just be forced across the border, to Pennsylvania, New York or Delaware.

``Seems to me that charity care is everyone's obligation, not just smokers','' Stewart said. ``Those on the other side are really just social engineers who want to tax cigarettes out of existence. . . . I don't think they're really looking for solutions to charity care.''

Whitman has declined to say which proposal she favors, choosing instead to await the conclusion of a 36-member panel that she appointed in June.

Republican legislative leaders, who plan to meet with the governor this week to discuss the issue and others for the lame-duck session, also are awaiting the commission's report later this month.

``It's definitely true that the public has become more negative about the tobacco companies, and that's translated to legislators, too,'' said Gregg Edwards, an aide to Senate President Donald DiFrancesco (R., Union).

But Edwards predicted that legislators again will shy away from approving a tax increase, even one on cigarettes, in favor of assigning the program to the general budget until money is available from national tobacco settlement.

Even that, however, carries risks, by leaving the program open to cutbacks.

``That's the irony to this whole thing,'' Edwards said. ``Once charity care gets thrown in, it has to compete with every other plan. So, in a way, it becomes less secure.''

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