Maryland House leaders unveiled a plan yesterday that would extend medical coverage to nearly 250,000 uninsured residents, a proposal that immediately ignited a debate over the key funding mechanism - a doubling of the state's cigarette tax to $2 a pack.
The $600 million health care proposal aims to provide coverage for every child in Maryland by expanding Medicaid, while requiring that higher-income individuals and families buy insurance or pay a fee. It also would give subsidies to small businesses to provide insurance to workers and require that private insurers allow adults up to age 25 to stay on their parents' plan.
"There's a lot of momentum out there for this in the general public," said House Speaker Michael E. Busch, who presented the proposal at a news conference yesterday along with its chief sponsor, Del. Peter A. Hammen, a Baltimore Democrat who chairs the House health committee.
"We ought to be at the forefront of taking on initiatives like this," Busch said.
The debate in Annapolis comes as states around the country work to address who should bear the cost of rising health care costs. Massachusetts enacted groundbreaking legislation to cover most of its uninsured last year, and California Gov. Arnold Schwarzenegger recently unveiled a proposal for near-universal health care. The Hammen bill would cover about one-third of the uninsured in Maryland.
The tobacco tax is a political lightning rod that could occupy much of the discussion over extending health care coverage.
Senate President Thomas V. Mike Miller said the $1 increase in the tobacco tax is dead on arrival. The powerful Democrat said Maryland cannot afford to enact expensive social programs without addressing a state deficit that reaches $1.3 billion in the next fiscal year.
"If we pass a cigarette tax this year, it will go to balancing the state budget," he said. "We have a deficit, and it's a hole that's getting deeper and deeper and deeper."
Gov. Martin O'Malley has shied away from supporting the tobacco tax increase, or any other tax increases, until he has a chance to look for ways to make state government more efficient.
O'Malley also has put together a legislative package addressing coverage for the uninsured, including some of the provisions that are in Hammen's bill. The governor indicated yesterday that the state's precarious financial situation could dictate how quickly he would seek to expand coverage.
"There will be some people who feel we can go a lot farther a lot faster, and I look forward to that debate," O'Malley said.
The state's uninsured population has swelled to nearly 800,000 residents, or more than 10 percent of the population, according to the U.S. Census Bureau.
Funding for the Hammen bill would come from a number of sources, including the federal government, which matches a portion of Medicaid costs. The $600 million annual cost estimate includes about $400 million in state funds.
But the biggest revenue-raiser would be the tobacco tax increase, which would generate $211 million in the first year and less in later years, as more people are presumably discouraged from smoking. Hammen said that future declines would be made up from savings realized when more people are insured.
The proposed $2-per-pack tax is less than New Jersey's $2.58 and in the middle range of all other states. Virginia ranks among the lowest, at 30 cents a pack.
Legislators were hard-pressed yesterday to say how they would pay for the measure without a tobacco tax increase. Miller said the legislature needs to approach impending deficits with solutions that could include increased sales taxes, budget cuts and slot machines that could be taxed.
Sen. Thomas M. Middleton, chairman of the Finance Committee and a Charles County Democrat, said the House proposal may need to be scaled back. He also pointed out that other states have increased payroll taxes to pay for expansions of health care coverage but added that he would not push for that in Maryland.
One of the biggest costs of treating the uninsured - unpaid hospital care - has increased to more than $800 million a year in the state. Under Maryland's system, hospitals are reimbursed for treating uninsured through higher rates charged at all hospitals. That pushes insurance rates higher, adding an estimated $1,000 to the annual premium of the average family plan.
"There's a growing consensus that there needs to be action this year," said Nancy Fiedler, senior vice president of the Maryland Hospital Association, which has been lobbying for greater access to health care coverage.
O'Malley and Busch signaled early this year that health care would dominate much of the legislative session, and a number of special interest groups have forwarded their own ideas.
The Maryland Citizens' Health Initiative, a nonprofit group that has been pushing for expanded health care coverage for years, is distributing a 140-page book profiling scores of the state's uninsured.
Business groups such as the Greater Baltimore Committee also have weighed in, two years after fighting a legislative attempt to compel Wal-Mart Stores Inc. to spend more for employee health insurance. That bill has been struck down in court.
"It's much more productive for us to put something on the table in order to find a solution that's acceptable to us," said Donald C. Fry, the committee's president.
Hammen's bill would extend Medicaid, the federal-state health program for the poor, to children from families with incomes up to four times the federal poverty level. A family of four earning $41,300, or more than two times the federal poverty level, would pay on a sliding scale for children.
The bill also would raise Medicaid eligibility for adults from 40 percent of the federal poverty level to 116 percent, or about $12,000 for an individual and nearly $20,000 in a family of three.
Those earning more than four times the poverty level, or $40,840 a year for individuals and $82,800 for families of four, would be required to purchase health insurance. Each person in that income bracket would need to include a proof of insurance when filing state tax forms. The uninsured would be assessed a surcharge of up to $2,000. Medicaid would be available to all higher-income families to cover children at cost, which would generally be less expensive than private insurance.
The so-called individual mandate has drawn criticism from some legislators, including Middleton. He said it would be "unconscionable" to force people to pay a surcharge when they might not be able to afford private insurance.
Roughly one-third of the uninsured are in families that earn more than $55,000 a year, including many younger people. "They choose not to buy health insurance even though they can afford it," Hammen said. "And that burdens the rest of our system and the rest of Marylanders who do the right thing."
The bill would provide $140 million in subsidies for employers with less than 50 workers to help them get health insurance. About 30 percent of uninsured workers are employed at such businesses. An additional $40 million would go to substance abuse treatment and smoking cessation programs.
One proposal that didn't make the bill was one backed by O'Malley that would create an exchange, similar to one in Massachusetts, that would pool small employers and perhaps individuals to get access to a broad range of affordable policies. The idea was opposed by insurance agents and brokers, said Bryson F. Popham, a lobbyist for the industry, because "they don't want a state-subsidized competitor." Hammen's bill would study the idea.
laura.smitherman@baltsun.com
Sun reporter Andrew A. Green contributed to this article.
Proposal
Highlights of a House Democratic proposal for extending health care to more Marylanders:
Tripling the maximum allowable income for Medicaid coverage for adults to about $12,000 a year for individuals and $20,000 for families of three. Medicaid eligibility would also be expanded for children.
Requiring individuals making more than $40,840 to buy health insurance or face a surcharge of up to $2,000.
Granting subsidies to small businesses to provide health insurance.
Raising the state's cigarette tax by $1 a pack in July.
[Staff and wire reports]