Healthy living may pay off

Sin taxes could fund statewide medical coverage

Bill Scanlon, Rocky Mountain News

Published August 1, 2007 at midnight

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More Colorado Government

Whether your taste runs to coffee or liquor or if you're wealthy or middle class, plan on feeling some financial pain if Colorado offers near-universal health care.

The Lewin Group health-care consultants has done a preliminary analysis of the costs and sources of revenues for the four plans chosen by the Blue Ribbon Commission for Health Care Reform.

The commission asked the Lewin Group to analyze how much money could be raised by the various sources of revenue as a way of giving the authors of the proposals a reality check, said commission Chairman Bill Lindsay.

"It's like remodeling your kitchen," Lindsay said Tuesday. "You have great ideas, but once the contractor gives you the initial cost estimate, you say, 'Uh, oh, maybe we can't afford the marble.' "

The authors of the proposals will have to make adjustments to bring benefits in line with revenues.

Most of the plans under consideration call for so-called sin taxes, including an additional $1.16 tax on a pack of cigarettes or a $5.03 tax hike on a liter of liquor.

But Lindsay said nothing is decided. "Ultimately, it will be up to the legislators to decide on whether a junk-food tax or a sin tax is feasible" and likely to pass muster with voters, he said.

Before proposing any tax increases, the commission will work on trying to save money by making Medicaid and other government programs more cost-efficient, Lindsay said. That could include making sure that everyone has a regular physician and regular "medical home," which studies have shown keep people healthier and lower costs.

The commission is supposed to recommend one plan - which could be an amalgam of all four - to the legislature and the governor by January.

There are some 770,000 uninsured Coloradans.

Some free-market advocates say a lot of those choose to go uninsured and that safety nets are an adequate addendum to private insurance.

But the prevailing sentiment among the commission members is that too many Coloradans don't have much of a choice now. They can't afford health insurance, so they either go without or go to emergency rooms for routine care, a practice that drives up the costs for all.

Among the biggest challenges facing the commission:

• How to achieve near-universal coverage without gutting jobs in the health insurance industry, which operates on a competitive model.

• How to achieve near-universal coverage without giving irresistible incentives to employers to stop covering their workers, and to instead pay into a pool that would cost them less.

Comparing plans for overhauling health care in Colorado

Better Health Care for Colorado

Who would be helped:

Heads of household under 24 would save the most. A family of three earning less than $50,000 a year would get a 96 percent subsidy on premiums and those who participate in wellness activities would get discounts.

Who would suffer or pay more:

Cigarette smokers would pay an extra $1.16 per pack. People who drink hard liquor would pay an additional $5.03 per liter bottle.

How the money would be raised:

Steep increases in taxes on cigarettes and hard liquor tax.

Health Solutions for Colorado

Who would be helped:

Individuals earning up to $20,000 a year would get a 70 percent subsidy on premiums. Low-income parents would more easily qualify for Medicaid and the wealthy would see their health-related costs rise less than the middle class.

Who would suffer or pay more:

25- to 34-year-olds would see the biggest increase, an extra $534 in health- related costs per year. Limits on punitive damages in malpractice cases would lower paydays for lawyers.

How the money would be raised:

5 percent sales tax on food with little nutritional value, including fountain sodas and coffee at walk-up stands. Individuals who can't show that they have insurance would be fined $500 to $1,500. Insurers would pay into a re-insurance pool to cover huge medical costs.

A Plan for Covering Coloradans

Who would be helped:

Families earning as much as $60,000 a year would get subsidies paying 60 percent of their premiums. Those with disabilities or chronic diseases couldn't be shut out while coverage for dental and mental problems would improve.

Who would suffer or pay more:

Drinkers of hard liquor would pay $5.03 extra per liter bottle. People 35 to 44 would be hardest hit, paying an additional $731 a year in health-related costs. Those earning more than $150,000 annually would pay $3,594 more.

How the money would be raised:

A liquor tax and income tax increase. Employers would have to offer coverage to workers or pay into a state-run insurance pool.

Colorado Health Services Plan

Who would be helped:

Employers now offering coverage would save $3,266 per employee because more burden would be shifted to the income tax. The poor and working class would be covered and see a net drop in taxes or health care costs. Consumers would pay nothing for preventive services, $5 for office visits and $15 for brand-name prescriptions.

Who would suffer or pay more:

Jobs would be lost in the private insurance market. Households earning more than $150,000 a year would pay $16,200 more in taxes.

How the money would be raised:

Big increase in income taxes. Bulk purchasing of drugs and medical equipment by the state would save $322 million.

Proposed increases

• Beer: 10 cents a six-pack generates $19.5 million.

• Wine: 66 cents a bottle generates $27.7 million.

• Hard liquor: $5.03 a liter generates $78.8 million.

• Salty foods: 5 percent sales tax generates $19.2 million.**

• Soft drinks, coffee: 5 percent sales tax generates $31.3 million (soda only).

** includes potato chips, pretzels, cheese puffs and the like.Source: The Lewin Group

scanlon@RockyMountainNews.com or 303-442-8729