Administration, lawmakers spar over cigarette tax hike to benefit children's insurance

As a Senate committee prepared to approve an additional $35 billion for children's health insurance, the Bush administration spelled out its objections to how the increase would be paid for _ a 61-cent increase on the excise tax for a pack of cigarettes.

"Ironically, the proposed legislation would increase taxes on low-income taxpayers as a way to fund health coverage for low-income individuals," Health and Human Services Secretary Mike Leavitt said Tuesday in a letter to Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa.

Baucus replied with his own letter to Leavitt. "When given the choice between standing with big tobacco companies and standing with kids, I stand with America's children," said the chairman of the Senate Finance Committee.

The renewal of the State Children's Health Insurance Program is considered by many to be the most important health legislation that Congress will take up this year. Democratic leaders called for adding $50 billion to the program over the next five years.

The program subsidizes the cost of insurance for children and some adults with incomes too high for Medicaid but not enough to afford private insurance.

On Friday, a bipartisan group of lawmakers in the Senate signaled their support for a $35 billion increase, which would bring total funding to $60 billion over five years. The Senate Finance Committee is expected to take up that proposal Wednesday. President Bush had recommended a $5 billion increase.

The Senate proposal would provide health insurance coverage to current participants as well as an additional 3.3 million uninsured children, according to estimates from the Congressional Budget Office.

Among the organizations that have announced their support for the proposal are the American Hospital Association, the American Medical Association and the American Cancer Society.

The Bush administration has consistently referred to SCHIP as government-run health care. Leavitt said the program is important and should be renewed, but that billions of dollars in insurance costs will be shifted from the private sector to the federal government under the Senate proposal.

But Baucus said the program's structure is not unlike that of the prescription drug benefit. He noted that private insurers administer the coverage for most children in return for a government subsidy.

"The vast majority of states contract with private companies to deliver all or some CHIP services to children," Baucus said.

In his 10-page letter to Baucus and Grassley, Leavitt also assailed the Senate proposal for using a "massive budget gimmick." In the proposal, funding would drop from about $16 billion to $3.5 billion in 2013, which he said is an admission that the expansion is unsustainable.

Baucus said revenue from the higher tobacco taxes would more than offset the program's cost in the first five years. By the end of fiscal year 2012, he believes that Congress and the next president would set appropriate funding levels for future years.