A debate over whether a new tax should fund the Dirigo Health program has both sides criticizing the process that led to Question 1 on the Nov. 4 ballot.
Question 1 reads: “Do you want to reject the parts of a new law that change the method of funding Maine’s Dirigo Health Program through charging health insurance companies a fixed fee on paid claims and adding taxes to malt liquor, wine and soft drinks?”
A “yes” vote means the voter supports repealing the new taxes and insurance fees and letting Dirigo continue with funding from the savings offset payment.
A “no” vote supports the tax and insurance fee package and would increase funding for Dirigo Health.
Supporters of the tax, on the grounds that it’s crucial to the fledgling Dirigo program’s goals, thought they found a long-sought funding solution with the advent of the so-called “beverage tax,” which was passed by the Legislature in April.
But opponents, who put the brakes on the new tax with a 72,000-signature petition to pose the repeal of the tax to voters statewide, say the legislature’s approval was too hasty and done without any chance for input from the public. The legislature enacted the tax during the final week of its session in April.
The beverage tax targets drinks ranging from beer to soda syrup, including a new $4 tax on a gallon of syrup used to make soda in restaurants, a new 42-cent-per-gallon tax on bottled soft drinks, and a doubling of the current tax on beer and wine, to 54 cents a gallon on beer and 65 cents a gallon on wine. The tax package also includes a 1.8 percent charge on claims paid by insurance companies and the self-insured.
In all, it would raise between $55 million and $75 million in revenue, which would allow Dirigo to expand its enrollment past the 18,000 people, the number at which it’s frozen because of funding, and make way for other provisions that would further reduce overall health care costs and ramp up quality and preventative medicine measures.
The impetus for the idea was that a tax on “unhealthy” products is appropriate to fund health insurance and that the effect on taxpayers would be mere pennies on the cost of a drink. Furthermore, the 1.8 percent tax on insurance claims would be less than is currently assessed for Dirigo through a formula called the savings offset payment. The coalition opposing the tax, Fed Up With Taxes, said with the ailing economy, a new tax is troublesome regardless of what it’s for.
“A $75 million tax is a $75 million tax is a $75 million tax,” said Newell Augur, an attorney and lobbyist for the Maine Beverage Association, who chairs the coalition. “It’s a recurring theme, but this will be acutely painful on all the people of Maine.”
Augur said the premise that the tax affects the price of only unhealthy drinks is flawed because it would also hit sugar- and calorie-free products like fruit juice and iced tea.
The ‘savings offset payment’
The Dirigo insurance plan, which was the first major piece of legislation pushed through by the Baldacci administration in 2003, started in 2005 with $53 million in one-time federal money. Since then, it has relied on a mechanism called the “savings offset payment,” a formula that is supposed to represent health care savings realized by hospitals and insurance companies because of provisions in the Dirigo legislation.
The first savings offset payment assessment was $43.7 million in 2006, followed by a $34.3 million assessment for 2007 and then this year’s assessment of $32.8 million. Last month, the state’s superintendent of insurance, Mila Kofman, ruled that the state may assess $48.7 million in savings offset fees to fund the program next year if the beverage and insurance tax is repealed Nov. 4.
The Dirigo Health Agency was hoping for $80 million next year. That gap between what Dirigo officials say they need and what they actually receive is the primary reason a new funding model is sought.
Trish Riley, who spearheads the Dirigo initiative from Baldacci’s Office of Health Policy and Finance, said the annual battle over the savings offset payment is one of the reasons steady funding offered by the beverage tax was so attractive.
“Because it’s become so contentious, it costs us $1 million a year to contest the savings offset payment, to make the case and go through all the hearings,” Riley said. “We clearly thought we had found the solution, and then the beverage companies came forward with this veto.”
Curtis Picard, executive director of the Maine Merchants Association, said the new tax would be cumbersome for beverage distributors to administer and pay, one problem that he said could have been addressed had it been subjected to a public hearing process before enactment.
“Our biggest worry is that the Maine Revenue Service decides to go to some convenience store somewhere and finds a product that isn’t being properly taxed because of a mistake,” he said. “It would be a major challenge to comply.”
Differing challenges
Opponents of the tax repeal acknowledge that challenge but say it pales in comparison to the challenges faced by 130,000 people in Maine who lack health insurance.
Megan Hannan, director of government relations and advocacy for the American Cancer Society of Maine, said encountering cancer victims whose treatment isn’t covered is the worst part of her job. Hannan originally supported funding Dirigo with a tax on cigarettes, but that proposal and others recommended by a Blue Ribbon commission on the subject, were rejected by the Senate.
Hannan said proponents of the veto are using scare tactics that should be familiar to Mainers.
“When we banned smoking in public places, they said all the restaurants would close,” she said. “When they wanted to raise cigarette taxes, they said the convenience stores would close. None of that has happened. They’re muddying the issue.”
But proponents of the repeal said the mud is coming from the other side. Ted O’Meara, a lawyer from the Portland firm Pierce Atwood, who is also supporting the repeal, said the fact is Dirigo will continue with or without the beverage tax.
“If this is an important program, shouldn’t it be discussed in the context of the overall state budget instead of this late-night, special deal?” he said. “There should be a larger conversation around this program if it is a priority.”
Alisa Coffin, owner of the Great Impasta restaurant in Brunswick, traveled with Augur and O’Meara last week to rally in favor of the tax veto. She sees this new expense as a reason for potential diners in her restaurant and others to stay home.
“We’re told it is pennies,” she said. “It’s not pennies. It’s going to cost me thousands of dollars and unfortunately, I’ll be forced to pass that on to my customers. There are only certain expenses that I have a say on, so I’m stepping in on this one.”
In an industry facing rising costs in several areas – everything from delivery and energy costs to the price of wheat for making pasta – another gouge in the profit margin is more pronounced, said Coffin.
(Statehouse News Service)
