Last week the House approved a major expansion of the children's health insurance program. The bill aims to expand the children's health program by $48 billion over the next five years. The proposed source of finance is an increase in tobacco taxes and cuts in payments to Medicare providers.
The bill was opposed by the Republicans as it seeks to cut subsidies to the private insurance companies who manage the Medicare plans. These Medicare plans are very popular in rural America.
The passage of the Bill has made both the Republicans and the Democrats happy. While for the Democrats it is a victory, being able to implement what they have been wanting to for a long time, the Republicans are grinning from ear to ear because they feel that a cut in the popular Medicare program will eventually cost the Democrats the control of the House. However, the Democrats have been quite smart. They plan to increase aid to poor Medicare beneficiaries and also put in place a plan for preventive health care that would make it less expensive for seniors.
While a tobacco tax is popular it has one major shortcoming. With the number of smokers declining the source of funding lacks stability and would ultimately shift the financial burden onto others. An increase in taxes is also likely to further increase the cost of smoking and cause a further decline in the number of smokers, and the downward spiral may accelerate.
But given the importance of the program the Government will simply have to find a sustainable way of funding it.