Counties call for cigarette tax to fund Medicaid relief

While North Carolina legislators debate a cigarette tax increase to help combat the state’s budget deficit, the North Carolina Association of County Commissioners is asking for a portion of those new revenues be devoted to relieving counties of their Medicaid burden.

More on Medicaid relief

“It is time that North Carolina legislators raise the cigarette tax beyond its current 5 cents per pack, which is the lowest rate in the country,” said NCACC President Breeden Blackwell, a Cumberland County commissioner. “A significant increase would discourage more children from taking up a deadly habit, which would in turn help curb the state’s drastically rising health-care costs. Using some of the proceeds generated by an increased cigarette tax to relieve counties of the Medicaid burden would be appropriate because health problems caused by cigarette smoking are a driving factor of Medicaid costs.”

According to the Federation of Tax Administrators, the median tax rate in the United States is 69.5 cents per pack. Kentucky’s tax rate increased from 3 cents to 30 cents per pack effective June 1, and Virginia’s is scheduled to increase from 20 cents to 30 cents effective July 1.

“Instead of cutting Medicaid services, as the Senate budget proposes, the state should be looking for ways to reduce future Medicaid expenses,” said Blackwell. “An increased cigarette tax would accomplish that objective. Directing some of the proceeds to ease the county share of the state’s Medicaid expenses would also enable counties to better meet their mandated duty to build and maintain adequate school facilities. This would result in healthier, better-educated children.”

North Carolina is the only state in the nation that requires counties to pay a fixed percentage of the state’s Medicaid share, even though the state and federal governments make all decisions regarding eligibility, services and reimbursement rates. This burden is forcing many counties to raise property taxes significantly or cut services to meet their constitutional mandate to provide schools.

In 2004, the N.C. General Assembly created the Blue Ribbon Commission on Medicaid Reform. Among that bipartisan commission’s recommendations was to phase out the county share of Medicaid in five years and to cap the county costs at the 2004-05 levels. For 2004-05, the county share of Medicaid is projected to be $440 million. That amount increases to at least $470 million for 2005-06.

“An increase of 5 cents in the cigarette tax would generate approximately $35 million, which would be enough to cap county costs at 2004-05 levels,” said Blackwell. “A few cents more would help provide some much-needed relief to our hardest hit counties.”

Several bills have been introduced in the General Assembly that would accomplish these recommendations.