SPRINGFIELD, Ill. (AP) – Without a vote to spare, the Illinois House agreed Friday to raise cigarette taxes by $1 a pack as part of an ambitious and politically perilous plan to close a $2.7 billion budget hole that threatens health services for the state’s poor and elderly.
The measure passed 60-52, the bare minimum needed for approval. It goes to the state Senate, which has backed similar increases in the past.
The tax increase, which also applies to other tobacco products, is the second major part of a plan to bail out the state Medicaid program, which officials say is near collapse. The General Assembly has already approved roughly $1.6 billion in cuts to Medicaid services and payment rates, which will reduce or halt health services for hundreds of thousands of Illinoisans.
House Majority Leader Barbara Flynn Currie, D-Chicago, warned that if lawmakers didn’t approve the tax increase, it would mean more “terrible, dreadful, draconian cuts” to Medicaid or other parts of the budget.
The bill would raise the cigarette tax by $1, to a total of $1.98 a pack. The money from that and other tobacco taxes would be matched by the federal government. It also would impose a new tax on hospitals to qualify for more federal matching money. In all, the measure is supposed to generate $800 million a year.
The Illinois Hospital Association supports the legislation, calling it vital to preserving Medicaid, which serves 2.7 million people. The bill also clarifies what hospitals must do to qualify for valuable property tax exemptions and creates a new tax credit for investor-owned, for-profit hospitals.
Groups trying to discourage smoking also backed the measure. By some estimates, the extra $1 for a pack of cigarettes would persuade 60,000 people to quit smoking and keep 80,000 children from taking up the habit.
In a statement, Gov. Pat Quinn urged the Senate to approve the legislation in order to “improve the health of our people and lower the burden of smoking-related conditions on our Medicaid system, while helping to fill the $2.7 billion Medicaid shortfall.”
Eighteen Republicans joined the Democratic majority to pass the tax measure.
“It’s a tough vote, but it’s the right vote,” said Rep. Jim Sacia, R-Pecatonica.
Top Senate Republicans say they doubt the tax will get any GOP support in the Senate. The vote will probably come early next week.
The governor announced in February that Medicaid costs would overwhelm revenues in the year ahead. He warned that doctors, hospitals and nursing homes already waiting months to be paid for their services would stop accepting Medicaid clients and the entire health system would fall apart.
Quinn called for $2.7 billion in cuts to fix the problem. Legislative negotiations didn’t achieve that goal. Instead, lawmakers came up with a plan for a mix of cuts, tax increases and minor budget maneuvers.
The cuts include lower payment rates for many hospitals and nursing homes and deep cuts in services, such as ending prescription drug coverage for nearly 200,000 senior citizens and halting health coverage entirely for 35,000 adults. Other services, from dental care to coronary bypasses, would be restricted.
The plan to save Medicaid asks legislators to cast election-year votes for cutting services to some of the state’s most vulnerable residents and for raising taxes a dangerous mix for anyone seeking another term.
Opponents include owners of gas stations and convenience stores, the “roll your own” cigarette business and a consumer coalition that says the property tax portion of the bill favors hospitals over taxpayers.
The property tax issue goes back to a 2010 Illinois Supreme Court ruling that stripped an Urbana hospital of its property tax exemption because it wasn’t providing enough free or discounted care for the poor. Two other hospitals also ended up losing their exemptions.
Under the bill, those three hospitals could qualify for tax exemptions again. One expert, Keith Hearle of Verite Healthcare Consulting, said most Illinois hospitals should be able to keep their exemptions under the rules laid out in the legislation.
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