An initiative on the ballot this November, which would raise taxes on tobacco products to fund Montana’s Medicaid expansion, has galvanized health providers and engendered the most well-funded opposition to an initiative in the state’s history, largely, but not entirely, funded by tobacco companies.
Initiative 185 would raise taxes on tobacco products — taxes on cigarettes would increase by $2 a pack, for a total tax of $3.70 per pack. The taxes for all other nicotine products, including electronic cigarettes and vaping products, would increase by 33 percent of the wholesale price. The revenue accrued by these taxes — estimated by the nonpartisan state Office of Budget and Program Planning to be about $74 million per year — would contribute at most $26 million annually toward continuing Medicaid expansion in Montana.
The Montana Legislature expanded Medicaid, the federal health-care program for disabled or low-income Americans, under the federal Affordable Care Act in 2015. Since then, 96,000 previously uninsured Montanans have received health care. The federal government initially contributed 100 percent of those funds; that number is now 95 percent and will drop to 90 percent in 2020 if the program does not expire as planned on June 30 of next year. Initiative 185 intends to raise the remaining 10 percent of funds required to extend the program.
Supporters of the measure say the initiative is far more than a tax raise.
“This is a public health issue,” said Dr. Jason Cohen, an internal medicine doctor at Kalispell Regional Medical Center. “It is not one or the other, it is both. It’s one of the rare opportunities we have to do the right thing.”
I-185 proponents, including Cohen, have been vocal in attributing opposition to the measure to “Big Tobacco.” In fact, tobacco companies have provided the vast majority of the funding to fight the measure. Altria Client Services, the parent company of Phillip Morris USA, has spent more than $12 million to oppose Initiative 185 — 3.5 times the amount spent by the initiative’s largest backer, the Montana Hospital Association.
Montanans Against Tax Hikes, the group funded by tobacco companies to combat the initiative, spent an average of $895,000 a week last month on advertising, according to an analysis by the Associated Press. The group claims the state’s contribution to Medicaid expansion — projected to be $60 million — will far exceed the $26 million allocated from the new tobacco tax, leaving Montanans on the hook to make up the remaining $34 million.
“As clearly written in the initiative language, I-185 dedicates no more than $26 million to cover those costs. It is deceptive to claim that I-185 fully funds Medicaid expansion, because it doesn’t,” Charles Denowh, treasurer for Montanans Against Tax Hikes, said in an emailed statement.
Proponents of the initiative reject that claim as reductive math that ignores the Medicaid’s long-term cost savings. Jason Spring, chief strategic officer for Kalispell Regional Healthcare, points to a report from the state Office of Budget and Program Planning that declared the program fiscally neutral.
“The initiative funds about $26 million, and expanding Medicaid for the state of Montana costs about $60 million,” Spring said, “so that difference in the $34 million is made up in two ways. One is the savings to the traditional Medicaid program that receives a better federal match as a part of the expansion program.”
Under traditional Medicaid, Montana contributes about 35 percent of the funds to the federal government’s 65 percent — considerably more for the state than under expansion, which brings more federal dollars to Montana. Medicaid expansion’s injection of federal funds has saved Montana more than $40 million in spending during the program’s first two years, according to a study by the University of Montana’s Bureau of Business and Economic Research released in April.
The savings going forward, according to I-185 advocacy groups and the Budget Office report, will contribute about $31 million to the cost of Medicaid expansion.
The report agrees that when Medicaid’s economic benefits are considered, “cost savings and increased revenue more than offset expansion costs. This will remain true even after the state’s share of Medicaid expansion costs rises to 10 percent in 2020.”
The remaining $4.5 million of expansion funding will come from insurance premiums paid by Medicaid recipients, Spring said.
Denowh said he doubts these savings. “[E]ven if those savings do materialize, nothing in I-185 guarantees those funds will be used to offset Medicaid expansion’s $34 million unfunded mandate,” he said.
Spring and supporters of I-185 maintain, however, that characterizing the initiative as an unfunded mandate is misleading.
Medicaid expansion is “fiscally neutral to the state budget,” Spring said. “So the remaining dollars from the tax go 30 percent to childcare, 32 percent to the general fund, 14 percent to new programs that include in-home services for the elderly...smoking cessation and prevention information.” Money also goes to programs for veterans and anti-suicide efforts, he added.
According to Dr. Jason Cohen, an internal medicine doctor at Kalispell Regional Medical Center, Initiative 185 is also an opportunity to tackle two public health issues at once.
I’m a doctor,” Cohen said. “I see the effects of tobacco every day in my patients — COPD, emphysema, lung disease.
“The evidence is that raising the cost of tobacco is actually the only effective way to decrease tobacco rates...particularly for youth smoking because kids don’t have a ton of money.”
Though largely funded by tobacco companies, some opposition to I-185 challenges the measure on constitutional or business grounds.
“The opposition that we raise is purely a constitutional issue,” said Nathan Pierce, a Billings contractor and spokesman for the Guardian Group, a Montana citizens group dedicated to consumer advocacy. “Not that we oppose the insurance of Montana’s sick and disabled and most vulnerable citizens. It’s just that if we’re going to do that those efforts should comply with the laws and constitution for the state of Montana. That’s the moral charter that we’ve all agreed to as citizens.”
Pierce, who said the Guardian Group is not funded by tobacco money, pointed to Section 4, Initiative 1 of Montana’s constitution: “The people may enact laws by initiative on all matters except appropriations of money and local or special laws.”
“We see [Initiative 185] as a specific appropriation,” Pierce asserted. “It very distinctly points out exactly where the money will go to and prevents the Legislature from decreasing those amounts in the future.”
Additionally, he said, “there are plenty of businesses out there that would be affected by this tax and some that may be put out of business.”
Matt Culley, who runs a vaping-specific Youtube channel and sells his products online, agrees that tobacco-related businesses in the Flathead would be stressed by the tax.
“If an 83 percent wholesale tax [on vaping products] is going to go through, it’s going to absolutely decimate the brick-and-mortar shops here” he said. “And the reason being is that, you can buy these products online, tax-free, from other states.
“I support Medicaid...But besides the morality of it, it’s going to hurt local business.”
He said there are three or four vaping-related shops in the Flathead Valley who could be put out of business by the tax, and pushed back on a measure that lumps vaping — a practice he used to quit cigarettes — in with Big Tobacco. “They’re not taxing [vaping] according to its harm.”
The initiative’s advocates, though, argue that economic costs to tobacco or nicotine distract from the main point: cementing Medicaid expansion in place allows nearly 100,000 Montanans to keep their health care.
“There’s real people being helped by this,” Cohen said. “It’s not just an argument between doctors and Big Tobacco, there’s real people out there who are benefiting from this.”
Reporter Adrian Horton can be reached at 758-4439 or at email@example.com.