SAN FRANCISCO – Proposition 86 will reduce patient focus, competition among California hospitals, harm smokers, draw more kids into government-run health care programs, and create a violent bootlegging trend, according to “Keep Tobacco Money Out of Our Hospitals,” a new voter-education pamphlet released today by the Pacific Research Institute (PRI), a free-market think tank based in California. The new pamphlet is part of
a Decision 2006 policy series published by PRI.

“Prop. 86 guarantees California hospitals a “river of cash” of $750 million—over 1 percent of their current gross revenues—for which they are entirely unaccountable,” said John R. Graham, director of Health Care Studies at the PRI. “It reduces their incentives to care for patients—from whom they would earn less revenue—and increases their dependency on tobacco money.”

According to “Keep Tobacco Money Out of Our Hospitals,” Prop. 86 would lead to other negative consequences for Californians:

1. Almost half of the revenue from the initiative will go to enrolling more children in government-run health care. As history has shown, this will “crowd out” private health insurance for kids, expand government, and reduce families’ health care choices. Prop. 86 will result in about 300,000 to 550,000 kids shifting from private coverage to these welfare programs.
   
   
2. By increasing the excise tax on the average smoker by $684 per year to a total of $1,097, Prop. 86 confiscates resources that a smoker could otherwise use to make healthier choices, of his own accord.
   
   
3. Prop. 86 greatly increases the incentives to smuggle cigarettes into the state, a black market offering profits between $330 million and $610 million that will attract mobsters and terrorists.
   
   
4. State law forbids health insurers in the small-group market from charging higher premiums to smokers than non-smokers. A simple legislative change would allow insurers the ability to price the risk of smoking efficiently without irresponsibly throwing more cash at wealthy hospitals, creating opportunities for terrorists, or feeding innocent children to creaky government health programs.

“Californians should not allow our hospitals to become distracted from patient care through an easy addiction to cigarette money,” said Mr. Graham.

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About PRI
For 27 years, the Pacific Research Institute (PRI) has championed freedom, opportunity, and individual responsibility through free-market policy solutions. PRI is a non-profit, non-partisan organization. For more information please visit our web site at http://www.pacificresearch.org/