President Obama Wants Tax Hike on Cigarettes, Smoking a Pre-Existing Medical Condition Under Some Obamacare Health Exchanges

Perverse incentives abound


a bridge too far
Camille Richez/Foter.com

Among President Obama's half trillion dollars in tax hikes is a 94 cent tax on cigarettes expected to raise $78 billion over ten years. The president wants to spend it on early education.

Meanwhile, healthcare exchanges created by Obamacare are starting to classify cigarette smoking as a pre-existing condition, prohibiting insurance companies for charging more to customers who take a higher risk by smoking. In noting the most recent such decision, in the District of Columbia, the National Review points out the absurdity of the decision and how it serves to illustrate the bureaucratic morass Obamacare imposes on the health insurance market:

Obamacare was sold as a way to help poor people and sick people get health insurance, but, as the D.C. decision shows, the actual intent of the law is the abolition of health insurance. The notion of insuring a preexisting condition is an oxymoron; insurance is by nature concerned with that which may happen in the future rather than with that which already has happened. In very large groups, human health outcomes are predictable with a fair degree of precision: Given 10 million people, actuaries can make pretty accurate predictions about how many people are going to get lung cancer and how many are going to be in car accidents. Some factors are relevant to some conditions: Being 17 years old and getting in a car accident, for example, or smoking and heart disease, emphysema, cancer, etc. Insurance, which places a price on calculated risks, will take some of those factors into account. But you cannot in any meaningful sense insure somebody against cancer when they already have cancer.

Obamacare is designed to destroy the insurance market. Markets do not function without prices, and Obamacare ensures that prices will not be allowed to emerge. There is a medical price associated with smoking, but the District of Columbia has decided to suppress that price by law. Pretending that smoking has no relationship with health-care costs does not make it so — it is only a way to push costs around in a way that is agreeable to the likes of Barack Obama, converting a system that prices risk into a system of entitlements.

Smokers have actually been shown to cost insurers less (spoiler: they die younger) but they present a higher risk and identifiable associated costs. The treatment of cigarettes as a revenue source by governments at all levels shows that while government may not hesitate to suppress the cost of smoking on healthcare, it's eager to impose costs on smoking of its own. The government's love-hate relationship with cigarette smokers ought to be a stark warning of how perverse government incentives could become as it becomes more and more involved in the business of healthcare.