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  1. SCCA Quarterly Meeting 01/30/07 Dum Spiro Spero

  2. Cigarette Smoking in South Carolina:Dum Spiro Spero

  3. Some history… • 1967 Surgeon-General’s Report -- The Health Consequences of Smoking • 1986 Surgeon-General’s Report -- The Health Consequences of Involuntary Smoking • June 27, 2006 Surgeon-General’s Report -- The Health Consequences of Involuntary Exposure to Tobacco Smoke

  4. The National Picture… Simply put: The #1 preventable cause of disease and death in the United States Each pack sold costs society $40 The Price of Smoking Frank Sloan, et al

  5. Tobacco - #1 Preventable Cause of Death in US McGinnis JM, Foege WH. Actual Cause of Death in US, JAMA 1993; 270: 2207-12

  6. TOBACCOMost of addictive of commonly abused substances • Average person quits 5X prior to success • 90% of current smokers started as a teen • Gateway drug to illicit substance abuse • 24.4% of SC high school students smoke

  7. Tobacco - Most Addictive of AllNational Survey on Drug Use and Health databaseNational Comorbidity Survey databaseFamily Practice News 03/15/05 • 1 of 10 first time THC users become dependant • 1 of 9 first time stimulant users become dependant • 1 of 7 first time ETOH users become dependant • 1 of 6 first time Cocaine users become dependant • 1 of 5 first time Crack users become dependant • 1 of 4 first time Opiate users become dependant • 1 of 3 first time Cigarette users become dependantTobacco is the gateway drug

  8. TOBACCO DISEASE & DEATHASCVD - #1 risk factorCancer - 30% of all cancerCOPD - #1 risk factor

  9. TOBACCO DISEASE & DEATH • Smoking linked to 63% of all US African American male cancer deaths • Highest burden in the South 67% Bruce Leistikow, Department of Public Health, UC Davis School of Medicine

  10. Deathly Delivery Device 50% of smokers will die of a tobacco related illness

  11. TOBACCO DISEASE & DEATH 400,000 Deaths in US /year More than a 2004 Tsunami on both East and West Coast annually

  12. Healthcare Crisis and Tobacco • Our nation spends more on health care than any other country - 1.4 trillion in 2001 • Chronic disease account for 75% of the cost of US health care. • Healthcare crumbling under the weight of under and unreimbursed healthcare

  13. Healthcare Crisis and Tobacco • Direct medical expenses attributed to smoking in US - 75 billion • 50% of smokers will die of a tobacco related illness • Most smokers are from lower socio-economic groups and are less educated

  14. SC Household Tobacco Cost Hidden Tobacco Tax $578/household/year

  15. US Personal Bankruptcy Illness and Injury as Contributors to Bankruptcy Himmelstein, Warren, Thorne, Woolhandler Health Affairs 12/03/04 Study of Personal or Household Bankruptcy in 2001 4 million declared bankruptcy in 2001 medical problems contribute to 50% of all bankruptcies in 2001 (up from 8% in of all bankruptcies in 1981 medical debtors, like other bankruptcy filers, are middle class

  16. US Personal Bankruptcy An average debtor was: 41 year old woman middle class with children some college education

  17. US Personal Bankruptcy 75% had health insurance at illness onset 38% had insurance coverage lapse 60% private (33% lost coverage) 8% Medicaid, 6% Medicare, 2%VA 75% of filings were for debtor or spouse, 13% child, 8% old relative

  18. US Personal Bankruptcy out of pocket medical costs leading to bankruptcy averaged $11,854 from illness onset to bankruptcy

  19. Cigarette Smuggling Linked to Terrorism By Sari HorwitzWashington Post Staff WriterTuesday, June 8, 2004; Page A01 Although black market cigarette sales have been around for decades, the link to suspected terrorist groups is a new and growing phenomenon. "The schemes provide terrorists millions of dollars which can be used to purchase firearms and explosives to use against the United States and others," said ATF Director Carl J. Truscott, who was appointed to head the agency two months ago after 22 years in the Secret Service. Several major cases of illicit cigarette trafficking with terrorist links have involved the purchase of cigarettes in Virginia and are currently under investigation, federal law enforcement sources said, adding that there are other cases nationally with links between the traffickers andHamas, Hezbollah and al Qaeda.

  20. A smuggler can make about $2 million on a single truckload of cigarettes. A truckload contains 800 cases, or 48,000 cartons. Cigarette Smuggling Linked to Terrorism By Sari HorwitzWashington Post Staff WriterTuesday, June 8, 2004; Page A01

  21. South Carolina’s situation… • Disease • $1.09 billion in health care costs directly caused by smoking in 2005 • Low birth-weight babies • 1 in 5 low birth-weight (LBW) babies are directly due to their mother smoking during pregnancy (in 2004, at least 1,120 LBW babies caused by maternal smoking) • Deaths • 5,900 adults die each year from their own smoking • 580 to 1,030 adults, children, & babies die each year from others’ smoking What are the other costs attributable to smoking? … years of potential life lost … lost work productivity … health care costs caused by exposure to second-hand smoke

  22. Tobacco Industry: Master Settlement Agreement(MSA)with the States* in 1998 • South Carolina has been awarded $2.3 billion • 1998-1999: $28 million received • In 2000, the Legislature agreed to a compromise with Governor Hodges on his plan to securitize the settlement funds by issuing bonds backed by the $2.3 billion the state expects to receive over the next 25 years, in return for an up-front payment of $912 million. The money raised was transferred into four trust funds. [ * 46 states, the District of Columbia, and fiveU.S. territories]

  23. The four trust funds: - 73%for theHealth Care Endowmentto fund a prescription drug program for seniors, tobacco prevention programs and Medicaid expansion; - 15%forassistance to tobacco farmers(in addition to the Phase 2 settlement funds); - 10%foreconomic development in rural areasof the state; and - 2%to fundlocal water and sewer projects. [In the healthcare trust fund, only the interest generated by the fund is available for expenditure, while the principal in the three other trusts is also available for programs.]

  24. BUT, the FY2003 budget approved by the Legislature and Governor Hodges withdrew $100 million from the Health Care Trust Fund (and the interest it had earned). As a result of the withdrawal, the endowment balance was reduced to $443 million.

  25. Tobacco Industry(cont’d) Master Settlement Agreement (MSA) Phase 2:The National Tobacco Growers’ Settlement Trust Fund(additional MSA payments specifically to the tobacco-growing states*) • South Carolina was awarded an annual allocation of 6.94% (totaling up to ~ $354 million): • 1999 $26.4 million • 2000 $19.4 million • 2001 $27.8 million • 2002 to 2008 $34.7 million per year • 2009 to 2010 $20.5 million per year [* from highest-to-lowest annual allocation % size: NC, KY, TN, SC, VA, GA, OH, IN, FL, MD, PA, MO, WV, AL]

  26. However,the tobacco quota buyoutpassed by Congress in 2004 ended the tobacco companies' legal obligation to continue thePhase 2payments to South Carolina tobacco growers.

  27. [source: accessed on 1/9/2007 at http://tobaccofreekids.org/reports/settlements/2007/fullreport.pdf ]

  28. SC Tobacco Policy RULE OF 7’s • Cigarette tax has not increased since 1977 • Lowest cigarette tax in the nation – 7 cents/pack • Medicaid and Medicare costs per pack - $7.00

  29. A Failing Business Model: Cigarettes and South Carolina Government • Cost to Government per pack cigarettes sold: ~ $7.00 (Medicare and Medicare) • State tax revenue collected per pack cigarettes sold: $.07 • Federal tax revenue collected per pack cigarettes sold: $.39 • Government’s net loss for each pack of cigarettes sold: ~ $6.50

  30. SC Tobacco Politics • Tobacco Industry and campaign contributions to our elected officials • Culture of individual rights and responsibility • Legislators who sign “No tax” pledges • Smoke and Mirrors: • fix Medicaid first – best fix • hurt the farmer – Federal buy out 2005 • unfair to the poor – most helpful to poor • declining source of revenue – lower cost

  31. What do South Carolinians really think about our state’s cigarette tax situation? • Likely voter survey, February 2006 • Survey results: • 71% favor increasing our state’s cigarette tax to $1.00 per pack • 71% support increasing our state’s cigarette tax to provide funding for health care programs and programs to reduce smoking among kids

  32. South Carolina Voters Strongly Favor A 93-cent Increase in the Cigarette Tax Would you favor or oppose a 93-cent per pack increase in the state cigarette tax, with part of therevenue dedicated to a program to reduce tobacco use, particularly among kids, and the rest ofthe revenue dedicated to funding Medicaid and other health care programs? Total Favor: 71% Total Oppose: 27%

  33. Upstate (36%) Strongly Favor 56% Total Favor 75% Total Oppose 24% Cherokee Spartanburg York Greenville Strongly Oppose 18% Pickens Oconee Union Chester Chesterfield Lancaster Midlands (29%) Marlboro Anderson Laurens Dillon Fairfield Kershaw Strongly Favor 55% Darlington Newberry Total Favor 65% Abbeville Marion Lee Greenwood Total Oppose 33% Florence Richland Saluda Horry McCormick Sumter Lexington Strongly Oppose 22% Edgefield Calhoun Clarendon Williamsburg Pee Dee (16%) Aiken Georgetown Orangeburg Strongly Favor 51% Barnwell Bamberg Berkeley Dorchester Total Favor 67% Allendale Total Oppose 32% Colleton Strongly Oppose 22% Hampton Charleston Low Country (19%) Jasper Strongly Favor 60% Beaufort Total Favor 77% Total Oppose 21% Strongly Oppose 14% Voters from every region strongly support the 93-cent cigarette tax increase. 93-Cent Tax Increase by Region

  34. Voters across party overwhelmingly support a 93-cent increase in the cigarette tax. 93-Cent Tax Increase by Party +44% +38% +12% +66% +48% 82% 73% 71% 68% 56% 44% 30% 27% 25% 16% Base GOP Soft GOP Ind Soft Dem Base Dem (28%) (19%) (12%) (15%) (25%) Total Favor Total Oppose

  35. Voters say they will reward legislators who support the 93-cent tax increase. “And, would you be more likely or less likely to support a candidate for political office here in South Carolina if they supported this 93-cent per pack increase in the state cigarette tax with part of the revenue dedicated to a program to reduce tobacco use, particularly among kids, and the rest of the revenue dedicated to funding Medicaid and other health care programs, or would this make no difference to your vote one way or the other?” Total More Likely: 50%* Much More Total Less Likely: 17% Likely 30% Smwt More Likely 21% DK/Ref 1% Smwt Less Likely 6% Much Less No Difference Likely 31% * Denotes Rounding 11%

  36. Voters prefer a candidate who supports raising the cigarette tax - regardless of party. Please tell me for which candidate you would vote if the choices were... a Republican candidate who supports the proposal to raise the cigarette tax a Democratic candidate who supports the proposal to raise the cigarette tax a Republican candidate who opposesthe proposal to raise the cigarette tax a Democratic candidate who opposes the proposal to raise the cigarette tax +13 Dem +22 GOP 47% 51% 34% 29% 16% 16%

  37. Common Sense • Increased price • Decreased demand • Decreased usage: • A 10% price increase in a pack of cigarettes = • a 7% decrease in youth smoking • a 4% decrease in overall cigarette consumption

  38. The Cigarette Tax - A gift that keeps on giving!WIN WIN WIN! Win for Public Health • Saves Lives – here and abroad • Fewer low birthweight babies, sudden infant deaths (SIDS), heart attacks, strokes • Less emphysema (COPD), lung cancer, asthma, pneumonia, dentures • Terrorist cells less able to exploit tax differentials between states • Decreases teen smoking • Most cost-effective means to discourage youth smoking • Teens most price-sensitive purchaser • 90% of smokers start smoking prior to age 21 Win for Revenue/State Budget • Reduces Healthcare Costs • American society saves $40 for every pack not smoked • Medicare and Medicaid in South Carolina save $7 for every pack not smoked • State cigarette tax revenues can be tripled with federal Medicaid matching funds Win for SC Legislators Strong public support (71%)

  39. The Downside(Is there any?!) • Cross-border sales of cigarettes • Georgia, North Carolina • New cigarette tax revenues being spent for other than cigarette smoking caused costs • Are cigarette tax revenues dependable enough to be used to pay for state programs year-in and year-out?

  40. Cross Border Sales ConcernCigarette Tax Revenue in SC and NCBefore and After NC’s 25-cent Increase on 9/1/05 South Carolina North Carolina +14.3% +388.3% Data were only available through May 2006. NC had a second tax increase of 5-cents on 7/1/06.

  41. Cigarette Tax Revenue in SC and GA for Fiscal Years 2003 and 2004increased from 25 cents to 37 cents South Carolina Georgia +1.9% +170.2% GA Tax Increase In Effect 7/1/03

  42. Declining Revenue Concern

  43. Our Policy Goal • Increase the cigarette tax at least to the national average of $1/pack • Utilize cigarette tax revenue to fund health care • Fund prevention in accordance with CDC national “best practice” guidelines

  44. Tobacco Policy • Ounce of prevention / pound of cure • Every dollar spent on youth tobacco prevention saves $16 of future health costs