To Reduce Medicaid Costs, Nebraska’s Tobacco Taxes Must Reflect Relative Risk

Nebraska lawmakers are considering LB 1124, which would substantially increase taxes on both combustible cigarettes and e-cigarettes. The stated goal is to help offset roughly $120 million in annual Medicaid costs attributed to smoking-related disease.

Reducing smoking and its fiscal impact is a public health imperative. But how tobacco taxes are structured has a profound impact on public health outcomes.

Cigarette taxes are among the most regressive taxes in state government. The burden falls disproportionately on lower-income and working-class adults — the Nebraskans who smoke at the highest rates and bear the greatest health consequences of smoking.

While cigarette tax increases prompt quit attempts, trying to quit and succeeding are very different things. Roughly 80 percent of Nebraska’s 185,000 adults who smoke have tried to quit smoking at least once. Yet quitting is hard, and only one in tenpeople who try to quit are successful.

Given the limits of traditional cessation strategies, many adults are turning to e-cigarettes. The Cochrane Review — one of the most rigorous evidence syntheses in medicine — has concluded that e-cigarettes are more effective for smoking cessation than nicotine replacement therapies such as patches or gum. The most credible scientific assessments, including those of the U.S. Food and Drug Administration, also indicate that e-cigarettes are substantially less harmful than combustible cigarettes because they eliminate combustion, the primary driver of smoking-related disease.

The reality is that tobacco products are not equally harmful and tax policy should reflect that reality.

Unfortunately, LB 1124 would triple the tax on e-cigaretteswhile also raising cigarette taxes. That approach narrows the price differential between combustible cigarettes and a lower-risk alternative shown to assist smoking cessation.

If lawmakers choose to raise cigarette taxes, they should do so. But to accelerate declines in smoking and reduce Medicaid costs more rapidly, Nebraska’s tobacco tax policy should be risk-proportionate: higher taxes on combustibles while keeping lower taxes on noncombustible alternatives.

Nebraska has an opportunity to accelerate the decline of smoking and reduce avoidable disease and Medicaid spending. That will not happen if tax policy blurs the distinction between combustible cigarettes and substantially lower-risk alternatives. Lawmakers should structure this bill so that it reinforces — rather than undermines — transitions away from smoking.