Maine Residents Angered by Expansion of Dirigo Program Subsidy

Published September 1, 2008

New taxes to support Dirigo Care, the Maine state government’s attempt at providing “universal” health care, have so angered Maine residents that a coalition dedicated to repealing the tax increases was able to collect nearly twice as many signatures as required to put a repeal referendum on the state’s ballot this November.

Dirigo Care is being funded by newly imposed taxes on health insurance claims, as well as on goods such as beer, soda, wine, and tobacco.

Tax Promises Broken

“Voters were assured Dirigo would never require an increase in taxes,” said Tarren Bragdon, CEO of the Maine Heritage Policy Center. “Those promises were repeatedly broken.”

Dirigo Care has cost the state’s taxpayers nearly $164 million in the four years since its inception. Although its intended purpose was to insure 128,000 people who had no health coverage, only 4 percent of that total, or just over 5,000 individuals, have been successfully removed from the rolls of the uninsured and into the state program, according to figures from the Maine Heritage Policy Center.

“Dirigo Care has been worse than useless,” said Greg Scandlen, director of Consumers for Health Care Choices at The Heartland Institute. “Not only has it failed to cover many people, but all the false promises surrounding it have distracted Maine from doing anything that would actually help improve the situation.”

On April 15, Gov. John Baldacci (D) signed LD2247, An Act to Continue Maine’s Leadership in Covering the Uninsured, expanding the Dirigo Care program by $28 million annually.

“I am proud to say that we’re moving toward a day when health insurance will be affordable for, and available to, all Mainers,” said Baldacci at the bill signing.

Tobacco Taxes Hit Poor

Taxpayers are footing the bill for the increased spending, as the state levied a 1.8 percent tax increase on paid insurance claims, raised taxes on alcoholic beverages, and increased tax rates on tobacco products. That “doesn’t make a lot of sense,” said Devon Herrick, a senior fellow with the National Center for Policy Analysis.

“Tobacco taxes fall predominantly on low-income households, so raising tobacco taxes to fund health insurance is akin to taxing the poor to provide coverage to the poor,” Herrick said. “If Maine truly wants to cover more people, it needs to make coverage more affordable.”

The tobacco tax increase was levied in two parts. The cigarette tax was increased by 50 cents, and then the tax on every other tobacco product sold in the state was increased to match the total tax on cigarettes, a procedure Baldacci called “equalizing tax treatment” of tobacco products.

‘Costly, Ineffective Failure’

Dirigo Care supporters say repealing the new taxes would take away health coverage from 18,000 Mainers and remove subsidies that make individual health care coverage more affordable for 40,000 more.

Bragdon disagrees, calling Dirigo Care “a costly, ineffective failure that best serves as an example of what not to do.”

“Politicians in Maine, like politicians in Massachusetts, are addicted to government spending–while taxpayers are stuck with the bill, and continue to see no benefit,” said Carla Howell of the Committee for Small Government, a grassroots Massachusetts organization dedicated to limited government.

“Dirigo Care was enacted with the lofty goal of covering the uninsured,” Bragdon said. “Maine has one of the highest state and local tax burdens. We should not be adding more taxes for this boondoggle, particularly at a time when Maine families are struggling with record high gas and heating oil prices and an uncertain economy.”

Past a ‘Train Wreck’

John Garven, president-elect of the Illinois State Association of Health Underwriters, concurs.

“What is really great about Dirigo is that it, along with the Massachusetts Connector program, are the only two examples that we currently have of ‘universal health care’ schemes that have actually been implemented in the United States,” Garven said. “Dirigo is the more ‘mature’ of the two programs, and it is already past the train wreck stage.”

If the state were seriously interested in increasing the number of insured Mainers, says Herrick, it should have worked to reduce the cost of health care “by eliminating excessive mandates and costly regulations [on health insurance], such as guaranteed issue and community rating, that drive prices up.”

Krystle Russin ([email protected]) writes from Texas.