This proposal increases the existing excise tax on cigarettes by $2.60 per pack (and on other tobacco products) effective January 2007, bringing the cost of a pack to roughly $6.60. The additional revenue would be used to support the existing and new programs specified in the measure—specifically, to provide funding for hospital emergency services, programs to increase access to health insurance for children, expanding nursing education, and supporting various new and existing health and education activities, curbing tobacco use and regulating tobacco sales.

The Issue: Buried deep within Proposition 86 is a hospital Antitrust Exemption. The proposition states that it is the policy of the state to encourage hospitals to work cooperatively to develop regional plans for assuring maximum availability of emergency services to all patients and to share equitably in the provision of emergency services to uninsured and low-income under-insured patients.

Hospitals that participate in developing or implementing such a plan will likely be immune from antitrust liability under both federal and state antitrust laws. Excerpting from Section 1797.304 of the proposition: "A hospital, in its sole discretion, may utilize (tobacco tax) funds it receives under this Chapter to provide compensation if ... the method and the amount of compensation to any physician or physicians is in compliance with applicable law ... to the extent that any hospital or hospitals work cooperatively in developing and implementing the plans for providing emergency services ... such hospital or hospitals shall incur no liability under federal or state antitrust or other anti-competition laws prohibiting combinations in restraint of trade..."

This Antitrust exemption has caused a significant division among the physician community because there is concern that this provision would allow hospitals to engage in anti-competitive practices that are now illegal. Catherine Hanson, CMA’s legal counsel, wrote that "While there may well be regionalization strategies that do "maximize the availability of emergency services for all patients," such as the sharing of back-up call coverage for certain services such that one hospital is designed to handle certain types of emergencies on certain days where there are not enough physicians available to cover all the hospitals in the community, it is questionable whether counties or EMS agencies would agree that wholesale abdication of market forces was in the public interest."

Ms. Hanson states that it is her opinion that the antitrust immunity contained in the Proposition is far narrower than many people believe. She suggests that the principle issue of concern the antitrust exception raises for physicians is the extent to which hospitals may seek to use Proposition 86 to collusively set the amounts they will pay for on-call stipends. Other antitrust lawyers have written that the Proposition (authored by CHA) gives hospitals unprecedented protection to engage in anti-competitive behavior.

One last caveat Ms. Hanson observed, was the view that the initiative provides an antitrust immunity for hospitals but NOT for physicians, creating a profound structural imbalance, to the detriment of physicians.

Voting on this proposition will be a difficult call for many physicians.