AUGUSTA -- The Legislature needs to find another way to fund Dirigo Health, and should consider alternatives such as an increase in the tobacco tax to stabilize the program, a representative of the Maine Medical Association said last week.

"I'm confident in saying there's a great many people who feel, in difficult economic times, it's more important than ever to support Dirigo and grow it if possible," said Gordon Smith, executive vice president of the association that represents more than 2,000 physicians across Maine.

Smith and other Dirigo supporters lost a battle in November when voters rejected an attempt to tax beer, wine, soda and other drinks to support the program.

But the overwhelming rejection -- 65 percent voted to repeal the tax -- shouldn't stop lawmakers from finding another way to pay for the program, Smith said.

The medical association is polling members on its Web site to ask whether they would support an additional tax on tobacco to fund Dirigo.

Smith said lawmakers could also look to a tax on insurance premiums for funding.

However, Senate President Elizabeth Mitchell, D-Vassalboro, one of the sponsors of the beverage tax legislation, said it's more likely the program will be kept afloat with existing money.

She said the state budget crisis -- a $140 million deficit in the current budget and a projected $838 million shortfall in the new two-year budget -- will make it difficult for legislators to think about changing the funding source for Dirigo.

"We have been so inundated by the budget crisis," she said. "I will work hard to keep as many people insured as possible within existing resources."

The current funding formula, a complicated scheme called the savings-offset payment, has been, and continues to be, challenged in court by Maine businesses.

Smith said it costs the state too much money to continue to fight in court and that the funding source is unpredictable.

"That's no way to run a health program," he said. "We need a reliable funding source that we know from one year to the next what it's going to be."

The Maine State Chamber of Commerce, one of the groups that spearheaded opposition to the beverage tax, continues to believe that the only way to make Dirigo a sustainable program is to pay for it through the state's General Fund, said Kristine Ossenfort, the Chamber's health care expert.

"You can't continue to fund it outside the budget process," she said.

The health care program, which offers health insurance along with taking steps to improve quality and make insurance more affordable for all Mainers, should have to compete for funding with education, corrections and other state-funded programs, Ossenfort said.

Also, she said, Smith's idea of taxing premiums is the wrong way to go.

"You're asking people who are struggling to pay for their own health insurance to pay an additional tax," she said.

At the beginning of his administration in 2003, Gov. John Baldacci set a goal of finding a way to reduce the number of uninsured people in Maine. Six months later, the Legislature passed the Dirigo Health bill. The state used federal funds to launch the program and created a funding mechanism designed to capture the money saved in the health care system because of reforms put in place by Dirigo.

Initially, Dirigo supporters said it would cover 136,000 people by 2009. Today, it covers about 16,000, many of whom participate in the Medicaid program.

Five years after Dirigo became law, legislators and others decided to try to change the savings-offset payment to something more stable -- and something less prone to litigation.

The original bill to change Dirigo's funding source included an increase in tobacco taxes to pay for the program. But a lack of support for that idea led lawmakers to turn to a tax on drinks instead.

Susan Cover -- 620-7015

scover@centralmaine.com