Virtually every facet of the health care industry wants to see the popular State Children’s Health Insurance Program reauthorized and expanded before it expires in September. They just don’t want to foot the bill, which is estimated at a cool $50 billion.

Congress this year instituted a “pay-as-you-go” rule, which means that any new budget costs must be offset by budget cuts or revenue raises. That has health insurers, hospitals and home care providers all trying to avoid the chopping block. Lobbying messages from many in the industry include the familiar call to take it out of someone else’s pocket. In addition to pointing fingers at other health care sectors, the jittery health care community also has banded together to call for a tobacco tax to help pay for SCHIP.

“Everybody’s watching it because they’re worried about how the government’s going to pay for it,” said Ken Kies, a tax lobbyist with the Federal Policy Group.

The Senate Finance Committee has said it hopes to mark up its SCHIP bill as early as next week, and insiders say that reauthorization is nearly certain. SCHIP was authorized in 1997 as a block grant that provides matching funds to states, which then administer the health care coverage to kids. Children who qualify come from families whose incomes are high enough that they do not qualify for Medicaid but do not have coverage from an employer and can’t afford to buy insurance privately.

Kies, for one, represents the Cigar Association of America. He wants to make sure lawmakers exempt cigar products from any possible tobacco tax. “We don’t think we should be paying for kids’ health because kids don’t smoke cigars,” Kies explained. “We’re not part of the kids’ health problem.”

Sen. Gordon Smith (R-Ore.) introduced a measure earlier this year that would call for the new tobacco tax to help pay for the SCHIP reauthorization, something he hopes will be part of the Finance Committee’s final SCHIP package, said his spokeswoman, Kimberly Collins. She added that Smith has been working closely with Senate Finance Chairman Max Baucus (D-Mont.) and ranking member Chuck Grassley (R-Iowa). “In order to truly have a ‘payfor’ for the program, you need to have true revenue,” Collins said, adding that Smith feels “the tobacco tax is the way to do that.”

While the health care sector might cheer this idea, tobacco lobbyists are, not surprisingly, geared up against the proposal.

One lobbyist who represents tobacco companies argues that the tobacco tax is not a solution.

“People are still going to smoke. They’ll just get their cigarettes from a nontraditional source,” said this lobbyist, who would speak only if granted anonymity. The lobbyist added that people simply would buy “counterfeits from China” or find other ways of avoiding the taxes, which could be more than 50 cents a pack.

Karen Ignagni, president and CEO of the insurance lobby group America’s Health Insurance Plans, said AHIP supports an expansion of SCHIP but does not want to pay for it by cutting Medicare Advantage, a supplemental insurance for retirees who don’t qualify for Medicaid but can’t afford to buy their own supplemental coverage. Many of Ignagni’s member companies receive revenue through that program. AHIP is lobbying for the tobacco tax to cover much of the expense.

“Funding SCHIP is very important, but it’s a false choice to set up the interests of children against the interests of seniors,” Ignagni said. “Seniors are going to have quite a lot to say. We are working with a range of individuals to make sure Members of Congress understand what’s at stake if they cut Medicare Advantage.”

Although hospital and doctor groups have publicly advocated reeling in what they call overpayments to private insurers that participate in the Medicare Advantage program, Ignagni said AHIP is not pointing its finger at other health sectors but is instead focused on the tobacco tax.

“Unlike other industries that have been very quick to look at Medicare Advantage for cuts, we are not engaging in a food fight,” she said.

To push the tobacco tax, Ignagni, along with hospital and other health care groups, has teamed with organizations such as Families USA.

“The insurance industry, on the one hand, has been very supportive of expanding children’s health coverage,” Families USA Executive Director Ron Pollack said. On the other hand, he said, the industry opposes any cuts to Medicare Advantage.

Rick Pollack, executive vice president of the American Hospital Association and no relation to Ron Pollack, said the association has gone beyond “traditional arguments and data” presentations to keep hospitals from facing cuts.

“We are trying to create alternatives to looking at provider cuts as the offset,” he said. Among those alternatives: the tobacco tax as well as capital gains taxes.

“We’re hopeful,” he said. “Obviously we want to avoid robbing Peter to pay Paul. We are very supportive of finding a way to pay for it that’s responsible because trying to get more coverage to kids is a priority for us.”

On the House side, Rep. Pete Stark (D-Calif.), chairman of the Ways and Means subcommittee on health, has indicated his support for reeling in what he calls overpayments to private companies under Medicare Advantage. He also has said that everything in Medicare is on the table when it comes to looking for possible offsets.

One contract lobbyist at a big firm said her health care clients were all looking over their shoulders. “We’ve got a bunch of clients who are trying to avoid being payfors: plans, hospitals, nursing homes, a lot of the provider groups. They are very nervous,” said the lobbyist, adding, “Stark has asked a lot of the providers: ‘If not you, then who?’”

One longtime health care lobbyist from another lobbying shop said Stark has put the pressure on health care sectors to come forward with cuts they’re willing to live with. Stark also has encouraged hospital and doctor groups to call for cuts to payments to managed care providers through the Medicare Advantage program, the lobbyist said.

“In some ways this could be a precursor of the larger health care debate that everyone is expecting to occur in 2009,” said the lobbyist, who represents several insurers and other clients. “All the players are saying, ‘Yes, we want to expand coverage,’ but they have no idea where the money is going to come from.”