Smoking, Medicare/Medicaid, and Alternative Revenue Tax Act of 1985 - Amends the Internal Revenue Code to increase the excise tax on cigarettes from: (1) $8 to $16 for small cigarettes; and (2) $16.80 to $33.60 for large cigarettes. Provides for a cost-of-living adjustment for such excise tax in fiscal years after FY 1986. Imposes a floor stock excise tax on small and large cigarettes.

Appropriates 25 percent of the revenues raised by such additional taxes to each of: (1) the Federal Hospital Insurance Trust Fund (Medicare); (2) the Federal Supplementary Medical Insurance Trust Fund (Medicare); and (3) the State share of Medicaid costs.

Expresses the sense of the Congress that there is no need for Medicare Part B premiums to pay for a greater proportion of program costs. Expresses the sense of the Congress that the remaining 25 percent of the revenues raised by such additional excise tax should be used to reduce the Federal cost of Medicaid and should thereby reduce the Federal deficit.