On Nov. 23, 1998, the attorneys general of 46 states, five commonwealths and territories and the District of Columbia finally reached a settlement with tobacco manufacturers to receive compensation for costs the states incurred through medicaid in treating people suffering from conditions correlating with smoking. The deal was consummated with tobacco manufacturers Philip Morris Incorporated, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, Lorillard Tobacco Company and the Liggett Group, together representing about 99 percent of the industry. The agreement, worth $246 billion during the next 25 years, has been a long debated issue between the states and the federal government with respect to the disbursement of the award money. It is essential that state governors and attorneys general work hard in developing strategies to prevent federal recoupment of these funds.
In 1996, a number of states settled their lawsuits early and began collecting payments from certain companies. Shortly thereafter, the Health Care Financing Administration (HCFA) contacted each of the relevant state Medicaid directors, claiming that payments received from the pursuit of Medicaid cost recoveries from tobacco firms qualify them for 50 percent of the financial recovery. Naturally, this claim raised concerns from a legal point of view.
Should the federal government attempt to claim the funds, states will likely respond with lawsuits. Federal law prohibits the U.S. government from seeking reimbursement of Medicaid funds. And since the states initiated the lawsuits, litigated them on their own behalf and undertook the risks involved in years of arduous negotiations, they should reap the full returns from the settlement.
These funds are critical to the states' implementation of effective programs to minimize the use of tobacco products by young people. To turn these ideas into reality, it is necessary that states decide how to spend the full settlement money.
State attorneys general and legal scholars alike say the federal government's case is flawed in many respects. The Medicaid provisions currently being pushed by federal officials were adopted decades ago and were originally designed for small claims and as a tool to fight provider fraud. Such outright exploitation and misuse could have never been envisioned, nor intended. The Medicaid reimbursement claimed by the federal government represented only a small portion of settlement funds anyway, because the states' attorneys general carefully crafted the agreement to reflect only state costs.
Because the tobacco lawsuit was initiated, litigated and craftily settled by the states to reflect state costs, its spoils should not be usurped by the federal government - especially since it is gearing up for its own lawsuit to recover money spent through programs other than Medicaid. State governors and attorneys general must work diligently to preserve the settlement they worked hard to earn.
Phone: (517) 335-7858
E-mail: migov@exec.state.mi.us
02-26-99
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