Tobacco, Up in Smoke Virginia/Metro Feedback Gateway Virginia

States, U.S. clash over tobacco funds / Federal claim to part of proceeds assailed

Tuesday, March 16, 1999

BY GIL KLEIN
Media General News Service

WASHINGTON -- State officials asked a Senate committee yesterday to keep federal hands off the $246 billion settlement the states reached with tobacco companies, but the Clinton administration insisted it has a claim.

"I sued on behalf of the people of Pennsylvania, not for the federal government," state Attorney General Mike Fisher told a Senate Appropriations subcommittee. "The states fought the tobacco industry for more than five years, expended considerable time and resources, and assumed 100 percent of the risk.

"It is wholly inappropriate for the federal government to now demand a share of the states' proceeds."

Sen. Kay Bailey Hutchison, R-Texas, has attached a rider to an emergency appropriations bill scheduled to be considered by the full Senate later this week that would prohibit the federal government from trying to take a portion of the settlement reached in November.

In a letter yesterday to Sen. Arlen

Spector, R-Pa., the chairman of the Appropriations subcommittee, Health and Human Services Secretary Donna Shalala expressed the administration's "strong opposition" to Hutchison's proposal.

Under federal law, she wrote, the government could collect more than 50 percent of the settlement to reimburse it for Medicaid expenses. Instead, she said, the administration is willing to reach an agreement with the states on how they spend the money.

Hutchison dismissed Shalala's offer as "a federal grab" for the settlement money.

Because the federal government pays the states anywhere from 50 percent to 77 percent of Medicaid's costs, federal law says that the states must reimburse Washington for its share of money the states collect from suits based on Medicaid.

Many of the states made their claims against the tobacco companies at least in part for Medicaid costs, the administration says, and in reaching their settlement, all of the states promised to file no more suits based on Medicaid claims.

Therefore, the administration believes the federal government deserves a share of the $246 billion that the tobacco companies agreed to pay the states over 25 years.

"Absent some agreement, we would have no assurance that one penny would be used for smoking cessation programs," said Mike Hash, deputy administrator for the Health Care Financing Administration, who appeared before the committee to defend the administration's position.

But the states bristle at that notion. First, they say, the federal government did not take part in the suits. Second, many of the claims the states made were not based on Medicaid, and third, when the states reached a $368 billion agreement with the tobacco companies in 1997 that required federal cooperation, Congress failed to pass a bill to settle it.

But it is not certain that Hutchison's proposal will pass. Spector, for one, said he thought the federal government should play a role in determining how the money should be spent.

"I'm not talking about micro management," he said, "but I'm not willing to turn over all money, carte blanche, to the states."