Analysis of New Mexico's Financial Position Regarding MSA
Research provided by Scott Goold, Ph.D.*
Citizens for Clean Air in Apartment: August 16, 1999
This analysis demonstrates that the Master Settlement Agreement (MSA) is a horrible
deal for New Mexicans. Through the year 2025, the State of New Mexico -- funded by New Mexico's
taxpayers -- will have supported Medicaid costs totaling an estimated $4.3 billion.
During this time, there will be a projected 75,000 deaths in New Mexico because of tobacco-related
illness and disease.
Besides inflation, the baseline figures are subject to a Volume Adjustment,
Non Participating Manufacturers Adjustment, Non Settling States Adjustment,
Federal Tobacco Legislation Offset, Litigating Releasing Parties Offset,
miscalculations and disputed payments (see Bill Godshall's
For this analysis, we increased the projected tobacco industry payments using
a 3% cost of living adjustment. We adjusted the estimated Medicaid
costs supported by the State of New
Mexico using a 5% annual inflationary growth rate. Traditionally,
medical costs increase at a rate higher than the
general cost of living figures. We assume the difference between settlement payment
increases and medical cost acceleration captures the actual economic reality.
One common misunderstanding is MSA payments to the state equal $40 million per
year. In actuality, the settlement figures vary across the years.
While adjustments may occur for a number of reasons, we use
the stated figures and adjust only for inflation. We believe the actual payments to New
Mexico will be significantly lower than the figures shown here.