Tobacco Settlement: It Is Not What
the Tobacco Industry Says It Is (continued page 7)
These above provisions in the
Settlement certainly result in a strange partnership between the Tobacco
Industry and Attorneys General, whose primary purpose is to represent the
interests of the people of their state, not necessarily those of the Tobacco
Industry (which has made more people suffer and killed more people in this
nation than anything else or any other disease).
Federal Government Taxes on Tobacco Companies Reduce Settlement Payments
Dollar for Dollar:
If federal tobacco-related legislation is enacted before 12/1/2002 and
results in any payments from the settling tobacco companies (in the form
of a tax or settlement payments), and this money is made available to Settling
States, there will be a dollar for dollar decrease (offset) in the States'
payments. This offset is triggered by the resulting federal money made
available to each Settling State; resulting unrestricted federal funds;
or any resulting federal funds used for any form of health care or any
tobacco-related public health. There is an exemption for federal money
that is used to help tobacco growers or communities dependent on tobacco
production. (Section X, pages 37-38)
In other words, restrictions on the Settlement payments pit State governments
against the Federal government and punish the States for any federal tobacco
tax or other federal financial charges on the Tobacco Industry that result
in money to the Settling States or money targeted for health or tobacco-related
public health. The Tobacco Industry continues to sell this Settlement as
one with public health achievements, yet it also has inserted provisions
to prevent the Federal Government from trying to take public health steps
of its own toward diminishing our nation's tobacco addiction.
HCFA's Claims on the Monetary Settlement: The Federal Health Care and
Finance Agency, which oversees each State's Medicaid Program has already
sent a letter (the week of 11/12) to states saying they will be pursuing
their share of the settlement money. This settlement was sold to states
by their Attorneys General mainly based on the large amount of money states
would receive, yet HCFA may be able to claim a substantial portion of these
funds (up to 2/3 of the settlement payments in a state like Maine).
If HCFA is successful, States could have achieved the same monetary
achievements in this Settlement by raising the State's tobacco excise tax
by about 15 - 20 cents (at least in Maine) without all the downsides of
the Settlement (such as perpetual immunity, the backward public health
steps, etc.). Even if HCFA is unsuccessful, the same monetary achievements
could have been achieved by a gradual increase in State's tobacco excise
tax of about 35 cents over 5 years.
Adjustments of Settlement Payments:
Settlement payments are adjusted according to the Consumer Price Index
(or 3%, whichever is higher), but not according to health care inflation,
which would be a much more appropriate adjustment and likely would be higher.
(Exhibit C, page 92-94)
Settlement payments are adjusted downward according to a "Non-Participating
Manufacturer Adjustment" (NPM). If there has been a market share loss
by participating manufacturers because of disadvantages experienced as
a result of the Settlement, then each settlement payment (Allocated Payment)
"shall be adjusted by subtracting from such Allocated Payment the
product of such Allocated Payment amount multiplied by the NPM Adjustment
Percentage." (Section IX(d), page 26-28) This NPM does not apply if
the Model Statute in Exhibit T (pages 137-141) is enacted.
Settlement payments are adjusted upward or downward depending on the
volume of cigarettes shipped to the U.S. by the participating manufacturers.
(Exhibit E, page 96-98) So, if tobacco consumption of the participating
manufacturers' tobacco product goes down, the result is that settlement
payments are reduced, these tobacco product prices can then be reduced,
and this price reduction results in tobacco consumption increasing. This
is yet another form of protection for the Industry which can result in
more addicted people dying from a tobacco-related illness.
Settlement payments are decreased dollar for dollar if the federal government levies
charges (taxes, for instance) to the Tobacco Industry under the provisions
of Section X, pages 37-38. See above explanation under "Federal Government
Taxes on Tobacco Companies Reduce Settlement Payments Dollar for Dollar".
In other words, there are a number of circumstances under which payments
to States are reduced, even to zero. Yet, this Settlement was marketed
as one with billions and billions of dollars to states.