WASHINGTON – A proposed federal lawsuit against tobacco companies should end the government’s bid to grab half of a $4.4 billion settlement that Maryland expects to get from cigarette manufacturers, state and federal officials said Thursday.
The federal Health Care Financing Administration has said that, since it pays half of Medicaid costs for the states, it should get as much as half of the $246 billion settlement that the states won for tobacco-related health-care costs.
HCFA officials said Thursday that that position has not changed, even after President Clinton announced this week that the Justice Department would file a similar federal lawsuit against the tobacco companies.
“The settlements belong to the states and should be used for the benefit of our states’ residents, not a federal bureaucracy,” said Sen. Kay Bailey Hutchison, R-Texas.
She and Sen. Bob Graham, D-Fla., introduced a bill last year that would keep the federal government from getting any portion of the states’ settlement. Graham plans to introduce the bill again, said an aide.
Maryland Deputy Attorney General Carmen Shepard agreed Thursday that the federal government should keep its hands to itself.
“I hope it (the Justice Department suit) is a sign the federal government recognizes they should pursue this on their own means rather than taking it from us,” Shepard said.
She said Maryland’s lawsuit against the cigarette manufacturers “was a state effort based on state law.” She noted that the federal government refused to participate in the cases filed by Maryland, the 49 other states and five territories.
Although Maryland included Medicaid costs in its suit against tobacco companies, the lead counts were violations of consumer protection and anti-trust laws, Shepard said. Hutchison echoed that fact.
“The lawsuits upon which these settlements were based were initiated by the states, on many different grounds, and the cases involved a wide variety of issues beyond health care costs,” Hutchison said in a statement.
But a large part of the states’ case consisted of seeking to recoup costs incurred by individual state Medicaid programs to treat tobacco-related illnesses.
HCFA maintains that states are required by law to recover Medicaid costs from liable third parties when possible and to return a portion to the administration, which pays at least 50 percent of Medicaid costs for each state.
In Maryland, where HCFA pays half of Medicaid, that means the federal government would stand to receive $2.2 billion of the state’s share of the settlement.
In a November 1997 letter from the Center for Medicaid and State Operations, director Sally K. Richardson said the federal government should be included in any reimbursement from the tobacco companies.
HCFA suspended that request shortly after the letter was sent and agency spokesman Chris Peacock said it will not press the issue for now. But the agency has not dropped its demand for reimbursement, he said.
“What we want to do is work with Congress and the states to resolve [the situation] in exchange for using the money for specific activities, such as public health and children,” Peacock said.
But some lawmakers say that the federal government does not deserve any of the settlement. Graham’s bill would allow the states to keep all of the money they won in the settlement.
Shepard said her office has been meeting with other states to make Maryland’s preferences known in Congress. She said Gov. Parris Glendening did not include the settlement funds in his budget as hard money, but, because the money could be received as early as this spring, he included possible uses for the funds.
HCFA might have other plans for the money, however. Rep. Mike Bilirakis, R-Fla., who has introduced House legislation to keep HCFA from the state settlement money, said the agency is “reportedly considering a plan to withhold $5 billion per year from federal Medicaid payments to the states over the next five years,” beginning in fiscal 2000.
But Shepard hopes Maryland will walk away with the whole pot. “I am positive [the federal government] wants to keep the door open,” to getting some of the states’ settlement, Shepard said. “Speaking as Maryland’s lawyer, I think we ought to fight as hard as possible.” -30-