The national tobacco settlement is shaping up to be a boon for Medicaid programs across the country. At least 38 states have earmarked a total of $3.5 billion in fiscal years 2000 and 2001 to broaden access to healthcare for the indigent and working poor, according to a report issued by the National Council of State Legislatures.
The sum represents 43% of all tobacco money appropriated to date for the two fiscal years. The NCSL says 44 states approved spending plans during their 1999 and 2000 legislative sessions for about $8.2 billion of the windfall negotiated from major cigarette makers.
The tobacco industry agreed in November 1998 to pay 46 states, the District of Columbia and five U.S. possessions $206 billion over 25 years to cover healthcare costs linked to smoking. Officials in Florida, Mississippi, Minnesota and Texas reached separate accords.
Nationwide spending on Medicaid programs was expected to top $182.1 billion for fiscal year 2000, the National Association of State Budget Officers estimated.
That is 5.7% greater than the $172.4 billion states disbursed for Medicaid during 1999.
Some of the tobacco funds not yet allocated for 2001 still could go to Medicaid programs. Voters in Arizona, Arkansas, Oklahoma and Oregon will make long-term spending decisions at the ballot box Nov. 7.
Oklahoma lawmakers already appropriated $36.4 million of the tobacco money for Medicaid programs, services and physician reimbursements. Voters will decide whether to place additional funds into an endowment for unspecified healthcare initiatives in the state.
Of the states using their share of the settlement for Medicaid, California is by far the largest spender. State legislators directly control 50% of California's $950 million windfall--local governments will appropriate the other half--and Gov. Gray Davis has proposed spending the entire $475 million state-controlled share on subsidies for the uninsured in 2001.
New York also is devoting a large chunk of its tobacco cash to Medicaid. It is increasing direct spending by $92 million and putting an additional $250 million into its general fund to reduce Medicaid-related debt. The state for years has turned to other funding sources to pay for Medicaid cost overruns.
Neighboring New Jersey is allocating $100 million from the tobacco settlement in 2001 to launch FamilyCare, a program for uninsured residents who do not qualify for Medicaid. Working parents making no more than 133% of the federal poverty level and whose children are eligible for Medicaid benefits will receive free health insurance.
FamilyCare will provide low-cost managed care benefits for working parents with incomes between 133% and 200% of the federal poverty level.
Iowa's share of tobacco money is relatively small, but officials there came up with perhaps the most specific Medicaid-related plan in the nation.
Iowa Medicaid providers this month are set to receive their first major funding increase in almost a decade, thanks to a $6 million appropriation from the state's share of the national tobacco settlement. Federal matching funds will triple the increase to $18 million in 2001.
The state on Nov. 1 was to implement a resource-based relative value scale to reimburse physicians for services performed under Medicaid, putting Medicaid on par with Medicare in Iowa.
"This is a very significant increase" to the historically underfunded program, says Jeanine Freeman, vice president of public policy and advocacy for the Iowa Medical Society. She says Iowa ranks 82nd among the nation's 92 Medicaid payment zones in physician reimbursement levels. Medicaid sets reimbursements based on the average cost of providing healthcare services within a specific region.
"There are no procedures under Medicaid that were being paid at more than 50%" of the billed amount in Iowa, Freeman says.
The $18 million cash infusion represents the state's first major Medicaid reimbursement increase for physicians since 1991. Iowa doctors received modest increases of $1.2 million each year in 1998 and 1999, of which just $437,000 annually came from state sources.
Iowa spent an estimated $1.5 billion on Medicaid in 1999, according to a report from the budget officers association.
The new appropriation covers the remainder of the fiscal year ending June 30, 2001, but the legislation that authorized the state funding calls for annual increases in physician payments for Medicaid at the same rate approved by federal officials each year under the Medicare RBRVS, which is 1.8% for the current fiscal year.