globalink-testimony-appropriations-house-3-16-2000

ORAL TESTIMONY

COMMONWEALTH OF PENNSYLVANIA
HOUSE OF REPRESENTATIVES
APPROPRIATIONS COMMITTEE

TOBACCO SETTLEMENT HEARING #3

Representative John E. Barley, Majority Chairman

March 16, 2000
[10:20 AM]

By Robert B. Sklaroff, MD
Suite #130
50 East Township Line Road
Elkins Park, PA 19027-2253
(215) 663-8200
FAX: (215) 663-8388
rsklaroff@home.com
http://members.home.net/rsklaroff/homepage.html

I am Robert B. Sklaroff, MD and I am testifying as an individual. I have various roles in organizations that have provided and will provide input with regard to this wonderful and difficult task presently before you but, to preclude confusion regarding these comments, they will not formally be identified. I will cite my pending litigation, legally and morally, and an effort will be made to provide context regarding how you will need to prioritize the overlapping, conflicting interests presented by the “stakeholders” who have emerged.

I greatly appreciate the privilege to testify. I would like to thank your staff for facilitating this task and, in particular, Ms. Kathryn Vranicar, who provided input regarding what you might want to hear emphasized in today’s testimony. Therefore, I will discuss the rationale for my litigation; what I feel should be the purpose for expending the monies obtained from the Tobacco Industry as part of the Master Settlement Agreement [“MSA”]; comments on the Gubernatorial proposal for appropriating these funds; and how I think the funds should be targeted, and why.

Currently, I have three separate active suits regarding the MSA. One constitutes an effort to gain standing to eliminate two onerous clauses therein, and I plan to file my Petition for a Writ of Certiorari on Monday with the United States Supreme Court. Another is directed at Philip Morris, inasmuch as it has funded third-party billboard advertising that the MSA had banned, and I plan to file a brief on Monday with the PA Superior Court. The third is intended to compel the Attorney General to enforce tenets of the MSA, and he is to file his brief within a few weeks with the PA Commonwealth Court.

These data are readily available on my web-site. The essential problem, here, is that the MSA threatens to immunize the Tobacco Industry if it engages in onerous future conduct, as long as it is performed within the normal course of business. This constitutes a legal “black hole,” inasmuch as anything Big Tobacco does can be portrayed as commercial. Thus, two phrases that the Attorney General states are superfluous must be deleted, inasmuch as they would protect the Tobacco Industry against the only weapon that has worked to protect public health, the threat of lawsuits. This is my cancer control strategy.

Specifically, I do not want the Attorney General to be able to stop me from trying to get Big Tobacco to comply with the MSA; this is the immunity clause. And I do not want the Tobacco Industry to be able to deduct fines levied against it from the money it pays annually to the states (as has been attempted in Oregon); this is the offset clause.

Last May, Philip Morris financed placement of billboard ads by Wawa Food Markets, initiating a “Manufacturer Sponsored Promotion” for Marlboro cigarettes. Anti-tobacco activists complained in the media, and the Attorney General got Wawa to remove them. Nothing was generated—such as an injunction—to stop them from posting them again. Therefore, I sued, but the Court of Common Pleas considered my effort “moot” because the signs had been removed. As predicted, however, they were re-posted, but the Court refused to recognize that its acquiescence established a precedent that another retailer, Sheetz, was then to emulate. The latter organization has pointedly refused to desist. Thus, my legal effort is directed at the cause of the problem, namely the national program initiated by Philip Morris to finance these billboard advertisements for Marlboros.

That is why I sued the Attorney General, for his inattention to enforcing the MSA may be explained by the Offset Provision; any successful litigation filed by the Commonwealth would merely generate a dollar-for-dollar deduction from anticipated payments. Thus, both individually and in the aggregate, I am trying to warn the public that Big Tobacco has tried to attain respectability and predictability through the MSA, escaping potential future liability. As was noted in the Minority Opinion filed by Commonwealth Court Judge James Kelley, the rights of “youth” have been sacrificed without consulting them.

These monies should be expended in ways that would be determined by the Complaint, inasmuch as the litigation was intended to recover Medicaid-associated health costs and inasmuch as the litigation was filed in parens patria, on behalf of Pennsylvania’s youth. When I testified thrice last year (before the House, Senate and Administration), I advised compliance with the “Best Practices” Guidelines issued by the Centers for Disease Control and Prevention. In doing so, Pennsylvania would create societal structures that would “detoxify” the populace from tobacco and “detaxify” government from tobacco.

This theme has consistently been endorsed by legislators and testifiers. For example, Representative Dennis O’Brien, a year ago, said the goal here should be to support health-related activities such as: health care services for the uninsured, medical research, health promotion, preventive health and smoking cessation programs, and improvement in health care delivery. And the Pennsylvania Academy of Family Practice advised that, “the funds should be used to help eliminate the need for future payments,” emphasizing behavioral research, interventions, and applied research rather than construction projects. The Pennsylvania Medical Society advised long-term funding be provided to cessation and treatment services for tobacco-related illnesses as a priority over disbursement for services unrelated to treatment. These ideas have resonated with the public, according to a recently-published poll published in the Pottsville Republican on March 3rd; 75% of those questioned said they favor devoting 25% of the settlement money to prevention and cessation programs. This 25% figure is central to the CDC Guidelines, and this particular goal has been endorsed by the Coalition for a Tobacco Free Pennsylvania.

Thus far, I have discussed the rationale for my litigation and what I feel should be the purpose for expending the monies obtained from the Tobacco Industry as part of the Master Settlement Agreement [“MSA”]. Please understand that I am thrilled that these monies have been provided, despite the projected pendancy of my litigation before the U.S. Supreme Court; my focus has consistently been on maintaining due process rights, not on seeking monetary gain. I will now comment on the Gubernatorial proposal for appropriating these funds, and I will discuss how and why the funds should be targeted.

The Gubernatorial proposal is a national model, for it complies with the CDC Guidelines and accommodates overlapping interests while creating a cohesive anti-tobacco program. This considerably simplifies your task, for you need only corroborate this analysis and then proceed to ensure key legislative details are enacted that ensure public health.
I have compared Governor Ridge’s proposal to a Venn Diagram, a concept we all learned in high school (and is probably now being taught in elementary school). Imagine a group of overlapping circles enclosed within one large circle; you will then be imaging what Secretary of Administration Tom Paese has helped to craft. Various methods of funding legitimate health-related activities have been accommodated in a fashion that allows each participant to perceive that his/her desires are depicted within larger contexts that encompass other “players.” In fashioning this plan, he properly ignored “pet-projects.”

And I love people who don’t allow “grass to grow under their feet.” On March 7, 2000, the Health Department pledged to fund “local lead agencies” as part of a comprehensive statewide tobacco control program. It is anticipated that budgeted efforts will include those advised in the CDC Guidelines: Community and School Programs; Partnership Grants and Law Enforcement; Counter-Marketing and Tobacco Cessation Programs; Tobacco Control Research; Surveillance and Evaluation; and Administration.

How should these principles be applied? You must redouble your efforts to be careful to devote these monies to the purpose intended, diagnosis and treatment of the raging tobacco epidemic. You must ensure every Pennsylvanian knows that his or her health will benefit greatly as soon as he or she stops smoking. Not just years or decades into the future, not just for some diseases, and not just for some types of cigarette smokers. For example, the Delaware Valley Health and Healthcare Council (a subset of HAP) showed that hospitalizations for lung infection (bronchitis/pneumonia) drop within a year after smokers had stopped using tobacco. We will empty our hospitals if we help people to stop smoking. In the absence of a “safe” cigarette, we can do no less for our patients.

I have not read the specific bill that serves as your “working hypothesis” today, but I can only note that the speakers on the agenda encompass the key stake-holders who have testified throughout the year. Funding Medical Assistance was the core concern legally, thus the input of Dr. Dierkers. Funding hospitals and academic medical centers has become necessary—due to the state-wide monopoly/monopsony enjoyed by the Blues—thus the input of Dr. Levine. Funding targeted insurance programs has become attractive, thus the input of Mr. Palmer. And funding health education is central to tobacco control, thus the input of Ms. Byrnes. I will therefore provide input regarding each cost-center.

Medical Assistance.

When fashioning programs that accommodate the underserved, you should maximize the capacity to obtain federal matching funds. This may be easier to accomplish, presently, by expansion of Medicaid rather than by creation of CHIP-program variants, as attractive as the latter concept may be, although federal legislation could alter the landscape.

Such monies should be supplemented by a steep increase in the tax on tobacco products. This has proven successful in California, as evidenced both by research demonstrating decreased tobacco use among youth during recent years and by the failed effort to repeal its 50 cent-per-pack tax by a 3-1 ratio during its recent primary election (Proposition 28).
Although your focus today is trained on the MSA-dollars, you may wish to envision concomitant enactment of a higher cigarette tax, if for no other reason than to ensure your programmatic initiatives are adequately funded. This would serve two purposes. First, smokers would be financing the anticipated health-related costs of self-inflicted diseases. Second, higher taxes consistently discourage youth smoking rates, the key goal, here. This concept is embodied, for example, in the recent “PACT” Proposal by Senator Vincent Hughes, and it may be wise to address this concept within the overall context of how these new MSA-dollars will affect health care financing. Consider it a “user fee.”

Hospitals.

In 1999, I critiqued efforts promulgated by the Hospital and Health Systems Association of Pennsylvania to denigrate essential Public Health goals. HAP thereafter softened its attack on funding tobacco control programs, although it continued to assert the view that hospitals need supplemental funding, if nothing else, for supplying unreimbursed care.

In 2000, it has become necessary to refocus this analysis upon input provided recently through the Pennsylvania Cancer Alliance, eight cancer research and treatment centers. This self-serving effort threatens the aforementioned “balance” of the gubernatorial plan. I parsed its “operational paragraph” in my Written Testimony by advising that the legislature should not cut the proposed allocation for tobacco control and prevention. (This was erroneously cited as being 10% rather than 15%.) You were advised to redirect these monies towards unrestricted cancer research, but I noted that the CDC goal of 25% would be met were 10% of the total available money—some of the money budgeted for cancer research—be exclusively directed at tobacco prevention efforts. This is another example of how the “Venn Diagram” approach to appropriation can solve problems. Academicians get money that is exclusively earmarked for tobacco control research, and the 15% allocation for tobacco control is raised to the 25% level, maximizing its effect.

Insurers.

As noted previously, how you decide the optimal method to expand access to care is left “to the experts.” What must not be ignored, however, is the need to fund legitimate tobacco cessation efforts, both the professional aspects thereof and the pharmacological aids that are needed to supplement such programs, such as nicotine substitutes (gum & patch) and centrally-acting medications. Because nicotine addiction is a disease state, such outpatient medications not customarily reimbursed are needed, for all patients (including medicaid) regardless of their insurer and specific health plan characteristics. This would be a “funded mandate,” directly supported by the tobacco-windfall money.

Insurers that would administer any CHIP-related programs have requested relaxed limitations on potential administration/profit margins, from ~7% to ~14%, efforts that must be resisted; such large-scale programs have been successfully conducted elsewhere with the intermediaries having earned as little as ~3% profit. Monopolistic insurers should not be able to obtain obscene profits merely by doling out MSA-related monies.

Tobacco Control.

Comprehensive tobacco control programs have reduced smoking by 35% in California and in Massachusetts during the past decade, an achievement that contrasts with the Pennsylvania experience. During the past decade, California lowered its cancer rate due to tobacco use by 14.4 percent compared to a four percent decline experienced in the rest of the country, and over $3.026 billion have been saved in medical costs by the program. And while teenage smoking has been on the rise nationwide, Florida’s aggressive anti-smoking campaign has produced an unprecedented 54 percent decline in middle school tobacco use over the past two years, and a 24 percent drop among high school students.

Listen to the Institute of Medicine: “The best evidence for the effectiveness of state tobacco control programs comes from comparing states with different intensities of tobacco control, as measured by funding levels and ‘aggressiveness.’ For example, when California and Massachusetts mounted programs that were more ‘intense’ than those of other states, they showed greater decreases in tobacco use compared to states that were part of the American Stop Smoking Intervention Study (ASSIST) funded by the National Cancer Institute. From 1989 to 1993, when the Massachusetts program began, California had the largest and most aggressive tobacco control program in the nation, and it showed a singular decline in cigarette consumption that was over 50% faster than the national average. A recent evaluation of the Massachusetts tobacco control program showed a 15% decline in adult smoking-compared to very little change nationally-thus reducing the number of smokers there by 153,000 between 1993 and 1999. States that were part of the ASSIST program, in turn, devoted more resources to tobacco control than did other states except Massachusetts and California, and they showed in aggregate a 7% reduction in tobacco consumption per capita from 1993 to 1996 compared to non-ASSIST states. Such a ‘dose-response’ effect is strong evidence that state programs have an impact, that more tobacco control correlates with less tobacco use, and that the reduction coincides with the intensification of tobacco control efforts.”

This is why public health leaders throughout America recoiled at the testimony provided on February 18th, by Ronald B. Herberman, MD. The University of Pittsburgh Cancer Institute has reportedly found cancer control activities—such as anti-tobacco billboards and commercials—to be failures, according to articles published by the Associated Press (by Jeffrey Bair) and the Pittsburgh Post-Gazette (by Christopher Snowbeck). Clearly, these data must be published or the assertions rescinded, for the scientific method provides for subjecting such assertions to the scrutiny inherent in the peer review process.

Dr. Herberman also averred that major efforts of the national entity funded by the MSA, the American Legacy Foundation, should suffice. It is my understanding that matching funds will be made available, so state-level programs will have to be funded as well. Furthermore, the ALF recently complied with Big Tobacco’s demand that pungent advertising—the kind that works—be killed. It is vital that Pennsylvania not be subject to constraints imposed overtly or covertly by Big Tobacco, for it would want to blunt our impact on the public health. This is why tobacco industry agents must not be permitted to be involved in the planning, implementation or oversight of tobacco control programs.

This is also why, a week ago, via FAX, I requested the leaders of each Cancer Alliance institution to confirm adherence to Dr. Herberman’s views. Only Rodrigue Mortel, MD (Penn State) responded (via e-mail); he wrote he concurred with his written testimony. Noting of the controversy surrounding those remarks, and their profound implications, you may wish to acquire specific comments thereupon from the other six organizations.

Finally, proper utilization of these monies during the next quarter century must be guided by those who have demonstrated a long-term commitment to ending our cultural dependence on tobacco. If nothing else, the Herberman Controversy illustrates why an advisory board must not be controlled by the voluntaries, academics, politicians, and “Johnny-come-lately” individuals and organizations who migrate to the allure of dollars. And if, indeed, it is necessary to anticipate funding shortfalls during upcoming years, it is vital that aggressive Public Health measures be implemented as soon as possible.

Appended model legislation is intended to provide a conceptual framework for how these monies might be expended; it is admittedly limited, both in scope and in legal language. Indeed, it does not include specific language that would implement expanded home care for the elderly (15%), broad-based health research and health-care-related venture capital (15%), and the endowment (5%). It does, however, establish the two key advisory boards that would be needed, one focused upon tobacco control and one on health care recipients (particularly those with Medicaid). Furthermore, it covers the conceptual fashion by which half of the money would be expended to all providers, rather than just to hospitals: the uninsured (40%) and uncompensated care payments (10%). Additional language would be needed to ensure the insurance coverage of cessation efforts (professional and pharmacological) were fully covered. Concepts embodied in this proposal were drawn from various previously-introduced bills. Additional boiler-plate language related to the roles of the Auditor General and Treasurer could be inserted [plus whatever might be needed to link with Act 68 implementation], as could clauses anticipating Congressional enactment of refinements of Medicaid law. Other models for the size/composition of the Advisory Boards can be accommodated, such as expansion to 25 members, direct membership of those empowered to appoint, etc. The goal was to ensure their creation.

To summarize, you must maintain the discipline of placing these monies into a fund that will support tobacco-related projects, maintaining the CDC’s 25% tobacco control goal. An Advisory Board should be empowered to advise annual expenditure recommendations —contingent upon the quality of grant requests issued by therapy and research entities—while maintaining the possibility that unspent dollars could be reinvested for future use. Expanding Medicaid may yield more fiscal resources than creation of a new CHIP entity. Consider, also, the appended legislation intended to increase “DiSh” money recipients. It is urgent that cessation efforts be maximized, funding both professionals and drugs. Concerns regarding present and future funding limits may be alleviated by prompt enactment of legislation that would increase the tobacco “user-fee” by 50 cents-per-pack. Throughout this process, it must be emphasized that tobacco control programs are cost-effective, particularly when calculated “per year of life saved,” when compared with the desire to focus solely on current expenditure needs.

If you have any further questions regarding my suggestions and my activities, please do not hesitate to call me. Keep in mind how we got here, and you will do the right thing. Pending review of additional proposals and study of testimony you are now receiving, these ideas are succinctly codified on the following page. Thank you for your attention.

Recommended Use of Tobacco Settlement Monies – (by Robert B. Sklaroff, MD)

1. Adhere to the Administration’s Proposed Allocation, consistent with CDC Guidelines.
2. Place all Money into Tobacco Control Trust Fund, controlled by legislature.
3. Establish Medicaid Advisory Board, comprised of entities and activists.
4. Maximize the capacity to obtain federal matching funds.
5. Establish Tobacco Control Advisory Board, comprised of entities and activists.
6. Fund Tobacco-Cessation services, both professional and pharmacological.

Programmatic Initiatives must encompass sociologic and scientific efforts. The former must encompass Community and School-Based Efforts, Partnership/Matching Grants and Counter-Marketing Advertising, and Enhanced Law Enforcement. The latter must encompass Cessation Treatment and Research, Surveillance and Evaluation, and Administration/Management. They must be integrated into a comprehensive campaign, disbursed principally through county-level initiatives that minimize new bureaucracies.

The Tobacco Control Advisory Board must be empowered to issue recommendations regarding appropriate legislative interventions, to track governmental activities to ensure they are maximally effective, and to prioritize funding projects. It must also ensure 5% of the annual allocated payments are escrowed for potential future use, if payments fall.

The goal of disbursements must be to help eliminate the need for future payments. Thus, they should concentrate on behavioral research, interventions and applied research. Societal structures must be created that will detoxify both the populace and government through a process of reducing reliance upon tobacco and tobacco-tax money.

Respectfully Submitted,

__________________
Robert B. Sklaroff, MD

WRITTEN TESTIMONY - SUPPLEMENT

COMMONWEALTH OF PENNSYLVANIA
HOUSE OF REPRESENTATIVES
APPROPRIATIONS COMMITTEE

TOBACCO SETTLEMENT HEARING #3

Representative John E. Barley, Majority Chairman

March 16, 2000

By Robert B. Sklaroff, MD
Suite #130
50 East Township Line Road
Elkins Park, PA 19027-2253
(215) 663-8200
FAX: (215) 663-8388
rsklaroff@home.com
http://members.home.net/rsklaroff/homepage.html

This document is intended to provide supplemental information to the Oral Testimony; therefore, it should not be perceived as “stand-alone” in character. In essence, it contains those data that were deleted from the Oral Testimony—in the interest of time—yet were referenced therein. Further background may be acquired by exploring my Web-Site.

I provided testimony last year before the House Health & Human Services Committee, the Senate Public Health and Welfare Committee, and the Governor’s own Task Force. The “charge” before the House, as it attempted to sort-through its initial spate of bills reflected the essence of the work that was accomplished, leading to the current proposal:

“The Purpose of the Hearing is to gather testimony on ways to use the tobacco settlement toward health-related purposes. If we do not utilize the money for health care initiatives, we risk losing a significant portion to the federal government. Therefore, the hearing is going to focus on testimony related to health care, such as but not inclusive to: health care services for the uninsured, medical research, health promotion, preventive health and smoking cessation programs, and improvement in health care delivery.”

Although these principles were obvious to most people, congruence between last year’s intent and this year’s initiative was no mean feat. Nationally, for example, politicians have proposed that these monies be diverted to various unrelated projects, ranging from road construction to covering the liability of the Los Angeles Police Department. Thus, the methodical, bipartisan approach adopted in Pennsylvania—presented at a meeting hosted by Governor Tom Ridge—serves as a model for how other states should behave.

My challenge to the immunity and offset clauses of the Master Settlement Agreement has conferred upon me a certain tangential “standing,” that legal opponents would probably reluctantly agree allows me “independence” to critique how this money should be spent. In my initial testimony, I reviewed all pending legislation and concluded that, in the aggregate, their essence was to move our culture towards reduced nicotine addiction. And in my subsequent testimony, I critiqued efforts promulgated by the Hospital and Health Systems Association of Pennsylvania to denigrate essential Public Health goals. Recently, it has become necessary to refocus this analysis upon input provided recently through the Pennsylvania Cancer Alliance, eight cancer research and treatment centers. This self-serving effort threatens the aforementioned “balance” of the gubernatorial plan.

The “operational paragraph” therein is flawed [page 3, bottom] and will now be parsed. “We wish to call your attention to the proposed allocation of 10 percent for tobacco prevention efforts.” [The “News Release” issued on January 26th (page 2, bulleted) states that 15% of these monies are to be directed towards “tobacco prevention and cessation.”] “We believe that substantially less of the Commonwealth’s tobacco settlement funds needs to be devoted to this important issue, since the overall settlement agreement includes two very large funding streams for such activities on a national level—$1.45 billion over the next five years for a national public education fund which would carry out a massive education and advertising campaign and another $250 million for a foundation dedicated to teen smoking.” [The American Legacy Foundation’s activities include limited components of CDC recommendations; are not—and never were—intended to supplant state programs; offer Pennsylvania limited dollars—assuming a grant is funded, a process that may require commitment of matching-funds—and are constrained by tobacco industry input, as was evidenced when some of their ads were pulled after Philip Morris objected.] “Rather, we believe that considerably more effort needs to be devoted to research to find better and more effective ways to prevent tobacco use.” [Existing knowledge, properly applied, has yielded unambiguous results.]

Ronald B. Herberman, M.D., Director of the University of Pittsburgh Cancer Institute, said that anti-smoking billboards and commercials are failures and suggested money be diverted away from them for cancer research, according to articles published by the Associated Press (by Jeffrey Bair) and the Pittsburgh Post-Gazette (by Christopher Snowbeck). He advised that money would be better spent on research into the behavioral factors associated with smoking, research that could help guide future prevention and cessation efforts. The latter article concluded, “Herberman's comments have been widely condemned in public health circles,” because they conflict with pronouncements issued by every major national public health entity, such as this from the Institute of Medicine:

“The best evidence for the effectiveness of state tobacco control programs comes from comparing states with different intensities of tobacco control, as measured by funding levels and ‘aggressiveness.’ For example, when California and Massachusetts mounted programs that were more ‘intense’ than those of other states, they showed greater decreases in tobacco use compared to states that were part of the American Stop Smoking Intervention Study (ASSIST) funded by the National Cancer Institute.

“From 1989 to 1993, when the Massachusetts program began, California had the largest and most aggressive tobacco control program in the nation, and it showed a singular decline in cigarette consumption that was over 50% faster than the national average. A recent evaluation of the Massachusetts tobacco control program showed a 15% decline in adult smoking-compared to very little change nationally-thus reducing the number of smokers there by 153,000 between 1993 and 1999. States that were part of the ASSIST program, in turn, devoted more resources to tobacco control than did other states except Massachusetts and California, and they showed in aggregate a 7% reduction in tobacco consumption per capita from 1993 to 1996 compared to non-ASSIST states. Such a ‘dose-response’ effect is strong evidence that state programs have an impact, that more tobacco control correlates with less tobacco use, and that the reduction coincides with the intensification of tobacco control efforts.”

Ms. Jennie R. Cook, chair of the oversight committee of California’s tobacco control program and former national American Cancer Society chair, registered her “outrage” in an e-mail response to Herberman, in which she cited the results of a ten year report on the success of California’s tobacco control program. . . .

And an article in the Washington Post piece (by Marc Kaufman) reported that, while teenage smoking has been on the rise nationwide, Florida's aggressive anti-smoking campaign has produced an unprecedented 54 percent decline in middle school tobacco use over the past two years, and a 24 percent drop among high school students.

Thus, Dr. Herberman’s posture defies both common sense and scientific achievement. Yet, his comments are consistent with his long-term position, as first reported on November 17, 1998 in the Pittsburgh Post-Gazette (by Anita Srikameswaran): “If a group of scientists has its way, almost $3 billion of the state's share of a settlement from tobacco companies will be channeled to several cancer research centers around the state.

“That could add more than $20 million a year to the University of Pittsburgh Cancer Institute’s budget. ‘What we’re proposing, particularly to the governor’s office and to the legislature, is to consider this as a major component of how to spend the money that comes into the state from the settlement,’ said Dr. Ronald Herberman, the Institute’s director.

“He and representatives of Fox Chase Cancer Center, Kimmel Cancer Center at Thomas Jefferson University, the University of Pennsylvania Cancer Center, Temple Cancer Center, Penn State Geisinger Health System Cancer Center and the Wistar Institute have already opened discussions with government officials to get 25 percent of the $11.2 billion settlement for Pennsylvania, Herberman said.”

The National Cancer Institute now operates a complex, respected and respected research review structure, and the Cancer Alliance must justify creation of a duplicative apparatus, particularly when it is focused neither on tobacco-related illnesses nor on tobacco control. . . .As has been noted by Dr. Herberman, even if everyone were to stop smoking tomorrow, the tobacco-related health bill wouldn’t be paid for decades.

PRINTER’S NO.—

THE GENERAL ASSEMBLY/SENATE OF PENNSYLVANIA

HOUSE/SENATE BILL

No.—Session of 2000

INTRODUCED BY ---, [date]

REFERRED TO [HOUSE] COMMITTEE ON HEALTH AND HUMAN SERVICES,
REFERRED TO [SENATE] HEALTH AND WELFARE COMMITTEE,
[date]

AN ACT

Providing for appropriating Tobacco Settlement Monies towards the financing of Medicaid-associated expenditures, the financing of a Tobacco Control Program; and imposing additional powers and duties on the Department of Health, the Insurance Department and the Department of Public Welfare.

Section 1. Short title
Section 2. Legislative findings
Section 3. Definitions
Section 4. Tobacco Control Council
Section 5. Medicaid-Supplement Council
Section 6. Expenditure of Commonwealth Funds
Section 7. Administration
Section 8. Duties of Providers
Section 9. Audits
Section 10. Waiver Request
Section 11. Reports
Section 12. Effective Date

The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

Section 1. Short title.
This act shall be known and may be cited as the “Tobacco Money Disbursement Act.”

Section 2. Legislative findings.
The General Assembly finds that:
(1) Tobacco use remains the major preventable cause of disease, disability and death.
(2) Tobacco Settlement monies were generated based upon Medicaid expenditures for tobacco-related illnesses, and this fact must control decisions regarding how they are to be budgeted.
(3) If utilized wisely, tobacco use will decline commensurate with the need for future disbursement of Tobacco settlement monies; thus, there is no need to retain an annual tithe to preclude shortfalls.
(4) It is difficult to distinguish all health care expenditures devoted solely to a tobacco-related illness from those devoted to the maintenance of overall health; thus, deferring any effort to differentiate these categories of costs will preclude creation of an unnecessary and unwieldy bureaucracy.
(5) The Centers for Disease Control and Prevention has promulgated a “Best Practices” program that would consume 25% of the Tobacco Monies, and implementing this program would satisfy the goals of that component of the Tobacco Settlement devoted exclusively to Tobacco Control activities.
(6) Providers provide more than a billion dollars of uncompensated care annually, and this figure can be anticipated to rise as the incidence of tobacco-related illness (caused by increase tobacco use among teenagers) continues to increase; for example, hospitals provided over $704,000,000 in uncompensated care in 1998, a figure that has risen over 5% annually during the past decade.
(7) Uncompensated care is clearly related to the ability of patients to pay for care, ascribable both to low income and lack of insurance coverage; currently, nearly one of every ten Pennsylvanians does not have health insurance coverage, a figure that has also risen over the past five years.
(8) Reliable data in Pennsylvania on the geographic and demographic distribution of the uninsured are lacking; thus, surrogates have been used (e.g., income, unemployment, and Medicaid enrollment data).
(9) Pennsylvania’s Medicaid program currently provides payments to assist some hospitals with the costs of providing uncompensated care for low-income and uninsured patients; the three basic funding streams under Medicaid invoked for this purpose include inpatient disproportionate share payments, outpatient disproportionate share payments and community access fund provider payments.
(10) Of this Commonwealth’s 254 acute care hospitals, 128 received about $304,000,000 through these three programs in 1998, with the Federal government providing slightly more than did the state; this covered about 56% of the reported cost of uncompensated care at those hospitals receiving assistance.
(11) Pennsylvania does not have a public hospital system to provide charity care; in those states that do run public hospitals, uncompensated care represents about one-third of the total costs for those facilities.
(12) Tobacco Settlement monies (initially, approximately $400,000,000 annually) can be used to supplement State Medicaid spending; monies channeled through the Medicaid program would be matched with Federal funds, thus doubling their potential impact when expended in this fashion.
(13) To qualify as an “institution of purely public charity” under the act of November 26, 1997 (P.L.508, No.55), known as the Institutions of Purely Public Charity Act, an institution must (among other things) provide uncompensated goods and services equal to 3% or more of its total operating expenses.
(14) Providing compensation to providers bearing a significant financial burden from uncompensated care permits their continued viability and continued access to care for the medically indigent and uninsured.
(15) Providing such compensation also motivates them to seek the opportunity to treat these needy patients.
(16) Organizations already exist (e.g. the National Institutes of Health) that are charged with ensuring ensure adequate funding is provided to other facets of health care delivery (e.g., research); therefore, Tobacco Settlement monies must be directed towards such pursuits to the extent to which these entities are funded for activities encompassed by the Medicaid-Supplement and Tobacco Control Councils.
(17) It is unnecessary to create a new bureaucracy to govern the expenditure of Tobacco Settlement monies, noting the competence of existing entities within the administrative structures of the Commonwealth.

Section 3. Definitions.
The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:
--“CDC” The Centers for Disease Control and Prevention.
--“Disproportionate share payment.” {“DiSh”} A payment made to a qualifying hospital that serves high volumes or large numbers of Medicaid and Medically Indigent patients under the Pennsylvania Medicaid program, including matching funds made available by the Federal Government pursuant to Title XIX of the Social Security Act (49 Stat. 620, U.S.C. § 301 et seq.); the term shall include any payments made to hospitals for inpatient disproportionate share, outpatient disproportionate share and community access on or before the effective date of this act.
--“Hospital.” An institution having an organized medical staff licensed by the Commonwealth to provide diagnostic and/or therapeutic inpatient medical care services, by or under the supervision of physicians.
--“Provider’s service territory.” The geographic region used by the Pennsylvania Health Care Cost Containment Council to determine the area in which the preponderance of a provider's patient load resides; determinations made with regard to hospitals may be invoked by other providers in that region.
--“Medicaid.” The State-administered program operated under sections 443.1, 443.2 and 443.3 of the act of June 13, 1967 (P.L.31, No.21), known as the Public Welfare Code.
--“Medically Indigent.” Low-income and moderate-income individuals who either lack health insurance coverage or whose health insurance coverage is insufficient to provide them with adequate coverage for the services that they require or who are enrolled in or are eligible for enrollment in the Medicaid program.
--“Tobacco Settlement Monies.” Payments derived from any damage award or settlement resulting from litigation between the Commonwealth and various defendant tobacco manufacturers
--“Uncompensated care.” Patient care for which a provider receives no compensation, including the cost of providing free inpatient and outpatient care to the medically indigent, the cost of delivering such care to patients who do not pay some or all of their charity care and other bad debt as defined by regulation of the Department of Public Welfare; the term does not include the difference between negotiated or contractual payments which are below usual and customary charges, other discounts from charges, unpaid balance- billing of Medicaid patients or the cost of community service programs, educational programs, outreach programs and other special programs, nor does it include any overdue Medicare or Medicaid payment owed by the Federal or State government of any Medicare or Medicaid contractor.

Section 4. Tobacco Control Council
(a) The Tobacco Control Council shall be established to ensure programs intended to minimize tobacco use are maximally effective, coordinated, non-duplicative and consistent with all national standards; it shall report regularly through the Health Care Quality Council and secondarily to other governmental entities whenever it deems such direct communication would expedite resolution of a given problem.
(b) The Tobacco Control Council shall be comprised of fifteen (15) voting members, three each appointed for two-year terms (to coincide with the legislative sessions) by the Governor, Senate Majority Leader, Senate Minority Leader, House Majority Leader and House Minority Leader; the Physician General shall serve as Chair and the Secretary of Health shall serve as ex officio member.
(c) The Tobacco Control Council shall invite input from both patients and providers, and such input shall be accepted 24-hours-a-day, seven-days-per-week either by-name or anonymously.
(d) Input shall be accepted through use of a toll-free telephone number (maintained by a live operator), a toll-free FAX number, a mailing address, and an e-mail address.
(e) The Tobacco Control Council shall attempt to ensure monies are expended in a fashion that is consistent with the CDC “Best Practices” Guidelines, emphasizing prevention and treatment activities.

Section 5. Medicaid-Supplement Council
(a) The Medicaid-Supplement Council shall be established to ensure Medicaid providers are provided supplemental payments that are maximized (e.g., through acquisition of Federal matching funds) and that are disbursed so as to encourage optimal access-to-care for Medicaid recipients; it shall report regularly through the Health Care Quality Council and secondarily to other governmental entities whenever it deems such direct communication would expedite resolution of a given problem.
(b) The Medicaid-Supplement Council shall be comprised of fifteen (15) voting members, three each appointed for two-year terms (to coincide with the legislative sessions) by the Governor, Senate Majority Leader, Senate Minority Leader, House Majority Leader and House Minority Leader; the Physician General shall serve as Chair and the Secretary of Public Welfare shall serve as ex officio member.
(c) The Medicaid-Supplement Council shall invite input from both patients and providers, and such input shall be accepted 24-hours-a-day, seven-days-per-week either by-name or anonymously.
(d) Input shall be accepted through use of a toll-free telephone number (maintained by a live operator), a toll-free FAX number, a mailing address, and an e-mail address.
(e) The Medicaid-Supplement Council shall ensure monies are expended in a fashion that is consistent with Disproportionate Share Guidelines used to qualify for Federal Medicaid matching funds; any statute intended to expand the qualifications of recipients of such monies (e.g., to Medically Indigent patients and/or providers) shall be drawn from a sequestered fund, if necessary, to ensure the capacity to obtain such matching funds is not compromised.

Section 6. Expenditure of Commonwealth Funds
(a) Allocation.--Annually the State Treasurer shall set aside Tobacco Settlement Monies.
(b) Appropriation.--All funds set aside under subsection (a) shall be deposited on a continuing basis in Funds administered by the Departments of Health and Public Welfare as restricted-receipt accounts to implement the provisions of this act.
(c) These monies shall be disbursed to Funds administered through the aforementioned Councils by application of the following formula: 50% to the Medicaid-Supplement Council, 25% to the Tobacco Control Council, 15% to the Health Department (to fund home care for the elderly), 5% to the Health Department (to fund broad-based health research and health-care-related venture capital), and 5% to an endowment fund (to be administered by the State Treasurer).
(d) Beginning in the State fiscal year starting July 1, 2000, Disproportionate Share payments shall be deposited into the Medicaid-Supplement Fund; the initial amount deposited shall be equal to the sum of all Disproportionate Share payments made in the State fiscal year beginning July 1, 1999, or the year beginning July 1, 1998 (whichever is greater) times 1.025, plus the appropriate Federal match for that amount.
(e) These Monies shall not be employed to offset previously-established levels of funding through the General Fund until/unless a specific finding has been legislatively that the need for such funding has been determined to have decreased; thus, the General Assembly shall annually deposit an amount equal to or greater than the amount deposited during the prior year, plus the appropriate Federal match.
(f) Monies from other sources shall be deposited into these Funds as received and at the determination of the appropriate Council(s); these may be derived from voluntary contributions by other payers, from Federal matching funds, from grants, and from fines levied against those who have violated state law.

Section 7. Administration
(a) The Departments of Health, Public Welfare and Insurance shall promulgate all rules and regulations necessary to implement the provisions of this act; pursuant thereof, they shall develop and use such forms, records and procedures as deemed necessary.
(b) The Department of Public Welfare shall have the following additional powers and duties:
(1) In conjunction with the Medicaid-Supplement Council, adopt in regulation and use an allocation formula to distribute monies from the Fund to qualifying providers; this formula shall include the following factors:
(i) The volume and percentage of inpatient Medicaid patient visits compared to total visits.
(ii) The volume and percentage of outpatient encounters covered by Medicaid compared to total outpatient encounters.
(iii) The percentage of households in the provider’s service territory at or below the Federal poverty level.
(iv) The annual unemployment rate in the provider’s service territory.
(v) The provider’s audited uncompensated care costs compared to the provider’s net patient revenue.
(2) Develop a definition and accounting methodology for use by the providers in determining Medicaid-related and uncompensated care levels.
(3) Recoup funds from providers that may have been overpaid for Medicaid-related medical care.
(4) Deny payment to any provider that fraudulently accepts payment under this act.
(5) Levy financial penalties and withhold in full or in part payments to providers that fail to meet their obligations under this act.

Section 8. Duties of Providers.
(a) Financial statement.--Providers shall annually provide the department, within 120 days of the completion of its fiscal year, a statement as to the level of Medicaid-financed and uncompensated care to the Medically Indigent Population they have provided.
(b) Other requirements.--Qualifying providers that receive payments from the fund shall:
(1) Accept patients regardless of their ability to pay.
(2) Be enrolled as Medicaid providers.
(3) Agree not to balance-bill Medicaid patients or other patients whose household income is at or below 185% of the Federal poverty level.
(4) Submit a plan to the department for its approval that would assess the ability of low-income individuals, Medicaid beneficiaries and the uninsured residing in that provider’s service territory to access outpatient services; the plan must include a description of how that provider intends to ensure the broadest possible access to outpatient care and preventative services.
(5) Make a good faith effort to determine if patients have health insurance coverage, and to file timely and complete claims to secure payment for services rendered.
(6) Fulfill any other obligations imposed on providers receiving Disproportionate Share payments pursuant to Federal or State law and regulation.

Section 9. Audits.
(a) Departmental.--The Public Welfare Department may audit the records of any provider receiving payments under this act to disapprove the allowance of any Medicaid-related or uncompensated care amount, to determine the reasonableness of any data used in calculating the allocation and distribution system, and otherwise to ensure compliance with this act; the Public Welfare Department shall have the authority to order an independent performance audit of the claims management, billing and collection processes of any provider receiving payments from the fund.
(b) Auditor General.--The Auditor General may audit the records of any provider to determine compliance with this act, ensuring the satisfaction of both performance and fiscal responsibilities; the Auditor General shall periodically conduct a random audit of the uncompensated care of a select sample of providers and provide the General Assembly and the Public Welfare Department a report on the results of such audits.

Section 10. Waiver request.
Were such an action to be determined to enhance the amount of money in the Medicaid-Supplement Fund and yield a more efficient administrative structure, the Commonwealth (through the Health and Public Welfare Departments and in cooperation with representatives of the hospital industry) shall apply to the Federal Health Care Financing Agency to request a waiver that would allow Medicare Disproportionate Share payments made to Commonwealth hospitals to be deposited into the Medicaid-Supplement Fund; any monies generated in this fashion would be earmarked exclusively for disbursement back to hospitals

Section 11. Reports.
(a) The Health Care Quality Council shall issue an annual report to the General Assembly, encompassing both its activities and those of the two Councils reporting through it; these reports shall include a summary of the input logs maintained by all three entities, plus how the problems raised were resolved.
(b) The Tobacco Control Council shall include in its report detailed information regarding the use of and fiscal impact of tobacco products, including specific information regarding youth access thereto.
(c) The Medicaid-Supplement Council shall include in its report the following information:
(1) The name, address and amount of Medicaid-related and uncompensated care provided by each provider in this Commonwealth.
(2) The amount paid to each qualifying provider from the Fund.
(3) Deposits into and disbursements from the Fund.

Section 12. Effective date.
This act shall take effect on July 1, 2000.