Debate and Issues Archive

draft settlement

Clinton Signs Away Tobacco Industry Settlement Money

The Lancet
Date: May 29, 1999
By Julie Rovner

On May 21, President Clinton waived the federal government's claim to a portion of the US$206 billion settlement between the states and the tobacco industry. The provision was tucked into a mid-year supplemental spending bill to fund the war in Kosovo and provide aid to victims of Hurricane Mitch in Central America.

The tobacco provision was added to the Senate version of the bill in March, and despite Clinton's threats to veto the policy, it was kept in the measure by a House-Senate conference committee. Backers of the bill bet--correctly--that Clinton would not dare veto a bill that included the $15 billion he wanted for Kosovo and other critical priorities. Nonetheless, said Clinton, "Congress [has] passed up an important opportunity to protect our children from the death and diseases caused by tobacco".

Even before the settlement was reached last November, the Clinton administration and the states had been in a war of words over whether a portion of the funds would have to be returned to Washington. As Medicaid is a joint federal-state programme, with the federal government paying about 55% of the costs, settlement funds attributable to federal Medicaid contributions by law must be returned to Washington. But the states argued that their lawsuits were not based on Medicaid, so the government had no claim.

Clinton had offered a compromise where the states could keep even Medicaid money if they agreed to spend it on anti-tobacco programmes. But many states have earmarked their settlement funds for non-health programmes. And backers of the provision said the government should have no say in the matter. "I believe the states are acting responsibly", said Senator Bob Graham, a former governor and cosponsor of the provision.

Anti-tobacco activists are outraged that the new law not only waives the federal government's past claims to tobacco-company refunds for Medicaid, but also bars it from seeking compensation for tobacco-related Medicaid costs that may accrue in the future.