Key Findings
Tobacco Prevention and Control Spending
View the State Rankings for Tobacco Prevention and Control Spending
| The Master Settlement Agreement:
In November 1998, 46 states and the tobacco industry settled the states’ Medicaid lawsuits for recovery of their tobacco-related health care costs. The industry committed to pay the states approximately $206 billion over the next 25 years. In addition, payments of $5 billion will be made to 14 states to compensate them for potential economic impact to their tobacco-producing communities. Four states (Mississippi, Texas, Florida and Minnesota) settled their tobacco lawsuits separately for a total of $40 billion over 25 years. |
Well-funded, sustained and comprehensive tobacco prevention and cessation programs have proven to be one of the best ways to combat tobacco use. A September 2003 study in the Journal of Health Economics found that cigarette sales dropped more than twice as much in states with comprehensive tobacco control programs than in the United States as a whole. The study found that between 1990 and 2000, sales fell an average of 43 percent in four states with large investments—Arizona, California, Massachusetts and Oregon—compared with only a 20 percent drop for all other states. This new study confirms that sustained tobacco control programs have a significant impact on cigarette sales. Further, the impact grows as programs continue to dedicate resources to curbing tobacco use. The study states that programs become more efficient and "make better and better use of each additional dollar" over time.6
This confirms earlier data from California and Massachusetts showing that an investment in tobacco prevention programs results in dramatic decreases in tobacco use. For example, California’s comprehensive approach to smoking prevention and cessation yielded an astounding 14 percent decline in the incidence of lung cancer from 1988 to 1997 and smoking rates have declined more rapidly compared with the rest of the country. 7 The very successful Massachusetts Tobacco Control Program released a study showing that from 1999 to 2002, Massachusetts reduced high school smoking by 29.7 percent and middle school smoking by 13 percent.8 Maryland, also a former leader in tobacco prevention programs, saw a steep decline in youth smoking rates between 1994 and 2002. Smoking rates for 8th graders and 10th grade students have been cut by more than one-half since 1994.9
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Ten Most Disappointing Tobacco Prevention Program Cuts in 2003
1. New Hampshire (-100%)
South Carolina (-100%) *
2. Florida (-97.3%)
3. Nebraska (-80.0%)
4. South Dakota (-74.4%)
5. Colorado (-74.2%)
6. Oregon (-66.9%)
7. Indiana (-66.8%)
8. Massachusetts (-56.4%)
9. Maryland (-49.3%)
* New Hampshire and South Carolina tied for #1
Top Six in Tobacco Prevention Spending (percent of CDC minimum) 1. Maine 137%
2. Delaware 125%
3. Mississippi 108%
4. Arkansas 103%
5. Arizona 93%
6. Hawaii 90% | Clearly, thousands of deaths from tobacco use could be prevented and billions in medical expenses could be saved if all states made long-term investments in a sustained campaign to prevent tobacco-related disease and death. In 1998, the states sued the tobacco industry to recover Medicaid funds spent on tobacco-related illnesses (see box on the Master Settlement Agreement). At the time, state leaders repeatedly asserted that their intent was to use these funds for health-related programs, particularly for persons suffering from tobacco-related diseases, and to prevent tobacco use and exposure to secondhand smoke. Five years later, only six states—Arizona, Arkansas, Delaware, Hawaii, Maine and Mississippi—have sustained the commitment of significant funds for tobacco prevention and cessation.10
Faced with growing budget deficits, seventeen states and the District of Columbia in the past few years have decided to securitize a portion of their tobacco settlement funds. 11 In so doing, they have opted to sell the rights to future annual tobacco settlement payments in the form of bonds, in exchange for an upfront lump sum payment. In most cases, funds from the bond issues are disappearing to plug one-year budget gaps.
Selling off 25 years of tobacco settlement payments to close a hole in a single year’s budget is fiscal malpractice. In 2002, states received approximately $0.30 to $0.40 for each dollar anticipated under the Master Settlement Agreement (MSA). Since then, the figure has plummeted even further as investment agencies have lowered their ratings for tobacco bonds.
From a fiscal standpoint, filling a budget gap with tobacco bond proceeds is a mere stopgap approach. By not addressing the underlying reasons for gaps between revenue and spending, states will continue to face budget shortfalls in subsequent years. Not only will there be no more tobacco money to securitize, the annual MSA payment will go to bond holders, not to the state. Furthermore, the states are not funding the programs necessary to reduce the public health and fiscal toll of tobacco addiction, thus leaving the state open to rising Medicaid and Medicare payments resulting from smoking-related illnesses.
Policy Goals
The American Lung Association recommends allocating a significant portion of state settlement funds to effective tobacco prevention and education programs, and adopting the CDC guidelines as the basis for building a comprehensive tobacco prevention and education program. The CDC’s Best Practices for Comprehensive Tobacco Control Programs guidelines recommend the following nine programs in any comprehensive approach:
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community programs to reduce tobacco use,
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chronic disease programs to reduce the burden of tobacco-related diseases,
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school programs,
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enforcement,
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statewide programs,
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counter-marketing,
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cessation programs,
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surveillance and evaluation, and
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administration and management.
Bright Spots
Legislators in Arizona, Arkansas, Delaware, Hawaii, Maine and Mississippi were able to look beyond their immediate budget situation to see the fiscal wisdom of maintaining at least 90 percent of the CDC’s minimum recommended funding levels for tobacco control programs. Rather than face worsening budget shortfalls in the future with no programs left to raid, these states will see their health-related costs gradually drop as prevention and cessation programs reduce the prevalence of smoking and tobacco-related disease. In fact, Maine was successful in reducing youth smoking rates by 48 percent in just six years between 1997 and 2003. 13 Tobacco-control programs translate into healthier citizens and reduced health care costs down the road.
Levels of secondhand smoke in restaurants are approximately 160 percent to 200 percent higher than in office workplaces. Levels in bars are 400 percent to 600 percent higher than in office workplaces.12
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Work to Do
Unfortunately, thirty-eight states and the District of Columbia received an F for program funding. In 2003, many state legislatures continue to raid their tobacco settlement funds. Two states—Indiana and Maryland—saw their previously well-funded model tobacco control programs slashed by half or more. Minnesota cut its program by one-third.
Looking Ahead
States still have the opportunity to live up to the promise made in 1998 through the Master Settlement Agreement by committing funds to tobacco prevention. Tobacco control is a sound investment for the future, one of the surest ways to protect health and decrease health care costs. Funding prevention programs make both good health sense and good fiscal sense.
Key Findings Continued... |
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