Medicaid Smokers Seek Share of States' Tobacco Settlement
By STEPHEN LABATON New York Times January 26, 2000 page 1
WASHINGTON, Jan. 25 -- With 46 states beginning to receive payments from their $206 billion settlement with the nation's leading cigarette makers, a legal fight is emerging over whether some smokers are themselves entitled to any of the money.
Lawyers in eight states are preparing to file coordinated class-action lawsuits on Wednesday maintaining that under federal law, any settlement to the states above the amount they paid through Medicaid for treatment of smoking-related diseases should go to Medicaid recipients who suffered from those illnesses.
None of the 46 states that were parties to the settlement, reached in 1998, plan payments to smokers. And many have begun using the money less for smoking-related programs like antitobacco education for youths than for initiatives like tax cuts and construction of roads and bridges.
Lawsuits similar to those being filed on Wednesday have already been brought recently in states including California, Florida, Montana, Texas and Wisconsin. Those cases have so far yielded conflicting results, with one court ruling in favor of the state's position but another suggesting that the smokers might have valid claims under federal Medicaid law. In any event, lawyers say these initial, lower-court skirmishes are not particularly meaningful: the big questions of law posed by the suits, they say, will be resolved by the appellate courts.
"This is the latest chapter in the tobacco wars, and it is over the forgotten class in those wars," said G. Kendrick Macdowell, a lawyer at the Washington firm of Patton Boggs, which is coordinating the new round of cases with lawyers from around the country.
"These are cases about the least fortunate and most vulnerable in our society who exhausted their savings to become eligible for Medicaid, who assigned their claims to recover expenses to the states and who are entitled to a portion of recovery under federal law."
But state attorneys general around the nation and lawyers who worked for the states in developing the settlement say the new plaintiffs will have to clear high hurdles to prevail. States are generally protected from most kinds of federal lawsuits for money damages by the 11th Amendment, which confers sovereign immunity, a defense that the Supreme Court has been steadily expanding. Moreover, the states have begun maintaining that the tobacco settlement was not intended to reimburse them for their Medicaid expenses but instead resolved claims of antitrust, consumer fraud and racketeering violations by the companies.
"Good luck," said James E. Tierney, the attorney general of Maine from 1980 to 1990, who was a consultant to many state officials during the tobacco settlement talks. "There's lots of evidence that the settlement was not for Medicaid reimbursement. The attorneys general sued the tobacco companies as lawbreakers: this was a law-enforcement action, not a reimbursement settlement."
The settlement calls for the $206 billion to be paid to the states over 25 years. When it was reached, the states vowed to use much of the proceeds for antismoking efforts, including programs to educate teenagers about the hazards of cigarettes. But the National Conference of State Legislatures says that only about 8 percent of the settlement's first payments have been budgeted for antismoking campaigns. The rest is going for general government expenses or to help finance tax cuts.
"The majority of the states have missed an historic opportunity for using the proceeds of the settlement to reduce tobacco abuse," said Matthew L. Myers, a lawyer with the Campaign for Tobacco-Free Kids, a Washington advocacy group. "Of the 30 states which have so far dealt with the tobacco money, 8 have provided enough new funding for effective comprehensive tobacco prevention. Eleven other states have dedicated funds for tobacco prevention, but significantly less than the amount recommended by the Centers for Disease Control."
The suits to be filed on Wednesday will be in Georgia, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont and West Virginia. None of the lawyers who are bringing the suits against the states were among the group of plaintiffs' lawyers who helped the states win the settlement with the tobacco companies.
Lawyers representing the classes of Medicaid recipients say they will not know either the size of the potential damages or the number of members of any given class until they begin the fact-finding phase of the cases.
But they say billions of dollars may ultimately be at stake for millions of American smokers who were on Medicaid.
The federal Medicaid law on which the class-action suits are being hung requires the states to pursue any third parties who are responsible for injuries that require medical expenses. The proceeds of that pursuit are supposed to go first to cover state expenses, second to cover federal contributions to Medicaid and third to any individuals harmed by the third parties.
Led by Senator Kay Bailey Hutchison, Republican of Texas, Congress adopted an appropriations bill last year that waived the federal government's interest in any proceeds of the settlement.
Now many state officials are maintaining that although the early state lawsuits against the tobacco companies sought Medicaid reimbursement, most of the later ones did not, and that the final settlement resolved only accusations of fraud, racketeering and antitrust violations and is therefore not subject to the federal Medicaid reimbursement provisions.
Last September a federal court in Wisconsin ruled in favor of the state, saying the suit against it was barred by the 11th Amendment, which generally prohibits federal suits against a state by citizens of that state or any other state for monetary damages. But the sovereign immunity defense, while strong, is not ironclad, and the case has been appealed. It is set to be heard later this year by the United States Court of Appeals for the Seventh Circuit, in Chicago.
In California, meanwhile, lawyers have brought a similar suit in a state court, partly in an effort to avoid having to cope with the sovereign immunity defense. In that case, the court has issued a tentative ruling suggesting that the plaintiffs have a valid claim. A more detailed ruling by the state court is expected in the next few days; the losing side is certain to appeal.