Oklahoma Voters Could Use Tobacco Revenue to Help Fund its Medicaid Program
Should Oklahoma use its revenue from the 1998 Master Settlement Agreement to help fund its Medicaid program?
by The 2020 Causes Voter Center | 10.19.20
What the Initiative Does
This legislatively referred constitutional amendment, known as State Question 814, would change the deposit percentages for the money that Oklahoma receives from the 1998 Master Settlement Agreement (MSA). At present, 75% of total MSA payments to Oklahoma are deposited into the Tobacco Settlement Endowment Trust (TSET) Fund, which was designed to fund tobacco use prevention and smoking cessation programs, and 25% is deposited into the Tobacco Settlement Fund, a special fund subject to appropriation by the state legislature.
State Question 814 would switch the deposit percentages so that 25% of MSA payments would be deposited into the TSET Fund and 75% would be deposited into the Tobacco Settlement Fund. The state legislature would be directed to appropriate remaining money in the special fund to secure federal matching funds for the Medicaid program.
If this proposition passes, Senate Bill 1529 would take effect. This would make changes to the percentage of funds in the Tobacco Settlement Fund that are directed to the Attorney General’s Evidence Fund to keep the amount of money directed about the same ($4.6 million).
Argument in Favor
As the COVID-19 pandemic has increased the number of Oklahomans eligible for Medicaid, it’s possible that Medicaid expansion will cost far more than previously anticipated. In light of this, legislators may need to cut other state services to fund Medicaid expansion without the TSET funding. Rather than allowing these challenges to arise, it would be better to proactively change the deposit percentages for Oklahoma’s MSA receipts now to ensure that Medicaid expansion doesn’t cannibalize other parts of the state’s budget.
The TSET Fund has a proven record of operating effective public health and prevention programs, such as the Oklahoma Tobacco Helpline and a physician recruitment program for medically underserved areas, which are necessary to support overall health and well-being in Oklahoma. It would be a mistake to take funding away from the TSET in order to fund another public health program; instead, Oklahoma legislators should find new money for Medicaid expansion and leave the prevention dollars from the MSA in place.
Supporters of SQ 814 note that changing the percentage allocations of Oklahoma’s MSA money could generate close to $50 million annually, helping fund Medicaid expansion without raising revenues. They also note that the endowment fund currently has over $1 billion dollars, so it should be able to continue funding research, prevention and health initiatives even if SQ 814 passes. Finally, they say that using MSA payments to help fund health care in Oklahoma could help keep the state from having to cut existing patient services or reducing payments to health care providers.
This measure’s sponsor, Oklahoma State Senator Kim David (R), says it will help ensure that Oklahoma’s health budget is able to support health care needs in the state:
"With the budget situation that we have now ... the last thing we want to do right now is next year or the year after look at possible budget cuts to health care or the provider rate cuts that we've had in the past, we want to make sure that we can continue to support all health care in Oklahoma."
Writing in support of State Question 814, the Tulsa World Editorial Board says:
“SQ 814 offers the state a reasonable way to help fund Medicaid programs for a broad population of uninsured Oklahomans in poverty, and it deserves the voters’ close consideration as a way to fund a healthy future for the state.”
It should be noted that the Oklahoma legislature is constitutionally required to fund Medicaid expansion regardless of voters’ decision on SQ 814. It should also be noted that if it passes, SQ 814 would likely generate less than one-third of the money needed to expand Medicaid.
Opponents of SQ 814 contend that TSET is funding important health initiatives, and that its ability to do this important work would diminish over time should SQ 814 pass, as smaller deposits to the trust fund would mean lower interest earnings in the future. They also point out that SQ 814’s language doesn’t specify that the funds be used by Medicaid expansion; so it’s possible that the funds could be used to replace Medicaid existing funding, leaving Oklahoma without a way to fund Medicaid expansion. Finally, they argue that there are other ways, such as reducing tax incentives, to fund Medicaid expansion without a tax increase.
American Cancer Society Action Network opposes this proposition. Its government relations director, Matt Glanville, says:
"Year after year, members of the Legislature suggest using Tobacco Settlement Endowment Trust (TSET) funds to bail out the budget, or fund other projects outside their constitutional mandate. What is being proposed through Senate Bill 1529 and Senate Joint Resolution 27 is a diversion of funding from Oklahoma’s primary source of tobacco control and prevention funding amid a public health crisis. At this critical moment, we must do everything in our power to keep our communities healthy and safe, which means building strong public health infrastructure including comprehensive tobacco control measures. ... It is short-sighted and worrisome to consider such sweeping changes to a proven program when public health has never been more important. The Legislature must leave the endowment to do its job and help ensure a strong, healthy Oklahoma."
In other comments, Glanville contends that it’s imperative to both leave TSET’s prevention dollars in place and find funds to expand Medicaid:
“We don’t need to pass SQ 814 to fund Medicaid expansion. If we’re going to truly invest in public health in Oklahoma, we need to leave those prevention dollars in place and find new money for Medicaid expansion.”
State Rep. Mark McBride (R) acknowledges TSET’s success but says its time for a change:
“I think they've done their job, but it's time we redirect, or the people of Oklahoma redirect, that money into Medicaid. I may not have agreed with it, but the people of Oklahoma voted for it, and now it's my job to fund it.”
The Master Settlement Agreement (MSA) of 1998 is an agreement between 46 states, four U.S. territories, Washington, D.C., and Puerto Rico and was what was originally four cigarette manufacturers. The agreement was reached to settle lawsuits brought by states seeking to recover their expenses incurred by treating tobacco-related illnesses.
Under the MSA, tobacco companies make annual payments to the states. Annual payments to the states under the MSA began in 2000 and were set to be paid to the states in perpetuity. As of 2020, Oklahoma’s average annual payment received under the MSA was around $75 million.
Summary by Lorelei Yang
(Photo Credit: iStockphoto.com / relif)
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