Securing Tobacco Settlement Funds for Health Care

Dona Upson, MDPulmonary & Critical Care MedicineNew Mexico Veterans’ Affairs Health Care Services

University of New Mexico

American College of Physicians – 4/13/05

Master Settlement Agreement

Written by and for tobacco companies Implemented 1998 States supposed to use payments to

support public health and tobacco prevention

Settlement, not a law– Only the parties involved, the tobacco

companies and the states, have legal standing to enforce its terms

Challenges Since 1998, tobacco companies have

doubled spending on marketing and promotion ($5.7 to $12.7 billion)

States’ economies have declined Many state anti-tobacco media campaigns

reduced or cut since 2002 Funding decreased for Legacy (truth) Youth smoking rates stable since 2002

(previously in decline)

Finances - Fiscal Year 2005 Annual smoking caused health costs

– $75+ billion Prevention spending

– $538 million CDC minimum prevention spending goal

– $1.6 billion Total state revenue from tobacco

– $19,966.5 million ($12,911 taxes; $7,055 MSA) Total prevention spending 2.7% of tobacco

revenue (0% DC, MO to 10.1% ME)

Tobacco Use Prevention and Control (TUPAC) - New Mexico

$37 million from MSATUPAC Funding: 2001 $2.225 million 2002 $5 million 2003 $5 million 2004 $5 million

CDC recommends $14.2 million annual funding for NM tobacco control

CDC funds TUPAC staff positions & administrative costs ($1.1 million)

$5.0

$57.7

$144.0

$0

$20

$40

$60

$80

$100

$120

$140

$160

Currrent TUPAC ProgramFunding in NM

Tobacco Industry Marketingin NM

Tobacco-Caused MedicaidCosts in NM

An

nu

al S

pe

nd

ing

(in

mill

ion

s)

Fundsto TUPAC

School Programs

Community Programs

MediaCessationPrograms Evaluation

Identify andEliminate

Tobacco-relatedDisparities

Promote Quitting Among

Youth and Adults

Best Practices

Eliminate Exposure to Secondhand

Smoke

PreventInitiation

Among Youth &Young Adults

TUPAC PROGRAM COMPONENTS

PROGRAM GOALS

Partnerships Oversight group

– Planning, coordination & implementation Voluntaries - ALA, ACS, AHA, etc

– Funding, advice, credibility Legislators

– On key committees Department of Health

– Promote each other’s agendas– Provide state-specific data and education

Health care professionals– Credibility, access, personal stories

Grassroots advocates

Strategy

Education– Public, legislature, executive branch

Polling Lobbyist Media

– Advertising, press conferences, editorials

Oversight group - NMCAT

NMCAT works to create community norms that discourage smoking and spit tobacco use. We believe that through responsible public policy changes New Mexico can become a healthier state and tobacco-related illnesses can be decreased.

NMCAT Background

Established in 1997 Initially funded by ACS, AHA, ALA &

Campaign for Tobacco Free Kids Staffed entirely by contractors Primary Focus: Legislative campaign for

settlement dollars & other tobacco issues 900+ members on email/ fax/ phone lists Currently have grassroots network of 2,000

Report to the Tobacco Settlement Revenue Oversight Committee

Susan Baum, Physician/Epidemiologist

Larry Elmore, Program Manager

Tobacco Use Prevention and Control Program September 29, 2004

Data-driven

Program planning– Baselines and future directions

Measuring performance Measuring outcomes

– short-, intermediate- and long-term Counter marketing Justify continued/ increased funding

Smoking & Lower Quality of Life

CDC 2003 estimate – For every premature death caused each

year by smoking, there are at least 20 smokers suffering with at least one serious illness from smoking.

NM estimate– 42,000 New Mexicans living with serious

smoking-related diseases.

FY04 Highlights - Adults Quitting

Best Practices as of FY04: All UNM Hospital patients are now screened for tobacco use.

Over 37,000 adults were screened for tobacco use, and over 2,700 adults received cessation services

1,500 healthcare providers trained in brief interventions

“Of all the classes I’ve ever attended, this class was the most effective because you inspired my self-confidence.”

--Freedom from Smoking Graduate

FY04 Highlights - Youth & Schools

CDC Guidelines implemented in over 150 schools, reaching 45,000 students statewide

Nearly 1,000 youth trained as peer educators & coalition members

“My students became better communicators, especially after they participated in the National Smoke-free Movies Campaign. They became empowered!”

--Alameda Middle School SQUADS Facilitator

30% of smokers were advised to quit smoking by their dental providers

20% of working adults report that their employer has offered some type of stop smoking program or assistance in the past year

Sources: 2003 NM Adult Tobacco Survey & 2001 BRFSS

Smoking Cessation Assistance

49

68

0

20

40

60

80

Pe

rce

nt

(%)

of

Sm

ok

ers

2001 2003

Percent of NM Smokers Advised to Quit Smoking by a Health Care Provider in the Past Year

Smoking Cessation among Adults in New Mexico

Smokers who tried to QuitSmoking in Past Year

More than half of smokers have made a quit attempt during the past 12 months.

Source: BRFSS, 2001-2003

Polling -Secondhand Smoke: Attitudes

91% of New Mexicans believe that secondhand smoke is harmful to their health (up from 84% in 2001)

Sources: 2001 & 2003 NM Adult Tobacco Survey

Place Percent of New Mexicans who believe place should be completely smoke-free

Day Care Centers 97%

Indoor Work Areas 76%

Public Buildings 73%

Indoor Shopping Malls 71%

Indoor Sporting Events 71%

Indoor Dining Area of Restaurants

65%

Health & EconomicImpact of Tobacco

New Mexico and

United States

Updated March 2005

Total Annual Smoking-Attributable Costs in NM (2002)

Direct Medical Costs $425 million

Lost Productivity Costs $428 million

Total Costs Annually $853 million

Annual Per Capita $460 per personSources: Campaign for Tobacco Free Kids, “The Toll of Tobacco in New Mexico” Fact sheet (2002 dollars), Full list of references available at http://tobaccofreekids.org/reports/settlements/toll.php?StateID=NM. Per capita calculation based on 2002 NM population.

Annual Smoking-Attributable Direct Medical Costs in NM

Ambulatory (outpatient)

$135 million

Hospital $103 million

Nursing Home $58 million

Prescription Drugs $29 million

Other medical $35 million

Annual Total $360 million

Annual Per Capita $208 per personSource: Annual Smoking-Attributable Mortality, Years of Potential Life Lost, and Economic Costs—United States, 1995-1999, MMWR (CDC), April 12, 2002/51(14); 300-303

Smoking-Attributable Neonatal Costs

Annual Neonatal Costs in New Mexico

$92 million

Smoking-Attributable Neonatal Costs

$1.6 million

Percent of Total Neonatal Costs Related to Maternal Smoking

1.75%

Annual Smoking-Attributable Costs per Maternal Smoker by Insurance Status

$635 (Medicaid or Uninsured)

$583 (Private or Other Insurance)

Source: State Estimates of Neonatal Health-Care Costs Associated with Maternal Smoking, United States, 1996, MMWR (CDC), October 8, 2004/53(39); 915-917.

Smoking-Attributable Deaths inNM & US, Disease-Specific

Disease NM(Deaths per 100,000)

US(Deaths per 100,000)

Smoking-Related Cancers(Lung cancer accounts for about 75% of the smoking-related cancer deaths in NM)

80.1 111.0

Cardiovascular Diseases 80.4 90.4

Respiratory Diseases 76.2 71.1Source: 2001 Annual Smoking-Attributable Mortality calculated using Smoking-Attributable Mortality, Morbidity, and Economic Cost (SAMMEC) software. Available at www.cdc.gov/tobacco/sammec. Does not include burn or secondhand smoke deaths.

NM and US Per Capita Taxable Cigarette Sales among Adults, 1992-2001

0

20

40

60

80

100

120

140

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Pac

ks p

er C

apit

a (A

du

lts)

New MexicoUnited States

Per capita sales in NM have historically been lower than in the U.S.

Per capita sales have been decreasing from 1992 through 2001.

Sources: NM Taxation & Revenue Dept. and Orzechowski, W & Walker, RC, Tax Burden on Tobacco, 2001

68

5045

5563 62 59 60

5453

64 64

0

20

40

60

80

'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03

Year

Pac

ks o

f C

igar

ette

s

Tobacco Control begins in NM

MSA Funding70-cent tax

increase

NM Per Capita Taxable Cigarette Sales 1992-2003

Per capita cigarette sales decreased by one-third between 1992 and 2003.

Source: NM Taxation & Revenue Department, 1992-2003

True Cost of a Pack of Cigarettes in New Mexico

Retail Price Per Pack $3.35

Smoking-Attributable Medical & Lost Productivity Costs Per Pack

$8.94

Smoking-Attributable Medicaid Costs Per Pack

$1.78

Source: Sustaining State Programs for Tobacco Control: Data Highlights, 2004, CDC. Direct medical expenses are updated from 1998 to 2002 dollars, and lost productivity costs are updated from 1999 to 2002 dollars, using the Medical Consumer Price Index and the Wage Consumer Price Index.

Tobacco Industry Marketing Expenditures

Annual tobacco industry marketing expenditures, U.S.

$12.7

billion

Estimated annual tobacco industry marketing expenditures, New Mexico

$57.7

million

Estimated annual tobacco industry marketing expenditures per New Mexican

$30.77

Annual expenditures on tobacco prevention and control per New Mexican

$3.25

Sources: Campaign for Tobacco Free Kids “The Toll of Tobacco in New Mexico” fact sheet. Original source: U.S. Federal Trade Commission (FTC), Cigarette Report for 2000, 2002; FTC, Federal Trade Commission Smokeless Tobacco Report for the Years 2000 and 2001. State total a prorated estimate based on its population. Tobacco prevention and control expenditures data from TUPAC Program.

Tobacco companies spend $23 to market their products for every $1 states spend on tobacco prevention.

States have cut funding for tobacco prevention programs by 28% in the past three years, resulting in overall funding which is only one-third of CDC minimum recommendations.

In NM, the amount spent by tobacco companies on marketing their products is about ten times the amount spent by the State on tobacco prevention and control programs.

Source: National Cancer Institute, Smoking and Tobacco Control Monograph No. 10 NIH Pub. #99-4645, 1999; NM estimate derived from NCI monograph, assuming a similar ratio between smoking deaths and secondhand smoking deaths in NM as in the US.

Tobacco Industry vs. Tobacco Prevention & Control Spending

Securitization

Securitization

Sale of future state tobacco settlement receipts for smaller lump-sum payment today

25-40 cents on the dollar Credit or bond ratings downgraded due

to lower future revenue stream

Benefits of Dedicated Trust Fund

Improve health Moral obligation to use funds as

intended Political capital - popular use of funds Reduces future state expenditures Strengthens bond and credit ratings