Colorado health-care programs that depend on tobacco money are bracing for a $20.7 million cut in funding this year.
Big tobacco companies are threatening to withhold the money – out of the $88.1 million payment expected this year – because of a long-running dispute over how much the companies owe the state.
Caught in the middle are poor mothers with newborn babies and HIV patients who need help with their drug bills.
“We believe this is a significant problem we’re looking at,” said Dr. Ned Calonge, chief medical officer for the state Department of Public Health and Environment.
“We’re tightening our belts, changing our priorities, reconsidering our distributions,” he said.
The Colorado Department of Health Care Policy and Financing, which runs a health-care program for poor children, estimates it could lose $4 million worth of tobacco funding.
The managers of the Children’s Basic Health Plan, which provides coverage for about 48,000 kids, would ask the lawmakers to shift $4 million out of other programs.
The possible decrease in funding puts state budget writers in a bind. They say they want to protect programs, but they don’t have the money to fill the gap.
State Sen. Moe Keller, D-Wheat Ridge, who serves on the legislature’s Joint Budget Committee, said: “I was asking if we could do some kind of bridge to help them get by, but we just don’t have the money.”
Colorado is one of 46 states locked in a legal dispute with big tobacco companies that are seeking to reduce the payments they are required to make under a landmark 1998 legal settlement.
The so-called “Master Settlement Agreement” requires companies to make annual payments to the states.
In exchange, the states gave up their right to sue manufacturers to cover the health-care costs of treating smoking-related illnesses. Colorado originally spent a portion of the money on programs to reduce smoking, but now the money is used for many health-related programs.
But the terms of the settlement give tobacco companies some wiggle room to adjust their payments if they can prove they lost market share to competitors that didn’t sign the agreement.
In addition, the companies must prove the states weren’t diligently enforcing a provision in the agreement that requires those competitors to set aside money to pay their share of the costs.
Last year, R.J. Reynolds Tobacco Co., Lorillard Tobacco Co. and some smaller companies withheld a portion of their required payment. Colorado’s expected payment of $91.1 million was reduced by $10.9 million.
Philip Morris USA, a major tobacco company based in Richmond, Va., made its payment last year, but if it hadn’t, Colorado would have lost an additional $4.2 million. The company is considering whether to withhold a portion of this year’s payment – and could hold back an amount equal to last year’s payment.
Nationally, the tobacco companies withheld about $800 million from the $6.5 billion in payments due to states last April.
States and the tobacco companies are sparring over whether state courts or an abitrator should decide the settlement provision calling for diligent enforcement.
In the meantime, the companies are withholding the money.
“I think it’s an act of bad faith,” said Eric Lindblom, director for policy research for the Campaign for Tobacco-Free Kids in Washington, D.C.
“What they’re doing is jerking the states around,” he said. “It’s pretty reprehensible behavior.”
Philip Morris spokesman David Sutton said it is premature to comment on whether the company will withhold its payment this year.
A spokesman for the Brattle Group, an independent consulting firm hired by the states and tobacco companies to mediate the matter, declined to comment.
Nate Strauch, spokesman for Colorado Attorney General John Suthers, said tobacco companies are stalling.
“The tobacco companies are unnecessarily prolonging the dispute by lumping the states together for arbitration, rather than allowing the states to arbitrate individually,” Strauch said.
Staff writer Mark P. Couch can be reached at 303-954-1794 or mcouch@denverpost.com.
