Unless overruled, an arbitration panel's recent decision will reduce Pennsylvania's April 2014 tobacco master settlement agreement payment by about 60 percent, or an estimated $180 million.
And that, the Corbett administration said, is forcing the state to freeze discretionary funding from the MSA, which will reduce funds for health research (Commonwealth Universal Research Enhancement grants), Life Sciences Greenhouses, uncompensated care to hospitals, and discretionary funds related to tobacco prevention and cessation programs.
Funding will continue without interruption for individuals 60 years of age or older who are receiving home- and community-based services; individuals ages 16 to 65 with disabilities who are employed with limited earnings and resources and enrolled in the Medical Assistance for Workers with Disabilities program; and medical assistance recipients receiving long-term-care nursing facility services, according to a news release. The freeze also will not affect Department of Aging programs or mandated components of tobacco use prevention, cessation and enforcement programs.
While the legal process continues, state officials began outreach to contractors and affected organizations this week to notify them of the impacts.
The MSA dates to 1998, when state attorneys general entered into it with four of the largest manufacturers of cigarettes in the United States. Since then, approximately 41 additional tobacco companies, known as participating manufacturers, have joined the MSA. The amount of money the participating manufacturers are required to contribute to states each year varies, but payments are based primarily on the number of cigarettes sold.
Under the MSA, payments to states could be reduced if participating manufacturers lost market share to nonparticipating manufacturers and if the loss could be verified as stipulated. States were exempt from this reduction if they enacted and enforced a statute that imposed obligations on nonparticipating manufacturers doing business within their borders.
However, participating manufacturers and several states, including Pennsylvania, were not able to reach agreement on whether these reductions should take place for payments that occurred from 2003 forward. The manufacturers later offered to settle the dispute, but Pennsylvania and several other states elected to arbitrate the claims.