[Congressional Record Volume 145, Number 19 (Wednesday, February 3, 1999)]
[Senate]
[Pages S1157-S1162]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON (for herself, Mr. Graham, Mr. Voinovich, Mr. 
        Abraham, Mr. McConnell, Mr. McCain, Mr. Lott, Mr. Leahy, Mr. 
        Smith of Oregon, Mr. Gorton, Mrs. Murray, Mr. Allard, Mr. 
        Burns, Mr. Frist, Mr. Cochran, Mr. Craig, Mr. Bunning, Mr. Kyl, 
        Mr. Lugar, Mr. Inhofe, Mr. Hutchinson, Mr. Mack, Mrs. Lincoln, 
        Mr. Torricelli, Mr. Bayh, Mr. Murkowski, Mr. Gramm, and Mr. 
        Thompson):
  S. 346. A bill to amend title XIX of the Social Security Act to 
prohibit the recoupment of funds recovered by States from one or more 
tobacco manufacturers; to the Committee on Finance.


                  states rights protection act of 1999

  Mrs. HUTCHISON. Mr. President, I am pleased to introduce this bill, 
along with 27 other cosponsors. The prime one is Senator Bob Graham of 
Florida, who has worked very hard with me over the last year to make 
sure that the State tobacco settlements which our States have worked so 
hard to achieve will remain in control of the States because, in fact, 
the President's budget which was just released this week assumes that 
it will still seize $18.9 billion of the State tobacco settlement funds 
for Medicaid recoupment. Mr. President, that is just not right, and the 
bill I am introducing with Senator Graham of Florida, Senator Gorton, 
and 26 others, on a bipartisan basis, will keep that from happening.
  The bill is strongly supported by the National Governors' 
Association, the National Association of Attorneys General, the 
National Conference of State Legislators, and several other groups.
  I ask unanimous consent that letters of support from these groups be 
printed in the Record.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                               National Governors Association,

                                 Washington, DC, February 3, 1999.
     Hon. Kay Bailey Hutchison,
     U.S. Senate, Washington, DC.

     Hon. Bob Graham,
     U.S. Senate, Washington, DC.
       Dear Senators Hutchison and Graham: A major priority for 
     the nation's Governors during the 106th Congress is ensuring 
     that state tobacco settlement funds are protected from 
     unwarranted seizure by the federal government. The Governors 
     believe it is critical that access to full, unencumbered 
     recoupment protection be afforded to all states. We are 
     pleased that you have introduced legislation to accomplish 
     this goal. Your legislation would prohibit the federal 
     government from attempting to recover a staggering 57% of the 
     entire settlement amount.
       Our states' Attorneys General carefully crafted the tobacco 
     agreement to reflect only state costs. Medicaid costs were 
     not a major issue in negotiating the settlement. In fact, the 
     final agreement reached by the Attorneys General on November 
     23, 1998 does not mention Medicaid. Therefore, there is no 
     legitimate federal claim on the settlement.
       Without the states' leadership and years of commitment to 
     initiating state lawsuits, the nation would not have achieved 
     one of its major goals--a comprehensive settlement with the 
     tobacco industry. After bearing all of the risks and expenses 
     in the arduous negotiations and litigation necessary to have 
     proceeded with their lawsuit, states are now entitled to all 
     of the funds awarded to them in the tobacco settlement 
     agreement without federal seizure.
       We look forward to working with you and other Members of 
     Congress to enact this legislation and prevent federal 
     seizure of state tobacco settlement funds.
           Sincerely,
     Thomas R. Carper.
     Michael O. Leavitt.
                                  ____

                                            National Conference of


                                           State Legislatures,

                                 Washington, DC, February 1, 1999.
     Hon. Kay Bailey Hutchison,
     Russell Senate Office Building, Washington, DC.
       Dear Senator Hutchison: On behalf of the National 
     Conference of State Legislatures (NCSL), I write in support 
     of bipartisan legislation that Senator Bob Graham and you 
     will soon introduce to ensure that states retain all of their 
     tobacco settlement funds. NCSL has made this legislation its 
     top priority for 1999. NCSL is very appreciative of the 
     leadership you provided on this issue during the 105th 
     Congress. I am grateful for your willingness to lead the way 
     again in 1999. The nation's state legislators will work 
     steadfastly with you and all of your Senate colleagues to 
     ensure that this legislature is enacted.
       It is through the sole efforts of states that the historic 
     settlement of November 23, 1998 and four prior individual 
     state settlements were finalized. States initiated the suits 
     that led to the settlements without any assistance from the 
     federal government. States consumed their own resources and 
     accepted all of the risks with their suits. Additionally, the 
     November 23, 1998 agreement makes no mention of Medicaid, 
     which is the program cited by those who want to establish a 
     basis for seizing state tobacco settlement funds. It is clear 
     to me that the federal government has no claim to these 
     funds. I fully appreciate, however, the need for 
     clarification that federal legislation would provide.
       As you well know, states are no finalizing the settlement, 
     carrying out the terms of the accord and making final fiscal 
     determinations about how to most responsibly apply settlement 
     funds to public health and other needs. Threats of recoupment 
     and related uncertainties only compromise our ability to 
     progress with finalizing the settlement and working to reduce 
     youth smoking, abating youth access to tobacco products and 
     addressing the economic impact of anticipated reduced demand 
     for tobacco products. Enactment of your federal legislation 
     would eliminate these threats and permit states to move 
     forward.
       I look forward to working closely with you to a successful 
     and mutually acceptable resolution of this issue.
           Sincerely,
                                                         Dan Blue,
     President, North Carolina House of Representatives.
                                  ____

                                           National Association of


                                            Attorneys General,

                                 Washington, DC, February 1, 1999.
     Hon. Kay Bliley Hutchison,
     U.S. Senate, Washington, DC.
       Dear Senator Hutchison: Your support at the recent press 
     conference for protecting the state tobacco settlements from 
     seizure by the federal government was much appreciated. On 
     behalf of the Association, thank you for your leadership 
     early in the new session on this issue.

[[Page S1158]]

       Building on the strong bipartisan support evidenced on 
     January 21, we want to continue to work with you and your 
     colleagues on legislation that will ensure that the states 
     retain all of their tobacco settlement funds. We hope this 
     legislation will be enacted as early as possible in the 106th 
     Congress.
           Sincerely yours,
     Christine O. Gregoire,
       Attorney General of Washington.
     Betty Montgomery,
       Attorney General of Ohio.
                                  ____



                             National Association of Counties,

                                 Washington, DC, January 27, 1999.
     Hon. Kay Bailey Hutchison,
     Russell Building, Washington, DC.
       Dear Senator Hutchison: I am writing to let you know that 
     the National Association of Counties (NACo) strongly endorses 
     the bill to be introduced by you and Senator Bob Graham (D-
     FL) that would prevent the federal recoupment of states' 
     tobacco settlement funds. NACo is adamantly opposed to any 
     attempt by the federal government to go after these funds and 
     applauds the introduction of this straightforward, bipartisan 
     legislation.
       The $206 billion settlement agreed to on November 23, 1998 
     by the state Attorneys General and the major United States 
     tobacco companies settles more than 40 pending lawsuits. 
     These lawsuits, which were initiated by state and local 
     governments with no assistance, in any form, from the federal 
     government, were based on a variety of claims, including 
     consumer fraud, antitrust protections, conspiracy, and 
     racketeering. In addition, the state Attorneys General 
     negotiated the settlement to reflect only state costs and 
     damages. Therefore, the federal government's claim that these 
     settlement monies represent Medicaid funds and should be 
     returned to federal coffers is simply not an accurate 
     portrayal of the settlement agreement. The agreement does not 
     claim to or intend to recover Medicaid costs. Attempts by the 
     federal government to claim these funds would likely result 
     in lengthy and costly legal battles between the states and 
     the federal government and would not be a wise use of 
     government resources.
       NACo applauds your efforts and those of Senator Graham to 
     protect these funds. We will continue to work to prevent the 
     federal recoupment of the states' tobacco settlement monies, 
     and we support this legislation.
           Sincerely,
                                                   Betty Lou Ward,
     President.
                                  ____



                                    National League of Cities,

                                 Washington, DC, February 3, 1999.
     Hon. Kay Bailey Hutchison,
     U.S. Senate, Washington, DC.
       Dear Senator Hutchison: On behalf of 135,000 cities and 
     towns, I would like to express the National League of Cities' 
     support for the legislation you are introducing today along 
     with Senator Bob Graham that would prevent the federal 
     government from taking a portion of state tobacco settlement 
     revenues.
       If the federal government were able to take a portion of 
     state settlement funds, cities and towns would bear the brunt 
     of this loss. This could mean that local tobacco cessation 
     programs and teenage smoking prevention programs would not be 
     funded and indigent care costs would not be compensated. 
     Cities and towns are often the last means of defense in 
     covering health care costs, particularly indigent care costs.
       For example, California's cities and counties stand to 
     receive half of the state's share of the settlement. This 
     money will directly assist cities and towns in helping to pay 
     for health care programs and costs. Other local governments 
     are currently working with their state legislatures to 
     address uncompensated costs related to tobacco illnesses and 
     to address local health care needs with settlement funds.
       The National League of Cities adopted a resolution at the 
     December 1998 Congress of Cities in Kansas City, Missouri, 
     that addresses municipal interests in the tobacco settlement. 
     A provision in the resolution states that any revenues 
     received by states or municipalities from any settlement with 
     the tobacco industry should not be required to be paid to the 
     federal government for Medicaid/Medicare or any other 
     program.
       We support the legislation introduced today, and your 
     continued effort to protect the interest of our nation's 
     cities and towns.
           Sincerely,
                                              Clarence E. Anthony,
                           NLC President and Mayor, South Bay, FL.

  Mrs. HUTCHISON. Mr. President, 46 States reached a settlement last 
November which added them to the other States that already had settled 
with the tobacco companies, making every State in America now in a 
settlement with the tobacco companies. These States have not just 
chosen to put the money that is coming in from the tobacco settlement 
on Medicaid and health care issues. There are myriad State issues that 
this money is going to be used for. But that is in limbo today because 
the President has given notice that he is going to seize this money 
from them. So everything is going to be held in abeyance until we 
settle this issue once and for all.
  That is what our bill will do. There is no reason--no reason 
whatsoever--that we should take money from the Medicaid funds that go 
to the States which provide a safety net for the millions of low-income 
and disabled Americans who depend on Medicaid for their health care 
needs. We cannot allow that to happen, and we will not.
  I intend to work with the cosponsors of this bill to find the first 
available vehicle to attach it so that we can make sure that this money 
that our States have worked alone to achieve, with no help from the 
Federal Government, will remain in their sole jurisdiction; that they 
will be able to make the choices on what their States need and not have 
dictated to them by the Federal Government what they will spend this 
money for.
  Many States--I was talking to Senator Abraham from the State of 
Michigan, and they are going to create scholarship funds for low-income 
students in Michigan, a very worthy cause. Other States are going to be 
doing education to try to encourage teenagers not to smoke. We don't 
want to substitute our judgment for the judgment that the States are 
making for their best and most important priorities.
  So I am pleased to have the 28 cosponsors of this bill. I think we 
will pass it. I hope that we can do it quickly so that these States 
will have the freedom to spend this money on the much needed programs 
in those States.
  I am happy to yield to Senator Gorton.
  The PRESIDING OFFICER. The Senator from Washington.
  Mr. GORTON. Mr. President, the federal government has done quite 
enough to impede states efforts to recover damages from and change the 
practices of tobacco manufacturers. Though they asked, the state 
Attorneys General received no help from the federal government in their 
litigation. When, despite this, the states in mid-1997 proposed to 
settle their claims for almost $400 billion and asked the 
Administration and Congress to codify the agreement, the federal 
government instead blew it up by spending the states' money, and then 
some, on this Administration's pet social projects. It was only through 
the ingenuity, hard work, and unwavering perseverance of people like 
Washington state Attorney General Christine Gregoire that states were 
able to take the tobacco manufacturers back to the table in late 1998 
and obtain a settlement agreement for $206 billion.
  Though it did none of the work, the Administration now wants to share 
in the reward. Using an old provision in the Social Security Act, a 
provision that I understand was intended to permit federal Medicaid 
recoupment in cases of fraud or over billing, the federal government is 
now claiming over 50% of the states' settlement money. To exact what it 
claims is its share, the Administration intends to withhold Medicaid 
payments, payments that go to the neediest residents of Washington and 
other states.
  This is no idle threat: three days ago, the President sent us a 
budget in which he spent $16 billion of the states' settlement money in 
the next five years. The President did indicate, however, that he would 
relinquish this claim to the money for one year if states agree to 
spend the money as he and other Washington, D.C. bureaucrats see fit. 
This is just wrong.
  The bill that we are introducing today rights this wrong. It allows 
states to keep the monies they fought for. No strings attached. The 
federal government has not earned this money, and does not know better 
than states how it should be spent. I urge my colleagues to join me and 
my friends from Texas and Florida in seeing that this bill is passed 
this session.
  Mrs. LINCOLN. Mr. President, I rise to join my colleagues in support 
of the ``States Rights Protection Act of 1999.'' I believe that states 
are entitled to retain the tobacco funds that were agreed upon under 
their settlement agreements.
  These funds result from an historic accord reached in November 1998 
between 46 states, U.S. Territories and commonwealths, the District of 
Columbia, and tobacco industry representatives. State Attorneys General 
worked diligently to initiate and negotiate a settlement with the 
tobacco industry. States are now in the midst of finalizing the 
settlement, carrying out the

[[Page S1159]]

terms of the settlement agreement and making fiscal decisions about how 
to apply settlement funds to public health and other needs.
  Although the U.S. Department of Health and Human Services initially 
notified states in the fall of 1997 of its intention to recoup the 
federal match from funds states received through the suits, citing a 
provision in existing Medicaid law, it has suspended recoupment 
activities. For this reason, I join my Senate colleagues in introducing 
this legislation to prohibit the federal government from trying to 
recoup any funds from state governments recovered from tobacco 
companies as part of their tobacco settlement or from determining how 
these funds should be spent.
  I strongly believe that each state should have the right to determine 
where this money is needed and how it is best spent. In my own state of 
Arkansas, Governor Mike Huckabee has reached an agreement with the 
Speaker of the Arkansas House of Representatives, Bob Johnson, the 
President Pro Tempore of the Arkansas Senate, Jay Bradford, and the 
Arkansas Attorney General, Mark Pryor, regarding the use of this money 
solely for health-related purposes. Specifically, the settlement funds 
will be used to prevent smoking by young people, to treat tobacco 
related illnesses, and to establish a foundation to provide for 
continued funding of these programs even when the tobacco settlement 
money expires. I'm proud that my home state of Arkansas will use these 
funds towards such valuable programs.
  I support the Arkansas state government and all other state 
governments in retaining their tobacco settlement funds and exercising 
their authority to determine how the funds are spent.
  Mr. GRAHAM addressed the Chair.
  The PRESIDING OFFICER. The Senator from Florida.


                         Privilege of the Floor

  Mr. GRAHAM. Mr. President, I ask unanimous consent that Mr. Matt 
Barry of our staff be given floor privileges for the remainder of the 
consideration of this issue during this session of the Senate.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRAHAM. Thank you Mr. President.
  Mr. President, I rise today along with Senator Hutchison and 21 
original cosponsors--Republicans and Democrats--to introduce 
legislation designed to prevent the federal government from seizing the 
State settlement proceeds negotiated with the tobacco industry.
  Just over 1 year has passed since the State of Florida received an 
ominous warning from the federal government which said in essence: 
``Prepare to hand over half of your money or we will be prepared to 
withhold your Medicaid funds.''
  This action was a slap in the face to States like Florida--a State 
which spent countless hours and millions of dollars preparing to wage 
war against the tobacco industry in court--with no guarantee of success 
and with no assistance from anyone--including the federal 
government. The State of Florida specifically asked the Federal 
Government to assist us, to join in a joint lawsuit. We the States will 
assume the responsibility of suing the tobacco industry for the 
Medicaid and other nonspecific medical program costs. The Federal 
Government will assume the responsibility for Medicare, the Veterans 
Administration, and other Federal health program costs. What was the 
response to that request for joint action? ``Not interested.''

  In fact, only after it became clear that States were going to be 
successful in their lawsuits did the federal government become 
interested in the State settlements.
  And so the Health Care Financing Administration sent collection 
notices to States based on a twisted reading of an obscure provision in 
Medicaid law--section 1903(D) of the Social Security Act.
  Mr. President, I ask unanimous consent that a copy of a letter dated 
November 3, 1997, from Ms. Sally K. Richardson, Director, Center for 
Medicaid and State Operations to the State Medicaid director of each of 
the 50 States be printed in the Record immediately after my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. GRAHAM. Mr. President, the federal government is attempting to 
collect almost $19 billion over 5 years, and, presumably almost $100 
billion over the 25 year settlement agreement period, based on a little 
known provision in Medicaid which was never intended to apply to a 
lawsuit of this magnitude or character.
  The regulations interpreting the Statutory language of 1903(D) read 
as follows:

   Subpart F--Refunding of Federal Share of Medicaid Overpayments to 
                               Providers

       This Subpart Implements Section 1903(d)(2) (C) and (D) of 
     the Act, which provides that a State has 60 days from 
     discovery of an overpayment for Medicaid services to recover 
     or attempt to recover the overpayment from the provider.

  The regulation then goes on to define ``overpayment'': Overpayment 
means the amount paid by a Medicaid agency to a provider which is in 
excess of the amount that is allowable for services furnished under 
section 1902 of the act.
  Mr. President, applying the provisions of this statute which was 
designed to collect overpayments paid by a Medicaid State agency to a 
provider, to attempt to apply this provision to the State tobacco 
lawsuits is absurd. This provision was intended and has been used to 
apply to billing errors made by providers.
  As an example, if a State finds that a provider has over billed 
Medicaid, the State collects the overpayment, then remits the 
commensurate share back to the federal government.
  Essentially, the federal government is stating that the revenues from 
the lawsuits should be interpreted as ``overpayments'' made to medical 
providers by state Medicaid agencies--that the services rendered by 
these providers to Medicaid beneficiaries should not have been rendered 
under the statute.
  This logic is twisted and absurd.
  The State lawsuits were not premised on a technical collections 
process--providers overbilling Medicaid. Rather, they were premised on 
the fact that the tobacco industry defrauded the taxpayer, violated the 
State civil racketeering statutes, and subjected the taxpayers to 
enormous smoking-related illness costs.
  Further, as an example, Mr. President, the suit of the State of Iowa, 
which was premised on Medicaid, was thrown out of court, but Iowa is 
still 1 of the 46 States which will receive their share of the proceeds 
under the nationwide settlement.
  How could the Federal Government lay any claim to Iowa's proceeds 
based on the overpayment provision in Medicaid since the court had 
specifically thrown out its suit based on Medicaid? The answer is, it 
cannot.
  The legislation that Senator Hutchison and my colleagues are 
introducing today is simple. It clarifies that the overpayment 
provision does not apply to either the comprehensive settlement agreed 
to in November of 1998, nor does it apply to any of the State 
settlements agreed to prior to the comprehensive settlement.
  Here is what the bill will do. It will prevent the Federal Government 
from stifling important bipartisan public health initiatives which will 
be paid for through the settlements.
  In my State of Florida, for instance, our former colleague and good 
friend, Democratic Governor Lawton Chiles, provided health insurance to 
over 250,000 previously uninsured poor children. Just 2 weeks ago, 
Florida's new Governor, Republican Jeb Bush, announced the 
establishment of a $2 billion endowment fund which will be named in 
honor of Governor Chiles. This fund will assure that the tobacco funds 
will be used exclusively for children's health, child welfare, and 
seniors' health programs.
  Mr. President, as you know, Florida is not unique. Other States will 
be just as innovative and be held to just as high standards of 
accountability by their citizens for the use of these tobacco 
settlement funds. It is important that States be given the green light 
to move forward on important public health initiatives and to do so as 
soon as possible. If we do not pass this legislation, funds that could 
otherwise be spent on improving America's health will be tied up in 
litigation between States and the Federal Government for the 
foreseeable future.
  So I urge my colleagues to join us in this effort, to support this 
legislation,

[[Page S1160]]

and I urge that it be adopted by this Senate and by the Congress and 
signed by the President of the United States at the earliest possible 
date.

                               Exhibit 1

                                           Center for Medicaid and


                                             State Operations,

                                                 November 3, 1997.
       Dear State Medicaid Director: A number of States have 
     settled suits against one or more tobacco companies to recoup 
     costs incurred in treating tobacco-related illnesses. This 
     letter describes the proper accounting and reporting for 
     Federal Medicaid purposes of amounts received from such 
     settlements that are subject to Section 1903(d) of the Social 
     Security Act.
       As described in the statute, States must allocate from the 
     amount of any Medicaid-related expenditure recovery ``the 
     pro-rata share to which the United States (Federal 
     government) is equitably entitled.'' As with any recovery 
     related to a Medicaid expenditure, payments received should 
     be reported on the Quarterly Statement of Expenditures for 
     the Medicaid Assistance Program (HCFA-64) for the quarter in 
     which they are received. Specifically, these receipts should 
     be reported on the Form HCFA-64 Summary Sheet, Line 9E. This 
     line is reserved for special collections. The Federal share 
     should be calculated using the current Federal Medicaid 
     Assistance Percentage. Please note that settlement payments 
     represent a credit applicable to the Medicaid program whether 
     or not the monies are received directly by the State Medicaid 
     agency. States that have previously reported receipts from 
     tobacco litigation settlements must continue to report 
     settlement payments as they are received.
       State administrative costs incurred in pursuit of Medicaid 
     cost recoveries from tobacco firms qualify for the normal 50 
     percent Federal financial participation (FFP). They should be 
     reported on the Form HCFA-64.10, Line 14 (Other Financial 
     Participation).
       Only Medicaid-related expenditure recoveries are subject to 
     the Federal share requirement. To the extent that some non-
     Medicaid expenditures and/or recoveries were also included in 
     the underlying lawsuits, HCFA will accept a justifiable 
     allocation reflecting the Medicaid portion of the recovery, 
     as long as the State provides necessary documentation to 
     support a proposed allocation.
       Under current law, tobacco settlement recoveries must be 
     treated like any other Medicaid recoveries. We recognize that 
     Congress will consider the treatment of tobacco settlements 
     in the context of any comprehensive tobacco legislation next 
     year. Given the States' role in initiating tobacco lawsuits 
     and in financing Medicaid programs, States will, of course, 
     have an important voice in the development of such 
     legislation, including the allocation of any resulting 
     revenues. The Administration will work closely with States 
     during this legislative process as these issues are decided.
       If you would like to discuss the appropriate reporting of 
     recoveries with HCFA, please call David McNally of my staff 
     at (410) 786-3292 to arrange for a meeting or conversation. 
     We look forward to providing any assistance needed in meeting 
     a State's Medicaid obligation.
           Sincerely,
                                              Sally K. Richardson,
                                                         Director.

  Mr. McCONNELL. Mr. President, I rise today to join my esteemed 
colleagues--Senators Hutchison, Graham, Voinovich, Abraham, and 
others--in sponsoring legislation to protect the States' tobacco 
settlement funds from the Clinton Administration's spurious recoupment 
claims.
  Members of the U.S. Senate will recall quite vividly that this 
chamber engaged in a lengthy, detailed debate on a national tobacco 
settlement bill last year. While those discussions proved inconclusive, 
the States--on their own--achieved much of what Congress and the White 
House identified as priorities through direct settlement agreements 
with the tobacco companies.
  As part of the comprehensive settlement with 46 states and the prior 
individual State agreements, the tobacco companies are required to take 
specific action to address public health concerns regarding teen 
smoking. First, they must fund a major anti-smoking advertising 
campaign to prevent youth smoking and to educate consumers about 
tobacco-related illnesses. Second, they must establish a charitable 
foundation to support the study of programs to reduce teen smoking and 
substance abuse. Third, the settlement prohibits tobacco advertising 
that may target youth, like the commercial use of cartoon characters 
like ``Joe Camel'' and outdoor advertising such as billboard, stadium 
and transit ads as well as tobacco sponsorship of sporting and cultural 
events. In addition, the States have plans to spend their tobacco 
settlement funds for advancing the public health and welfare.
  Much to the dismay of the nation's governors and state legislators, 
instead of receiving a commendation from the President for a job well 
done, they got a multi-billion dollar collection notice. Despite the 
fact that the States filed lawsuits asserting a number of non-Medicaid 
claims, the Clinton Administration argues that every state who agreed 
to the $206 billion settlement should fork over from 50 to 79 percent 
of their share to the federal government--including states like 
Kentucky who didn't even file a lawsuit but joined the settlement. As 
such, the President's FY 2000 budget states that the federal government 
has the right to withhold at least $16 billion Medicaid dollars from 
the States over the next five years.
  Simply put, Mr. President, this bogus claim will deny Kentucky's most 
needy citizens over $2.4 billion in Medicaid funds over the term of the 
settlement agreement. I cannot excuse the fundamental conflict created 
by an Administration that claims it is fighting for the health of our 
children while it gobbles up the money specifically designated for 
them. This effort to hold state Medicaid programs hostage in exchange 
for federal strings on how the States spend their own money is 
intolerable and unacceptable.
  Unlike the Administration, I believe all wisdom does not reside in 
Washington. It's clear to me that our state's elected officials are in 
a better position to determine Kentucky's needs than a federal 
bureaucrat sitting 600 miles away in Washington. I am proud to serve as 
an original sponsor to this legislation which makes clear that the 
federal government has no claim to the tobacco settlement funds 
attained by the States. I commend my fellow sponsors for their 
commitment to preserving common-sense in government, and urge my 
colleagues to approve this legislation expediently and without 
compromise.
  Mr. McCAIN. Mr. President, I am pleased to be a co-sponsor of the 
States' Rights Protection Act. This bill will ensure that the states 
retain the use of the settlement proceeds from the tobacco litigation 
settlement announced in November, 1998, as well as the prior 
settlements with Mississippi, Texas, Florida, and Minnesota. The bill 
will entitle the states to keep all of the money from the settlement, 
without federal recoupment of a Medicaid share.
  I believe this is the right thing to do for several reasons. First, 
and foremost, the settlement was of litigation initiated and pursued by 
the states. The President announced in his State of the Union address 
that the Department of Justice will be filing an action on behalf of 
the United States against the tobacco companies. This is the right way 
for federal claims to be addressed, rather than taking this hard-
fought, negotiated money from the states.
  Second, not all of the states raised Medicaid claims in their 
lawsuits. The courts dismissed the Medicaid claims in other cases. 
Thus, in some states, the federal government is not truly entitled to 
share in the settlement proceeds. Allowing recoupment from some of the 
states, but not all of the states, will lead to disparate and unfair 
results.
  Finally, federal and state governments alike share in the goal of 
addressing public health needs. It is not necessary that this goal only 
be accomplished through federally mandated programs. The states' 
settlement also includes funding for counter-advertising and cessation 
efforts. These efforts may be complemented by federal programs, but do 
not need to be duplicated simply to give the federal government an 
excuse to spend money. In addition, many states have other existing 
public health programs related to tobacco use or children's health on 
the books. The federal government does not need to attempt to duplicate 
those programs through federal mandates. Most importantly, I am 
confident that the state will spend their settlement money wisely and 
in the best interests of their citizens. These decisions are best 
reached through discussion and consensus reached at the state and local 
levels.
  I regret that Congress was unwilling to accept the opportunity 
presented to us with the 1997 proposed settlement agreement. 
Comprehensive legislation would have benefited the nation by addressing 
kids smoking and limiting the excessive attorney's fees paid in these 
cases. Nevertheless, I applaud the Attorneys General for reaching 
settlement of their litigation and for the

[[Page S1161]]

public health advances they have made in the settlement agreement. They 
have ensured a win for every state, without years of litigation and 
varied results. They have ensured an end to Joe Camel on billbroads 
throughout the country. They have established a mechanism to police 
advertising. They have achieved more in this joint settlement than any 
one state could have achieved alone with a court verdict.
  I thank my colleague, Senator Hutchison, for introducing this bill, 
and am pleased to join with so many other distinguished friends in 
sponsoring this important piece of states' rights legislation.
  Mr. LEAHY. Mr. President, I am pleased to join Senator Hutchison and 
Senator Graham and a bipartisan group of my colleagues to introduce 
legislation to prohibit the Federal government from recouping any part 
of the multi-state settlement between the tobacco industry and the 
State Attorneys General.
  To the surprise of many state officials, the Health Care Financing 
Administration has threatened to seek reimbursement for its share of 
Medicaid costs for treating tobacco-related diseases from the multi-
state tobacco settlement. In other words, the Federal government may 
want to take more than half of the total multi-state settlement based 
on the federal share of Medicaid, which is approximately 60 percent of 
total Medicaid costs.
  For my home State of Vermont, that means the Federal government may 
try to take more than $15 million annually out of Vermont's share of 
the settlement. Vermont Attorney General William Sorrell settled with 
the tobacco industry for more than $800 million to be distributed over 
the next 25 years. But now the Federal government may seek more than 
$400 million of Vermont's tobacco settlement for its own use.
  Washington State Attorney General Christine Gregoire, one of the lead 
attorneys generals in the settlement negotiations with the tobacco 
industry, recently stated: ``These lawsuits were brought by the States 
based on violations by the industry of state laws. The settlement was 
won by the states without any assistance from Congress or the 
Administration. As far as we are concerned the States did all the work 
and are entitled to every dollar of their allocated share to invest in 
the future health care of their citizens.'' I could not agree more with 
General Gregoire.
  The States, not the Federal government, deserve the full amount of 
their settlements because the States and their Attorneys General took 
the risks in bringing the novel lawsuits against Big Tobacco. Without 
the willingness of the State Attorneys General acting on behalf of the 
citizens of their states and taking significant financial and 
professional risks and pursuing these matters so diligently, we would 
not have any legal settlements by the tobacco industry. These State 
Attorneys General deserve our gratitude and our respect for their 
extraordinary efforts. I commend them all for their diligence on behalf 
of the public.
  When tobacco companies were fighting any and all lawsuits against 
them, the State Attorneys General pursued their legal challenges 
against great odds. Men and women whose lives were cut short by cancer 
and other adverse health consequences from tobacco deserved better 
treatment than the years of obstruction and denial by the tobacco 
industry. Only now as the internal documents are being disclosed and 
the legal tide is beginning to turn have tobacco companies decided to 
change their strategy and pursue settlements. The tobacco industry did 
not agreed to these settlements out of some new found sense of public 
duty. The truth is that giant tobacco corporations came to the 
bargaining table only after they realized that they might lose in 
court.
  In my home state, General Sorrell took the financial and legal risks 
in bringing suit against the tobacco industry on behalf of the people 
of Vermont. General Sorrell and his legal team put together a powerful 
case in support of the public health of all Vermonters. General Sorrell 
did this without any assistance from the Federal government. As a 
result, the people of Vermont deserve the full amount of their tobacco 
settlement.
  If the Federal government wants to recover its costs for tobacco-
related diseases, the appropriate avenue to do that is a Federal 
lawsuit. Indeed, President Clinton announced during the recent State Of 
The Union address that the Department of Justice is planning litigation 
against the tobacco industry. I applaud the President and Attorney 
General Reno for pursuing legal action against the tobacco industry so 
that the Federal government may recoup its costs for tobacco-related 
diseases. That is the proper approach for the Federal government.
  The multi-state tobacco settlement provides an historic opportunity 
to improve the public health in Vermont and across the nation. I 
believe that the States, not the Federal government, are in the best 
position to determine their public health needs. Our bipartisan bill 
grants the States that flexibility by permitting each state to use its 
settlement payments in whatever way that state deems best.
  That is why the National Governors Association, National Association 
of Attorneys General, National Conference of State Legislatures, 
National Association of Counties, National League of Cities, and U.S. 
Conference of Mayors support our bipartisan legislation. In my home 
state, our bipartisan bill is supported by Governor Dean, Attorney 
General Sorrell, the Vermont Health Access Oversight Committee, and the 
Vermont Association of Hospitals and Health Systems.
  I want Governor Dean and the Vermont legislature to have the 
flexibility to use Vermont's settlement funds in whatever way they deem 
is best for the public health of Vermonters. It is only fair for the 
other 49 Governors and state legislatures to have that same flexibility 
to use their settlement funds in whatever way they deem is best for 
their citizens.
  In the final analysis, I trust the people of Vermont and the other 49 
States to determine how best to use their tobacco settlement funds. I 
look forward to working with my colleagues as Congress moves forward on 
legislation to ensure that the interests of Vermont and the other 
States are protected in the multi-state tobacco settlement.
  Mr. BAYH. Mr. President, I rise today as an original cosponsor of the 
State tobacco settlement protection bill, a bill to protect state 
tobacco settlement funds from seizure by the federal government. I want 
to thank Senators Hutchison and Graham for their leadership on this 
issue. I stand today for fiscal responsibility, local control and 
fairness. I stand today to protect our children's health, to assist 
those who have become addicted to tobacco.
  This is really about fairness. Is it fair for the federal government, 
having sat on the sidelines during this uphill battle against Big 
Tobacco, to come in after the fact and claim a large share of the 
victory? If nothing else, this proves the old adage that victory has 
many parents, while defeat is an orphan.
  I have said repeatedly that the federal government does not have all 
the answers. Much of what has gone right in this country in the last 
several years is a direct result of moving decisions and power out of 
this city and into small towns and communities. I came to Washington to 
stand up for what is right, to protect Indiana's values, and to speak 
up when the federal government oversteps its bounds.
  Does the federal government have a right to take more than 60% of 
Indiana's tobacco settlement to spend on federal priorities? Absolutely 
not. Indiana's share of the settlement is $4 billion over 25 years, but 
the federal government's claim could take two and a half billion away. 
While the President's budget acknowledges the difficulty in collecting 
this money in the coming fiscal year, I am disappointed they have laid 
claim to a substantial share of state settlement funds in their budget 
for use on federal discretionary programs in years to come. The 
fiscally responsible approach is to ensure this money is spent wisely 
at the local level, not to allow it to be dumped into the black pit of 
the federal bureaucracy in Washington.
  Indiana began this fight to protect our kids from the dangers of an 
addictive, life-threatening habit. The State fought a lonely battle, 
without any federal assistance and invested considerable resources in 
prosecuting this case.
  The Governor of Indiana, Frank O'Bannon, is in the planning stages 
for using this money to improve public health, promote teen smoking 
cessation programs and children's health

[[Page S1162]]

care, the purposes originally outlined in the lawsuit. But with more 
than 60% of the funds at risk it is hard to sketch out a reliable plan.
  The confrontation between states and the federal government that 
would result from an attempt by the Health Care Financing 
Administration to take these state settlement funds would only hurt the 
people in each of our states. It would tie us up in needless court 
actions over who has the legal right to these funds. That is wasted 
time. While the courts decide what to do with the funds, we lose the 
opportunity to cover uninsured children, start anti-smoking campaigns 
and improve the lives of Hoosiers and the people in all our states.
   Mr. President, I hope all my colleagues become a part of this 
bipartisan coalition. I hope we can all--Democrats and Republicans, 
States and the federal government--work together to ensure these funds 
are used in the states to improve health, deter smoking and educate 
kids about the dangers of this addiction. I look forward to working to 
pass this very important legislation this year.
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