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TRENDSImproving Health With Tobacco Dollars From The MSA: The Arkansas Experience
Analyses of expenditures from the historic tobacco Master Settlement Agreement (MSA) demonstrate the difficulties in achieving support for long-term disease prevention and health promotion initiatives. We report as a policy case study the successful development, political execution, and program deployment of new state health programs funded by Arkansas’ MSA funds. Arkansas’ success demonstrates the need for political leadership, the development and insertion of empirical health information into the policy deliberations, in-depth knowledge of the political process, and a broad-based coalition committed to improving health.
All states face both new opportunities and continued fiscal challenges in developing and implementing new programs. Perhaps this tension has never been more self-evident than during the time of the historic Master Settlement Agreement (MSA) between tobacco companies and states and the subsequent decisions surrounding allocation of these new resources.1 The difficulties in targeting efforts to promote health have been documented elsewhere.2 The objective of this paper is to report Arkansas’ experience from a health policy perspective as a case study with a distinctly different outcome than those of other states. We identify critical components required for successful development, deployment, and maintenance of health improvement initiatives. Arkansas’ experience could inform efforts in other states, increasing the likelihood of success in improving the quality of people’s lives and the public’s health. Background. On 23 November 1998, through the MSA, eleven major U.S. tobacco producers offered financial payments in exchange for individual states’ agreement to hold the companies harmless for past and future medical claims related to tobacco use.3 Within seven days, all involved parties—forty-six states, five territories, and the District of Columbia—agreed to the $206 billion cumulative payment that ranged from $487 million (Wyoming) to $25 billion (California) over twenty-five years.4 The companies also agreed to restrict marketing to youth and to eliminate all direct and indirect lobbying efforts to influence legislation and regulation of tobacco products. Importantly, the settlement did not include any guidance or restrictions on states’ use of their MSA funds. Five years later, states have received a combined total of more than $37.8 billion and expect continued annual payments from the tobacco companies.5 Most states have now allocated and are spending their tobacco funds.6 However, it has been found that states with high tobacco use rates, high burdens of tobacco-related diseases, minimal previous investments in tobacco-control programs, and low per capita income have not supported needed health improvement programs.7 In light of these findings, national calls have been made for continued efforts to secure MSA funds for tobacco-control programs.8 Arkansas’ decisions regarding spending of the MSA funds are consistent with these calls.9 The largest component of the Arkansas MSA funds was designated to fully fund the Centers for Disease Control and Prevention (CDC)–recommended best practices for tobacco control and prevention, albeit at the minimum CDC-recommended level ($7.10 per capita).10 The second-largest component enabled new Medicaid expansions, targeting pregnant women, uninsured adults, and impoverished seniors who lack prescription drug coverage. The third-largest component established the Arkansas Biosciences Institute to stimulate new programs in tobacco-related research and program development in Arkansas’ academic institutions. Finally, the state selected several health-related agencies to receive funding, including the Minority Health Commission, satellite regional Centers on Aging, regional Area Health Education Centers in the Mississippi River Delta, and a new College of Public Health. Successful deployment of these programs warrants examination of the process through which necessary support was obtained for their development and implementation.
Study data and methods.
We examined national and state-specific health statistics from the CDC (Exhibit 1
State health statistics. At the time of the MSA announcement in 1998, Arkansas was one of the least healthy states in the nation, with much of the poor-health burden related to tobacco use. It had the fourth-highest rate of age-adjusted lung cancer deaths and of cardiovascular deaths and the second-highest rate of stroke deaths; each of these factors contributed to an overall age-adjusted death rate that was 19 percent higher than the national average.11 Contributing to these high mortality rates were the eleventh-highest rate of smoking among adults (25.9 percent) and the seventh-highest rate of tobacco use among high school students (39.6 percent).12 State budget. The sale and consumption of tobacco products had a substantial economic impact on both Arkansas families and state government. The annual median family income in 1998 was $27,505, with an average consumption of more than 100 packs of cigarettes by each adult.13 This cigarette consumption generated an estimated $98 million annually in tax revenue from an Arkansas tax of $0.315 per pack, the twenty-ninth-highest tax nationally.14 In contrast, overall tobacco-related medical costs in the state were estimated at $412 million per year, of which direct medical spending on tobacco-related medical costs for the state Medicaid program was estimated at $78 million per year.15 Despite these costs, state tobacco-control spending totaled only $0.37 million out of an annual state budget of $2.5 billion. These expenditures represented 2 percent of the CDC-recommended minimum annual expenditures for tobacco control and prevention efforts in the state (CDC minimum recommendation, $17.9 million per year; optimum recommendation, $46.4 million.16 Initial proposals. Immediately after the MSA announcement in fall 1998, multiple plans for use of Arkansas’ allotment were proposed in anticipation of the 1999 Biennial Session of the Arkansas General Assembly. These included applying MSA funds to tax relief programs, highway building projects, teachers’ raises, and prisons. Initial proposals by the University of Arkansas for Medical Sciences (UAMS), the state’s only doctoral-level medical education institution, and the Arkansas Department of Health (ADH) to split the funds between indigent care and tobacco control met with resistance. Discussions of alternative spending proposals during the 1999 legislative session, however, were limited because of concerns over the long-term economic viability of the tobacco companies under the MSA and the delayed timing of initial payments from the MSA (the first payment was not expected until January 2000). Recognizing the potential opportunity to inform policymakers, the Arkansas Center for Health Improvement (ACHI)—a small health policy institute jointly supported by the UAMS and ADH—undertook a study of the tobacco impact in Arkansas and released a position paper on the subject in February 1999.17 Although the paper did not advocate for specific programs, it did describe the effect of tobacco use in the state and summarized empirical information on both the health and economic impact of tobacco on citizens and their communities. It also proposed four principles to guide spending decisions for MSA funds: (1) All funds should be used to improve and optimize the health of Arkansans; (2) funds should be spent on long-term investments that improve the health of Arkansans; (3) future tobacco-related illness and health care costs in Arkansas should be minimized through this opportunity; and (4) funds should be invested in solutions that work effectively and efficiently in Arkansas. The position paper was presented to the governor, the president pro tem of the Senate, the speaker of the House, and the lieutenant governor in a public news conference in February 1999. Public acceptance of the four principles by the state’s political leaders effectively narrowed the options under consideration to health-related topics. In April 1999 the Arkansas House of Representatives held an open forum for presentations on proposed ways to spend the MSA funds. External consultants and more than ninety local organizations participated. In May 1999 the ACHI convened a meeting of health groups interested in the use of MSA funds. Participants suggested more than $350 million in proposed annual requests for the $62 million estimated annual MSA payments, with little initial consensus on funding priorities. Through a data-driven process examining the state’s health statistics and needs, participants compromised and crafted a proposal for spending the MSA funds. Proposals included public health education, health disparities among minorities, elder care issues, and health care access issues in the Mississippi Delta. A bioscience research agenda was incorporated to address Arkansans’ existing medical needs through health-related scientific inquiry and support for future economic development.
From this development process, a single proposal balanced with short- and long-term health improvement components emerged, and the Coalition for a Healthy Arkansas Today (CHART) was formed to advance the plan. Although the coalition was initially composed mainly of health and health care advocates, business and community groups joined as the burden of tobacco and rationale for the plan were disseminated.18 From September 1999 through January 2000 CHART conducted twenty-four town hall meetings across the state to inform community leaders and members of the Arkansas General Assembly and to develop grassroots support for its proposal. After these meetings, the proposed plan was modified to incorporate the Healthy Century Trust Fund, which was to be established with the initial $100 million from the MSA payments to provide a mechanism for continued program funding should tobacco funds cease to flow to the state (Exhibit 2
Special session of the Assembly. In February 2000 the governor, with support from many legislators, called for a special session of the Arkansas General Assembly, to achieve two goals: (1) pass the spending plan proposed by CHART, and (2) establish the Capitol as a nonsmoking public building. On 3 April 2000 the Assembly was called into session. The Capitol was quickly established as a nonsmoking public building (codified at Arkansas Code Annotated 22-3-220). During the five-day session the Senate unanimously passed the CHART proposal; the House referred the CHART proposal and three alternative proposals to its Rules Committee, where historical protocol required all tobacco-related legislative issues to be addressed. The three alternative proposals were to (1) place all tobacco settlement proceeds into a trust fund; (2) use all MSA proceeds for Medicaid expansion; or (3) support a bill comprising mostly short-term health goals such as Medicaid expansion, tobacco-related treatment, and Meals on Wheels for the elderly. Each proposal was favorably reviewed and referred from the Rules Committee to the full House for a vote; however, each was defeated on the House floor. Subsequent review of required reports of political contributions revealed that several tobacco companies made substantial contributions to many committee members during this period.19 Initiated Act I: Tobacco Settlement Proceeds Act of 2000. After failure of the Special Session to reach a resolution and after conferring with the Senate leadership, Gov. Mike Huckabee immediately announced his intention to take the CHART proposal "to the people" in the November 2000 election through a voter-initiated referendum. Placement on the ballot required collection of approximately 90,000 signatures (10 percent of the voters from the previous statewide election). During the next three months more than 120,000 signatures supporting the ballot initiative were collected, with approximately half generated by paid canvassers and half from grassroots organizations. In July 2000 the secretary of state validated the petitions and placed the proposal on the November ballot. However, some members of the General Assembly, concerned over the complexity of the act and in continued opposition to the proposal, filed suit in the Arkansas Supreme Court to strike the initiative; the Court ultimately denied the petitioners’ request in a four-to-three vote.20 With less than two months until the election, CHART mobilized grassroots organizations and information campaigns. The governor (in the middle of a four-year term) established the initiative as one of his primary goals for the election. Local tobacco-prevention coalitions mobilized networks that were developed years before the MSA. Funding was largely generated from private associations because of Internal Revenue Service prohibitions against political activities by most nonprofit organizations. Radio and local newspaper advertisements were the principal media available for dissemination; television advertising was limited because of its previous procurement by hotly contested local, congressional, and presidential campaigns. On 7 November 2000 tension mounted as efforts to raise awareness and inform Arkansas citizens climaxed. With majority support in seventy-three of the state’s seventy-five counties, the CHART plan, called the Tobacco Settlement Proceeds Act of 2000, passed with the largest majority in any statewide race that year, receiving 64 percent of the 788,473 votes cast.21 Authorization of spending. With the act’s passage, Arkansas voters had established the enabling legislation directing how the state’s MSA funds would be spent. However, authorization for state agencies to spend the funds still required legislative action through separate appropriations bills. The eighty-second session of the Arkansas General Assembly took up the appropriations bills in spring 2001, and some legislators attempted to reprioritize short-term programs over long-term prevention and public health interests. The lack of funding for Meals-on-Wheels programs became a particular focus of legislative concern and threatened authorization to initiate the voter-supported programs. A resolution to the legislative blockade came through knowledge of existing legislation that contained invaluable strategic components predating the MSA: The Arkansas Breast Cancer Act, passed in the 1997 General Assembly, contained a requirement that if funding was not otherwise appropriated, then a cigarette tax was to be automatically triggered to fund the breast cancer program.22 The solution to the impasse was to defund the Breast Cancer Act, freeing state general revenues to support the Meals-on-Wheels program. The lack of funding for the Breast Cancer Act subsequently triggered a new increase in the tobacco tax, which resulted in higher cigarette prices and available funds to continue Breast Cancer Act screening and treatment programs. Thus, political finesse based on knowledge of existing statutes achieved multiple goals at once. On 13 April 2001 the governor signed twelve appropriations bills authorizing the spending of tobacco funds in the state as directed by the voter referendum. By 2001 the Healthy Century Trust was fully funded with an initial $100 million, and program implementation began. As in many states, budget shortfalls in 2001–2002 forced Arkansas to cut state spending. Facing a $60 million deficit, the governor called another special session in June 2002 to address budget issues.23 Unlike in many other states, however, Arkansas’ MSA funds were successfully protected and not redirected to fulfill revenue shortfalls and maintain existing programs. Because of the voter mandate to invest in both short- and long-term health improvements, alternative budget cuts were undertaken, and the new health improvement programs passed by Arkansas voters continue into the current biennium, fully funded and operational. Importantly, the appropriations bills will require reauthorization by the General Assembly every two years, and future decisions will be required to allocate proceeds from the Healthy Century Trust Fund.
In the first five years after the MSA was reached, states received more than $37.8 billion, with cumulative individual state payments ranging from $70 million in Wyoming to $5.1 billion in Texas. During this period Arkansas received $236 million.24 Original concerns about the economic viability of corporations selling tobacco products and the possibility of their filing for bankruptcy dissipated, only to be raised again by tobacco companies in the 2003 Illinois court decision (Price v. Phillip Morris Inc.). Despite these concerns, tobacco stocks continue to be a selected strategy for investors with comparable performance to the Dow Jones Industrial Average.25 MSA payments have been reduced slightly because of a reduction in overall U.S. domestic cigarette consumption; however, this reduction is minimal, and analyses of smoking projections predict failure to reach the Healthy People 2010 goal of 15 percent smoking prevalence in adults.26 States’ use of MSA funds. Most states have used at least a portion of funds for health-related programs, averaging 36 percent of each state’s total payments.27 However, because of state budget shortfalls during the past two years, much of the funds have been used to stabilize and fund existing health programs, not expand or initiate new ones. Review of CDC recommendations to fully fund states’ best practices for tobacco cessation and control reveals that only a small subset of states has funded these scientifically supported programs. Through the political process described above, Arkansas has dedicated all of its MSA funds for health promotion and disease prevention programs.28 The difficulty of funding long-term initiatives is important to understand. Despite the clear link between intentional advertising to youth and increased cigarette use, the disease burden and associated costs of tobacco use in states, and the benefit to states in reducing major health burdens related to tobacco, no requirement to spend funds on tobacco-use reduction or health promotion activities was included in the MSA. Thus, long-term investments in health promotion are counterbalanced by states’ short-term programmatic desires and budgetary needs. Most states have used the legislative process to fund a potpourri of programs, many not related to health. Lobbying activity. Arkansas’ legislative experience in the 2000 special session, during which continued lobbying activities by tobacco company representatives were documented, raises major concerns. The MSA explicitly restricts all lobbyists who receive support from tobacco companies from attempting to influence or oppose any state, local, or federal legislation or regulation without the participating manufacturer’s express authorization. As of 24 February 1999 all states achieved "state-specific finality"—a technical term contained in the MSA requiring that all legal issues be resolved prior to full implementation of the MSA.29 Review of required disclosure documents filed by lobbyists three months after the Arkansas Special Session (June 2000) revealed that tobacco companies donated the maximum allowed amount ($1,000) to selected members of the House Rules Committee.30 These members voted to block passage of the prevention programs. If similar activities continue in statehouse deliberations across the country, clear violations of the MSA are occurring and should be acted upon by the states’ attorneys general. Ongoing monitoring. Because continued payments under the MSA will require ongoing legislative action, monitoring state funding allocations and continued advocacy for long-term investment in health promotion activities will be of paramount necessity. Evaluation and tracking of the outcomes from states’ political and programmatic perspectives could identify opportunities to improve future policy development initiatives, maintain needed support, and achieve critically important health improvement goals. The tobacco MSA of 1998 represents the most important legal decisionand corporate settlement of the past century with the potential to improve the public’s health. The experience in Arkansas suggests that citizens recognize the impact of tobacco on their lives and will support a well-organized health program, even while tobacco companies continue to exert influence in the statehouse, possibly in defiance of the MSA requirements. Continued political leadership and advocacy for long-term health promotion are essential to improve the health and productivity of all U.S. citizens.
Joseph Thompson is director of the Arkansas Center for Health Improvement (ACHI) and assistant professor in the Department of Pediatrics, University of Arkansas for Medical Sciences in Little Rock. Fay Boozman is director of the Arkansas Department of Public Health. Shirley Tyson is a research assistant at the ACHI, Kevin Ryan is associate director, Suzanne McCarthy is an associate, Ray Scott is associate director, and Richard Smith was founding director. Smith is currently chair of the Department of Psychiatry at the university. The authors thank the staff of the Arkansas Center for Health Improvement for their contributions to the development of this manuscript. In addition, they acknowledge the editorial and research support of Paula Card-Higginson.
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Case Study: Arkansas
