II

106TH CONGRESS

1ST SESSION S. 346

To amend title XIX of the Social Security Act to prohibit the recoupment

of funds recovered by States from one or more tobacco manufacturers.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 3, 1999

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) introduced the following bill; which was read twice and referred to

the Committee on Finance

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. FINDINGS.

4 Congress makes the following findings:

5 (1) Over the last decade, State governments ini6 tiated lawsuits against the tobacco industry, assert7 ing a variety of claims, including the violation of
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1 consumer fraud and other State consumer protection

2 laws, antitrust violations, unjust enrichment, con3 spiracy, racketeering, and others. Several State law4 suits did not include any claims for reimbursement

5 of tobacco-related health care costs paid under the

6 medicaid program.

7 (2) The lawsuits against the tobacco industry

8 were initiated by the States without any financial,

9 technical, or other assistance from any branch or

10 agency of the Federal Government, at any stage of

11 the litigation or settlement process.

12 (3) Culminating in a comprehensive, 46-State

13 agreement reached in November, 1998, all of the

14 States, the District of Columbia, and the United

15 States territories, have entered into settlement

16 agreements with the major tobacco manufacturers in

17 the United States. The States’ Attorneys General

18 carefully crafted these agreements to reflect only

19 State costs, direct damages, civil penalties,

20 disgorgement of profits, injunctive relief, and other

21 appropriate remedies.

22 (4) States that entered into the comprehensive,

23 46-State settlement agreement, as well as the other

24 States that entered into individual settlement agree25 ments, have planned for or have begun to plan for
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1 the allocation and expenditure of the funds received

2 under those agreements. Several States have already

3 received and expended funds under those agree4 ments.

5 (5) The medicaid third party recovery provi6 sions of the Social Security Act do not encompass,

7 nor did Congress intend them to apply to, situations

8 in which States initiate lawsuits on behalf of all

9 their residents against manufacturers of products,

10 asserting a variety of consumer protection and other

11 causes of action.

12 (6) If the Secretary of Health and Human

13 Services were to claim that each of the States’ set14 tlement agreements include the existence of specific

15 medicaid claims, arbitrarily assume that some por16 tion of the settlement funds received by the States

17 are related to such medicaid recovery claims, and

18 then seek to recoup what is determined to be the

19 Federal share of those funds, it would likely result

20 in protracted and costly litigation that would cause

21 unnecessary conflict between the States and the

22 Federal Government and would delay or preclude

23 States from using their settlement funds for the

24 health and welfare of their residents, as determined

25 by the needs and priorities of those residents.
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1 SEC. 2. PROHIBITION ON TREATING ANY FUNDS RECOV2 ERED FROM TOBACCO COMPANIES AS AN

3 OVERPAYMENT FOR PURPOSES OF MEDIC4 AID.

5 (a) AMENDMENT TO SOCIAL SECURITY ACT.—Sec6 tion 1903(d)(3) of the Social Security Act (42 U.S.C.

7 1396b(d)(3)) is amended—

8 (1) by inserting ‘‘(A)’’ after ‘‘(3)’’; and

9 (2) by adding at the end the following:

10 ‘‘(B)(i) Subparagraph (A) and paragraph

11 (2)(B) shall not apply to any amount recovered or

12 paid to a State as part of the comprehensive settle13 ment of November 1998 between manufacturers of

14 tobacco products, as defined in section 5702(d) of

15 the Internal Revenue Code of 1986, and State Attor16 neys General, or as part of any individual State set17 tlement or judgment reached in litigation initiated or

18 pursued by a State against one or more such manu19 facturers.

20 ‘‘(ii) Except as provided in subsection (i)(19), a

21 State may use amounts recovered or paid to the

22 State as part of a comprehensive or individual settle23 ment, or a judgment, described in clause (i) for any

24 expenditures determined appropriate by the State.’’.

25 (b) PROHIBITION ON PAYMENT FOR ADMINISTRA26 TIVE EXPENSES INCURRED IN PURSUING TOBACCO LITI-
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1 GATION.—Section 1903(i) of the Social Security Act (42

2 U.S.C. 1396b(i)) is amended—

3 (1) in paragraph (18), by striking the period

4 and inserting ‘‘; or’’; and

5 (2) by inserting after paragraph (18) the fol6 lowing new paragraph:

7 ‘‘(19) with respect to any amount expended on

8 administrative costs to initiate or pursue litigation

9 described in subsection (d)(3)(B).’’.

10 (c) EFFECTIVE DATE.—This section and the amend11 ments made by this section shall apply to amounts paid

12 to a State prior to, on, or after the date of enactment

13 of this Act.

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