COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES COMMITTEE.ON APPROPRIATIONS :n re: 2000-2001 Appropriations Hearings Tobacco Settleaient -.*\U J/-\ /Jl-\ Stenographic report of hearing held in Majority Caucus Room, Main Capitol Harrisburg, Pennsylvania Thursday March 16, 2000 9:00 a.m. ION. JOHN E. BARLEY, CHAIRMAN [on. Gene DiGirolamo, Secretary [on. Patrick E. Fleagle, Subcommittee on Education [on. Jim Lynch, Subcommittee oti Capitol Budget Ion. Ron Raymond, Subcommitee on Health and Human Services Ion. Dwight Evans, Minority Chairman MEMBERS OF APPROPRIATIONS COMMITTEE Ion. William F. Adolph Hon. Steven R. Nickol [on. Matthew E. Baker Hon. Jane C. Orie [on. Lita I. Cohen Hon. Joseph Preston, Jr. Ion. Craig Dally Hon. William Russell Robinson Ion. Teresa E. Forcier Hon. Samuel E. Rohrer Ion. Dan Frankel. Hon. Stanley E. Saylor Ion. Babette Josephs Hon. Curt Schroder Ion. George Kenney Hon. Edward Staback Ion. Frank LaGrotta Hon. Jerry A. Stern Ion. John A. Lawless Hon. Stephen H. Stetler Ion. Kathy Manderino Hon. Jere L. Strittmatter Ion. Phyllis Mundy Hon. Leo J. Trich, Jr. [on. John Myers Hon. Peter J. Zug ilso Present: [on. Peter J. Daley, II lichael Rosenstein, Executive Director Reported by: Dorothy M. Malone, RPR Dorotkq M- Malone Registered Professional Reporter 135 S- L*rJi* Street , Uummelstown, Pennsqlvcmia 17036 \^\ io Present: (Cont'd) :hy Vranicar, Budget Analyst •y Soderberg, Minority Executive Director k Randolph, Budget Analyst Dorotk4 M- M^lone |<egisterea Hrofessional 1-v.eporter 135 o. l_andir o^Teet |—) ummelstown, Mennrijlveinici 17036 INDEX TO WITNESSES Name Page Margeret J. Dierkers, Ph.D. Deputv Secretary- Medical Assistance Program 5 Arthur S,,Levine, M.D., Senior Vice Chancellor 40 For Health Services and Dean School of Medicine, University of Pittsburgh Jeffrey S. Palmer, President/CEO Coordinated Care 57 Network Robert B. Sklaroff, M.D. 66 Susan P. Byrnes, Founder/Chair - Susan P. Byrnes 93 Health Education Center Testimony of Michele Lewis, Public Policy Analyst 108 AFSCME - AFL-CIO CHAIRMAN BARLEY: Good morning everyone. I would like to call our hearing to order. This is the third and final hearing that the Appropriations Committee has scheduled on the issue of the Master Settlement Agreement from the tobacco companies. Many of you are well aware of the fact that Pennsylvania will receive $11 billion over the next 25 years. And it will mean up to nearly $460 million per year. That will not necessarily be the exact amount each year. It will vary somewhat from year to year. But the General Assembly and the Ridge administration, the current administration, we have the responsibility for developing the blueprint which will allow us to invest this money and make it available for the citizens of Pennsylvania. We have an opportunity I think before us to address the concerns and certainly hear the concerns of many of the organizaitons and the individuals that will be impacted and will be affected over the next several years by this initiative. Now in turn, we will, as I mentioned, be making the decisions on behalf Pennsylvanians on how we should be reinvesting this funding. So, that has really been the main reason why we have been holding the hearings because we feel it is extremely important to be able to get this feedback. I think much of what we do, I mentioned in the beginning, it is a blueprint we are going to be working on, but as you put a program in place initially, that really does set the pattern for what you will do over the next 25 years. It isn't something that will be totally inflexible but nevertheless it will certainly have a tremendous impact. So today we have several witnesses that will be appearing before the Committee with some suggestions that they have. And again, I just want to welcome our first testifier, Peg Dierkers, who is Executive Secretary of Medical Assistance for the Department of Public Wel­ fare. Peg, we welcome you and we will provide you the opportunity now to deliver your testimony to the committee. MS. DIERKERS: I am very pleased to be here to provide the Committee an overview of Governor Ridge's Health Investment Plan and answer questions that you may have. Sitting beside me today is Pat Stromberg. Pat is the Executive Director of the CHIP Program in the Department of Insurance and she will assist me in answering any questions on the basic coverage for uninsured adults that the Governor proposed under this plan. Since, as you said, Representative, this is probably the third time you've heard from the administration about the Governor's plan. I will try to keep my remarks brief. In 1998, Pennsylvania Attorney General Mike Fisher joined the Attorneys General of 46 states, five territories and Commonwealths and the District of Columbia, in finalizing the tobacco Master Settlement Agreement with the five major tobacco manufacturers. These manufacturers represent almost 99 percent of the entire tobacco industry's revenues. The settlement agreement provides reimbursement to states for the costs they have incurred as a result of tobacco use. Pennsylvania's share, as you have said, is approximately $11.5 billion dollars, with maximum annual payments expected to range somewhere between $397 million and $459 million from the year 2000 to the year 2025. Governor Ridge has made it a point to note that these figures are just estimates--and they likely represent maximum allocations. Volume adjustments, based on future tobacco use and consumption, as well as the possibility of future litigation by entities other than states, may reduce Pennsylvania's projected annual allocation. The Administration plans to begin allocating the tobacco settlement revenues during the fiscal year beginning July 1, 2000. The Tobacco Settlement does represent a historic opportunity to focus energy and resources on the health of Pennsylvanians. Governor Ridge committed himself and his administration to focusing every penny of the Settlement on "making Pennsylvanians healthier." In doing so, he has positioned Pennsylvania as a national leader in this regard. Again, the Governor's Health Investment Plan was developed following almost nine months of research and a comprehensive public process and discussion during which Administration Officals heard from hundreds of Pennsylvanians and met with every group who requested a meeting--all in the spirit of developing a plan that reflected the needs and concerns of Pennsylvanians. The Governor's only request is that the public discussion be focused on the five principles which he believes should guide the Commonwealth's spending of the tobacco settlement. These are: 1. The goal should be to make Pennsylvanians healthier; 2. A portion of the funds [should, be set aside for future generations; 3. The'settlement proceeds should be directed to programs and initiatives that can be adjusted easily given the likely fluctuation in payment amounts; 4. The focus should be on fulfilling or enhancing state government's existing service areas before creating new ones; and 5. The initiatives should not require significant growth or expansion of government bureaucracies. It was encouraging to me--both as a policy maker and as a Pennsylvania citizen--that there were striking similarities in the main themes gleaned from each public meeing. It didn't matter if the geographic location or the stakeholder group themes were very similar and they were. Funds should be used to prevent tobacco-relatec diseases and fight tobacco addiction Funds should be used to provide better access to health care Funds should be used to support Pennsylvania hospitals that incur costs from uncompensated health care, and finally, Funds should be used to support research by Pennsylvania researchers and institutions. The Administration took these proposals that we heard from the public, analyzed them, brought work groups together to further develop them and the Governor then seeks funds in the following allocation amounts: First, we propose that 40 percent, on an annual basis, be used to pay for health insurance for low-income uninsured adults. Our proposal would offer basic health care coverage for the uninsured whose income is under 200 percent of the Federal Poverty Level and who have no other coverage. This program will provide uninsured adults with the improved health and peace of mind that comes with access to health care. In addition, our plan calls for a Medicaid "buy-in" plan for employed persons with disabilities whose income is under 250 percent of the Federal Poverty Level., Often, persons with disabilities are forced to choose between work and health care coverage - the income they would earn working would disqualify them from the comprehensive benefits package they need to meet their special health care needs. Under both the low-income adult and disabled pieces of this particular component of Governor Ridge's plan, individuals taking advantage of this opportunity will contribute a nominal co-payment to receive the coverage. Secondly, we believe that 10 percent annual­ ly ought to go toward broad-based health research. Under our proposal, funding would be targeted to Pennsylvania- based health researchers and health research institutions, and wo uld largely be limited to proposals that have been peer reviewed by nationally accepted entities. Often, many good proposals-developed by Pennsylvania research institutions, and for Pennsylvania health priorities- are graded very high in terms of the merits of their proposals, but simply are not funded due to limited funding or given other national health care priorities. We believe these projects should be given priority so that Pennsylvania researchers, working on Pennsylvania priorities, receive the funding that they could not garner elsewhere. Third, we believe a venture capital account should be created using five percent of the fund for three consecutive years. The venture capital account would use tobacco dollars to leverage private sector investment and encourage private sector business development that will translate health-related academic research into marketable products and services.