Use of Tobacco Funds for Medicare Debt Urged

To avoid cutting programs or dipping into reserves, Ventura County administrators are recommending the Board of Supervisors use $3 million in tobacco settlement funds to help pay $15.3 million in penalties stemming from the county’s Medicare fraud case.

The tobacco funds would cover the county’s first of five annual reimbursement payments to the federal government--an attractive alternative to jeopardizing building projects or tampering with reserve accounts.

But some officials oppose using tobacco settlement money for anything other than preventive health care programs, such as anti-smoking campaigns.

“I think it is a terrible option,” Supervisor Frank Schillo said. ‘I think it is the worst thing we could possibly do. That means that health programs and programs related directly to tobacco are going to lose out.”

But other members of the board, which is expected to take up the issue Tuesday, say the tobacco money is their best alternative.

“I think we have no choice but to do that under the present circumstances,” Supervisor John Flynn said.

If the tobacco money is not used to help pay down the debt, Flynn and others fear the Medicare settlement could force the county to cut programs, delay building projects or tap reserve funds.

Projects such as a long-planned juvenile justice facility, a cafeteria and laboratory at the Ventura County Medical Center, and a social services and employment center in Santa Paula could be affected.

County Auditor-Controller Thomas O. Mahon also has expressed concern about the potential impact on the county’s bond rating.

Last month, the county agreed to pay $15.3 million to settle a civil lawsuit alleging the mental health department submitted fraudulent Medicare claims dating back nearly 10 years. The U.S. attorney’s office became involved after a whistle-blower alerted federal authorities to prohibited billing practices.

Under the agreement negotiated by Flynn, the U.S. attorney’s office agreed to give Ventura County five years to pay off the settlement, instead of three. The agreement was significant because it drops the county’s annual payment from $5.1 million to $3 million.

Although the settlement has not been finalized, county officials say they need to move quickly to figure out how to cover the first payment, which Supervisor Kathy Long expects will be due “as soon as the ink dries” on the agreement.

County administrators have been looking for alternative ways to pay the debt--and the tobacco money is an attractive one.

The proposed funding comes from a $25-billion settlement reached last year between California and the tobacco industry--unrestricted money that will trickle into county reserves over the next 25 years.

Ventura County is slated to receive between $8 million and $10 million in tobacco settlement funds in annual installments until 2025. The $3 million is an initial payment.

In crafting the settlement, former Atty. Gen. Dan Lungren had hoped the money would be spent on health and anti-smoking programs for children--and Schillo agrees.

“That money should not be used to pay for someone else’s error,” Schillo said. “The money should be used . . . for preventive programs.”

Schillo said the health services agency, which was where the Medicare billing problems started, should be held responsible and figure out how to come up with the money.

But faced with financial uncertainty over the Medicare settlement, administrators say the $3 million in tobacco money should be used now to pay down the debt, and future tobacco settlement payments could be used for preventive programs.

“It is totally discretionary, and this payment is related to health care,” said Bert Bigler, the county’s acting chief administrative officer. “It is just the first-year settlement amount.”