Who is qualified to receive an annual pro rata share of the tobacco settlement proceeds?
Political subdivisions as defined in 25 Tex. Admin. Code § 102.1(b). These include “a hospital district, another local political subdivision owning or maintaining a public hospital, or a county of the State of Texas responsible for providing indigent care to the general public.”
How can I determine whether a given political subdivision qualifies for tobacco settlement proceeds under this definition?
Consult Chapter 61 of the Texas Health and Safety Codepertaining to the County Indigent Health Care Act.
What was the total settlement amount, initially, for political subdivisions?
The settlement agreement totaled approximately $2.3 billion. Of this amount, $450 million was deposited into a lump sum trust account and distributed to political subdivisions. The remainder, approximately $1.8 billion, was deposited into a permanent trust account and eligible political subdivisions receive an annual pro rata share of the investment proceeds from this account.
Who is responsible for managing the distribution process and the trust accounts?
Under the settlement agreement, the Texas Department of State Health Services (DSHS) is responsible for certifying to the Comptroller of Public Accounts the percentage of the annual distribution to be paid to each political subdivision. The Comptroller’s office is responsible for managing the trust accounts and issuing the pro rata shares to political subdivisions.
How are unreimbursed health care expenditures defined in the settlement agreement?
For counties not wholly located within a hospital district, they are defined as “all unreimbursed amounts, including unreimbursed jail health care, expended by such county for health care services to the general public during that year, plus 15% of that total.” For hospital districts, they are defined as “the total amount of taxes collected by the hospital district, together with the unreimbursed amounts expended by a county coterminous with such hospital district for jail health care.” For non-hospital district public hospitals owned, sold, or leased by a political subdivision, they are defined as “the total unreimbursed amount of political subdivision funds paid to such public hospital by any political subdivision during that year.”
What period should the expenditure statement cover?
According to 25 Tex. Admin. Code § 102.3(f)(1), unreimbursed expenditures should be reported for the preceding calendar year.
What is the deadline for submission of the expenditure statement by a political subdivision to the DSHS?
According to 25 Tex. Admin. Code § 102.3(f), a completed and signed annual expenditure statement is due by March 31 of each year.
What format should political subdivisions use to submit their expenditures to the DSHS for reimbursement?
According to 25 Tex. Admin. Code § 102.3(f)(3), there is a required format for the expenditure statement. It differs by political subdivision. The required forms can be found on the Tobacco Settlement Expenditure Forms page.
When will the Comptroller’s office distribute pro rata shares of the tobacco settlement to political subdivisions?
According to 25 Tex. Admin. Code § 102.2(b), pro rata shares will be distributed in April of each year.
How can political subdivisions give input to the DSHS regarding the distribution of tobacco settlement proceeds?
You can provide input through the Tobacco Settlement Permanent Trust Account Administration Advisory Committee. This committee is established in Health and Safety Code § 12.137, which lists the appointing authorities for the committee and describes the responsibilities of the DSHS in the certification of tobacco settlement proceeds. The committee represents political subdivisions and assists the DSHS to develop and update program rules for the distribution of tobacco settlement proceeds. A list of committee members is available at the Tobacco Settlement Permanent Trust Account Administration Advisory Committee page.
Do expenditures made using tobacco settlement proceeds received in a prior calendar year need to be excluded from the expenditures being claimed on the most current statement?
No, the portion of expenditures made for health care services using tobacco settlement proceeds can be reported as unreimbursed expenditures. See #16.
Distribution Calculation
Once the DSHS receives the expenditure statements, how will it apportion the available dollars among the political subdivisions?
The DSHS combines eligible expenditures from all statements received to obtain a statewide total, then divides that total into the individual statement amount submitted by each political subdivision to determine the percentage of available tobacco settlement proceeds each political subdivision will receive for that year. For example, if the total eligible expenditures submitted by all political subdivisions in the state amount to $1 billion and county X submits $10 million in expenditures, then the percentage for county X would be 1% ($10 million ÷ $1 billion). If $50 million were available for distribution, county X would receive a payment for $500,000 (1% x $50 million).
Use of Tobacco Settlement Proceeds
May a political subdivision spend the money it receives from the tobacco settlement for any purpose it chooses?
Yes, the use of the money is unrestricted. The settlement agreement does not require that it be spent for a particular purpose.
What are some of the ways in which political subdivisions intend to use the tobacco settlement proceeds?
Use of funds varies widely, based on information received by the DSHS.
Is there any incentive for political subdivisions to spend their tobacco settlement proceeds on health care?
Yes, because all pro rata shares, beginning in 2000, are based on unreimbursed health care expenditures, as defined in the settlement agreement and health care expenditures made with tobacco settlement proceeds are treated as unreimbursed. See #12.
General Information Regarding Counties
Should counties coordinate with cities to determine how best to maximize funds for reimbursement?
Yes, counties should coordinate with cities to maximize all dollars being spent on health care in the county. For instance, if both the county and city are contributing to a family clinic and both are also contributing to a public library, the county may want to sign an agreement with the city whereby the county would take over all responsibility for funding the family clinic and the city may want to take over all responsibility for funding the public library, since the library is not health care related and those funds are not eligible for reimbursement. These agreements need to be reviewed once a year and may need to be adjusted if costs rise in one area more than another. Also, be careful that all expenditures taken over by the county are health care related. Environmental services provided by a local public health department will not count as health care related and will not be eligible for reimbursement.
More specifically, for what kinds of services can a county expect to receive payment under the settlement agreement?
These must be for services such as a hospital district may provide. They will typically be diagnostic and treatment services for individuals. Health care education, outreach, screening, laboratory services, counseling, and case management may be counted. However, environmental services such as mosquito control, water testing, and septic tank inspection may not be counted. Expenditures for population-based regulatory services, such as restaurant inspections, are also ineligible.
May a county include expendable medical supplies such as bandages, medications, and syringes?
Yes, medical supplies may be included, but administrative supplies, such as copy paper, can be counted only if they are used in support of health care services.
Are expenditures related to medical waste disposal, including the destruction of drugs and narcotics, eligible?
No, these are not considered health care services.
Can salary expenses and benefits for county personnel be included?
Yes, employee salary and benefits may be counted to the extent the employee is engaged in patient health care or other health care services. However, any expenditures related to clothing or uniforms are ineligible as they are not directly attributable to the provision of health care.
May a county include the expense paid to health care providers for the health care of county employees?
No, county expenditures on health care services for county employees cannot be included. The 15% add-on for general administration costs is intended to address this expense.
May a county claim its unreimbursed expenditures for health care outreach and prevention efforts, including but not limited to radio and TV announcements, counseling, education, and the production and distribution of promotional literature? Typical target areas for such efforts include teenage smoking, child safety, and campaigns to promote public awareness of health hazards.
Yes, counties may claim these expenditures.
Can autopsies, burials, or mortician services be claimed?
No, these are not considered health care services.
Can program evaluation, such as ways to improve access to health care services with ADA compliance, be claimed?
Yes.
Are the salaries and benefits of Emergency Medical Technicians (EMTs) eligible for reimbursement?
Yes, medical personnel salaries and benefits are eligible to the extent they are engaged in patient health care or health care services. However, if they are also serving in another position such as a fire fighter, the county would need to back out the percentage of time the person spends on fire fighting and deduct that amount of salary and benefits from the EMT portion. First responder services are not eligible unless and until medical services are provided by a licensed health care provider (e.g. an EMT). The cost of medical equipment and training the county provides to first responders is eligible.
Are the expenditures associated with operating and maintaining 9-1-1 and first responder services eligible?
No, these are not direct health care services provided to the general public.
Are expenditures associated with ambulance runs eligible?
Yes, these expenditures are eligible if health care services were provided and the county did not receive any payment. If the county received payment for any portion of these expenditures, the remaining balance is not eligible. Expenditures associated with ambulance runs in which no health care services were provided are not eligible.
If a county has a contract with the local hospital to provide EMS services and also provides additional funds for the hospital’s EMS shortfall, can the county include these expenditures?
Yes, you can count any unreimbursed expenditures by the county relating to health care, except for expenditures exclusively on behalf of county employees.
May a county include capital expenses, such as the cost of building a new station for emergency medical services (EMS), buying ambulances, or renovating a county hospital?
Yes, all of these expenses are claimable.
Can you count the rent the county pays for a public health clinic or EMS station?
Yes, according to 25 Tex. Admin. Code § 102.3(b)(1)(H), “capital expenditures for direct health care services such as construction of ambulance facilities or clinics” can be counted. Make sure that 100% of the rent is going for these services. If the county were also paying rent for a non-health care related county office in the same building, the county would need to subtract that amount before calculating the total amount of rent paid for the provision of health care services.
May a county include money it has set aside in a trust fund to be used for health care expenditures?
Counties may only include the expenditures made out of the trust fund. It should not include amounts set aside in the trust fund, but may include expenditures made out of the trust fund if they are used for health care services and the county does not receive reimbursement for those services.
May county expenditures for a county nursing home be included?
Yes, these expenditures are eligible.
When determining the actual unreimbursed expenditures, may a county include an accrual, which is an estimate of the amount of expenditures that have been incurred but not paid?
No, the Tobacco Settlement Distribution Program works on a cash basis instead of an accrual basis and the expenditure statement should reflect expenditures actually paid less any reimbursements actually received.
If the county passes private foundation funds through the budget and writes a check to the hospital, can the county count this money?
This is similar to a grant and, on the face of it, would be treated as a reimbursement that the county cannot claim. However, if the foundation gave the money to the county as a general donation, giving the county clear authority to use the money at the county’s discretion, and the county used the money on health care, then the county could count the use of such funds as an unreimbursed health care expenditure. If asked for documentation of these expenditures, the county will need to describe the overall arrangement and justify it on a reasonable basis.
Are the salary and benefits of the public health authority eligible?
Yes, even though public health authority staff may not actually do anything until there is a disease outbreak. If staff provides environmental services, or other non-health care related services, the county would need to back out the percentage of time, salary, and benefits spent on environmental or other non-health care related services from the total calculation.
If the county pays the utilities or the telephone services for the MHMR facility, are those expenditures eligible?
Yes, those expenditures are eligible.
Will the entire contract with the health department count even though some of the services the health department may provide are not health care related, such as restaurant inspections?
No, environmental or regulatory services provided by a local health department are not considered health care services and are not eligible. The county can count only the health care portion of the money given to the health department in the county budget. The county may want to make an agreement with the health department and/or the city, whereby all money given or the largest percentage given by the county needs to be spent on health care. Monies received by the health department from other entities might be used for these environmental or regulatory services. However, to continue environmental services at the current level, the county may need to spend funds on environmental services, which are not eligible.
If a county provided services to someone in a given year and did not expect reimbursement, then received reimbursement for that care the subsequent year, how should it offset the reimbursement?
The county may include those services as unreimbursed expenditures in its annual expenditure statement for the year services were provided. Once the county receives reimbursement or funds for any portion of previously claimed expenditures, the county should subtract the amount of the reimbursement or funds from the amount of unreimbursed expenditures claimable on its next expenditure statement. See 25 Tex. Admin. Code § 102.3(b)(3).
May the county include expenditures such as medication for individuals who do not meet the indigent health care eligibility standards?
Yes, while the annual expenditure statement calls for a total of indigent health care expenditures, this is not limited to indigents as defined in Chapter 61 of the Health and Safety Code. Many counties have medical assistance programs that provide services to individuals who do not qualify for the County Indigent Health Care Program. These additional services may be reported under category B or category C, whichever is applicable, of the county expenditure statement. Make sure that all unreimbursed health care expenditures are only counted once when filling out the expenditure statement.
If the county provides for MHMR evaluations and intake or outreach personnel, are those services eligible?
Yes, the county may report these services if it is paying someone to do evaluations or paying physicians to examine people to see if they are in need of mental health services. Transportation costs for the patient are also an eligible expense. However, expenditures related to court procedures such as continued commitment or medication hearings are not an eligible expense as they are not considered health care services.
If you have a foundation that owns a building and the county leases space at lower than market value for a health care agency to provide indigent health care, can the county count that loss of revenue as part of that service?
No, there is no provision for providing undervalued services. This would be similar to giving tax abatements to a business and in turn the business would provide medical services. Tax abatements do not count as unreimbursed medical expenditures. See 25 Tex. Admin. Code § 102.3(b)(2)(G).
Can the cost of prevention programs be included as expenditures? 25 Tex. Admin. Code § 102.3(b)(1)(E) provides for health care outreach and prevention efforts.
Will a county be eligible for tobacco reimbursement for a county-owned hospital if the county did not give any money to its public hospital?
No, if the county does not give money to its public hospital, that county will not be eligible to receive tobacco monies for that hospital.
If the county pays for instructors to come in and teach DWI or smoking cessation programs, are these expenses eligible?
Yes, these expenses are eligible as prevention programs and are authorized in 25 Tex. Admin. Code § 102.3(b)(1)(E).
May the county include the salary and benefits of the indigent health care workers who process the claims and administer the program?
Yes, you can include the entire salary and benefits amount if this is the person’s full time job. If the judge’s secretary or treasurer provides this service, then only a percentage of the salary and benefits may be reported, based on how much time is spent performing indigent health care duties.
Does the rabies control program funded by the county count as a health care expenditure?
No, although it is a prevention program it would fall under the same category as an environmental program such as mosquito control.
Is the expense for an animal head, which is sent off for a rabies determination, eligible?
No, that is not eligible; however, expenditures associated with a physician’s exam of the individual who was bitten are eligible.
Do the health care premiums that the county pays for its employees count as an eligible expenditure?
Yes. However, only the health care premiums associated with employees who are engaged in patient health care or other health care services are eligible.
Can you count the amount of a bond payment you make on a portion of a building that is used as a health care facility or clinic, even if it is located within the jail?
Yes, the payment is eligible to the extent that you set aside a facility or clinic in the jail and you can demonstrate either the capital expenditure attributable to that facility or the square footage of the jail that is used for inmate health care. This counts as part of your total jail health care expenditure. Any reimbursements for inmate health care will need to be deducted before you submit the expenditure statement.
May a county claim reimbursement for meals and lodging which it has paid on behalf of its indigent residents whom they referred to out-of-town providers for outpatient health care services?
Yes, some counties refer clients to UTMB Health, MD Anderson Cancer Center, or other institutions for several consecutive days of outpatient treatments, such as chemotherapy, and pay for their out-of-town meals and lodging. These expenditures, as well as payments for transportation, are eligible.
What kinds of expenditures can be reported as overhead costs for a health care facility?
Eligible overhead costs refer to non-labor expenses required to operate a health care facility (e.g. utilities, internet service, building insurance). Ineligible overhead costs include expenses for repair, maintenance, or operations where labor is involved (e.g. janitorial service, pest control, landscaping, grounds maintenance, elevator maintenance, HVAC service).
County Jail, Sheriff, & Prisoner Information
May a county include the salary and benefits of the nurse in a county jail?
Yes, under 25 Tex. Admin. Code § 102.3(b)(1)(J), the county may include employee salary and benefits to the extent the employee is engaged in patient health care or other health care services. If you are holding inmates for another political subdivision and you are receiving payment from that political subdivision which covers health care expenditures, you will need to subtract that amount from your total jail health care expenditures.
If a county hires a private contractor to provide inmate medical care, would it be considered an eligible expenditure?
Yes, the county can claim the contract amount.
May a county include drug testing for the sheriff’s department personnel?
No, the expense must be related to health care for the general public or the inmates of the county jail.
Can the expense of mental competency hearings or mental health commitments in the court system be included as a possible expense?
No, court costs and deputy sheriff’s time spent transporting a prisoner to and from his/her court hearings are not considered direct health care services. Expenditures associated with the examination by a physician to determine if an individual is in need of mental health care is eligible. The transportation cost for an individual to be examined or treated is also eligible.
Are salaries and per mile transportation charges eligible?
Yes, salaries, benefits, and per mile transportation charges are eligible if they involve the provision of health care services. If jail personnel average twice a month transporting of persons for medical care, for example, the equivalent proportion of their salary and benefits can be counted as a health care transportation expense. You could not count the entire amount. Also, if half of the time the vehicle is used to carry individuals for health evaluations or treatment and the other half of the time the vehicle is used to carry persons to TDJC, for example, you can count the half of the cost of transportation expenditures that are attributable to health evaluations/treatment. If asked for documentation of these expenditures, the county will need to describe the overall arrangement and justify it on a reasonable basis.
Can the salary and benefits of an officer who provides security while an inmate is in a health care facility be included?
No, inmates are maintained under security regardless of whether they are in a health care facility or in jail. However, the transportation cost of inmates to/from a health care facility is eligible.
If you have a Drug Abuse Resistance Education (DARE) program that is administered by one of the officers in the sheriff’s department whose sole duty is to run the DARE program, can you count the money spent on the program, including the salary and benefits?
Yes, DARE is a drug prevention program, which falls under 25 Tex. Admin. Code § 102.3(b)(1)(E). Expenditures related to the DARE program should be reported under category C4, Other Health Care Outreach and Prevention Efforts. However, if you receive any grant money from another source for the DARE program, you would need to subtract that amount from your total expenditures.
Are unreimbursed health care expenditures for adults or juveniles that are on probation or otherwise not in the jail system eligible?
Yes, however, these expenditures must be reported under category A or category C, whichever is applicable. These expenditures should not be reported under category B. Category B should reflect unreimbursed expenditures for health care services (medical, dental, psychiatric, etc.) for adults or juveniles that are in the jail system, including juvenile detention, boot camp, lockup, jail, or prison. Costs related to the criminal court system are not eligible.
Hospital District & County Information
If you have a hospital district that does not cover the entire county, is the hospital district responsible for claiming jail health care?
No, the county will file its own report and will include indigent health care expenditures in the other parts of the county as well as all county monies spent on jail health care.
If a county has a hospital district that covers the entire county, which entity will count the unreimbursed health care expenditures for inmates of the county jail – the county or the hospital district?
The hospital district will obtain the amount spent by the county and report it on the hospital district expenditure statement. The hospital district will receive a pro rata share and should give the county the proportion that applies to the amount that was spent by the county on inmate health care. The majority of the time, the hospital district will be solely responsible for inmate health care and this expense is not reflected in the county budget. The hospital district covers the expense for inmate health care in the amount of taxes it collects. The hospital district cannot include the cost of inmate health care that it provides on behalf of the county for which the county does not pay. Only jail health care expenditures out of the county’s budget are claimable.
What expenditures may be claimed by a political subdivision that has sold its public hospital to a private company?
Note the following provision in 25 Tex. Admin. Code § 102.3(e) for the distribution of tobacco settlement proceeds to political subdivisions: “(1) When a political subdivision has sold or leased its public health care facility(s) [sic] and accepted an agreement from the new owner or lessee of the facility(s) [sic] to provide indigent health care services, the political subdivision is receiving contracted services in lieu of cash as consideration for the sale or lease of the facility(s) [sic]. In submitting its expenditure statement for the distribution, the political subdivision may claim the value of the health care services for indigent residents of the political subdivision performed by the purchaser or lessee of the facility as if they had been reimbursed using either the Medicaid Diagnosis Related Group (DRG) for the individual patients or the Medicaid interim rate for the facility. (2) When a political subdivision has sold or leased its public health care facility(s) [sic] and accepted profits or payments in consideration of the sale or lease, additional non-tax operating funds may result from the profits or payments attributable to the sale or lease. These profits or payments may be used to fund ongoing operations, indigent care obligations, or other statutorily authorized expenditures not otherwise funded by taxes. The profits or payments from the sale or lease that are expended on operations, indigent care, or other statutorily authorized expenditures in any given calendar year are countable, in addition to tax collections received by a hospital district, as unreimbursed expenditures under the agreement. As a result, the expenditures claimable by a political subdivision are increased by the amount of non-tax funding the political subdivision has spent from its accounts containing the profits or payments attributable to the sale or lease of the political subdivision’s public health care facility(s) [sic], including the interest or investment proceeds from such profits or payments.”
Who submits an expenditure statement when a new hospital district comes into existence in the middle of the calendar year?
The county in which the hospital district is located should submit an expenditure statement for the period January 1 through the day prior to the effective date of the establishment of the hospital district. The hospital district should submit an expenditure statement for the period beginning on the date the hospital district was created through December 31. If the county transfers funds to the hospital district after the date the hospital district was established, the county cannot claim these monies on its expenditure statement.
Please clarify the definition of “total amount of taxes collected by the hospital district” as stated on the hospital district expenditure statement. If a hospital district collects both property taxes and sales taxes, should the total of both taxes collected during the calendar year be reported or only property taxes?
You should report any taxes collected on behalf of the hospital district, including delinquent taxes and any penalties and interest you collect related to your taxes. Fees associated with collecting taxes (e.g. attorney fees) are not taxes and should not be reported UNLESS they are passed along to the taxpayer and included in the total amount of taxes collected. Refunds for overpayment of taxes are not eligible.
Please clarify category B (Unreimbursed County Expenditures for Jail Health Care Services) on the hospital district expenditure statement.
If a county wholly located within a hospital district has spent funds out of its own budget for jail health care, then the county would report this amount to the hospital district. The hospital district would then include this amount on its expenditure statement. Expenditures for services such as transportation of inmates to doctor appointments can be included. The relevant portion of the salary and benefits of a deputy sheriff who transports inmates to doctor appointments can also be included. Also any medications, dental appointments, nursing time, etc., are eligible. However, if the county receives payment for the inmates’ care from another county, for example, that payment would have to be subtracted from the claimed cost. In addition, the hospital district cannot include the cost of inmate health care that it provides on behalf of the county and for which the county does not pay. Only jail health care expenditures out of the county’s budget are claimable. A county not wholly located within a hospital district may report the county’s unreimbursed expenditures for jail health care services on the county expenditure statement.