Our conservative estimates for Medicaid support incurred in New Mexico between 1964 and 1997 suggest costs totaling $1.2 billion. We projected future Medicaid support costs to New Mexico applying a 5% annual growth rate. These costs (1998-2025) to New Mexico sum to over $4.3 billion.

The Master Settlement Agreement does not come close to compensating New Mexicans for the public medical costs attributable to tobacco-related illnesses and disease. In the best case, the state will receive $1.2 billion (in 1998 dollars) over the next 25 years due to the settlement. Current indicators suggest it is unlikely New Mexico will ever receive this amount of money1. Due to the recent increases in youth smoking, we assume it unlikely smoking will decrease significantly over the next 25 years.

The graphic below compares adjusted baseline payments (black) to projected Medicaid costs (green) for the years 1998 to 2025. The yellow area shows the losses per year. Settlement payments never fully reimburse the state for Medicaid support costs. Further, over the 25 years, the gap continually widens. We conclude the Master Settlement Agreement will cost New Mexicans approximately $2.5 billion in the first 25 years of the deal. We point out that the MSA continues indefinitely, and likely, so will the losses.