CHARLOTTE, N.C. (AP) -- North Carolina spends millions of dollars every year in treating smoking-related illnesses, but currently spends none of its tobacco settlement money on smoking prevention, a new reports says.

If the state would spend more on smoking prevention, adult smoking could drop 10 percent -- saving the state's cash-strapped Medicaid program $4.6 million a year, according to the report released Wednesday by the American Legacy Foundation, a Washington, D.C.-based group. Health policy experts say the report is perhaps the first to quantify what states could save in if they beef up smoking cessation efforts. "This report is a wake-up call for the states," said Cheryl Healton, the foundation's CEO. The foundation was created by the 1998 settlement agreement between tobacco companies and attorneys general from 46 states that claimed smokers' medical bills drained their Medicaid budgets. The settlement called for cigarette makers to pay $206 billion over 25 years. North Carolina's cut is $4.6 billion. States have used the money to build roads, fill budget holes and do other things. But few have spent much on programs to stop kids and adults from smoking, foundation officials said. North Carolina currently spends no settlement funds on smoking prevention, tying it with Michigan and Tennessee for last place in a ranking by the Campaign for Tobacco-Free Kids in Washington, D.C. But North Carolina's ranking may soon change. The state-appointed Health and Wellness Trust Fund Commission, which decides how to spend settlement funds, recently allocated $5 million a year to teen-smoking prevention. Wednesday's report is based on state Medicaid expenditures. Medicaid is the insurance program that pays medical bills for the poor and disabled. Some figures are outdated. For example, researchers estimated total North Carolina Medicaid expenditures this year at $5.1 billion. Based on that figure, the report said $263 million of that is attributed to smoking. But state Medicaid expenditures actually are $6 billion this year, so the report's other numbers would be higher if adjusted to the latest data. Medicaid claims don't say which bills are smoking-related, so the foundation had to estimate how much was from smoking, basing it on which diseases are linked to smoking. Still, the estimates probably are close, officials in both states said. Healton said the report proves "spending a dollar today to reduce smoking could save the state as much as $3 down the road, and countless lives." Her statement was based on savings seen in California, which has been among the most aggressive states in tobacco control efforts. The report did not say how much North Carolina or other states must spend to reduce adult smoking to the point of achieving the predicted Medicaid savings.

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