There is a truly terrifying problem in the US that no one has paid attention to until now. Health care costs for public-sector retirees may represent a total cost of $1 trillion, according to Mercer Human Resources.
State and local governments are facing a requirement to report their future health care cost liabilities within the next three years. You will hear the explosion of public outrage and feel the impact on future state and local taxes shortly after individual governments announce the results of their analyses. And it will be ugly.
According to a New York Times article featuring Duluth Minn.,
“For years, governments have been promising generous medical benefits to millions of schoolteachers, firefighters and other employees when they retire, yet experts say that virtually none of these governments have kept track of the mounting price tag. The usual practice is to budget for health care a year at a time, and to leave the rest for the future.
Off the government balance sheets – out of sight and out of mind – those obligations have been ballooning as health care costs have spiraled and as the baby-boom generation has approached retirement. And now the accounting rulemaker for the public sector, the Governmental Accounting Standards Board, says it is time for every government to do what Duluth has done: to come to grips with the total value of its promises, and to report it to their taxpayers and bondholders.
My home state, Connecticut, is one of those that budget for health care on a pay-as-you-go-basis. I have been encouraging our local town officials to come to grips with this problem for two years, to no avail. So, it is encouraging that we are being forced to do so. Disappointing that we could not act like adults and do this on our own, but better forced to do it now than later.
Meanwhile, Medicaid and Medicare are the subject of a major fight over $10-50 billion in budget cuts. This is truly tweaking around the edges, and almost a waste of time compared to the local and state problems with health care liabilities. Clearly, we need more than accounting tricks and small benefit design changes if we are to adequately address the nation’s health care cost and access problem
What does this mean for you?
Higher taxes.
Dec
12
