Monday, October 16, 2006
Time Bomb
Retiree health benefits for state and local government employees are "a $1.4 trillion fiscal time bomb," according to a Cato Institute analysis, Cato tax policy director Chris Edwards and Cato senior fellow Jagadeesh Gokhale write in a Wall Street Journal opinion piece. Cato's analysis, based on a review of unfunded health care costs in 16 states and 11 local governments, finds that state and local governments' future health care obligations are "twice the reported underfunding," the authors write. They note that "a new Government Accounting Standards Board rule will kick in next year and reveal exactly how large this problem is" (Edwards/Gokhale, Wall Street Journal, 10/12). The rule directs governments over the next 30 years to document in their financial statements the full cost of health benefits for current and future retirees beginning at the end of 2006. Governments also must show a plan to cover such costs (Kaiser Daily Health Policy Report, 1/30). Edwards and Gokhale write, "The key problem is that the great majority of state and local governments finance their retiree health benefits on a pay-as-you-go basis," which in coming years "will create pressure to raise taxes as baby boomers age and government employees retire in droves." According to the authors, "The only good options are to cut benefits and move state and local retirement plans to a prefunded basis with personal savings plans." They conclude, "Every year that policy makers put off the tough decisions, the hole gets bigger. Hopefully, the new GASB rules will prompt them to enact the reforms needed to avert job-destroying tax increases on the next generation" (Wall Street Journal, 10/12).
"Reprinted with permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.
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Unfunded Health Care Liability For Retirees Is A "Fiscal Time Bomb," Opinion Piece States
16 Oct 2006Retiree health benefits for state and local government employees are "a $1.4 trillion fiscal time bomb," according to a Cato Institute analysis, Cato tax policy director Chris Edwards and Cato senior fellow Jagadeesh Gokhale write in a Wall Street Journal opinion piece. Cato's analysis, based on a review of unfunded health care costs in 16 states and 11 local governments, finds that state and local governments' future health care obligations are "twice the reported underfunding," the authors write. They note that "a new Government Accounting Standards Board rule will kick in next year and reveal exactly how large this problem is" (Edwards/Gokhale, Wall Street Journal, 10/12). The rule directs governments over the next 30 years to document in their financial statements the full cost of health benefits for current and future retirees beginning at the end of 2006. Governments also must show a plan to cover such costs (Kaiser Daily Health Policy Report, 1/30). Edwards and Gokhale write, "The key problem is that the great majority of state and local governments finance their retiree health benefits on a pay-as-you-go basis," which in coming years "will create pressure to raise taxes as baby boomers age and government employees retire in droves." According to the authors, "The only good options are to cut benefits and move state and local retirement plans to a prefunded basis with personal savings plans." They conclude, "Every year that policy makers put off the tough decisions, the hole gets bigger. Hopefully, the new GASB rules will prompt them to enact the reforms needed to avert job-destroying tax increases on the next generation" (Wall Street Journal, 10/12).
"Reprinted with permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation . © 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.
Article URL: http://www.medicalnewstoday.com/medicalnews.php?newsid=54059
