At a recent town financial forum in Belmont, “multiple residents” questioned whether we should continue to promise subsidized health plans for retirees from state and local government jobs.
Massachusetts public employers face a combined liability of approximately $50 billion for promises made already. Retiree health care costs are growing faster than other areas of the budget and are crowding out other priorities. Well under 20% of private sector employees have any expectation of employer-subsidized health benefits in retirement and very few can expect benefits as generous as those in the public sector. Finally, although most older citizens still spend a lot on health care, we do have a relatively strong safety net, given our recent health care reforms.
I’d like to sketch a possible response to the problem and get some feedback: (1) We should protect retirement health care for all current retirees and protect the expectation of retirement health care for all current state and local employees. (2) We should abolish the expectation of employer-subsidized retirement health care for new state and local employees. (3) We should allow individual employee bargaining units to negotiate employer contributions to health care savings accounts. (4) We should provide a mechanism for municipalities to transfer to the state the risk of cost growth associated with existing employees and retirees.
A recent official state commission made a complex recommendation that would have abolished or reduced the expectation of benefit for some, but not all, existing employees. Affected employees asked with some reason, why us and why now? Many have taken lower paying jobs based on the benefits promises that the state had made to them. The commission’s recommendations fell flat in the last legislative session. The cleaner approach is to abolish the benefit outright for new employees, but to grandfather all existing employees and retirees.
In some physical jobs, employees need to retire before they reach Medicare eligibility at 65. To help give them good choices, we should allow them to bargain for supplementary employer payments into health care savings accounts. Localities will bear an increased current cost, but they will no longer face hard-to-estimate future liabilities.
Abolishing the expectation of retirement health benefits for employees who start after the effective date of the act, will not lead to any immediate savings. I would allow municipalities that shift retirees into the state’s Group Insurance Commission plan to elect to also transfer the growth in future costs to the state. The state cannot afford to outright take over the liability, but if the state had responsibility for managing the program, it could perhaps take responsibility for the cost growth. Managing health care costs generally is the central financial challenge for the state already. Municipalities shouldn’t have to juggle other priorities against costs that they have little control over.
I’d very much appreciate feedback. I am not sure where this issue will fit in the constellation of challenges that we face in the next legislative session, but I’d like to know how people feel about the issue.