Weight of Healthcare Threatening Government As Well As Corporate
> 3/13/2006 9:24:50 AM

As has been discussed before, here and here, changes are on the way in the field of health coverage. Unfortunately, according to a recent story from Barron's (subscription needed) detailing the impending crunch that local, state and federal government agencies are already starting to feel. In terms of financial implications, the deal breaker could come this December when a law requiring any government with a budget of $100 million or more to disclose the results of calculations regarding the cost of health care over the next 30 years.

Many problems require solutions if something is to be done about ballooning costs in the public sector. The article notes:
[Public worker's] retirement packages let state employees stop working at an earlier age. Many retire when they're 50 to 55 years old and thus use their health plans much longer than private-sector employees do. Johnson notes that states are lax in tracking the work habits of their retirees, letting them take part-time jobs and "double-dip." This gives state workers an incentive to retire as soon as they can.

It should be noted however, that the burden for answering for these problems will fall jointly on management and labor. If concessions are not made, the amount of salary that would have to be withheld simply to pay for healthcare costs would be astronomical.

One potential solution is laid out in greater detail, but even it has flaws:
Some states are considering issuing retiree-health obligation bonds, modeled on pension-obligation bonds. The latter allow states to pay down their pension liabilities early and save money. The interest paid to the bond holders is less than the pension obligation would have been if it hadn't been pre-funded with earning assets. But, while forecasting the future liabilities of pension plans is relatively easy, predicting health-care liabilities is anything but.

This is just one more aspect of the shifting nature of health care which must be watched. There are going to be changes on the way, and every citizen should know how they are going to be effective so that they can plan accordingly.

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