The cost of doing nothing, part two

The Boston Globe had a two-part series on the cost of health insurance for local governments in Massachusetts that began on Sunday.  

Health care costs went from 8% of local city and town budgets in 1999 to 14% over 2009.  This creates a real crisis of crowd-out – that 6% of the budget now used to pay for health care is no longer available for the other things cities and towns do – largely schools, police, fire departments, and roads. Cities and towns provide a great illustration of the threat posed by massive health care cost increases.

The Globe articles focus on the role that unions and local town politics  have played in the burgeoning health care costs.  Some municipalities don’t force eligible retirees over 65 to use Medicare as primary insurance ($5m bill for Boston alone), many offer “Cadillac plans” that have very low copayments, and some even still offer indemnity health insurance plans.  Few have joined the state’s purchasing agency, the Group Insurance Commissioner (GIC). State law makes it easy for a single union to stymie a town’s transition to the GIC, and even requires a municipal vote to require transition to Medicare.   Many towns offer lifetime health coverage to those who have held office or been on commissions for as little as 10 years. Government retirees and employees vote, and therefore these requirements are difficult to meet even if the alternative is to close the library,  lay off teachers,  and stop repairing the potholes.

The Globe has editorialized about the need to reform state laws that make it difficult for cities and towns to address these cost  increases through cost-shifting to current and former employees.

This series is another good example of how our current system with its rapidly increasing costs is unsustainable.   Suggested changes in state law are prudent – but a real solution to this crisis will require meaningful health care reform that will lead to lower rates of health care cost increase.