Skip to content

MassRetirees.com

Increase font size  Decrease font size  Default font size 
You are here:   Home arrow Healthcare arrow Summit Meeting Warns Of Healthcare Costs
Summit Meeting Warns Of Healthcare Costs PDF Print E-mail
SEPTEMBER 2005 - State/Local Governments Must Prepare In Advance - According to healthcare financial leaders, our state and local governments must now prepare to meet future healthcare costs for their retirees.

A summit forum, sponsored by the Public Employee Retirement Administration Commission (PERAC) this June 28, served as a wakeup call for the budget directors of both the Commonwealth and its cities and towns.

The attention now being focused on the issue of retiree healthcare costs comes in light of soon to be implemented national accounting standards that require state and local governments to identify the financial liability of retiree insurance plans.

In simple terms, unless some type of advance health insurance funding mechanism is put in place, similar to our pension funding plan, we will find ourselves in a dilemma, whereby lowered bond ratings will put us in the same bind that unfunded pension liabilities caused 20 years ago.

Although our Association has been warning public officials of the new Government Accounting Standard Board (GASB, pronounced GAZBEE) rules which will shortly take effect, the PERAC forum, held at Holy Cross College, was the first time a state official openly spoke out.
As it turns out, state Comptroller Martin Benison, the keynote forum speaker, not only clarified the effect of GASB, but importantly, explained that state officials, including Governor Romney, have been working on a plan to present to the Legislature this coming January.

One of the possible revenue sources that Benison mentioned is the Medicare Part D (Drugs) money that Medicare will be sending the state as an incentive to maintain prescription drug coverage in the Medicare supplement plans for its retirees. Because this is a money saver for Medicare, the feds are willing to pay the state the subsidy worth between $25-$30 million a year.

Association officials had targeted the Medicare Part D subsidy to fund the Medicare Part B reimbursement that had been previously lost during the Swift Administration in 2002. While observers feel that it is a good bet that this same money could end up as a centerpiece of a GASB funding plan, the Association will continue to push for use of the subsidy to refund Medicare Part B.

Local Funding Legislation Planned

The majority of the attendees at the GASB forum were fiscal representatives from the cities and towns, including local retirement boards. Although the state's unfunded insurance liabilities could run upwards of $10 billion, local governments are in the same bind, with individual unfunded liabilities in the millions and even billions.

Benison did indicate that the state will also draft legislation that could serve as a model for local governments, rather than each community filing its own legislation. Local leaders are also eyeing the federal Medicare Part D subsidy as seed money to go towards meeting the new funding obligations. Again, Association officials had hoped the money would be used to offset the cost of Medicare Part B.

The drain on tax revenues to meet the requirements of GASB will make it even more difficult to finance new additional pension benefits at all levels of government. Association officers, as well as retirement board members, are up to the challenge.

"City reserves are extremely tight," said Larry Curran, chairman of the Boston Retirement Board. "Taking on a new obligation of the magnitude of the GASB regulations, on top of our current pension funding schedule, will certainly make new benefits, such as a higher COLA base, that much more difficult, but not impossible."

 
< Prev   Next >