State can offload retiree health costs on Obamacare

June 8, 2013

By Chris Reed

john-chiangOne of the best reasons to snort with derision over Gov. Jerry Brown’s claim to have whipped the state budget into shape is his decision to simply ignore the crisis posed by cost of unfunded health benefits for state retirees. This is from state Controller John Chiang in February:

“The unfunded actuarial accrued liability of providing health and dental benefits for state retirees is projected to be $63.84 billion over 30 years. ‘The current pay-as-we-go model of funding retiree health benefits is short-sighted and a recipe for undermining the fiscal health of future generations of Californians,’ Chiang said.  ‘However, today’s challenge won’t necessarily become tomorrow’s crisis if policymakers can muster the fiscal discipline to invest now so that we can pay tens of billions of dollars less later.'”

Yet another absurd flaw in the Affordable Care Act

So much for the controller’s plea. Brown includes zip for retiree health care in his 2013-14 budget. But maybe Jerry’s figured out something that only a USA Today columnist appears to have noticed so far: Obamacare is so incompetently crafted that it could allow states to offload retiree health-care obligations onto federal taxpayers.


“We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office (GAO) makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060. A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees. These largely unfunded obligations are similar to the pressures on the federal government to fulfill its unrealistic Medicare promises.

“But there is a critical difference when it comes to how state and local governments can approach these obligations compared to the federal government. State and local governments can’t print money and typically have balanced budget requirements. More often than not, retiree health benefits are not guaranteed under state constitutions, are not insured, and are not protected by federal law, which means the systems in place can be changed.

“States that offer extremely generous health benefits for government retirees, and which have little to no pre-funding for those benefits, could choose to move their retirees into the Affordable Care Act’s new exchanges. State and local governments would likely continue to contribute by paying some premium support to individual retirees for healthcare, but the federal government and/or participants in the exchanges would pick up much of the tab. For these states, the exchanges offer a chance to shore up their finances and relieve state taxpayers of some of the looming burden of financing all those retirees. It could be a huge opportunity for states and localities in desperate need of fixing their long-term finances, and one that they should seriously consider in the coming months.”

The poster child for Obamacare? More like the canary in a coal mine

This is richly hilarious. But other states — at least well-run states that don’t need to slough off their responsibilities on the federal government — aren’t likely to love bailing out California. Even then, the Golden State has a secret weapon: the Obama administration’s intent to make California the example that sells the rest of America on the glory that is Obamacare. This is from a Thursday online post by Sandhya Somashekhar and Sarah Kliff on the Washington Post Wonkblog:

“President Obama will try to allay anxiety over his signature health-care law Friday during a visit to California, a state that the White House is highlighting as proof that the law is working.”

The Post bloggers’ definition of “working,” of course, is built on the lies told by California Covered about low insurance premiums. But maybe California will get lots of love in the implementation of Obamacare in coming years if the White House really wants the Golden State as poster child for the law.

So maybe Jerry Brown really should think about trying to shift the $64 billion in unfunded state retiree health care costs to the federal government. That can be California’s price for being the canary in the coal mine — not the poster child — for Obamacare.


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