The problem Illinoisans are beginning to see the dangers ofanother unfunded liability: free or subsidized health care for retired state workers. The state has liabilities of more than $100 bil- lion in health benets for state retirees duringthe next 30 years, yet it has set aside nothingto pay for them. 1 These unfunded liabilities are growing 2½ times faster than state revenues and, if left unreformed, will work in tandem with ris- ing pension costs to dramatically cut govern- ment services. One of those services is health care to the poor and disadvantaged. In Illinois, three general groups of people re- ceive free or subsidized health care: •The state’s poor, both children and adults; •The disabled and the elderly; and •Retired state employees, many who sit on million dollar pensions. The state simply cannot pay the health care costs of all these groups, and certainly not with the costs of the federal health reform, more com- monly known as ObamaCare, on the horizon. Generous health care coverage for retired state employees competes with resources for the steadily eroding services that Illinois’ poor re- ceive under Medicaid. The state’s budget woes and mismanagement of Medicaid already hav e led to low reimbursement rates and long pay- ment delays to doctors and hospitals, leaving the state’s most vulnerable population with few op- tions. 2-7 They must wait much longer to receive care, if they can get it at all. 8-9 With nowhere left to turn, Medicaid patients have no choice but to seek nonurgent care from hospital emergencyrooms. 10-11 The program’s mismanagement has created huge access barriers that only will wors- en in the coming years as more unpaid bills pile up and ObamaCare kicks in. 12-13 Meanwhile, many state retirees contribute little or nothing to their health insurance premiums. In fact, for the state’s largest retiree health pro- gram, the State Employee Group Insurance Pro- gram, retirees only contribute 9 percent toward their premiums. That’ s a lot less than other states, which require state retirees to pay six times that amount. 14 In the private sector, the vast majorityof retirees are not offered cov erage at all, and the few who are must pay the majority of their insurance costs. 15-16 Finally, to make matters worse, the state’s health coverage policies incentivize early retirement ofstate employees, signicantly driving up costs for the state. State politicians have a clear choice on the re- form of retiree health care costs. If they fail to act, they will continue to favor free Cadillac coverage for well-off state retirees, whil e the most vulnerable search for a doctor willing to see them. 17-18 The state’ s prioritization of retir- ees over core government services and the social safety net already has hurt many. As the cost ofproviding these generous benets continues to climb , it only will get worse. Jonathan Ingram is a Health Care Policy Analyst with the Illinois Policy Institute. Diagnosis: Disaster The $44 bill ion price tag of state retiree healt h insura ncee a l t h C a r e B r i e fF e b r u a r y 2 8 , 2 0 1 2
17
Embed
Diagnosis: Disaster - The $44 billion price tag of state retiree health insurance
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
8/2/2019 Diagnosis: Disaster - The $44 billion price tag of state retiree health insurance
10 Medicaid patients, on average, use emergency rooms twice
as often as privately insured and uninsured patients. See, e.g., National Center for Health Statistics, “Health, United States,2010: With special feature on death and dying,” Centers for
Disease Control and Prevention (2011), http://www.cdc.gov/nchs/data/hus/hus10.pdf.
11 Between 1997 and 2007, per-capita emergency room use
increased for Medicaid patients and decreased for uninsured and privately insured patients. Emergency room use for preventable
conditions was much higher for Medicaid patients than privately
insured and uninsured patients. See, e.g., Ning Tang et al.,“Trends and characteristics of US emergency department visits,
1997-2007,” Journal of the American Medical Association 304(6): 664-70 (2010), http://jama.ama-assn.org/
content/304/6/664.
12 Illinois will need to appropriate $3.1 billion more in scal year 2013 than in 2012 just to keep a record six-month
backlog and $2.4 billion in unpaid bills. Without reform or
additional appropriations, the state’s Medicaid program will be almost $5 billion in debt to hospitals and doctors. See, e.g.,
Jonathan Ingram, “Medicaid FAIL: Why cutting appropriations doesn’t control costs,” Illinois Policy Institute (2011), http://
illinoispolicy.org/uploads/les/MedicaidFAIL.pdf.
13 Illinois can expect to pay another $1.4 billion from state funds on Medicaid the rst year that ObamaCare’s massive
expansion of Medicaid kicks in. See, e.g., Jonathan Ingram,
“Overloaded: One in three Illinoisans on Medicaid by 2019?” Illinois Policy Institute (2011), http://illinoispolicy.org/
uploads/les/overloaded10-20.pdf.
14 Mercer Health & Benets LLC, “Retiree Healthcare Contributions,” Commission on Government Forecasting and
30 Author’s review of hundreds of school district collective
bargaining agreements. School districts pick up all or some of a
teacher’s pension contributions in 84 percent of school districts. See,e.g., Ted Dabrowski & Michael Wille, “Teachers’ pensions: Who’s
really paying?: Many teachers contribute nothing; taxpayers shoulder burden,” Illinois Policy Institute (2011), http://illinoispolicy.org/
uploads/les/teacherpensions10-13.pdf.
31 About 80 percent of the labor force work for employers with fewer than 500 employees. These small employers rarely offer
this coverage. About 20 percent of the labor force work for large employers. Only 25 percent of those large employers offer coverage.
When coverage is offered, retirees must pay more than half of the
cost of their premiums. See, e.g., Mercer Health & Benets LLC,“Retiree Healthcare Contributions,” Commission on Government
Forecasting and Accountability (2011), http://www.ilga.gov/commission/cgfa2006/Upload/2011-MAY-17MercerRetireeHeal
thcareContributions.pdf.
32 Author’s calculations based upon 2009 GASB No. 43and No. 45 actuarial valuations of SEGIP, TRIP and CIP, for
scal years 2012-41, historical trends in revenue component shares
for scal years 2002-11, and benchmarked retiree contributions.Figures assume a current retiree contribution trend of 9.1 percent
for SEGIP, 40.9 percent for TRIP and 38.4 percent for CIP.Figures also assume a benchmarked retiree contribution of 54
percent.
33 Author’s calculations based upon 2009 GASB No. 43and No. 45 actuarial valuations of SEGIP, TRIP and CIP, for
scal years 2012-41, historical trends in revenue component shares
for scal years 2002-11, and benchmarked retiree contributions.Figures assume a current retiree contribution trend of 9.1 percent
for SEGIP, 40.9 percent for TRIP and 38.4 percent for CIP.Figures also assume a benchmarked retiree contribution of 54
percent.
34 Author’s calculations based upon 2009 GASB No. 43and No. 45 actuarial valuations of SEGIP, TRIP and CIP, for
scal year 2041, historical trends in revenue component shares for
scal years 2002-11, and benchmarked retiree contributions.
35 Medicaid underfunding has left the state with $2.4 billion in
unpaid bills. Without reform, these unpaid bills likely will grow to
almost $5 billion by the end of scal year 2013. See, e.g., Jonathan Ingram, “Medicaid FAIL: Why cutting appropriations doesn’t
control costs,” Illinois Policy Institute (2011), http://illinoispolicy.org/uploads/les/MedicaidFAIL.pdf.
36 ObamaCare’s massive expansion of Medicaid will
cost the state more than $62.8 billion by 2041. See, e.g., Jagadeesh Gokhale, “The new health care law’s effect on state
Medicaid spending: A study of the ve most populous states,”
Cato Institute (2011), http://www.cato.org/pubs/wtpapers/
17 In general, state-provided health insurance benets for
employees and retirees are far more generous than the benets provided in the private sector. See, e.g., Josh Barro, “Cadillac
coverage: The high cost of public employee health benets,” Manhattan Institute (2011), http://www.manhattan-institute.org/
pdf/cr_65.pdf.
18 About 80 percent of the labor force work for employers with fewer than 500 employees. These small employers rarely offer retiree
coverage at all. About 20 percent of the labor force work for large
employers. Only 25 percent of those large employers offer coverage.When coverage is offered, retirees must pay more than half of the
cost of their premiums. See, e.g., Mercer Health & Benets LLC,“Retiree Healthcare Contributions,” Commission on Government
Forecasting and Accountability (2011), http://www.ilga.gov/commission/cgfa2006/Upload/2011-MAY-17MercerRetireeHeal
thcareContributions.pdf.
19 Author’s calculations based upon 2009 GASB No. 43 and
No. 45 reporting of total members by status for SEGIP, TRIP and CIP.
20 Author’s calculations based upon 2009 GASB No. 43 and
No. 45 actuarial valuations for SEGIP, TRIP and CIP for scal years 2012-41.
21 This is substantially below the historical average of 7.1
percent a year.
22 Author’s calculations based upon 2009 GASB No. 43 and
No. 45 actuarial valuations for SEGIP, TRIP and CIP for scal
years 2012-41.
23 The total cost to taxpayers represents the total employer cost:
total liabilities less retiree contributions. While a portion of these costs is paid by payroll deductions from active employees in TRIP and CIP, these deductions often are picked up by local school districts
and community colleges.
24 Author’s calculations based upon 2009 GASB No. 43 and No. 45 actuarial valuations for SEGIP, TRIP and CIP.
25 GASB No. 43 and No. 45 actuarial valuations were
required for scal year 2011, but have not been completed as of the date of this publication.
26 Members of TRS and SURS receive the state contribution
starting at the fth year of service. Members of SERS receive the
state contribution starting at the eighth year of service. Members of GARS receive the state contribution starting at the fourth year of
service. Members of JRS receive the state contribution starting at the sixth year of service.
47 Author’s calculations based upon 2009 GASB No. 43
and No. 45 actuarial valuations of SEGIP, TRIP and CIP, for scal years 2012-41, historical trends in revenue component
shares for scal years 2002-11, and benchmarked retiree contributions. Figures assume a current retiree contribution trend of 9.1 percent for SEGIP, 40.9 percent for TRIP and 38.4
percent for CIP. Figures also assume a benchmarked retiree contribution of 45 percent.
48 Author’s calculations based upon historical GRF
expenditures for SEGIP, TRIP and CIP.
49 Author’s calculations based upon historical revenue growth for scal years 2002-10, indexed from scal year 2002, as
reported by the National Association of State Budget Ofcers.See, e.g., Brian Sigritz et al., “State expenditure r eport:
Examining scal 2009-2011 state spending,” National
Association of State Budget Ofcers (2011), http://nasbo.org/LinkClick.aspx?leticket=C3LJlSFxbdo%3d&tabid=79.
50 Author’s calculations based upon historical state-source
general revenue growth for scal years 2002-10, indexed from scal year 2002, as reported by the Commission on Government
Forecasting and Accountability. See, e.g., Dan R. Long, “FY 2012 economic forecast and revenue estimate and FY 2011
revenue update,” Commission on Government Forecasting and Accountability (2011), http://www.ilga.gov/commission/
cgfa2006/Upload/FY12econforecastrevestimate.pdf.
51 Author’s calculations based upon costs and enrollment gures for scal year 2011 in SEGIP, TRIP and CIP for
Medicare and non-Medicare retirees.
52 Author’s calculations based upon historical trends in per-member costs in TRIP and CIP for scal years 2002-11
for Medicare and non-Medicare retirees. HFS ofcials could not provide the 10-year historical data for per-member costs
in SEGIP for Medicare and non-Medicare retirees. In scal
year 2011, the cost gap between Medicare and non-Medicare retirees was slightly larger in SEGIP than in TRIP or CIP.
Accordingly, it is likely that SEGIP saw similar growth rates for Medicare and non-Medicare retirees.
53 Author’s calculations based upon per-member costs in
SEGIP, TRIP and CIP for scal year 2011, for Medicare and non-Medicare retirees.
54 Author’s calculations based upon historical trends in per-
member costs in TRIP and CIP for scal years 2002-11 for Medicare and non-Medicare retirees, indexed at 2002 levels.
55 Steven Nyce et al., “Does Retiree Health Insurance
Encourage Early Retirement?” National Bureau of Economic Research (2011), http://www.nber.org/papers/w17703.
56 About 25 percent of employers with 500 or more
employees offer health insurance coverage to pre-Medicare-eligible
StateMedicaidSpendingWP.pdf.
37 Members of TRS and SURS receive the state contribution
starting at the fth year of service. Members of SERS receive the state contribution starting at the eighth year of service. Members of
GARS receive the state contribution starting at the fourth year of service. Members of JRS receive the state contribution starting at the
44 About 54 percent of retirees with SEGIP coverage have household incomes greater than $60,000. See, e.g., Mercer Health
& Benets LLC, “Retiree Healthcare Contributions,” Commission on Government Forecasting and Accountability (2011), http://www.ilga.gov/commission/cgfa2006/Upload/2011-MAY-17Merc
erRetireeHealthcareContributions.pdf.
45 The median household income in Illinois is $50,761. See, e.g.,U.S. Census Bureau, “Median household income by state: 1984
to 2010,”Current Population Survey: 2010 Annual Social and Economic Supplement, http://www.census.gov/hhes/www/income/
data/historical/household/2010/H08_2010.xls.
46 Mercer Health & Benets LLC, “Retiree Healthcare Contributions,” Commission on Government Forecasting and
8/2/2019 Diagnosis: Disaster - The $44 billion price tag of state retiree health insurance