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Wisconsin Faces Massive Unfunded Health Care Liabilities

October 10, 2018

Twenty-five Wisconsin cities face a total of nearly $2.25 billion in unfunded liabilities, many of which are related to health care benefits promised to retired workers, a Wisconsin Policy Forum report shows.

Some Wisconsin cities are obligated to pay several thousand dollars per resident, the report states.

Recent estimates indicate the aver- age 65-year-old woman will spend $214,565 on health care throughout retirement and the average 65-year-old man will spend $189,687.

‘On the Verge of Insolvency’

Thurston Powers, a legislative analyst with the Center for State Fiscal Reform at the American Legislative Exchange Council (ALEC), says costs of other post- employment benefits (OPEB)—benefits besides pensions a state or local government employee receives as part of his or her package of retirement benefits—can fluctuate wildly from year to year.

“Most OPEBs are operated as pay-as-you-go and thus subject to large chang- es in year to year annual required contributions,” Powers said. “Cities compound all these problems by hav- ing smaller participant pools, making swings like a 24 percent increase in unfunded liabilities unsurprising.

“There are many municipalities that are on the verge of insolvency due to legacy costs like pension, OPEBs, and bonds, and it’s not clear how they will fare the next recession, especially if states aren’t in a position to bail them out,” Powers said.

Regulatory Price Hikes

Jim Martin, founder and chairman of the 60 Plus Association, says the Affordable Care Act and regulatory bodies such as the Independent Patient Advisory Boards are driving up costs for everybody and making it increasingly difficult for seniors to receive good health care.

“The fact is seniors are getting less care for more costs, and market-based reforms can help us save the system,” Martin said. “You can’t keep throwing good money at a bad system because there’s only so much money from tax- payers. We don’t need unelected officials like Independent Payment Advisory Board members telling us what medications we should have access to. You should be able to purchase insurance across state lines and let competition prevail to bring down the cost of insurance.”

Trump Reforms Helping

Katebi says some of the reforms Martin seeks are happening now.

“Several of the changes to the health insurance landscape made by the Trump administration and proposed by Congress—such as expanding access to association health plans, making short- term health plans last longer, and the introduction of legislation to make it easier to contribute to health savings accounts—should help alleviate at least some of the worry retirees face,” Katebi said.

INTERNET INFO:

"Promises to Keep: Unfunded liabilities improve but still pose challenge for many cities,” The Wisconsin Taxpayer, May 2018: https://wispolicyforum.org/ wp-content/uploads/2018/07/ Taxpayer_1805.pdf

Article Tags
Health Care
Author
Brandon Best writes from Cedarville, Ohio.
bbest@cedarville.edu