Government pension liabilities have been in the news, but an even more urgent problem is the skyrocketing cost of health benefits. That's the gist of a new study by Josh Barro of the Manhattan Institute which finds that health-care costs for local and state governments have tripled in 15 years, outpacing the growth in private insurance premiums by about 20%.
Governments typically offer a choice of several managed care plans that include comprehensive medical coverage and supplemental benefits like vision and dental care. Governments are also three times more likely than business to provide retiree health insurance. Many companies stopped covering retirees in the 1990s when the Financial Accounting Standards Board began requiring them to report these liabilities on their balance sheets. Governments have since accrued a $1 trillion unfunded liability.
Businesses are passing some of the rising premium costs to workers, but governments are reluctant to do the same...