How Local Governments Are Addressing Retiree Health Care Funding

/PRNewswire/ -- A new issue brief from the Center for State and Local Government Excellence finds that the economy has slowed the ability of local governments to address long-term funding of their retiree health care obligations.

The brief follows up on a 2009 survey in which 206 local governments indicated they were likely to adopt a long-term strategy to strengthen their retiree health care funding, including:

-- establishing a Section 115 trust (governmental); medical subaccount
[401(h)]; or Voluntary Employee Beneficiary Association (VEBA) trust
[501(c)(9)];
-- issuing OPEB bonds;
-- increasing the years of service for vesting for RHC;
-- increasing the age at which RHC is available;
-- terminating retiree health care for all new hires.


Since then, the economy, insufficient revenues, and competing budget priorities have posed the greatest impediment to their plans.

The new brief finds that many jurisdictions are making sweeping changes in their retiree health care plans:

-- 36 percent have increased or plan to increase the years of service
required to vest.
-- 11 percent have increased the retirement age.
-- 39 percent have eliminated or plan to eliminate retiree health
benefits for new hires.

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Georgia's New Healthcare Budgets Precariously Balanced

In order to tackle the large deficit and significant revenue declines while still protecting Medicaid, lawmakers enacted a temporary hospital provider fee to prevent significant rate cuts to hospitals, doctors, nursing homes, and other health care providers and balance the budget for the upcoming fiscal year. This and other aspects of the healthcare budgets are discussed in the Georgia Budget & Policy Institute's latest analysis: Lawmakers Protect Medicaid, Serious Funding Gaps Loom for 2012.

Thanks in large part to the enhanced federal Medicaid funding made available to all states through the Recovery Act in 2009, Georgia is not implementing major cuts to Medicaid eligibility or services in FY 2011.

But now Georgia is in a tough position.

Georgia is among 30 states that have built its state budget assuming that enhanced Medicaid funding will be available through next June, when our budget year ends. The U.S. Congress is currently considering legislation to extend this funding until then, but unless they act soon to extend the enhanced Medicaid funding, Georgia's budget will be short $375 million.

If, instead of finding additional state revenue, lawmakers cut the Medicaid program to save $375 million, the state would also forgo more than $650 million in federal funds that are in the state's Medicaid base budget.

"The Great Recession has caused more Georgians to seek help for their families through Medicaid and losing a billion dollars would devastate a Medicaid budget that already relies significantly on temporary funding in FY 2011," said Timothy Sweeney, the Institute's senior healthcare analyst and author of the healthcare budget analysis.

"The cuts necessary to balance the budget without these funds would be devastating for individual Georgians and for the healthcare sector that depend on an adequately funded Medicaid program. In addition, many local economies rely significantly on their healthcare industry."

Other notable changes lawmakers made for this upcoming fiscal year are:

*10% cut to state grants to county health departments
* Increasing premiums families pay for children in PeachCare
*Increased funding for mental health services

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