Retiree healthcare in trouble
Charles Chieppo, a research fellow at the Ash Center of the Harvard Kennedy School, is a regular contributor to “Governing’s” blog.
Pensions are just part of the problem. Health care is another dark cloud circling.
As state and local governments focus on how to fix their pension problems, a recent report demonstrates the dramatic measures large American cities will have to take to address another issue: woefully underfunded retiree health-care liabilities.
According to Charles Chieppo, a research fellow at the Ash Center of the Harvard Kennedy School, the overarching lesson of the study from ElderBranch, an online information portal that helps people find and evaluate long-term-care providers, is to address the retiree health-care issue before it gets out of hand.
For many cities, it’s already too late. In fiscal 2012, only five of the nation’s 25 largest cities had set aside 95 percent of their annual required contribution (ARC) — the amount that would put them on track to pay for the health-care costs of all current and future retirees over 30 years. More than half the cities contributed less than half of ARC. That leaves most large cities with three distasteful options: Raise taxes, cut spending and/or reduce health benefits.
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