- Most retirees will get PPACA subsidies (and CA could even offer up some small medical premium stipend as well at a fraction of the cost of actual coverage);
- California alleviates its budget disaster;
- Fiscally responsible states can pay for ones with unfunded, fantasy-land, retiree promises;
This is David Walker witing in the USA Today:
We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office (GAO) makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060. A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees. These largely unfunded obligations are similar to the pressures on the federal government to fulfill its unrealistic Medicare promises.
But there is a critical difference when it comes to how state and local governments can approach these obligations compared to the federal government. State and local governments can't print money and typically have "balanced budget" requirements. More often than not, retiree health benefits are not guaranteed under state constitutions, are not insured, and are not protected by federal law, which means the systems in place can be changed.
States that offer extremely generous health benefits for government retirees, and which have little to no pre-funding for those benefits, could choose to move their retirees into the Affordable Care Act's new exchanges. State and local governments would likely continue to contribute by paying some premium support to individual retirees for healthcare, but the federal government and/or participants in the exchanges would pick up much of the tab. For these states, the exchanges offer a chance to shore up their finances and relieve state taxpayers of some of the looming burden of financing all those retirees. It could be a huge opportunity for states and localities in desperate need of fixing their long-term finances, and one that they should seriously consider in the coming months. ...
What does it mean for taxpayers? ... A significant portion of the tab would be passed on to the federal government. But the overall tax burden will shift, and in ways that Americans in other more fiscally responsible states may not appreciate. Since the exchanges are federally sponsored, much of their cost will ultimately be shared among all the nation's taxpayers. So residents in those states who push retirees onto the exchanges will get to off-load some of their financial burden to the rest of us.
Moreover, the cost of the exchanges could grow precisely because more retirees are joining the pool. And if young people forgo the exchanges in large numbers, it will put upward pressure on the total costs and related insurance premiums over time.
