The state of Alabama has a generous retirement system for teachers and other public employees. After working for 25 years (regardless of age), you can retire. This has been a boon for teachers (by far the largest employee group in the state). The legislature was successful this past session in putting into place an increase in the employee match over the strong objections of the teachers. The problem was not the cost of the pension itself, which has been relatively secure as a result of investments on the behalf of the System. What will bankrupt us is the cost of health insurance. If a teacher retires at 47 (possible under the current system), he or she will be retired for 15 years longer than his or her working life. The health insurance product that is offered (PEEHIP) is a PPO. This means that the beneficiary pays a fixed amount and if he or she goes to a preferred provider there is little or no “skin in the game” for either one. As health care costs have risen, the premium paid by the retiree (about $4,000 annually for family coverage if not Medicare eligible) is only 30% of the total premium ($12,000 annually) with the rest paid by the state. Back when high health care costs were economic multipliers that were GOOD, a report identified that
…healthcare payments surpassed $1.4 billion and over $1.3 billion went to Alabama providers and facilities.
Now that health care costs (for PUBLIC EMPLOYEES) are bad
Alabama’s PEEHIP program needs an immediate comprehensive strategy for cost containment and pre-funding of PEEHIP benefits for future retirees. Of the three options available—raising taxes, reducing government spending, and reforming PEEHIP—only the latter two have the potential to both save the state money and keep the state’s economy from further harm.
I would argue that health care costs are what they are, they are very expensive for certain people in Alabama, and they are possibly most expensive for retired teachers. There are many things that we can do to reduce the cost of health care, but the first rule of change is that people have to want change for it to happen. In an editorial on the Kaiser Family Foundation website, Drew Altman talks about the realm of the possible. The regulations surrounding the Affordable Care Act are being written and put forward for public comment at a fairly rapid pace. As he points out
The regulations give states substantial flexibility in structuring exchanges, should they choose to set them up. (If a state doesn’t establish an exchange, then the Federal Government will operate one in the state.) In crafting the draft regulations, federal policymakers had to weigh how prescriptive to be. For example, they had to decide whether to prohibit insurance company representatives from serving on the boards of exchanges, or require exchanges to aggressively negotiate with insurers. In general, they erred on the side of less, rather than more, requirements.
My dream is that Alabama Medicaid, Alabama Blue Cross (the folks that manage PEEHIP) and our Republican physician governor will get in a room and petition CMS to allow a grand experiment on how we can do better. We should be able to provide adequate care for our poor, cost effective care for our retirees, and allow choices such that if you want to pay for excessive care, you can (at the risk of hastening your own death). If only Richard Nixon had gotten this law passed the first time around.