California Retiree Health Care Costs Reach Nearly $72B
Medical and dental care costs for California state government retirees have reached nearly $72 billion, according to a recent report by State Controller John Chiang (D), the Sacramento Bee's "The State Worker" reports.
In response to the growing costs, Chiang released a five-year plan to reduce the state's unfunded liabilities related to retiree health care costs.
The state currently pays for retiree health care costs as they are accrued without earmarking funding for future medical costs, according to "The State Worker."
This year, retiree health care costs in California increased by $7.2 billion -- up from $64.6 billion last year.
Chiang attributed the increase largely to residents living longer (Ortiz, "The State Worker," Sacramento Bee, 12/16/14).
In a statement, Chiang said, "The price tag associated with providing health care to retired state workers has quietly grown to rival or even eclipse the funding gap associated with public pensions," adding, "If we continue to do nothing, we will be sowing the seeds of a future crisis" (Megerian, "PolitiCal," Los Angeles Times, 12/16/14).
Details of Chiang's Plan
Chiang recommended that the state begin pre-funding retiree health care costs, similar to how the state pays for pension benefits.
He said, "California ought to be paying down our health care costs on an annual basis" (Adler, "KXJZ News," Capital Public Radio, 12/16/14).
In his plan to address the unfunded liabilities, Chiang recommended that the state over the next five years significantly increase the amount it contributes to an investment fund for retiree health care costs.
Under the plan, Chiang said:
- Retiree health benefits for current state employees would be entirely pre-funded by fiscal year 2019-2020; and
- The additional payments would reduce the state's unfunded liability by nearly $20 billion.
Brown To Address Retiree Health Care Costs in Budget Plan
Following Chiang's announcement, state Department of Finance spokesperson H.D. Palmer said Gov. Jerry Brown (D) in January will introduce a budget proposal that includes "a plan to address this unfunded liability -- and sustain health benefits for retirees for the long term" ("The State Worker," Sacramento Bee, 12/16/14).
Palmer said the unfunded liability for retiree health care costs is a "substantial and growing" problem ("PolitiCal," Los Angeles Times, 12/16/14).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.