New York State, along with its cities and counties, have promised $200 billion worth of retirement health care benefits to their employees, and no one knows where that money is going to come from, according to a study conducted by the Empire Center for New York State Policy.
Unless the governments in question figure out a way to raise that money, they will soon be forced to decide between paying the promised health care bills and paying other expenses, such as the $264 billion in bonds that they also owe. With rising health care costs, a faltering economy, and steady public opposition to higher taxes and bailouts, the problem is only likely to worsen in the coming years.
“In fact, the cost of our ‘health’ is spiraling so far out of control that the Health Care Financing Administration predicted that our system would cost 16 trillion dollars by 2030,” write T. Colin Campbell and Thomas M. Campbell II in their book The China Study.
“We have seen almost a 300 percent increase in expenditures, as a percentage of GDP, in less than 40 years!”
The report’s authors warn that although their study focused on New York, the problems are not unique to that state.
Credit analysts are currently predicting that if forced to choose between defaulting on health care payments and defaulting on bond payments, governments will choose to pay down their bonds. This will inevitably lead to lawsuits as retirees attempt to claim the benefits that they were promised as city, county or state employees.
According to Jerry A. Webman of Oppenheimer Funds, such defaults are nearly unheard of, meaning that there is little precedent for resolving them.
“It will be a mess,” Webman said. “There will be a lot of disputes, a lot of litigation.”
Indeed, retirees have already begun suing in cases where governments have tried to shift more health care costs back toward them.
Sources for this story include: http://www.nytimes.com/2010/10/13/b….