MTF report: Municipal health costs causing crisis
On July 19, the Massachusetts Taxpayers Foundation released a special report on the local budget crisis caused by skyrocketing municipal health costs and urged state officials to provide local officials with the management tools needed to address the problem.
The MTF report, “A Mounting Crisis for Local Budgets: The Crippling Effects of Soaring Municipal Health Costs,” documents the dramatically negative budget impact that soaring health insurance costs are having on local budgets in cities and towns across the state.
• MTF report: “A Mounting Crisis for Local Budgets: The Crippling Effects of Soaring Municipal Health Costs” (PDF file, 172K)
The report finds that:
• The cost of providing health coverage for municipal employees in Massachusetts increased by 63 percent from 2001 to 2005, more than four times the rate of growth in local budgets and nearly double the rate of increase in the state government’s costs for state workers.
• Employee health care as a share of total municipal budgets jumped from 7.4 percent in 2001 to 10.6 percent in 2005, a 42 percent increase. At this rate, health care will consume 15 percent of local budgets within four years.
• Between 2001 and 2005, the increase in health costs in the communities surveyed consumed four out of every five dollars of the 2.5 percent annual growth in property taxes on existing properties that is allowed under Proposition 2 1/2.
• Current state laws impose severe restrictions on the ability of local officials to manage municipal employee health insurance. MTF recommends that state officials act to give localities the same powers that the state uses to determine the premium share and plan design for state employees.
The report supports legislation filed by Senate President Robert Travaglini that would allow local legislative bodies to set health insurance contribution rates and would provide a more realistic system for determining local health insurance plan designs.
MTF also strongly recommends that the state allow cities and towns, on a local option basis, to establish their own local group insurance commissions (see related article).
The report also recommends a law change to require all municipal retirees to enroll in a Medicare extension plan in order to remove the decision about participation in Medicare Part B plans from the collective bargaining process.
The MMA argues that cities and towns will continue to face deep fiscal woes, including service cuts, employee layoffs and higher reliance on the property tax, until health costs are brought under control.
The MTF report is based on statewide data from the Department of Revenue and the results of a joint MMA/MTF Municipal Health Cost Survey of nearly 10 percent of Massachusetts communities conducted in May 2005. The 32 participating communities reflect the broad range of the state’s municipalities in terms of population, geographic diversity, and wealth. They account for approximately one-fourth of the state’s population and almost 30 percent of local revenues and spending.
Written by Pam Kocher
