Public Agencies Face Healthcare-Cost Crisis

·  The bill is just starting to come due on medical coverage promised to retirees during an era of lower expenses.

Cities, counties, school districts and state agencies across California face rapidly growing bills for retiree health benefits, but most have done little to get ready to pay them.

The future costs, which run into the tens of billions of dollars, are equivalent to a massive mortgage that taxpayers have taken on with little public notice. The required payments threaten to put heavy financial pressure on governments that granted generous benefits in the past and now are beginning to see the bills come due.

The price of retiree benefits has risen quickly in recent years, driven by inflation in healthcare costs and the first retirements of the baby boom generation.

For early retirees, the health benefits cover most doctor and hospital bills until the retiree becomes eligible for Medicare at 65. For those already eligible for Medicare, the plans fill gaps in coverage, particularly the cost of prescription drugs, which has escalated rapidly.

The debate within government agencies over future costs of health coverage lags behind private industry, where many companies have reduced benefits. Two years ago, for example, healthcare was the major issue in the long and bitter labor dispute at major

Southern California supermarkets. General Motors officials have estimated that what the company spends on healthcare, including generous benefits for retirees, comes to $1,500 for every car they sell.

Inevitably, any move to set aside money for retiree benefits will compete against demands to fund other government programs. In the case of schools, every additional dollar going to healthcare is one fewer that can be spent in the classroom.

For the complete story go to http://www.latimes.com/news/local/la-me-benefits5aug05,0,7253841.story?page=1&coll=la-home-local.