California Doesn’t Need Retiree Health Care

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The conversation about pensions and "pension reform" in California is narrow, and off.

The broader problem is public employee compensation -- it's too high, especially for law enforcement.

And we've promised more to public employees than governments and taxpayers seem willing to pay for.

But saving is a hard, long-term slog.

The push for pension reform has netted some savings, but may not produce all that much. Writing at The California Fix, former deputy state treasurer Mark Paul (my California Crackup co-author), explains all of this -- and suggests one big, provocative way to save on public employee compensation:

Eliminating retiree health care benefits -- for those who aren't already retired or vested.

Unfunded obligations just for existing promises to current and future retirees have been estimated at more than $62 billion by the controller's office; the money owed gains as more employees become vested.

Those obligations would remain, but eliminating the benefits would free up money for the future. And eliminatingg retiree health benefits doesn't face the same legal and human obstacles that reducing pensions would have.

Medicare can cover most retirees. And the Affordable Care Act, better known as Obamacare, means that, by 2014, retirees will be able to buy health insurance regardless of pre-existing conditions -- a protection that Republican presidential nominee Mitt Romney, even as he promises to"repeal" Obamacare, has pledged to protect.

It is hard to come up with a number for potential savings -- there are too many unknowns, in terms of numbers of employees and life spans -- but the savings would run into the billions. And it would be easier than pension reform. So why not?

Lead Prop Zero blogger Joe Mathews is California editor at Zocalo Public Square, a fellow at Arizona State University’s Center for Social Cohesion, and co-author of California Crackup: How Reform Broke the Golden State and How We Can Fix It (University of California, 2010).

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