We thought we should highlight a recent USA Today story because, well, the public needs to know … and the politicians are trying to ignore it.
Millions of Americans are already concerned about the future of Social Security and Medicare—as well they should. According to the Social Security and Medicare Trustees Reports, Social Security’s unfunded liabilities was an estimated $15.8 trillion in 2008, and $86 trillion for Medicare. That’s a total of $101.7 trillion (in today’s dollars) for both programs.*
Yes, that’s “trillion” with a “T.”
Now USA Today tells us that states have retiree health care obligations totaling about $445 billion. Not all states, however. Nebraska has no unfunded liability. And 16 other states—Arizona, Idaho, Indiana, Iowa, Kansas, Minnesota, Mississippi, Montana, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont and Wyoming—have an unfunded retiree health care liability of less than $1 billion.
But New Jersey has an unfunded liability of $50.7 billion. Texas is $48.7 billion and California is $47.9 billion.
Even allowing for the very large populations of Texas and California, these are unimaginable numbers! And when added to the federal government’s $100 trillion unfunded obligation, we are sitting on a future financial disaster.
IPI has been trying to get Washington to transition Social Security and Medicare from a defined benefit to a defined contribution plan, but those efforts were stymied both by Democrats and Republicans.
But that doesn’t stop the states—and city and county governments—from moving to fully funded retirement accounts where state workers contribute to their own retirement plans, along with defined contributions from the state.
At retirement, retirees should be allowed to buy into Medicare Advantage plans with their savings. Currently, Medicare gives those plans a flat contribution for each Medicare beneficiary who chooses to join. Why not let state retirees do the same?
And if retirees need another option, let them buy into the state health insurance plan. They are just paying the premium, like the state does for the workers.
It is absolutely essential that states begin to deal with this huge unfunded financial obligation. Just because Congress is grossly irresponsible in dealing with its own unfunded liability doesn’t mean the states can’t recognize the problem and address it—NOW.