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Detroit May Shift Retiree Health Care Costs to Obamacare, Taxpayers

Unintended consequences.

8:01 AM, Jul 29, 2013 • By MICHAEL WARREN
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The bankrupt city of Detroit may have found a way out of its health care woes for its retired city workers: shifting the costs to taxpayers nationwide via Obamacare. If Detroit and other struggling municipalities follow through, the result could be a "huge cost" to taxpayers.  The New York Times has the story:

As Detroit enters the federal bankruptcy process, the city is proposing a controversial plan for paring some of the $5.7 billion it owes in retiree health costs: pushing many of those too young to qualify for Medicare out of city-run coverage and into the new insurance markets that will soon be operating under the Obama health care law.

Officials say the plan would be part of a broader effort to save Detroit tens of millions of dollars in health costs each year, a major element in a restructuring package that must be approved by a bankruptcy judge. It is being watched closely by municipal leaders around the nation, many of whom complain of mounting, unsustainable prices for the health care promised to retired city workers.

The Times goes on to note that other cities like Chicago and Stockton, California, are considering similar steps. If enough muncipalities with unfunded retiree health care costs decide to place beneficiaries into the Obamacare exchanges, that would very likely increase the cost to the federal government. Here's more from the Times:

Unfunded retiree health care costs loom larger than ever for localities across the country, and the health law’s guarantee of federal subsidies to help people with modest incomes afford coverage has made the new insurance markets tantalizing for local governments. A study issued this year by the Pew Charitable Trusts found 61 of the nation’s major cities wrestling with $126 billion in retiree health costs, all but 6 percent of that unfunded.

“The Affordable Care Act does change the possibilities here dramatically,” said Neil Bomberg, a program director at the National League of Cities. “It offers a very high-quality, potentially very affordable way to get people into health care without the burden falling back onto the city and town.”

But if large numbers of localities follow that course, it could amount to a significant cost shift to the federal government. Authors of the health care law expected at least some shifting of retirees into the new insurance exchanges, said Timothy S. Jost, a law professor at Washington and Lee University who closely follows the law. “But if a lot of them do, especially big state and local programs,” he said, “that’s going to be a huge cost for the United States government, and it’s mandatory spending.”

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