$2 Trillion Fiscal Hole Requires a Mighty Shovel

Addressing the healthcare needs of individuals and corporations is challenging enough. But the new Governmental Accounting Standards Board rule will kick in next year to reveal underfunded...or over promised...retiree health benefits will cost $1.4 trillion.

This number is a bit too large to comprehend, so lets take New Jersey as an example given by Chris Edwards and Jagadeesh Gokhale. The Garden State's unfunded obligations in its retiree health plan now stand at $20 billion, and the overall costs of the health plan are expected to grow at a rate of 18% annually for the next four years.

Out of 15.9 million state and local workers, 65% are covered under retirement health plans, compared to 24% of workers in large firms in the private sector.

So what are the options available to state politicians as their federal colleagues struggle to finance massive shortfalls in Social Security and Medicare?

Based on our early analysis of state data, and assuming a 20% utilization rate by state and local workers of our global healthcare option program for only seven surgical procedures, state politicians could expect to generate $928 million in savings nationally for the 15.9 million state and local workers.

Conceivably, we could also contribute $2.4 billion nationally for potential savings in state Medicaid programs.

So while $3.3 billion in state retiree and Medicaid healthcare savings might not address the entire issue, one might expect that anyone willing grab a shovel of any size would be welcome.