Mini-Medicare Proposal Could Solve Municipal Retiree Benefits Problems

Police, fire and teachers could use Medicare at 55, cutting localities' costs.
December 10, 2009 AT 3:00 AM
Girard Miller
By Girard Miller  |  Finance Columnist
The finance columnist for Governing.

Updated December 15, 2009

A group of Democrats in the Senate are working on a health-care reform compromise that contains a feature of keen interest to state and local governments -- expanded access to Medicare benefits for American retirees and unemployed workers over age 55. This proposal gained renewed interest as a trade-off or alternative for the so-called public option which has become a possible deal-breaker. [Editor's note: By December 15, however, the proponents were bowing to objections from Senator Joe Lieberman, whose support is vital to passing the overall bill, so the Medicare buy-in might not survive this week. We will update this column if the proposal dies.]

As I suggested three months ago in my column on "Mini-Medicare," this powerful idea has the potential to save some state and local governments millions of dollars in retiree medical (OPEB, or "other post-employment benefits) costs.

Although the Medicare system has no financial capacity whatsoever to absorb the increased costs of the proposed extension of subsidized Medicare benefits to individuals over age 55, I don't think it necessary to subsidize these recipients just because of age.

Access is the key: If Congress simply makes the Medicare program available to that age group at cost without a federal subsidy, it still provides a much-needed benefit to early retirees and their employers. The unsubsidized cost for a single person's coverage in the age 55-65 age group is estimated by one source at $630 monthly, which would be a bargain for public employers and their retirees in many states.

As we all know, the most important impediment to secure early retirements is the lack of medical insurance. Public employers who provide retiree medical benefits for their retired police officers, firefighters and teachers must now pay through the nose for insurance coverage for those early retirees whose careers typically begin early and finish earlier than average workers. Until now, the state and local taxpayers have been paying those costs in many cases.

By making Medicare benefits eligible to state and local government retirees whose careers are completed before age 65, Congress could help ensure that those workers have a secure retirement, and that insurance is available at a reasonable cost. States and localities can then decide or bargain for what portion of the new Mini Medicare benefits they would pay, and provide either a stipend or a supplement to the policies that these individuals obtain through Medicare. Similar savings will inure to private employers as well, making American businesses more competitive in global markets.

As public officials responsible for redesigning their OPEB benefits plans to make them affordable for taxpayers look for creative solutions, I believe it's important to contact your Senators this week to let them know that this is an idea with merit.

State and local government professional and policy organizations need to move quickly to voice their support for this provision, and make it clear that they don't expect a federal handout -- just access to Medicare benefits at cost for their retirees between ages 55 and 65.

Girard Miller
Girard Miller | Finance Columnist |