If you are a municipal employee of Sterling Heights, Kalamazoo, or Grand Rapids, you are earning $3,000-$5,000 more today than in 2010. 

Not true, you say? 

It is true.  But, likely, you do not notice your bump in pay because it has come in the form of higher cost health care benefits instead of take-home pay. 

Those cities, just like most of the other cities, towns, and counties in Michigan, are each paying at least $3,000 more per employee to provide health benefits in 2018 than they were in 2010.

Even more alarming to citizens and municipal leadership should be the fact that by the year 2040, Sterling Heights will spend 25 percent of its property tax revenue on active employee health care benefits, Kalamazoo 73 percent, and Grand Rapids 113 percent, assuming that both property tax revenue and health care costs continue to grow at the same rates they have since 2010 for each respective city. 

Do not count on Public Act 152, passed by the state Legislature and signed into law by the governor in 2011, to bail-out municipalities from this harsh reality.  PA 152 provided municipalities an option to cap their annual employee health care benefit costs at the national medical services inflation rate.  However, medical services inflation has consistently grown at a rate nearly double the overall inflation rate.  Therefore, health care costs will continue to eat up an ever greater share of municipal revenue and employee compensation. 

Furthermore, PA 152 forces municipal workers to pay a greater share for worse benefits.  Soon, workers will face deductibles of $5,000 and greater. 

But, wait, there is more bad news for workers.  If you are starting today as a new police officer, firefighter, sanitation worker, or office worker, you should know that about half of your total compensation over the next 30 years will go to paying for health care, even if you are perfectly healthy during that time.  Assuming that you start earning a gross salary of $44,000 today and receive a 2 percent raise every year for the next 30 years, you will earn $1.86 million over 30 years.  However, you will also pay $1.56 million in health care costs in the form of insurance premiums, out-of-pocket costs, Medicare taxes, and the share of income taxes used by state and federal governments to pay for their own health care budgets.  And again, this assumes that you never have a serious medical condition over those 30 years. 

To those who think single-payer health care will fix our rising health care costs, the statistics prove differently.  Since 2010, the per-capita cost of health care in the US has grown an average of 3.7 percent per year while the single-payer countries of Australia, Canada, France, Japan, Great Britain, and Sweden have grown 4.4 percent per year.  Single-payer countries’ health care costs are growing just as fast as the U.S. (if not faster) even though they spend less than the U.S. overall. 

Municipalities, workers, and unions could actually fix our health care cost problem themselves, without action from politicians, if they are willing to break free from the status quo way of obtaining health care benefits.  Governments such as the Allegheny County School Health Insurance Consortium in Pennsylvania and King County in Washington have figured out how to provide health care benefits with low deductibles and near zero cost growth.  The helpful tools are just waiting to be used – Reference-based Pricing, Direct Contracting, Direct Primary Care, Transparent Pharmacy Benefits, each one of these options could provide employees better health care at lower cost. 

Tom Valenti is founding partner of Forthright Health.

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