Study finds Michigan counties face growing health care costs

By Kathyk Barks Hoffman Associated Press LANSING (AP) -- Many Michigan county governments haven't set aside enough money to pay for their retirees' health care costs and need to take steps to get the growing costs under control, the nonpartisan Citizens Research Council says in a new study. The 50 counties that responded to the CRC's survey had an accrued liability for retiree health care costs of well over $4 billion, with more than $3 billion of that unfunded. The survey didn't include figures from the largest of Michigan's 83 counties, Wayne County, which encompasses Detroit. Eric Lupher, CRC director of local affairs, said that retiree health care costs when first offered decades ago were relatively insignificant compared to counties' general fund budgets. But as health care costs outpaced inflation and the number of retired workers grew, counties began to spend more on health care coverage for retirees just as shrinking revenues made it harder to cover those costs. New accounting rules that require governments to account for retiree benefits while employees are working and earning the benefits puts governments in even more of a bind. Many counties are having to look at decreasing current services so they can set aside the money for employees' future health care costs or trying to raise taxes to bring in more revenue, Lupher said. "I think we're going to see more counties getting out of the business of providing health care to their retirees rather than trying to figure out how to fund it," he said recently. With counties weighing how to spend scarce dollars amid falling revenues and rising costs, "it's a very difficult political decision to put it into retiree health care." Angela Minicuci, communications coordinator for the Michigan Association of Counties, said counties are struggling to pay for retiree health care costs amid other challenges, such as property tax revenue pushed down by falling housing prices and cuts in revenue-sharing money from the state. Gov. Rick Snyder wants to drop the amount the state gives counties from $150 million now to $100 million in the fiscal year that starts Oct. 1, a cut of 33 percent, Minicuci said. Yet even amid falling revenue, "Michigan counties (are) taking a proactive approach in working to get legacy costs funded in the future," she said. Twenty-nine of Michigan's 83 counties offer full health care benefits to retirees, 15 provide limited benefits and 39 provide no benefits or require retirees to pay 100 percent of the costs, according to the report. Seventeen counties have stopped providing retiree health care benefits to new employees, but the report warns that won't do much to bring down costs. Among the 50 counties that responded to the survey, retired employees pay an average of 12 percent of their health care costs, while active employees pay 17 percent. Forty-four counties that provide retiree health care benefits coordinate with Medicare, the federal program that begins offering health insurance at age 65, which can lower the counties' costs. State, municipal and township governments that offer health care benefits to active and retired workers also are behind in funding those costs. Snyder puts the cost of unfunded health care liability for state workers and retirees at $14.5 billion. He said last week during his budget address that he wants to begin to address the liability by contributing $200 million toward it, and urged local governments and school districts to try to chip away at their long-term costs as well. Published: Wed, Mar 2, 2011