Magazine article Nation's Cities Weekly

Plenty of Good Questions, but Not Enough Answers; How Will Health Care Affect Cities?

Magazine article Nation's Cities Weekly

Plenty of Good Questions, but Not Enough Answers; How Will Health Care Affect Cities?

Article excerpt

The national health care reform debate had finally begun. Already, millions of dollars have been spent for TV spots, press releases, grass roots campaigns, and other advocacy efforts to influence the outcome. For political consultants and ad agencies, health care reform is a bonanza. But what does it mean for the nation's cities and towns?

The answers are not easy to find. Local officials must carefully examine what is at stake, consider all proposals, and analyze the impact of those proposals on their own communities.

One issue is clear: cities have a vital stake - and a key role to play - in the health care reform debate. City revenues, employment, services, and taxes will all be affected by health care reform.

City Spending

America's cities and towns currently spend $7 billion annually for employee health insurance. This is one-third of the amount spent on police and about three times what cities and towns spend operating public libraries each year.

In NLC's 1993 City Fiscal Conditions survey, 91 percent of cities responding said the cost of employee health benefits was hindering their ability to balance the municipal budget. The cost of health benefits was the most frequently mentioned budget-buster, out-polling the cost of federal and state mandates (89 percent) and infrastructure and capital needs (87 percent).

When asked in the same survey to select the three factors impacting most adversely on the ability to balance the city budget, 51 percent of cities selected health care, followed by infrastructure and capital needs at 33 percent, and federal and state mandates at 29 percent. Clearly, municipal fiscal officers see the cost of municipal employee health benefits as the factor most damaging to local balanced budgets.

Due to double-digit annual percentage increases since 1988, city health care premium costs have doubled in the past five years. From 1987 to 1991, while city general operating spending increased 31 percent, municipal employee health care, increased 84 percent, almost three times as fast. Spending for municipal employee health care is putting the squeeze on other local spending priorities.

Health care reform proposals could impact city spending in a variety of ways:

(1) By requiring cities to pay a specified payroll tax for the health care of their employees and employees' dependents.

(2) By requiring or allowing cities, particularly small cities, to join insurance purchasing pools sanctioned by the states or federal governments.

(3) By removing the bulk of health care costs from labor negotiations and at the same time limiting options for cities in deciding what type of health care to offer or how much to pay for it.

(4) By taxing municipal employees for any health care benefits received above a federally defined level. …

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