A key component to Detroit’s bankruptcy plan reveals The Affordable Health Care Act as a ploy to bail out deeply blue cities and their corrupt public employee unions.
As Detroit enters the federal bankruptcy process, the city is proposing a controversial plan for paring some of the $5.7 billion it owes in retiree health costs: pushing many of those too young to qualify for Medicare out of city-run coverage and into the new insurance markets that will soon be operating under the Obama health care law.
Unfunded retiree health care costs loom larger than ever for localities across the country, and the health law’s guarantee of federal subsidies to help people with modest incomes afford coverage has made the new insurance markets tantalizing for local governments.
For decades, Detroit has grossly over-promised benefits, high pensions, and fully-funded health care plans to its public sector employees; now, unable to deliver on its expensive promises, Detroit is placing the financial burden on the federal government’s national health care law, funded by taxpayers nationwide.
And legally, it can; Obamacare has been designed to allow blue cities like Detroit to over-spend on behalf of the public sector and then divert the cost to the American taxpayer, who has no vote or control over the city’s financial decisions.
Detroit is not the only city to propose such a controversial plan. Other blue cities, like Chicago, have proposed similar plans to divert city-run health care coverage over to Obamacare; and more cities are likely to follow. A recent Pew Charitable Trust study discovered that 61 of the country’s leading cities have made a combined promise of $126.2 billion worth of retiree health coverage to their public sector workers, yet only 6% of this cost is funded.
While both Republicans and Democrats have been lamenting the huge financial strains of Obamacare and escalating costs of insurance premiums, this shift from city-run health care coverage over to Obamacare would drive the cost of Obamacare up even more, all for the benefit of public employee retirement funds.
It gets worse—the Pew study found that cities have been allowing their public employees to manipulate their pensions and health care retiree funds, sometimes costing the city, and now the taxpayer, hundreds of thousands of dollars per public sector employee.
A number of cities have allowed workers to include overtime, unused sick leave, or unused vacation time to boost or “spike” final average salary—a figure generally used to establish the level of benefits. Late-career promotions also can increase salaries just months before retirement.
Joe Estep, Charleston’s finance director, tells the story of a 50-year-old police lieutenant who retired in 2009 after 24 years of service. In his final three years, the lieutenant earned enough overtime to raise his salary from a base of $49,000 to a three-year average of $78,000. The extra earnings boosted his pension from $33,000 to $53,000 a year. Given his age and life expectancy, the overtime could increase his lifetime benefit payment by $574,000.
This blatant bailout of blue cities and their public employee unions through Obamacare is reminiscent of the $1 trillion stimulus package implemented by the Obama administration in 2009, which claimed to improve ‘infrastructure’ and ‘create jobs’ but in reality distributed over half the funds to “state and local municipalities, which is in effect to the municipal unions, which are at the core of the Democratic Party.” Today, it’s claiming that Obamacare will lower the cost of healthcare and provide full-coverage for all Americans; in reality, it is a tool to fund manipulated, public employee health care plans at the expense of taxpayers, who will not only pay for the public employees, but for their own, escalated insurance premiums as well.
How many more times will the Obama Administration reward blue states for their irresponsible spending and the public employee unions for the manipulation of their retirement plans? Better yet, how many more times will the average American taxpayer have to pay for it?