Texas: Party Now, P(r)ay Later

In a first for any state, Texas is about to scuttle rules drawn up by the Governmental Accounting Standards Board. These rules (GASB 45) require governments to disclose the cost of healthcare they have promised to their employees, so that their future expenses are kept in line with expected revenues. Texan politicians want to continue spending now, without worrying about a financial crunch after their time. Their colleagues in other states may also like this easy way out.

GASB 45 would force the state governments to curb wasteful expenses and irresponsible promises, and also have healthcare delivered more cheaply and efficiently to former and current employees. I have personally seen the effect of this newly imposed accountability.

Several state governments faced with budgetary pressures have started exploring innovations like voluntary medical tourism. In this the patients covered by state health insurance who need major surgery are offered incentives to receive treatment abroad in pre-approved hospitals that match or exceed US quality of care. This can dramatically cut costs for the state while being welcomed by patients who receive a portion of the savings. But special interests including local hospitals obviously do not like this, and the states are likely to overcome political opposition only in a budgetary "feet to the fire" situation. GASB 45 exposes a budgetary gap of $50B for Texas alone, and about $1.4 trillion for all 50 states.

But why not simply kill the messenger, GASB 45, so that the looming shortfall doesn't need to be planned for? The Texas Governor and legislators seem set on this course, ably assisted by Texas Controller Susan Combs who is also trying to get other states to join. The New York Times story today quotes how these “Politicians don’t want to deal with the problem ... state lawmakers were betting that by the time rising health care costs became unmanageable, they would no longer be in office and could not be held accountable."

Restoring Health By Shedding Health Benefits

Wal-Mart's CEO H. Lee Scott said last year that GM is no longer an automotive company, but a benefits company that sells cars to fund those benefits.

Now distressed carmaker Chrysler is being sold and the prospective new owners hope that UAW concessions on health benefits restore the company's health.

http://online.wsj.com/article/SB117913164108101758.html?mod=home_whats_news_us

You may have heard that health and other benefits to retirees and current staff place an extra $2000 burden per car for the Detroit Big Three as compared to their Japanese competitors. The WSJ article describes this another way - as a $30 per hour advantage that Toyota has over US makers that may increase to $45 per hour if the present arrangements continue.

Since a large chunk of these costs comes from healthcare, it strengthens the case for reforms like bringing healthcare costs down and also having healthcare for all (including workers) paid through public funds with all employers required to chip in.

But there's also a specific proposal in the current discussions for the UAW to be given a lumpsum of billions of dollars and then be required to manage the health benefits for its own members. Such a step should be welcomed. Direct responsibility will make the unions more supportive of innovative measures that can drastically reduce healthcare costs, especially if they maintain or improve quality.

We can talk about these steps subsequently. The point is, it will be good to see strong consumer groups pushing for healthcare reforms instead of just having key industry players resisting them.