In my last blog, I commented on a July 11 article by Mary Walsh of the New York Times on the crisis relative to horrifically large pension and retiree medical obligations for government employees.  Coincidentally, as I traveled to and from Europe between July 15 and 20, I had an opportunity to catch up on reading, and I read Roger Lowenstein’s great book While America Aged.

In this book, Lowenstein details the history of three out-of-control pension and retiree medical commitments, the commitment by the Big 3 automakers to their employees and retirees, the commitment to the Transit Workers Union and other municipal unions in New York City, and the commitment to San Diego’s municipal workers.  He draws broader conclusions from these analyses, consistent with Mary Walsh’s.  As Lowenstein puts it on page 1:  “America has a crisis of epidemic proportions.  The fabric of the nation’s pension system is collapsing – at the very moment when the American population is rapidly aging.”

I agree with Lowenstein’s conclusion, and I also agree with some of his key recommendations.  Most importantly, we need to apply private pension and retiree medical accounting to state financial statements.  Today, while governments are expected to size their obligations in total, they are not required to set aside money every year to pay for a portion of the long-term commitments they have made.  They are only required to cover the current year’s obligations in a pay-as-you-go system.  As noted in my last blog, private sector employers had to change to a full accounting of pension benefits on their income statements in 1987, and to a full accounting of retiree medical obligations in 1993.

While I agree with Lowenstein’s recommendation that there be a form of universal health care that combines benefit requirements for the elderly with those of people of all ages, I do not agree that it should be managed under the same system as Medicare or Medicaid.  Throughout his book, he eloquently talks about the many pressures brought to bear on elected officials to do something popular today, such as keeping down current-year expenses, while mortgaging the future. 

Unfortunately, much of what is required for a sensible health care system requires decisions to invest in health today to reap the benefits in future years.  For example, preventive screenings, immunizations, outreach to increase adherence to chronic disease treatment plans, and programs for youth health and fitness are great medium and long-term investments, but almost never is there a current fiscal year payback.  Therefore, any universal health care system that operates on annual budget cycles is likely to be subject to the same pressures as the corporate executives and government officials Lowenstein describes.

Moreover, just as Lowenstein described special interests that interfered with objective decision making in the San Diego and New York situations, health care has great potential for special-interest decision making, as evidenced by the power of medical lobbies to drive for coverage mandates that are highly-specific and often not justified by best-in-class health care.

If we are to have universal health care supported for underserved groups by the government, it is imperative that we construct a system that is not susceptible to annual cost reduction pressures.  Similarly, as Lowenstein recommends, any system needs to have highly-transparent analysis of the longer-term consequences of any major decision, since short-term savings often breed significantly higher long-term costs.

What shocks me most about these issues relative to government employee retirement obligations is how little attention is paid to them in the popular media.  Mary Walsh and Roger Lowenstein deserve credit for the courage of their convictions in dealing with a “dirty little secret” about the massive and often unintended wealth transfer from a large number of taxpayers to a small number of government employees.

I do not blame the employees or their union leaders for demanding rich benefits, because the leaders are expected to be strong advocates for their members, although they need to insure that pension trusts are appropriately funded.  However, I believe that we need to hold elected officials accountable for responsible decision making in the area of legislated or otherwise bargained-for employee benefits.  I also believe that our media do not do a good job educating the public on this issue, because, except for a situation like New York’s (where there was a major transit strike three years ago) or San Diego (where the city basically lost its ability to access the bond markets because of financial insolvency caused by under funded pensions) it is a crisis in slow motion, rather than a single dramatic event.

We must demand more relative to how our tax dollars are spent!!
 

In the July 11 New York Times there was an article on the serious issue of state and local government pension liability, and the debate about the extent to which the Government Accounting Standards Board should require governments to reflect pension and retiree health liabilities on their income statements.

I was pleased to see this issue get coverage because it is one of the biggest issues of our time. We are an aging society, and like every other developed country, we are facing the dual challenge of meeting our commitments to the elderly, while at the same time being able to meet commitments to the rest of our population. Before we can address the dual challenge, we need honesty and transparency as to what the commitments to our elderly populations are going to cost us. (more…)

Having just finished attending the Conference on Research in Regulated Industries sponsored by Rutgers University and led by Dr. Michael Crew, I have been immersed in many presentations relating to many subjects, but one, in particular, caught my attention:

• What universal or public services do we expect of major communication media?

With respect to mail, postal services around the world all have a variety of what are called “universal service obligations.” They are expected to maintain a network that allows every citizen in their country to transact business, to deposit mail into collection boxes or at a conveniently-located post office, and to receive mail at a designated home or business address 5-6 days a week all year. Additionally, their governments expect them to subsidize charitable and educational organizations, to charge affordable and uniform prices for mail originating from individual citizens and to be large employers and anchors for rural communities. In the U.S., the Postal Service also absorbs an enforcement responsibility for obscene, offensive, and fraudulent material that gets sent through the mail. In recent years, Congress has deferred its payments to the Postal Service for the mandates imposed on the Postal Service to subsidize certain categories of mail and certain types of users, such as non-profits. (more…)

One of the basic assumptions of many health care reform advocates is that a “richer” plan which provides a broader range of benefits and which has a higher percentage reimbursement for medical events is automatically better for the plan participant. This is flawed thinking.

A health insurance plan is better for plan participants and for society as a whole if it causes participants to engage in healthier behaviors and if it drives physicians, hospitals, and other providers to deliver a higher quality of health care. In the blog entitled “Results-Driven Health Care” explores the five steps to higher quality, and lower cost health care. (more…)

On Saturday, April 26, I watched a TV program hosted by Tim Russert. He and the commentators were reflecting on the broader implications of how an off-the-record comment by Senator Obama at a San Francisco speech could achieve worldwide exposure in a relatively short time. Their conclusion is that, at this time and irreversibly going forward, “everything is on the record.” I would add one other phrase as well: “Everything that is on the record is likely to stay on the record permanently.”

The combination of cell phone cameras, the ability to upload digital images to web sites, and the broad reach of user-generated content on sites like YouTube and Facebook mean that all of us have the potential to live our entire lives out in the open, not unlike the lead character played by Jim Carrey in “The Truman Show” a few years back. Scott McNealy, the Chairman of Sun Microsystems, made the comment almost a decade ago that, with the Internet, there is no privacy and all of us need to get over it. He’s right. (more…)

On Monday, April 7, I was in New York City, and the subject of Mayor Bloomberg’s congestion pricing became part of several conversations. The depth of the discussion was clearly driven by the outcome of the plan that failed to gain popularity amongst the democrats who ultimately refused to put the bill to a vote on the floor of the state assembly, as highlighted in an article published by the New York Times. I believe that any discussion about infrastructure finance usually is explicitly more complex than publicized with regards to whether or not the public versus the users should be taxed for infrastructure-related capital projects. However, just below the surface of any discussion about raising taxes, fees, tolls, or implementing congestion pricing is a lack of trust about whether the money raised by the government will be spent for infrastructure improvement or absorbed into general revenues. (more…)

Anyone who has read my past blogs knows that I have commented that too many health care reform advocates focus too much on universal health insurance coverage, and insufficiently on improving health, the supply of health care professionals, and the quality of health care. While many proponents of universal health care pay lip service to the value of prevention, those who advocate universal health care clearly want to address the visible and important issue of affordable coverage independently of, and prior to, the issues I have identified.

Unfortunately, they have it backwards. To solve the universality and affordability problem, the others have to be addressed. A compelling story appeared on the front page of the national edition of the April 5 New York Times, entitled “Universal Coverage Strains Massachusetts Care: Influx of Patients and Shortage of Doctors Create Long Waits.” (more…)

Recently, because I concluded the first phase of a two-part assignment as Chairman of a commission created to recommend reform of the Connecticut Department of Transportation, I have been asked to share my observations about government to a number of audiences. I will begin that process in this blog, but, because I have learned so much, I will probably cover this subject over several blogs.

By the way, my comments are not meant to be critical of individual government officials, most of whom I respect greatly. In fact, as you will see, government officials have to overcome huge structural and political obstacles to get anything done, and, given the constraints that have been put in their path, anything they do has to border on the heroic. (more…)

As a person who studied Communications, Political Science, and Law during college and law school, I am acutely aware of the power of language to shape how we think about and act on problems.

The main example that comes to mind is the way we characterize how government positions are filled.

When I was growing up, like most American history students, I read about the 1881 assassination of President James Garfield, who was killed by a “disappointed office seeker.” I learned that this tragedy gave rise to “civil service reform”, which, if I remember the history books, characterized the change as being one which replaced an appointment system based on “patronage” or “spoils” with one based on “merit”. Like most Americans, I came to believe that the civil service system was an unqualified positive development for American government, and the old system was corrupt, to the point of being “un-American.” In fact, on the radio this past week, I also heard a radio commentator refer to “patronage” appointments in a very disparaging way. (more…)

Anyone who has read this blog knows that, in discussing public policy issues, I have always tried to consider both the intended and unintended consequences of government decisions. For example, I have contended that, before governments mandate that “Do Not Mail” registries be created in each state, they should consider the economic and environmental consequences of such registries by both elected and appointed officials. If the goal of reducing unsolicited mail is to improve the environment, that goal may actually be undermined by a change in consumer behavior to engage in more face-to-face retail transactions begun by a drive in a motor vehicle to the retail store.

Using a similar analysis, the regulation jointly issued by the U.S. Departments of Labor, Health and Human Services, and Treasury limiting wellness incentives to 20% of the premiums paid by an employer-based health care plan participant is one which appears to have been decided without reference to whether it will maximize health improvement or lower health care costs for those not receiving the incentives. (more…)