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Background
In addition to retirement benefits, many public sector employers and/or pension funds provide health care
coverage for their members, either through third-party providers or a self-insured program. The rising costs of health care,
especially for retirees, are a great concern to these funds. Premium increases of 20% are the norm and some have been in excess
of 50%. In the public sector, this number is even higher given older populations and the prevalence of retiree medical coverage.
Pre-Medicare eligible employee costs increased by 10.6%, while Medicare-eligible employee costs increased by 17%. National
health care costs rose to a record 14.1 percent of GDP in 2001 and could rise to 23 percent by 2011. This is the fifth
consecutive year in which health care spending grew at an accelerated rate.
Legislative History
The 107th Congress (2001-2002) did not address the issue of health care. There were many
proposals to contain prescription drug costs and to assist retirees with their medical expenses, but none was adopted by the
Congress. The 108th Congress (2003-2004) is addressing the issue of prescription drug coverage for seniors through Medicare.
NCPERS Position
- NCPERS supports legislation that will enable public employees and retirees to meet the rising costs of
health care. Rising health care costs are eating away the pension benefits of public
sector retirees and threatening the benefits of future retirees.
- NCPERS supports legislation to stop the spiraling costs of health care. Unless legislation is adopted to stop spiraling health care costs, future public sector retirees could
lose their entire pension benefit to health care costs, and worse yet, they could be forced to forego health care treatment
and protection.
- NCPERS supports federal aid to state and local governments that provide health care benefits for their
employees and retirees. Such action is necessary because state and local governments are
reducing funding for health care by increasing cost sharing or cutting coverage of employees and retirees.
- NCPERS supports reforming the Medicare system to make it financially sound and to provide health care
coverage for senior citizens. The financial solvency of the Medicare fund is vital to
ensure that all citizens continue to receive good health care at affordable prices.
NCPERS Federal Legislative Proposals to Address Rising Health Care Costs
- Allow retired public employees to take a distribution from their deferred compensation plans, such as a 401(a), 401(k),
403(b) or 457 plan, and use these pre-tax dollars to pay for health care costs without incurring a tax penalty.
- Establish a tax credit deduction on federal and state income taxes for every dollar spent on health care costs, thus
helping make health care affordable to all retirees.
- Allow for elective rollover of sick leave into a health care account on a pre-tax basis.
- Expand the employer pickup provision under Internal Revenue Code Section 414(h) for health care to allow use of these
pre-tax funds for health care costs.
- Allow retirees to pay for health care benefits and long-term care from their pension checks without tax consequences.
- Allow long-term care coverage under a cafeteria plan.
- Support legislation to close the loopholes in Hatch-Waxman Act of 1984 (Drug Price Competition and Patent Term Restoration
Act of 1984) that allows drug manufacturers to extend drug patents beyond their legal time limit.
- Ask members of Congress to use the legislative process to review whether hospital consolidations and mergers hurt
competition in health care and result in higher health care prices.
- Continue to oppose the Government Accounting Standards Board (GASB)
exposure draft that would require state and local governments to carry health care benefits as a long-term liability on
their financial statements.
- Establish federal revenue incentives to state and local governments that provide or guarantee retiree health care benefits
for public employees and retirees.
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