PHILADELPHIA'S CRISISOr why we don't need government-paid health care if it's anything like theirs

[T]he average cost for state and local government health care coverage is currently $9,082 per capita while for private sector in the mid-Atlantic region it is $4,292. - Pew Charitable Trusts

In Philadelphia the cost is $13,030 - Pew Charitable Trusts

Today, CBS3 reports that Philadelphia has taken out a $275 million loan from JP Morgan Chase. At a 3% interest rate if it is fully repaid by November 30. The city expects to take out another loan with the private sector after that. The Inquirer explains that the loan that would enable it to repay millions of dollars owed to thousands of contractors who have not been paid since July. If the city doesn't repay the loan in November, the interest rate raises to 8%.

The city wants the state to bail them out with a sales tax increase, but the state is getting tough. According to CBS3, state officials are "forcing the mayor" to submit a new pension plan to the public agency that oversees the city's pensions. The State Senate agreed to delay about $150 million of pension payments owed by the city this year - "but only if the city cuts the costs of its pensions."

That means freezing pension benefits for current workers and reducing pension costs for new workers by 20 percent. Currently, "pensions eat up a large share of the city's budget – this year it's expected to be some 12 percent, or $450 million out of a $3.7 billion budget."

Bottom line: No reform, no sales tax money.
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THAT'S ONLY HALF OF THE STORY
Health care for city employees takes up 10 percent of their budget. In January 2008, The Pew Charitable Trusts issued a report declaring that Philadelphia’s pension and health care costs for public employees was growing at unsupportable rates.

According to the study, Philadelphia’s pension obligations are only 52 percent funded, one of the lowest levels in the country. Their health care costs are extraordinary.

The city’s health insurance expenses are also significant. Total costs rose 80 percent from fiscal year 2002 to fiscal year 2007, and another increase this fiscal year brings this expense to $374 million or nearly 10 percent of the city’s total budget.

Philadelphia pays more per capita than nearly any other city in the nation, and that amount has increased by 33 percent in the past two years alone—to an average of $13,030 per person this year.

By comparison, the Bureau of Labor Statistics reports that the average cost for state and local government health care coverage is currently $9,082 per capita while for private sector in the mid-Atlantic region it is $4,292. Philadelphia’s health care benefits are costing the city approximately $113 million more than if the expenses were in line with state/local government averages.

LOOK at that again.

. . . the average cost for state and local government health care coverage is currently $9,082 per capita while for private sector in the mid-Atlantic region it is $4,292.

Average state/local health care costs = $9,082
Private Sector costs mid-Atlantic region = $4,292
Philadelphia's health care costs = $13,030

The study found that members of three of the four unions do not make any monthly contributions. (The one exception is District Council 47, which represents white-collar city workers. They pay about $40 per family per month.) Health care benefit costs per capita are higher than every other city studied, with the exception of Detroit.

WHAT REALLY COSTS IS THIS HIGHLY UNUSUAL ARRANGEMENT -

The city pays a negotiated (or currently, arbitrated) per capita amount for health care directly to each individual labor union. Researchers could find no other city or state that has such little control over its workers’ health care costs. Any cost savings achieved by the unions remain under their control.

IN OTHER WORDS, the city of Philadelphia pays $113 million more for insurance than do other state and local governments, asking no contribution from three of the four unions, and lets the unions keep any money they save on negotiating health insurance for their members.

A sweet arrangement.