This article is a response to a story in this Weekend’s Wall Street Journal (June 15-16, 2013) which explains that Detroit is quickly heading to bankruptcy.
The information in the article highlights how making promises to employees in unions can create a false sense of security. I am sure the government workers in Detroit were confident that their jobs were not only secure but padded with pensions and long-term health care benefits. People with government jobs often have a smile on their face with the false knowledge that their retirement is fully secure. This weekend’s article demonstrates that you don’t always get what you want. Government officials are happy to promise us things but these promises are often made out of “thin air”. Corporations are guilty of the same thing when they promise pensions but then don’t fund them actively.
Kevyn Orr, who is in charge of restructuring Detroit’s troubled finances informed creditors that he plans to stop making payments on Detroit debts and in the near future at least $2 billion of unsecure municipal debt appear slated to be wiped out. The article goes on further to state that $20 billion in long-term liabilities exist for Detroit. Chapter 9 is just around the corner. Apparently $11 billion of unsecure debt is most at risk.
What makes this debt call relevant to health care and our readers is that beyond slashing the health care benefits to the Detroit government employees/retirees, Mr. Orr proposes to enroll retirees under the Affordable Care Act (formerly Patient Protection and Affordable Care Act, the Patient Protection part has conveniently left the program’s and the public’sconsciousness now that it is law) or through Medicare thus removing the Detroit government from its promises of retirement benefits.
Unfortunately the generation before mine has been promised all kinds of things based on an assumed future of infinite resources and an assumption that American would continue to be more productive despite shifting demographics that require we have less human capital. I have witnessed General Motors employees lose their benefits as well as former American Airlines employees. We watched Delta Air Lines restructure more than once while wiping off its books billions of dollars of pension obligations. Now we’re going to see large municipalities do the same thing. The municipal government employers will shifting their former promises onto the Federal program essentially placing the risk across the country instead of in their region. I would summarily say “definitely there is moral hazard being played out here”.
Bottom line: We have not reconciled our debt as a nation. Promises made by unaccountable government officials are going to wreak major havoc on uncountable individuals. The nation will be asked to shoulder the burden of local government’s lack of fiscal responsibility. The Affordable Care Act is going to be used to dump good health care benefits for a crappy, “Medicaid for all”. Allowing government officials who haven’t accountability for their concessions to create false promises is one obvious example of government and union moral hazard demonstrated readily today. You can’t earn what you don’t produce.
