State and local government spending on health insurance grew by twice the national rate for 2012

One of the more alarming data points I have come across while compiling the necessary records for the Transparent California website has been the large sums of money spent on health insurance for public employees. As our site groups together the cost of pension payouts and health insurance in order to present the information in a uniform and understandable manner, the cost of individual health plans was not something we were particularly focusing on.

However, in the course of formatting and uploading the necessary records to TransparentCalifornia.com, several agencies jumped out at me due to their alarmingly expensive health insurance plans. First, it was the $20k+ plans in Corte Madera, Calif. and the Contra Costa Community College District. Then I saw the $30k+ plans in Beverly Hills. Finally, I came across what remains the most expensive plan I have seen to date — a $37,815 health insurance plan for the Water Superintendent of Sierra Madre, Calif.

I suspected this was not a problem isolated to the handful of agencies whose numbers happened to catch my attention but, rather, indicative of a systemic problem likely to be found in many other public agencies. This sets up a situation where taxpayers are effectively taxed twice for these plans — initially, to fund the public employee’s compensation itself and, again, when they find themselves paying an artificially inflated premium for their own health insurance.

Pew Research confirms these suspicions. In 2012, state and local government spending on health care increased by 8 percent; double the amount total U.S. healthcare spending grew during that same time period. The larger trend is terrifying — state and local government spending on health insurance premiums has increased an inflation-adjusted 444% from 1987 to 2012. The agencies above are merely symptoms of a much larger problem.

The farther the distance between consumer and provider, the less reason either has to economize, which is a factor in the out-of-control prices we see nationwide in the health-care sector. When a government is willing to spend $37,815 of your money on one health plan, what financial incentive does an insurance company or anyone in the medical system have to work on lowering prices?

While there are a plethora of factors responsible for the current health-care crisis in this country, the third-party-payer system, especially when that third party is using other people’s money, like a government agency does, is one of the core issues that demands immediate attention.