It is easy to take sides and even grow angry when the question of healthcare benefits is raised. We all have an opinion depending on our jobs, how much we have paid into various plans, and whether we have received quality care in times of need. We all start judging the system by how much it costs us but, the moment our own health fails or one of our family is at risk, the focus immediately shifts to the standard of actual care available. Indeed, as we age and feel ourselves slipping down the slope into the health "danger zone", we all worry about what will happen should some serious disease strike. Looking around the US right now, we see the majority of states dealing with record deficits. Indeed, the situation is likely to get far worse before it gets better as there is no will to raise taxes while we remain on the edge of falling back into recession. So most states are looking for ways in which to cut back on spending. No more "big government". One obvious target in this is the health benefits of state and local government employees. The idea is to force employees to take on a bigger share of the costs of their health benefits. Connecticut, Kentucky and Texas have already pushed through cuts. But Michigan is facing legal challenges for its plan to deduct 3% from state employees' gross pay. This will accumulate in a trust fund to pay approximately one-third of the health costs of retirees. There are also law suits in New Jersey challenging increases to the current deductions. The other states are watching with interest to see how this litigation plays out.

Around the US, the total liability will be more than $550 billion for the healthcare and other non-pension benefits made available to retirees. At current levels, state governments are covering only about 7% of these costs out of money set aside. All other payments are being made out of revenue. This pay-as-you-go approach to non-pension costs is putting a severe strain on budgets as healthcare costs continue to rise. There is an emerging black hole and nothing other than transferring costs to current public employees as an option for trying to plug it. Regardless of party membership, politicians are all arguing public employees should contribute towards the cost of their own healthcare costs. The days when they could rely on state funds has passed. The reason for this approach comes from a recent Supreme Court decision which distinguished between pension benefits which are guaranteed and non-pension benefits which are not protected.

It seems the days of "free" or heavily subsidized health insurance plans for public employees have gone forever unless the trade unions in Michigan and New Jersey can prevail. They are arguing this is an unlawful unilateral variation of the contract of employment. Until the federal courts rule, the money is being deducted but held in a suspense account. If the states lose, the money will be paid back. Not even states can find cheap health insurance these days.