The Texas retired teacher healthcare fund is nearly out of money. Trustees predicted this summer that reserves will be gone in two years, and its deficit could be $580 million by 2014.
This group is in a unique situation, because teachers’ retirement and medical care funds exist as stand-alone entities separate from federal programs. Teachers don’t pay into Social Security, they pay into the Teacher Retirement System. The $1 billion healthcare fund, TRS-Care, exists separate from Medicare, though its benefits and costs depend on the retiree’s level of participation in Medicare. These two teacher funds are technically separate, but they are managed by the same umbrella organization.
The connection between rising healthcare costs and lowered personal income is hard for many people to see, because benefits packages are commonly presented by companies and perceived by employees as existing separately. The reality is an employer, or a retirement fund, has a certain amount of money it devotes to each employee per year. It really matters little to the company’s accountants if the expense goes in the benefits category or the personal income category: both are expenses that are a part of running a business that affect the company’s bottom line.
Let’s hope the teachers can think outside the box and see the healthcare choices they could create. They could either accept the status quo of 8% per year healthcare inflation and in a year or two start taking income from its retirees through higher deductibles and co-pays, or they could bravely chart a new path and give their members choices that don’t currently exist – less aggressive but much more affordable healthcare that preserves personal income.
They are in a great position to see how healthcare costs affect income. Here’s hoping the retired teachers have one more lesson within them to teach the rest of us.