The financial stability of municipalities in Massachusetts and nationwide is being threatened by rapidly rising health care costs. Cities and towns are being thrown into crisis as they struggle to provide benefits for hard-working city employees such as firefighters, policemen, and teachers. In Massachusetts from 2001 to 2005, employee health care costs as a share of total municipal budgets increased from 7.4% to 11%. Overall, municipal health care costs rose by a total of 99% from 2001 to 2007. At the same time, local budgets increased by only 28%. In Boston, employee health care costs increased by 92% from 2001 to 2007 while all other operational spending increased by only 18%. This drain on budget resources is preventing cities and towns from maintaining other important services.

The dilemma of municipalities in Massachusetts is exacerbated by Proposition 2½, which limits the annual increase in property taxes to 2.5 percent, regardless of how fast municipal costs are rising. In 2007, health cost increases consumed approximately three-fourths of the revenue from the 2.5 percent property tax increase outlined in Proposition 2½. Municipal tax data from 2003 to 2006 saw a marked increase in the percentage of total tax revenue used for health care costs.

One strategy to combat rising costs was used by Springfield, MA when in 2003 they began allowing city employees to buy cheap prescription drugs from Canada. If health care costs continue to increase by 11-13% annually, they are predicted to consume 19-23% of municipal budgets by 2018. Single-payer health care would free municipalities from the burden of insuring their workers, while at the same time creating a healthier workforce. Single-payer is already being recognized as a solution by mayors nationwide. At their 2008 Annual Meeting, the U.S. Conference of Mayors endorsed HR 676, the national single-payer bill.

FURTHER RESOURCES:

• “A Mounting Crisis for Local Budgets: The Crippling Effects of Soaring Municipal Health Costs,” Massachusetts Taxpayers Foundation, July 19, 2005.
• “MA Health Care Costs Continue to Stress Local Finances,” Massachusetts Municipal Association, October 1, 2007.
• “Municipal Health Reform: Seizing the Moment,” Boston Municipal Research Bureau, August 2007.
• “Springfield Institutes a Drug Reimportation Program,” Drug Cost Management Report, August 8, 2003.
• “Proposition 2½ Resource Area,” Massachusetts Municipal Association.