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Health costs soar, squeeze localities

Groups lobby for legislation

Health care spending for Massachusetts communities has nearly doubled since 2001, squeezing town budgets and forcing cutbacks in public safety and government services and leading to calls for property tax increases.

Employee healthcare costs in cities and towns shot up about 85 percent , from an average $2.5 million to $4.7 million, from 2001 to 2006 , according to a Globe analysis of budgets from 324 communities , using data from the Massachusetts Department of Revenue .

In Weston, healthcare costs are up more than 120 percent, a major contributor to the town's decision to seek a $1.1 million general override from voters last year. In Amesbury, healthcare costs more than doubled, to $4.9 million, and the town has held off on filling five to 10 jobs. In Fall River, costs have nearly doubled, to $32.7 million, and the city has at least 10 percent fewer staff members than it had in 2002.

Meanwhile, Stoneham has seen health costs soar 130 percent , to about $6 million , since 2001, said Ronald J. Florino, the town accountant. The increases each year total between $500,000 and $1 million, "which pretty much wipes out all our new revenue each year," he said.

"That extra $500,000 we could have had would definitely save 10 positions a year," he said.

The town has eliminated about 12 jobs in the police and fire departments, cut hours for other employees, and chopped programs. The town no longer has an information technology director or a town planner. The treasurer gets a stipend to handle computer issues, said Florino.

"It is the biggest fiscal crisis facing every city and town in Massachusetts," said Samuel R. Tyler, president of the Boston Municipal Research Bureau, a government-funded watchdog organization.

"Escalating prices are absorbing a larger share of revenue growth, which means fewer resources for other services, which puts more pressure on property taxes."

On average, healthcare now eats up 9 percent of municipal budgets, up from 6 percent in 2001.

Tyler is part of a group of municipal officials, unions, and public retirees lobby ing for legislation to curb the skyrocketing healthcare costs. Governor Deval Patrick has also proposed legislation to curb costs.

"The governor believes we must give cities and town additional tools to help relieve the pressure on the property tax, and this is one way we believe makes sense," said Cyndi Roy, the governor's spokeswoman.

The coalition wants to give communities the option of joining the state's healthcare plan, called the Group Insurance Commission , a quasi-independent agency, as long as 70 percent of a community's unions agree.

State officials say municipalities like the plan because it has held costs to a relatively modest 54 percent increase over the past five years, compared with the average 85 percent hike in municipal costs .

The state health plan has a number of financial advantages over the communities' coverage. First, its massive size gives it far more clout when negotiating deals with insurance companies and physicians.

The state health plan has other advantages for local governments : State employees and their unions do not directly bargain for many aspects of their medical benefits, while municipal employees do.

For example, the state plan, through the Legislature, sets the percent of the premium paid by members, which ranges from 15 percent to 20 percent for most employees. The plan also sets the design, which means it can establish prices on items such as copayments for doctor visits.

By contrast, the cities and towns' plans are relatively generous, sometimes offering $5 copayments and 10 percent premiums. That is also better than private-sector policies in the state, where the average copayment is $15 for a visit to the doctor's office, and the employee share of premiums is usually 20 percent to 25 percent.

Some employees drop a spouse's private-sector plan for the municipal plan because it saves the family money.

In Plainville, costs have roughly quadrupled since 2001 -- from $340,000 to $1.4 million.

"We're looking at freezing wages and making budget cuts," said Town Administrator Joseph Fernandes. He said the town is "$750,000 in the hole" on a budget of about $23 million.

"Everything is on the table. . . . Other things are going up, too, but nothing like health insurance."

Across the country, health care costs have exploded in the past few years because of two trends, said Joseph Newhouse , a professor at Harvard University who specializes in healthcare economics.

Baby boomers need more medical care as they age. Plus, the medical field is constantly improving. But more capability -- in the form of new procedures, drugs, and devices -- means higher costs.

For some community officials, union members, and retirees, the solution lies in the legislative proposal that would steer municipal employees to the state plan. They have been working on the legislation for more than a year.

Currently, many municipalities have their own plan or join with other cities and towns to establish one. Medical benefits are a contentious issue during contract negotiations, and unions and the cities and towns battle over premiums and copayments.

The Massachusetts Teachers Association, which has 106,000 active and retired members, supports the measure, said its vice president, Paul Toner.

"Health care costs have been accelerating on a very rapid pace, and cities and towns are under stress," Toner said. "We see a win-win situation for municipalities on a case-by-case basis."

Other unions supporting the measure include the American Federation of State, County and Municipal Employees Council 93 -- which represents 35,000 state and municipal workers across the state -- and the National Association of Government Employees, which is based in Quincy and represents 8,000 public workers statewide.

Mayor Thomas G. Ambrosino of Revere, who has worked with the 12-member Metropolitan Mayors Coalition on the bill, said the plan tries to give everyone something.

The best plan would allow municipalities to join the state plan without negotiating with unions, he said .

"The problem with that is that it has absolutely no chance of passing the Legislature," Ambrosino said. "There would be immense labor opposition."

Some municipalities doubt they will see savings. Other critics said the bill would not help cities and towns nearly enough. And some unions have declined to support the bill, saying it would not protect its members.

Firefighters are not enthusiastic about the plan. Bob McCarthy , president of the 12,000 -member Professional Fire Fighters of Massachusetts, said he is hoping for changes. For example, he is concerned that under the bill, unions would lose their ability to negotiate a plan's design, including copayments.

Michael J. Widmer , president of the Massachusetts Taxpayers Association , a nonprofit watchdog organization, called the bill a weak response.

"While a good step, it is too tepid a response for a problem of this magnitude," he said. He would like to give towns the option of joining over union objections.

House Bill 2601, which has been co sponsored by more than 100 representatives and senators, would give communities the option of joining the state plan, but would not force them.

The decision to join would be made jointly by municipal leaders, unions, and retirees.

A vote to join would require a 70 percent vote by unions and retirees.

Matt Carroll can be reached at mcarroll@globe.com.

(Correction: Because of a reporting error, a Page One story Sunday about rising employee healthcare costs in cities and towns misstated the background of a local research group and its position on legislation aimed at curbing costs. The Boston Municipal Research Bureau is a business-funded watchdog organization. It is not part of a coalition pushing legislation to curb the costs because the bureau believes the proposal does not go far enough.)

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