The roughly 3,600 people now employed within the central Cayman Islands government service will not be required to pay a portion of their monthly healthcare costs, Financial Secretary Ken Jefferson said Wednesday.
Speaking before the Legislative Assembly’s Public Accounts Committee, Mr. Jefferson responded to questions about the status of negotiations between the government and its employees regarding sharing costs for healthcare premiums. Right now, all civil servants and their dependents receive free healthcare coverage.
“It was concluded that the cost-sharing arrangements would not affect existing civil servants,” Mr. Jefferson said. “It would only impact civil servants hired at a specified date. That date hasn’t been specified.
“It is intended that cost-sharing would only apply to civil servants at a future hire date and, to the best of my knowledge, that hire date hasn’t been decided.”
Prospect MLA Austin Harris asked Mr. Jefferson whether it was “fair to admit” that government was in no better position in resolving massive future healthcare costs now than it was five years ago.
“Incoming staff [numbers] will not be such that they would even begin to make a dent [in the government’s healthcare liabilities],” Mr. Harris said.
Mr. Jefferson said the government believed that the public recognized the serious issues faced in continuing to provide healthcare to a population that was living longer after retirement.
He said a review of healthcare liabilities completed in late 2017 had looked at how much in total the government expects to owe for health costs in the next 20 years, as well as how much taxpayers are funding public sector healthcare annually. The question now is, what to do about it, he said.
The numbers can look scary, Mr. Jefferson admitted, but he said, at this stage, the issue is not a public “crisis.”
“I don’t want the public to be left with the impression that this is a crisis,” Mr. Jefferson said. “The government has cared for retired civil servants and their families all along without this becoming a national crisis.”
In 2014, the government estimated its present value healthcare liability for both current and retired civil servants would be $1.18 billion over the next 20 years.
By June 2016, those future liabilities were estimated to have increased to $1.4 billion and last year, to nearly $1.7 billion.
It’s not all money that is due at once, Mr. Jefferson said. However, if the healthcare costs continued to grow as expected, they could end up “overwhelming the government’s budget,” he said.
In the next 15 years, Mr. Jefferson said it was possible government could be paying hundreds of millions of dollars each year just to ensure senior citizen retirees can maintain health coverage.
Further, daunting healthcare liabilities can affect Cayman’s ability to finance government operations, the financial secretary noted. For instance, if a healthcare liability figure of $1.4 billion over 20 years was placed on the government’s “balance sheet,” it would be more than the entire amount of assets now declared by the public sector, Mr. Jefferson said.
“The net assets position would be negative to the tune of $200 million … or even $500 million,” he said. “It is extremely significant.”
The budget numbers also become relevant when government is looking to borrow money, as it will be next year to pay off some of its existing debt.
“If you are a financier of the government and you had two contracts … a balance sheet that says government has a positive position of $1.2 billion or a deficit of $500 million, the contrast is quite stark,” Mr. Jefferson said. ”One inspires great confidence … the other doesn’t.”
Mr. Harris suggested there were only two options left to government, if civil servants were not going to pay a portion of their healthcare premiums – save money in a dedicated healthcare fund, or cut health costs via budget reductions.
Public Accounts Committee Chairman Ezzard Miller said it was unlikely healthcare costs would decline in the near future. Mr. Miller suggested that “saving money” sounded good, but only during years of economic growth.
“You have one or two bad years, and you’re in trouble,” Mr. Miller said.