Most active state and local government employees are covered by health plans, and these plans extend into retirement as well.1 The generosity of these plans help governments recruit and retain quality workers, but the plans raise significant issues for the public sector and the economy as a whole. Fiscal issues are one obvious concern: like health costs nationally, the cost of coverage for state and local governments has been increasing more rapidly than the economy. Only a few state or local governments have created reserve funds to support the promise of health insurance to retired employees. This leads to a number of incidence questions: do workers or taxpayers pay for these benefits? How do recessions affect this balance?
Clark, Robert L., Joseph P. Newhouse, and David M. Cutler. "Health Insurance and the American Public Sector Labor Market." Journal of Health Economics 38 (December 2014): 62-64.