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Postal Service Asks Medicare to Deliver the Drug Subsidy


By Stephen Barr, The Washington Post


November 9, 2005

 

 


The U.S. Postal Service has applied to the Medicare program for a retiree prescription drug subsidy, which could save postal customers at least $250 million annually.

"We feel it is a small amount, but the postal ratepayer is entitled to that amount," said Richard J. Strasser Jr., chief financial officer at the Postal Service.
The cost of providing retiree health insurance -- nearly 330,000 postal retirees and survivors are eligible to receive Medicare -- has doubled over the past five years, Strasser said.

For next year, the Postal Service estimates that it will spend more than $7 billion -- 10 percent of post office operating costs -- on health benefits for postal employees and retirees, Strasser said.

The 2003 Medicare law, which expanded the program to provide a prescription drug benefit known as Part D, includes an incentive so employers will continue to provide drug coverage to retirees. Under the provision, public and private employers providing qualified drug coverage can receive a tax-free payment from Medicare equal to 28 percent of their drug costs.
In an initial estimate, the Congressional Budget Office calculated in July 2004 that Medicare would spend $71 billion on employer subsidies from 2006 to 2013.

The Postal Service qualifies for the subsidy because it helps pay premiums under the Federal Employees Health Benefits Program. Overall, the FEHBP provides a more generous drug benefit than the one planned for Medicare, according to the Office of Personnel Management, which administers FEHBP.
OPM has decided not to apply for the Medicare subsidy for civil service retirees, saying there was no reason for the government to pay itself to continue providing drug coverage when it has no intention of dropping or modifying FEHBP drug benefits. The Postal Service, however, is not a typical government agency because it relies on postage revenue rather than taxpayer dollars to finance health insurance.

Charles L. Fallis , president of the National Active and Retired Federal Employees Association, said civil service retirees could end up paying more than postal retirees for health coverage because of OPM's stance. 

He faulted OPM's decision to forgo the subsidy, noting that federal agencies participate in "intragovernmental" transactions, such as making payments for future retirement obligations, and that such receipts are not classified as spending under federal budget rules.

Fallis praised the Postal Service for applying for the Medicare subsidy and urged the agency to use the payment to hold down insurance costs or to improve benefits for postal workers and retirees.

Strasser said the amount of the subsidy will not be known until complex calculations involving benefit levels and benefit claims are made. He said that the Postal Service has asked to receive quarterly payments and that the money will be used to pay expenses.


Health Benefits Forum

Next week, Rep. Chris Van Hollen (D-Md.) will host his third annual federal employee health benefits forum, featuring health insurance experts and representatives from insurance companies.

The first session is scheduled for 7 p.m. Monday at the Universities at Shady Grove in Rockville, and the second session is scheduled for 10 a.m. Tuesday at the Holiday Park Senior Center in Wheaton.

The forum is held in cooperation with the Maryland federation of NARFE chapters. The enrollment season for the federal employee and retiree health benefits program begins Monday and ends Dec. 12. For information on the forum, call 301-424-3501.

 


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